SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

(Mark One)
[ X ] Annual report  pursuant to section 13 or 15(d) of the Securities  Exchange
Act of 1934 for the fiscal year ended August 31, 1999 or
[   ] Transition   report  pursuant  to section  13 or 15(d)  of the  Securities
Exchange Act of 1934 for the transition period from _________ to _________.

                           Commission File No. 1-13479

                         AGRIBRANDS INTERNATIONAL, INC.
           -----------------------------------------------------------
             (Exact name of registrant as specified in its charter)

                               MISSOURI 43-1794250
          ------------------------------------------------------------
          (State of Incorporation) (I.R.S. Employer Identification No.)

                9811 SOUTH FORTY DRIVE, ST. LOUIS, MISSOURI 63124
 ------------------------------------------------------------------------------
               (Address of principal executive offices) (Zip Code)

                                 (314) 812-0500
          ------------------------------------------------------------
              (Registrant's telephone number, including area code)

           Securities Registered Pursuant to Section 12(b) of the Act:

                                                   Name of each Exchange
         Title of Each Class                       on which Registered
         -----------------------                   ----------------------------

         Agribrands International, Inc.            New York Stock Exchange, Inc.
         Common Stock, par value $.01 per share

        Securities Registered Pursuant to Section 12(g) of the Act: None

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
Registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

         Indicate by check mark if disclosure of delinquent  filers  pursuant to
Item 405 of Regulation S-K is not contained  herein,  and will not be contained,
to the best of  registrant's  knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part  III of this  Form  10-K or any
amendment to this Form 10-K. [ X ]


         The aggregate market value of the voting stock held by nonaffiliates of
the Registrant is  $509,954,141,  based upon the closing market price on October
1, 1999.  Excluded  from this  figure is the voting  stock held by  Registrant's

<PAGE>

Directors, who are the only persons known to Registrant who may be considered to
be its "affiliates" as defined under Rule 12b-2.

         The number of shares of Common Stock, $.01 par value, outstanding as of
the close of business on October 1, 1999: 10,363,016.

                      Documents Incorporated by Reference:

         Portions of  Registrant's  Notice of Annual Meeting and Proxy Statement
relating to its 2000 Annual Meeting (to be filed) are  incorporated by reference
into Part III of the Form 10-K.

                                       2
<PAGE>



                                TABLE OF CONTENTS

                                                                            Page
INTRODUCTION

       Forward Looking Statements                                              4
       Risk Factors                                                            4

PART I
       Item 1.   Business                                                     10
       Item 2.   Properties                                                   17
       Item 3.   Legal Proceedings                                            19
       Item 4.   Submission of Matters to a Vote of Security Holders          20

PART II
       Item 5.   Market for the Registrant's Common Equity and Related        21
                 Stockholder Matters
       Item 6.   Selected Financial Data                                      22
       Item 7.   Management's Discussion and Analysis of Financial Condition  23
                 And Results of Operations
       Item 7A.  Quantitative and Qualitative Disclosures about Market Risk   37
       Item 8.   Financial Statements and Supplementary Data                  37
       Item 9.   Changes in and Disagreements with Accountants on             66
                 Accounting and Financial Disclosure

PART III
        Item 10. Directors and Executive Officers of the Registrant           66
        Item 11. Executive Compensation                                       66
        Item 12. Security Ownership of Certain Beneficial Owners and
                 Management                                                   66
        Item 13. Certain Relationships and Related Transactions               66

PART IV
        Item 14. Exhibits, Financial Statement Schedules and Reports on
                 Form 8-K                                                     66


                                       3
<PAGE>

FORWARD-LOOKING STATEMENTS

         Certain  statements  under  "Management's  Discussion  and  Analysis of
Financial Condition and Results of Operations," "Business" and elsewhere in this
report constitute "forward-looking statements" within the meaning of Section 27A
of the Securities Act of 1933 and Section 21E of the Securities  Exchange Act of
1934. Any statements that express, or involve  discussions as to,  expectations,
beliefs, plans,  objectives,  assumptions or future events or performance (which
may use words or phrases such as "will likely  result," "are expected to," "will
continue,"    "anticipates,"   "expects,"   "estimates,"   "intends,"   "plans,"
"projects," and "outlook") are not historical facts and may be  forward-looking.
Such forward-looking  statements involve known and unknown risks,  uncertainties
and other factors that may cause the actual  results,  levels of activity,  cost
savings,  performance or achievements of the Company, or industry results, to be
materially different from any future results,  levels of activity, cost savings,
performance  or  achievements  expressed  or  implied  by  such  forward-looking
statements, and accordingly,  such statements should be read in conjunction with
and are qualified in their  entirety by reference to, such risks,  uncertainties
and other factors,  which are described below and elsewhere in this report. Such
factors include, among others, the following:  (i) changing conditions or market
trends in the animal feeds and agricultural  products  industries;  (ii) general
economic and business  conditions,  including a regional recession in any of the
various regions of the world in which Agribrands operates;  (iii) the ability of
the Company to  implement  its  business  strategy  and maintain and enhance its
competitive  strengths;  (iv) the  ability of the  Company  to  recover  its raw
material  costs in the  pricing of its  products,  (v)  political  and  economic
instability  in countries or regions where the Company's  business is conducted,
(vi) the level of demand  for  Agribrands'  products,(vii)  the  ability  of the
Company to obtain financing for specific or general corporate  purposes;  (viii)
actions  of  competitors  and  government  entities;  (ix)  availability  of key
personnel;  (x) industry  capacity  trends;  and (xi) changes in the economic or
financial  impact of, or failure to comply with,  government  regulations.  As a
result of the  foregoing  and other  factors,  no  assurance  can be given as to
future results, levels of activity and achievements,  and neither Agribrands nor
any other person assumes  responsibility  for the accuracy and  completeness  of
these  forward-looking  statements.  Any  forward-looking  statements  contained
herein speak  solely as of the date as of which such  statements  are made,  and
Agribrands undertakes no obligation to update any forward-looking  statements to
reflect events or  circumstances  after the date on which such  statements  were
made or to reflect the occurrence of unanticipated events.


RISK FACTORS

Company and Industry Specific Risks

Limited Operating History as an Independent Company

         The  assets  associated  with  Ralston  Purina  Company's   ("Ralston")
international  animal  feeds  and  agricultural  products  business  were  first
contributed to Agribrands International, Inc. ("Agribrands" or the "Company") on
April 1, 1998 when the shares of  Agribrands  were  distributed  to the  Ralston
shareholders  (the  "Distribution").  As a  result,  Agribrands  has  a  limited
operating  history as an independent  company.  While the business  conducted by
Agribrands and its subsidiaries was profitable as part of Ralston,  and has been
profitable since the  Distribution,  there is no assurance that it will continue
to be operated  profitably as a stand-alone  public company.  In addition,  from
time to time,  certain local  operations of Agribrands  have operated at a loss.
Agribrands is no longer able to rely on Ralston for financial support or benefit
from its relationship  with Ralston to obtain credit or receive  favorable terms
for the purchase or sale of certain goods and services. In addition,  except for
certain transitional  services,  Agribrands is responsible for its own corporate
administrative services such as tax, treasury,  accounting,  and legal that were
previously provided by Ralston.

                                       4
<PAGE>

  Obligations to Ralston

         Under  agreements  entered  into  with  Ralston  at  the  time  of  the
Distribution,  Agribrands has agreed to indemnify  Ralston against,  among other
things,  liabilities  relating to the operation of the  Agribrands  business and
other former  businesses  associated with Ralston's  international  animal feeds
operations, or the ownership of the assets utilized in those businesses,  except
to the extent such were  assumed or retained  by  Ralston.  Agribrands  has also
agreed that  neither  Agribrands  nor its  subsidiaries  will enter into certain
transactions  for three  years  following  the  Distribution,  and to  indemnify
Ralston  and its  shareholders  as of the date of the  Distribution  against tax
liabilities  incurred  by reason of the  Distribution  being a taxable  event if
Agribrands engages in any of the restricted transactions.

Animal Feeds Industry

         The  Company,  as a  supplier  of animal  feeds and other  agricultural
products,  is subject to the risks and uncertainties  associated with the animal
production  industry and the resulting  fluctuations  in demand for  Agribrands'
products.  The animal  production  industry,  and  consequently the animal feeds
industry,  in a  particular  country can be  negatively  affected by a number of
factors,  including the  following:  the market price of livestock,  poultry and
other animals and their food  products;  alternative  feed  sources;  changes in
consumer  demand for, and  consumption  of, grain,  meat,  fish,  milk and eggs;
outbreaks  of  diseases in humans or animals  (such as BSE or "mad cow  disease"
foot  and  mouth  disease  or  aviarian  virus);   real  estate  values;   urban
development;   weather   conditions;   government   farm  programs;   government
regulations;   restrictive  quota  policies  and  trade  policies  and  tariffs;
production   difficulties,   including   capacity  and  supply   surpluses   and
constraints; and general economic conditions,  either local, regional or global.
In certain markets, the increasing nutritional efficiency of available feeds has
resulted in lower volume demand for feeds.  Profit pressure and  overcapacity in
various markets have led to consolidation of both the feed production and animal
production  industries in those markets.  Larger animal producers have tended to
integrate their business by acquiring or constructing feed production facilities
to meet some or all of their feed  requirements,  and  consequently  have relied
less on outside suppliers of animal feeds.

Significant Competitive Activity

         There is  substantial  excess  capacity  in the  animal  feed  business
worldwide,  including the countries in which the Company  operates.  The Company
currently faces intense,  and as a result of consolidation may face increasingly
intense, competition from large multinational and other international as well as
local and regional feed manufacturers, cooperatives, single-owner establishments
and government  feed  companies.  Some of these  competitors are larger and have
greater financial resources than Agribrands,  and in some countries cooperatives
and  government  feed  companies  may have  significant  financial and political
advantages.  Because of limited technological or capital constraints on entry to
the animal feed  industry and the extremely  fragmented  nature of the industry,
new competitors with relatively modest return objectives can arise in any market
at any time. In addition,  lower priced  alternative  feed sources or methods of
feeding may be elected by  Agribrands'  customers  during times of weak economic
conditions affecting their markets and operations.

         Local animal  production  industries are  consolidating  as a result of
end-product price pressures and overcapacity,  and management expects this trend
to continue.  The  tendency of large  producers to  vertically  integrate  their
businesses by acquiring or constructing feed production  facilities has at times
led to  significantly  less  reliance  on  outside  suppliers  of  feed.  As the
consolidation of animal producers  continues,  competition is likely to increase
among  independent  feed  suppliers,   and  that  industry  is  also  likely  to
consolidate.

         Competition  is based  upon  price,  product  quality  and  efficiency,
customer service and the ability to identify and satisfy animal production needs
in  particular  countries.  The  Company  from  time to time  experiences  price
pressure  in  certain  of  its  markets  as a  result  of  competitors'  pricing
practices. As the Company operates on an international basis and markets a broad
line of animal  feeds and other  agricultural  products,  it bears  higher costs

                                       5
<PAGE>

associated  with a  multi-layered  distribution  system,  a  complex  production
system,  and tax and  financing  obligations  imposed by its  international  and
multi-currency  structure. Such higher costs may restrict its ability to compete
in particular markets on the basis of price.

         Also,  low  commodity  prices  may  reduce  the value of and demand for
complete feeds as livestock and poultry feeders switch to pre-mix or concentrate
products  which are mixed with  directly  acquired  commodities.  A  significant
reduction in demand for complete feeds could  materially  affect the utilization
of the Company's fixed assets thereby affecting its financial performance.

Raw Material Price Volatility

     The prices of raw  materials,  such as grain,  grain  products  and protein
ingredients, are susceptible to fluctuations,  possibly volatile, due to weather
conditions,  crop disease or pestilence,  government regulations,  (for example,
regulation   of   genetically   modified   organisms,   "GMOs",   Agribrands  is
investigating the issues surrounding the use of GMO-free  ingredients,) economic
climate, labor disputes or other unforeseen circumstances. Operating results may
be  affected  by the  price  volatility  of raw  materials  which  constitute  a
substantial component of the cost of goods sold for the Company's business.  The
rapid  turnover  of  certain  raw  material  inventory  items and,  for  certain
products,  the  ability to  substitute  alternative  lower cost  ingredients  to
produce feeds with specified  nutritional  characteristics at a lower total cost
may provide  Agribrands  with some protection  against  fluctuating raw material
prices.  Agribrands  believes  that  adequate  supplies  of  its  necessary  raw
materials  are  available  at  the  present  time,  but  cannot  predict  future
availability or prices of such products and materials.  Agribrands may from time
to time hedge its  commodities  purchases or otherwise take market  positions in
various  ingredients.  Although  they  would be  intended  to  ensure  supply or
establish  ingredient costs for anticipated sales volume,  such transactions may
under certain  circumstances magnify the adverse effect of unanticipated changes
in market prices.

Non-Compete Agreements

     The Company has agreed with Ralston that,  until April 1, 2003, the Company
will not engage in the manufacture,  distribution or sale of foods for pets, pet
products,  pet supplies,  pet accessories,  litter or personal care products for
cats, dogs or other pets, subject to certain limited exceptions.  If the Company
does enter into any of those  businesses  following the restriction  period,  it
will not  have the  right to use the  trademarks  "Purina"(R), "Chow"(R)  or the
"Checkerboard"(R)  logo, on pet food products,  other than products produced for
Ralston or provided by Ralston.

Year 2000 and European Economic and Monetary Union

         Many computer systems, and other systems with embedded chip technology,
process  dates based on two digits for the year of a  transaction  rather than a
full four digits. These systems are unable to properly process dates in the year
2000 and beyond.  Agribrands  utilizes a number of computer  systems  across its
entire worldwide operation.  The Company has identified its significant software
coding issues  related to the year 2000 date  recognition  for key financial and
operational systems.

         Based on the Company's  efforts to date,  management  believes that its
systems  will be year  2000  compliant.  The  Company  is  working  with its key
customers  and suppliers to obtain  assurances  that their systems are year 2000
compliant.  However,  the  Company  does not have any  control  over these third
parties  and, as a result,  cannot  currently  determine  to what extent  future
operating  results  may be  adversely  effected  by the  failure of these  third
parties to successfully address their year 2000 issues. In addition, the Company
operates in sixteen  countries on four  continents at various stages of economic
development  and is  dependent  on systems  operated by  governments,  financial
institutions,  utilities,  communications  suppliers and others in each of these
countries.  The failure of any infrastructural systems to be year 2000 compliant
could  disrupt the  Company's  business  for a period of time and if not quickly
resolved could have a material adverse effect on the Company.

                                       6
<PAGE>

         On January 1, 1999,  eleven of the European Union countries  (including
four countries  where  Agribrands'  operations are located)  adopted the Euro as
their  single  currency.  There is now a fixed  conversion  rate  between  their
existing  currencies  ("legacy  currencies") and the Euro. The legacy currencies
will remain legal tender in the  participating  countries  during the transition
period from  January 1, 1999  through  January 1, 2002.  Beginning on January 1,
2002, the European Central Bank will issue  Euro-denominated bills and coins for
use in cash transactions. On or before July 1, 2002, the participating countries
will  withdraw  all  legacy  bills  and  coins  and use the Euro as their  legal
currency.

         The Company's key financial  information systems in Europe are equipped
to process both Euro and legacy  currency  transactions  through the  transition
period ending January 1, 2002; however, they are not ready to handle the July 1,
2002 withdrawal of all legacy  currencies.  Management is currently  planning to
modify the Company's  key financial  systems so they can handle the July 1, 2002
mandatory  conversion  to the Euro.  The Company has not yet  incurred any costs
associated with the conversion.  To modify the key financial systems so they can
handle the mandatory conversion,  the Company anticipates incurring $0.2 million
of reprogramming costs and spending  approximately $0.2 million on new software.
All  reprogramming  costs will be expensed as incurred,  and all software  costs
will be  capitalized.  The Company plans to complete  system  modifications  and
necessary testing by September 1, 2001.

         From a broader business  perspective,  conversion to the Euro may cause
pricing  disparities  in different  markets to narrow,  lowering  the  Company's
margins.  Nevertheless, the Company believes the conversion to the Euro will not
have a material impact on the Company's consolidated financial results.

Foreign Operations Risk

Worldwide Regulatory and Political Risk

         The Company has  operating  companies in 16 countries  around the world
and is subject to  government  regulation  and  political  risk in each  market.
Because the Company operates  primarily through its subsidiaries,  it is subject
to  regulation  by  numerous  common  market,  national  and local  governmental
entities and agencies  around the world.  Changes in the laws or  administrative
practices  relating to foreign  ownership  and  control,  local  employment  and
benefits,  air and water  quality,  noise  pollution,  underground  fuel storage
tanks,  waste  handling  and disposal as well as other  regulations  intended to
protect public health, the environment, currency exchange controls, alienability
of property, taxation or other matters in any jurisdiction could have a material
adverse  effect  on  the  operations  and  prospects  of  the  Company  in  such
jurisdiction  and as a whole.  Countries differ widely with respect to legal and
political  structure and stability and some of these countries lack stable legal
and regulatory systems.  For example,  many European  countries,  as well as the
European  Union,  have been very active in adopting and enforcing  food handling
regulations,  while many developing countries in which the Company operates have
not adopted or enforced  significant  regulation  relating to food  safety,  the
environment,   occupational  safety,   employment  practices  or  other  matters
extensively  regulated in the United States.  As such economies  develop,  it is
possible that new and expanded  regulations may increase the risk and expense of
doing business in these  countries.  Governmental  regulations may also restrict
the  ability  of the  Company's  operating  subsidiaries  to remit  funds to the
Company,  or impose minimum  requirements  as to the capital  structure of local
operating companies.

         In addition,  the  Company's  operations  may at times in the future be
subject to expropriation, confiscatory taxation or price controls, and political
and  economic  changes  may damage  operating  and growth  prospects  by causing
political and regulatory uncertainty or economic  difficulties.  For example, in
Europe,  any failure of a country in which the Company does business to join the
European  Union or the  European  Monetary  Union may have a negative  effect on


                                       7
<PAGE>

borrowing,  exchange rates and economic stability in such country, and any delay
in the  expansion  or  development  of the  European  Unions may have a negative
effect on borrowing, exchange rates and economic stability in Europe as a whole.
Furthermore,  conversion to the Euro may cause pricing  disparities in different
markets to narrow, lowering the Company's margins.

Inflation and High Local Interest Rates

         Many countries have in the recent past  experienced,  and in some cases
still experience,  substantial or at times extremely high rates of inflation and
correspondingly  high  interest  rates.  Inflation,   hyperinflation  and  rapid
fluctuations  in  inflation  rates have had and may  continue  to have  negative
effects  on  the  currencies,   economies,  capital  markets  and  the  business
environment of certain  countries and could have an adverse effect on various of
the  Company's  operating  subsidiaries  and  investments  in  those  countries,
including an adverse effect on their ability to obtain financing.

Currency Fluctuations

         The  monetary  assets  and  liabilities  of  the  Company's   operating
subsidiaries are typically  denominated in local currency.  Consequently,  their
value in Dollar terms will  fluctuate  with changes in the exchange rate between
the local currency and the Dollar.  Agribrands  periodically enters into foreign
exchange forward  contracts to mitigate economic exposure to changes in exchange
rates, but does not, as a matter of policy, hedge against all such exposure.  As
a result,  the Company may  experience  economic  loss with respect to its local
currency exposures.  In addition,  the Company's  operating  subsidiaries report
their results of operations  and financial  position in the local currency while
the Company  reports its results of operations and other  financial data in U.S.
Dollars.  Accordingly,  the Company's  reported  operating results and financial
position  are  affected  by changes in currency  exchange  rates  between  those
currencies  and  the  U.S.  Dollar.  For  example,  the  Company  experienced  a
significant  decline  in the  reported  value of its  investment  in its  Korean
operating subsidiary as a result of the sharp decline in the value of the Korean
Won during fiscal year 1998.  Many of the currencies of the countries  where the
Company  operates  have  experienced  steady  devaluations  relative to the U.S.
Dollar.  Sudden major  adjustments have occurred in the past, may again occur in
the future and could have a material adverse effect on the Company.

U.S. Regulation of International Commerce

         The Company is subject to the Foreign  Corrupt  Practices Act ("FCPA"),
which generally  prohibits U.S. companies and their  intermediaries from bribing
foreign  officials for the purpose of obtaining or keeping  business or licenses
or  otherwise  obtaining  favorable  treatment.  Although  the Company has taken
precautions  to  comply  with the  FCPA,  there  can be no  assurance  that such
precautions  will  protect  the  Company  against   liability  under  the  FCPA,
particularly  as a result of  actions  which may have been  taken in the past or
which may be taken in the  future by agents and other  intermediaries  for whose
actions  the  Company  may be held liable  under the FCPA.  In  particular,  the
Company  may be held  responsible  for  actions  taken by its local  agents even
though such agents may not be subject to the FCPA. Although these actions may be
customary under local practice, they may result in inadvertent violations of the
FCPA.  Any  determination  that the Company has  violated  the FCPA could have a
material adverse effect on the Company.

         Trade  sanctions  imposed by the United States in response to political
developments  may limit the  Company's  access to  suppliers  or  customers.  In
addition,  the Company may at times become  subject to  conflicting  obligations
under the laws of the United States and the laws of the  jurisdictions  in which
it operates,  including  circumstances  when trade  sanctions or boycotts may be
imposed by the laws of one  jurisdiction,  while laws of the other  jurisdiction
may expressly prohibit participation in such sanctions or boycott.

International Tax Risks

         Income earned and distributions of those earnings and other payments by
the Company's operating  subsidiaries are often subject to withholding and other

                                       8
<PAGE>

taxes  imposed  by the  jurisdictions  in which  such  entities  are  formed  or
operating.  In  general,  a United  States  corporation  may claim a foreign tax
credit  against  any  federal  income tax  expense  for local  currency  foreign
withholding taxes and foreign taxes paid directly by corporate entities in which
the  company  owns 10% or more of the voting  stock.  The  ability to claim such
foreign tax credits and to utilize net foreign  losses is,  however,  subject to
numerous  limitations,  and the ability of the Company to utilize  these credits
may be limited  because (i) tax rates are higher in certain  jurisdictions  than
the  comparable tax rates in the United States or (ii) the Company may not be in
a tax-paying position in the United States.  Intense focus by tax authorities on
intercompany transactions of international companies could lead to challenges of
the Company's tax treatment of such items which,  if sustained,  could  generate
tax liabilities material to a particular quarter or annual period.

Reporting Standards and Financial Data

         Companies  operating  overseas are subject to accounting,  auditing and
financial  standards and requirements that differ, in some cases  significantly,
from those applicable under U.S. GAAP. The Company's  ability to comply with the
informational  and filing  requirements  will  depend on the  timely  receipt of
accurate  and  complete  financial  and  other  information  from the  Company's
operating  subsidiaries.  The failure to receive  such  information  on a timely
basis could have a material adverse effect on the Company,  including preventing
it from  satisfying  its  informational  and filing  requirements.  Furthermore,
maintenance of adequate  internal  control systems may be made more difficult by
the  geographical   dispersion  and  autonomous   management  structure  of  the
Agribrands business.

Entering New Markets

         Agribrands  anticipates that it will continue to explore  opportunities
to enter new geographic  markets when appropriate  opportunities are identified.
Opening new markets can result in increased  earnings  for the Company,  but not
all such  ventures  are  likely to be  successful,  which  could have an adverse
effect on the overall operating results of the Company.


                                       9
<PAGE>

                                     PART I

ITEM 1.  Business

General

         The  Company,   incorporated   in  Missouri  in  1997,   is  a  leading
international  producer  and  marketer of a broad line of animal feeds and other
agricultural and nutrition  products for hogs, dairy cows, beef cattle,  poultry
(broilers and layers), rabbits, horses, shrimp and fish. The Company operates 71
manufacturing  plants in 16 countries on four  continents.  Management  believes
that,  among  commercial  producers of complete animal feeds,  Agribrands is the
most  geographically  diversified company of its type in the world, and that its
local operations rank among the top three in share of the commercial animal feed
market in most of the countries in which it operates.

         Agribrands  business  consists  of the  international  animal  feed and
agricultural  products  businesses  conducted by Ralston prior to April 1, 1998,
when the shares of the Company  were  distributed  to the Ralston  shareholders.
Accordingly, the Company benefits from Ralston's over 100 years of experience in
the animal feeds and agricultural  products  industry,  during which time it has
built and  maintained  a leading  industry  position by  consistently  providing
high-quality,  research-proven  products and customer  service.  The Company has
more than thirty years' experience operating across four continents.

The Commercial Feed Industry

         Feed costs  represent the largest  component of the total cost to raise
animals used in the production of meat, fish, milk and eggs. The commercial feed
industry  provides feed and feed  components,  generally to  independent  animal
producers  who  then  market  fully-grown  animals,  fish,  milk or eggs to food
processing companies who finally supply retail food outlets and the consumer.

         The  animal  production  industry  is  driven by human  consumption  of
protein which is influenced by population and income.  In developing  economies,
consumption of animal protein  generally rises with growth in disposable  income
as consumers shift to more animal-based  protein.  After per-capita  consumption
reaches  saturation,  growth or decline in  consumption  is driven by changes in
population.  The  commercial  animal  feed  industry  is driven by total  animal
production and economic development.  As an economy moves toward specialization,
animal  production   intensifies  and  competition  drives  out  inefficiencies.
Commercial  animal feed producers  provide the benefits of efficient  ingredient
procurement, value-added processing, and sophisticated formulation, which raises
the efficiency of animal production.  However,  as animal production  techniques
evolve,  even greater  efficiencies  can  sometimes  be gained by  concentrating
production of a particular  species of animal and  establishing  dedicated  feed
production as part of a vertically integrated system.

         Animal feed is produced by combining  grains and proteins  with desired
vitamins  and  minerals.  Animal  producers  can achieve  the desired  ration by
purchasing a complete feed or by acquiring and combining the components. Broadly
speaking,  commercial feed companies sell complete feeds  (ready-to-eat  rations
requiring no additional ingredients or processing),  concentrates (requiring the
addition of some ingredient or ingredients,  usually grain),  premixes  (vitamin
and mineral mix usually  requiring  the  addition of grains and  proteins),  and
supplements  (select  vitamins  and minerals  added to other  rations to deliver
targeted  nutrition).  The animal  producer  selects between these product types
based on the type of ration desired, availability of ingredients, and capability
to  process  the  ingredients  with  on-farm  equipment.  Substantial  levels of

                                       10
<PAGE>

premixes  are  produced  by large drug  companies  and sold to  commercial  feed
producers for processing with other ingredients.

         Complete  feed  products  are bulky and  expensive to  transport.  Most
complete feeds and concentrates are sold within close proximity of the producing
feed mill. Where the local infrastructure is adequate, large customers generally
buy product in bulk,  which is  delivered  by truck and placed  directly in bins
connected to the animal production unit.  Smaller customers  typically  purchase
bagged  product and are generally  served by  distribution  outlets  rather than
direct from the plant. In very low-intensity  farming areas and where commercial
feed is used as a supplement to other feed sources,  retailers  sometimes divide
bags into smaller units for sale.

         The feed industry around the world prices on a cost-plus-margin  basis.
Approximately  80% of the cost to produce  feed is the cost of the  ingredients.
Since the majority of ingredients are commodities traded on global markets, cost
positions are  relatively  transparent  and the animal  producer is aware of the
underlying  ingredient costs.  While decreased demand can place pressure on feed
producers' margins,  industry participants generally retain their narrow margins
and suffer volume  declines.  The greatest  impact of cyclical supply and demand
inequalities  is usually  borne by the animal  producer  who, when faced with an
end-product  price  less than the cost to raise an  animal,  reduces  production
until favorable economics return.

         Feed producers  generally compete on the basis of cost per unit of feed
or projected  total cost of feeding to achieve a specific  animal output.  Using
on-farm trial results,  producers of premium-priced feeds attempt to demonstrate
to the  farmer  that  the  additional  per-unit  cost of the  feed is more  than
compensated  by (1) the  reduced  amount of feed and time  required to produce a
market-ready  animal or output or (2) the  improved  quality of the end  product
which  itself  can be  sold  at a  premium.  The  producer  uses  this  data  to
demonstrate  that the farmer's  total profits are  increased  through use of the
more efficient, higher priced feed.

         Animal nutrition  research is central to development of more productive
feeds.   Research  provides   increasingly  precise  information  regarding  the
biological  factors that determine how nutritional  qualities of ingredients and
additives  are  processed  by  animals,  and the  effect  of feed  manufacturing
processes and ingredient  interactions on nutritional values. Feed manufacturers
use this knowledge on a regular basis to reformulate existing products using the
lowest cost combination of ingredients that can deliver the desired  nutritional
values. In addition,  research  knowledge is the basis of the development of new
products that deliver  enhanced  nutrition for  increased  animal  production or
improved end-product characteristics. The challenge for the feed manufacturer is
to develop new products whose increased value (in terms of the additional all-in
benefit  to  the  farmer)  exceeds  any  additional   costs  of  ingredients  or
processing.

Principal Products

     The Company sells primarily  complete feeds,  but also sells  concentrates,
premixes,  supplements and animal health and sanitation products.  The Company's
products are  predominantly  value-added  premium  offerings  and are  generally
marketed   under   the   "Purina"(R)   and   "Chow"(R)    trademarks   and   the
"Checkerboard"(R)   logo,   and   product   names  such  as   "Omolene"(R)   and
"Hi-Octane"(R).

 Sources and Availability of Raw Materials

         Feed is manufactured  by processing a combination of grains,  proteins,
vitamins,  and minerals.  Approximately 80% of the total cost to produce feed is
the  cost  of  these   ingredients,   most  of  which  are   widely   traded  in
Dollar-denominated  global commodity markets. Large multinational drug companies


                                       11
<PAGE>

produce and sell globally the micro ingredients,  such as vitamins. Vitamins and
minerals are also available from brokers, distributors and local companies.


Organizational Structure

         The local markets served by Agribrands vary  dramatically  with respect
to locally available  ingredients,  animal species being raised,  climate,  real
estate values and economic  conditions.  In order to manage  effectively in this
environment,  day-to-day  operating  decisions  are made by local  managers with
extensive  experience  and with  knowledge  of local  factors,  who operate on a
highly  autonomous  basis.  Regional  and global  management  coordinate  global
research  efforts,  assist  with  U.S.-based  ingredient  purchasing  and market
surveillance,  consult on process  engineering  and major capital  additions and
leverage  the  considerable   cumulative   experience  of  the  organization  by
collecting and sharing management and  administrative  best practices across the
operating units.

Distribution Network

         Agribrands'  distribution  network  consists of over 3,400  independent
dealers,  most of whom sell the Company's  products on an exclusive  basis.  The
dealers  are  independent   wholesalers   who  sell  to  animal   producers  and
(particularly   where  animal   production  is  done  at  a  very  small  scale)
redistribute  to  thousands  of points of sale.  More than 70% of the  Company's
sales are made through these dealers, with the balance made through direct sales
primarily  to large  feeders.  The  Company  offers  assistance  to  dealers  in
establishing  sound  financial  and  business  practices,   including  training,
marketing  support,   promotional  materials,  and  formal  business  management
programs,  including  assistance in obtaining bank financing.  As a result,  the
Company enjoys a high level of dealer loyalty.

Patents and Trademarks

         At the  time of the  Distribution,  Ralston  entered  into a  Trademark
Agreement with Agribrands  pursuant to which Ralston  assigned to Agribrands all
of Ralston's rights in certain country  specific  trademarks  associated  solely
with the  Agribrands  business,  such as  "Omolene"(R)  and  "Hi-Octane"(R)  and
granted to Agribrands a perpetual license,  on a royalty-free  basis, to use the
trademarks  "Purina"(R)  "Chow"(R) and the  "Checkerboard" (R) logo, and certain
other  trademarks  with  respect to  agricultural  and certain  other  products,
subject  to the  rights  of  Purina  Mills,  Inc.  ("PMI")  referred  to  below.
Agribrands does not have the right to use such trademarks on pet products, other
than products produced for Ralston or provided by Ralston.

         The Company  has agreed with  Ralston  that,  until April 1, 2003,  the
Company will not engage in the  manufacture,  distribution  or sale of foods for
pets,  pet products,  pet  supplies,  pet  accessories,  litter or personal care
products for cats, dogs or other pets, subject to certain limited exceptions.

         In 1986, Ralston sold the outstanding  capital stock of its subsidiary,
Purina Mills, Inc. ("PMI") which was engaged in the animal feed and agricultural
products  business in the United States.  In connection  with that sale, PMI was
granted a  perpetual  license  in the  United  States  with  respect  to certain
significant  trademarks  which are currently  used by Agribrands  outside of the
United States.  Although  Agribrands does not currently  compete with PMI in the
United States, there are no restrictions on Agribrands' right to expand into the
United States  market,  subject to the  exclusive  rights of PMI to utilize such
trademarks, trade

                                       12
<PAGE>

names and certain proprietary  technologies in the United States. PMI may expand
into markets outside the United States,  subject to the exclusive  rights of the
Company as described above, and is competing with Agribrands in the Philippines.

Seasonality of Business

     Sales  prices  and  volume  can  both  be  impacted  by  seasonal  factors.
Agricultural  product  sales  prices are directly  influenced  by changes in the
underlying  commodity  prices for the raw  materials  used to  formulate  animal
feeds.  Commodity  prices are usually at their lowest in the months  immediately
following the fall harvest.  Sales volume may fluctuate  somewhat  seasonally as
temperature  affects  caloric  intake and  breeding  cycles.  For  example,  the
Company's Mexican  subsidiary sells the vast majority of its shrimp feed between
June and October due to the nature of the shrimp  farming  cycle and location of
the customers.

         Currently,  seasonal  factors  have a limited  impact on the  Company's
total performance in any given period.  Seasonality of commodity prices does not
materially  affect  earnings  due to  the  industry  practice  of  pricing  at a
relatively constant margin over ingredient costs. With the possible exception of
shrimp feed sales,  seasonally  driven changes in sales volume do not materially
affect sales or earnings due to the  geographic and species  diversification  of
Agribrands' operations.

Competition

         The animal feed business has substantial excess capacity on a worldwide
basis,  including  excess capacity in the countries where the Company  operates.
The  Company  faces   competition  in  most  of  its  markets  from  other  feed
manufacturers, including, in certain countries, large multinational corporations
(such  as  Nutreco,   Ridley,  Cargill  and  Charoen  Pokphand),   cooperatives,
single-owner  establishments,  and  government  feed  companies.  Some of  these
competitors are larger and have greater financial resources than Agribrands, and
in  some  countries   cooperatives   and  government  feed  companies  may  have
significant financial and political advantages. Because of limited technological
or capital  constraints on entry into the animal feed business,  new competitors
with relatively modest return objectives can arise in any market at any time. In
addition,  less  effective  but lower priced feed sources  become an  attractive
alternative to Agribrands' products when livestock, poultry and other animal end
product  prices are low and customers are unwilling to pay a premium for quality
feeds.  Although  the  strength of  competitors  varies by  geographic  area and
product line,  Agribrands believes that no other commercial producer of complete
feeds  produces  and markets as broad a line of animal feed  products in as many
countries as Agribrands.

         Local animal  production  industries are  consolidating in concert with
the  broader  development  of the local  economies.  This trend is  expected  to
continue.  In the past,  Agribrands  has been  successful  in evolving  with the
sector and generating  sales to progressively  larger  producers.  However,  the
tendency  of  large  producers  to  vertically  integrate  their  businesses  by
acquiring  or  constructing  feed  production  facilities  has at  times  led to
significantly  less reliance on outside  suppliers of feed. As the consolidation
of  animal  producers  continues,   competition  is  likely  to  increase  among
independent  feed  suppliers,  and this industry is also likely to  consolidate.
Agribrands  believes that the superiority of its products and its reputation for
service  and  knowledge  about  animal   nutrition  needs  should  allow  it  to
effectively compete in the face of such trends.

                                       13
<PAGE>

         Much of the competition in the animal feeds and  agricultural  products
industry centers around price, due to the commodity-like aspects of basic animal
feed. However,  Agribrands  believes that product quality,  customer service and
the  ability to identify  and  satisfy  animal  production  needs in  individual
markets are also significant  competitive  factors.  Agribrands also believes it
has significant advantages due to its extensive dealer distribution network, its
nutritional  expertise,  its ability to convert its research and technology into
products  which meet the diverse  requirements  of its  customers  in  different
markets  under  different  economic  circumstances,  its high level of  customer
service,  the  responsiveness  of its  locally  autonomous  structure,  and  the
breadth, quality and efficacy of its product lines.

         The animal  feeds and  agricultural  products  business  is expected to
remain highly competitive in the foreseeable future. Future growth opportunities
are expected to depend on the Company's  ability to implement its strategies for
competing  effectively  in  new,  growing  agricultural   markets,   maintaining
effective cost controls,  making strategic  acquisitions,  effectively  managing
customers changing preferences for complete feeds, concentrates or premixes, and
developing  and  implementing  methods  for  more  efficient  manufacturing  and
distribution  operations,  while at the same time maintaining aggressive pricing
and promotion of its products.

Research and Development

     Agribrands' research and engineering  development is coordinated  centrally
but conducted on a decentralized  basis in each of the three regions  (Americas,
Europe and Asia).  Fundamental research is conducted in cooperation with leading
agricultural research  universities,  institutes and commercial entities such as
Cornell  University  (U.S.A.),  Massey University (New Zealand),  INRA (France),
Lethbridge Research Center (Canada) and Guelph University  (Canada).  Agribrands
provides  funding  for  leading  edge  research  in  exchange  for the rights to
commercially apply the results.

         Research  projects are selected based on priorities  established by the
Agribrands'  research and  technology  team and an Agribrands  interdisciplinary
product  steering  group.  The  product  steering  group is  composed  of senior
management,  research, engineering,  operating personnel and specialists for key
animal species groups.

         The  Agribrands  research  team  consists of more than 25 persons  with
postgraduate or doctoral  degrees in animal  nutrition,  veterinary  medicine or
agricultural  sciences.  In  1999,  Agribrands  expenditures  for  research  and
development amounted to $7.0 million.

         During  fiscal  year 2000 the  Company is  bringing  a newly  developed
product to market.  The product consists of a proprietary blend of enzymes to be
applied to feed ingredients using a patented application process. The product is
intended to improve ruminant  (multiple  stomach  animals,  such as cows) animal
digestion.  The  product  and  process  will be  marketed  under the brand  name
"PROMOTE  Natural  Energy  Technology(TM)".   Enzymes  are  naturally  occurring
proteins  that are  present in all living  animals and act as  catalysts  in the
digestive  process.  Agribrands  secured  a  license  to  utilize  the  patented
application  process during fiscal year 1999 from The Lethbridge Research Center
in Alberta, Canada.

                                       14
<PAGE>

Governmental Regulation and Environmental Matters

         Agribrands'  operations  are subject to  regulation  by various  common
market and local governmental entities and agencies, national and local laws and
regulations  with  respect to  environmental  matters,  including  air and water
quality,  noise pollution,  underground  fuel storage tanks,  waste handling and
disposal  and other  regulations  intended  to  protect  public  health  and the
environment.  Many European countries,  as well as the European Union, have been
very  active  in  adopting  and  enforcing  environmental  regulations.  In many
countries  in  which  Agribrands  operates,   there  has  not  been  significant
governmental  regulation  relating  to  the  environment,  occupational  safety,
employment practices or other business matters routinely regulated in the United
States.  As such  economies  develop,  it is possible that new  regulations  may
increase  the risk and  expense of doing  business in such  countries.  Evolving
environmental and zoning  requirements have led to Agribrands  relocating two of
its Korean facilities from urban areas to industrial sites.


         While  it  is  difficult  to  quantify  with  certainty  the  potential
financial impact of actions regarding  expenditures for  environmental  matters,
particularly  remediation,  and future capital  expenditures  for  environmental
control  equipment;  in the opinion of  management,  based upon the  information
currently  available,  the ultimate  liability  arising from such  environmental
matters will not have a material  effect on Agribrands'  financial  position but
could be material to capital expenditures or earnings.

Employees

         The Company, as a whole,  employs 50 employees in the United States and
approximately 5,012 in foreign jurisdictions.

                                       15
<PAGE>

Executive Officers of the Registrant

         The following is a list of all the executive officers (7) of Agribrands
as of August 31, 1999. All of these officers were elected by the Board and serve
in such  positions  until  their  successors  shall have been duly  elected  and
qualified.  There  are no  family  relationships  between  any of the  executive
officers.


Name                  Age         Positions


William P. Stiritz     65   Chairman of the Board,  Chief Executive  Officer and
                            President  of  Agribrands  since 1998.  Mr.  Stiritz
                            joined Ralston in 1963 and served as Chief Executive
                            Officer and President of Ralston from 1982 until his
                            retirement in 1997.

David R. Wenzel        36   Chief  Financial  Officer of Agribrands  since 1998.
                            Mr. Wenzel served as the Chief Financial  Officer of
                            Ralston's   international    agricultural   products
                            business  since 1996.  He joined  Ralston's  Protein
                            Technologies  subsidiary  as Director  of  Strategic
                            Planning  in 1993  and in 1994  became  Director  of
                            Corporate  Planning  for  Ralston.  Prior to joining
                            Ralston, Mr. Wenzel was a Manager, Tax Services, for
                            PricewaterhouseCoopers LLP in its St. Louis office.

Bill G. Armstrong      51   Chief  Operating  Officer of Agribrands  since 1998.
                            Mr.  Armstrong served as Executive Vice President of
                            Operations of Ralston's  international  agricultural
                            products  business  during 1997 and  Regional  Chief
                            Executive Officer - South Asia from 1995 to 1997. He
                            served   as   Managing    Director   of    Ralston's
                            international   agricultural   products   Philippine
                            operations from 1992 to 1995.


Kim Ki Yong            54   Chief  Operating  Officer  - North  Asia  Region  of
                            Agribrands  since  1998.  Mr. Kim served as Regional
                            Chief  Executive  Officer - North Asia of  Ralston's
                            international  agricultural  products business since
                            1995 and  President and Chief  Executive  Officer of
                            Ralston's international agricultural products Korean
                            operations from 1993 to 1995.

Eric M. Poole          54   Chief   Operating   Officer   -  Europe   Region  of
                            Agribrands  since  1998.  Mr.  Poole  served as Vice
                            President  -  Americas  of  Ralston's  international
                            agricultural  products operations from 1993 to 1995;
                            and as international  agricultural products Regional
                            Chief Executive Officer - Europe from 1995 to 1998.

Michael J. Costello    47   Secretary and General  Counsel of  Agribrands  since
                            1998. Mr. Costello served as  International  Counsel
                            of  Ralston's  international  animal and human foods
                            businesses from 1989 to 1998.

Robert W. Rickert, Jr. 48   Treasurer  of  Agribrands  since 1998.  Mr.  Rickert
                            served  as  Director  of   International   Financial
                            Services  of  Ralston's  international  agricultural
                            products  business  from  1990  to  1998;   Director
                            International Finance - Latin America,  Middle East,
                            and  Africa   from  1988  to  1992;   and   Manager,
                            International Finance from 1986 to 1988.


                                   16
<PAGE>

ITEM 2.  PROPERTIES

         Agribrands'  principal  properties  are its animal  feed  manufacturing
facilities.  Shown  below  are the  locations  of the  principal  facilities  of
Agribrands,  all of which,  except as indicated,  are owned by Agribrands or its
wholly owned  subsidiaries.  Agribrands'  facilities in the Peoples  Republic of
China are  located  on sites  subject  to  long-term  lease  agreements.  Due to
restrictions on foreign land ownership, Agribrands facilities in the Philippines
are leased from a company which owns the sites. Agribrands' Philippine affiliate
owns forty percent of the shares of the leasing company.  Agribrands  leases the
office space in St. Louis County, Missouri where its principal executive offices
are located. Although a substantial number of these manufacturing facilities are
more than twenty years old,  management  believes the Company's  facilities  are
adequately  maintained  and are suitable and adequate for the purposes for which
they are used.  During the fiscal year ended August 31, 1999, the utilization of
these facilities averaged approximately 70% of capacity, and management believes
that existing capacity should be sufficient for anticipated needs.


                                       17
<PAGE>

BRAZIL                                MEXICO
Canoas                                Cuautitlan
Inhumas                               Guadalajara
Maringa(3)                            Merida (2)
Paulinia                              Mexicali
Recife                                Monterrey
Volta Redonda                         Obregon
                                      Salamanca
CANADA                                Tehuacan
Addison, Ontario
Courtice, Ontario (1)                 PEOPLE'S REPUBLIC OF CHINA
Drummondville, Quebec                 Fushun (2)
Palmerston, Ontario                   Langfang
St. Romuald, Quebec                   Nanjing (2)
Strathroy, Ontario                    Yantai (2)
Woodstock, Ontario
                                      PERU
COLUMBIA                              Arequipa (1)
Bogota(1)                             Chiclayo
Buga                                  Lima
Cartagena
Giron (1)                             PHILIPPINES
Ibaque (1)                            Pulilan
Medellin (1)                          Villasis
Mosquera
                                      PORTUGAL
FRANCE                                Benavente (3)
Courchelettes                         Cantenhede
Limoges (2)
Longue                                SPAIN
Pommevic                              Benavente
St. Ybard (2)                         Don Hermanas
Sorcy                                 La Coruna
                                      Marcilla
GUATEMALA                             Merida
Guatemala City                        Torrejon
                                      Valencia
HUNGARY
Kaposvar                              TURKEY
Karcag                                Bolu
                                      Gonen
ITALY                                 Luleburgaz
Borgoratto (3)
Sospiro                               VENEZUELA
Spessa                                Barcelona
San Felice                            Cabimas (2)(3)
Termoli                               Maracaibo
                                      Maracay
KOREA                                 Hatcheries - Valencia, Venezuela
Kimhae
Kunsan
Songtan


                                       18
<PAGE>


(1) Leased                 (2) Joint Venture         (3) To be Divested

         In addition to the  properties  identified  above,  Agribrands  and its
subsidiaries own and/or operate sales offices,  regional offices,  laboratories,
storage facilities, distribution centers and terminals and related properties.


ITEM 3.  LEGAL PROCEEDINGS

         The Company is subject to legal  proceedings  and claims arising out of
its business  that cover a wide range of matters,  including  trade  regulation,
contracts,   environmental  issues,  product  liability,  patent  and  trademark
matters, and taxes.

         In August 1999,  Agribrands (together with Cargill,  Incorporated,  The
Iams Company and by  subsequent  amended  pleading  Carl S. Akey,  Inc.) filed a
complaint  in the U.S.  District  Court for the  Northern  District  of Illinois
against F. Hoffman-LaRoche Ltd., Hoffman LaRoche Inc., Roche Vitamins Inc., BASF
Aktiengesellschaft,  BASF Corporation,  Rhone-Poulenc S.A.,  Rhone-Poulenc Inc.,
Rhone-Poulenc  Animal Nutrition Inc., Lonza A.G.,  Lonza,  Inc., Takeda Chemical
Industries,  Ltd.,  Takeda  Vitamin & Food USA,  Inc.,  EISAI  Co.  Ltd.,  EISAI
Corporation of North America,  EISAI U.S.A.  Inc.  DAIICHI  Pharmaceutical  Co.,
Ltd., DAIICHI Fine Chemicals,  Inc., Chinook Group Limited, Chinook Group, Inc.,
DuCoa, L.P., E. I. Dupont De Nemours and Company, DCV Inc.,  Bioproducts,  Inc.,
Roland  Bronnimann,  Kuno Sommer,  John W. Kennedy,  Robert  Samuelson,  Lindell
Hilling,  J. L. (Pete) Fischer and Antonio Felix. The complaint alleges that the
defendants  conspired  globally  to fix the  prices  of  vitamins  and  allocate
customers in support of such  arrangement  in  violation  of the U.S.  antitrust
laws. The defendants have admitted in criminal  proceedings to  participating in
such  practices.  Agribrands  believes  that it will be successful in recovering
damages arising from these  practices.  The timing of recovery and the amount of
damages are  difficult to determine  due to the  multiple  variables  which will
influence the  determination of damages such as period of time covered,  percent
of overcharge, purchasing entity, as well as other issues and defenses which may
be  asserted  by the  defendants.  As of August 31,  1999,  the  Company has not
recognized any gain in its financial statements for this matter.

         In the fall of 1997,  Agribrands'  wholly owned subsidiary,  Agribrands
Philippines, Inc. (formerly Purina Philippines,  Inc.), applied for renewal of a
warehouse  license  to  store  corn  and rice  and  by-products  at its  Pulilan
facility.  The Philippines  National Food Authority  ("NFA"),  the  governmental
agency that administers the Philippines laws and regulations  governing the corn
and rice industry,  advised  Agribrands  Philippines by letter dated October 31,
1997  that  its  license  renewal  application  was  denied.  The  letter  cited
Philippines  legislation and regulations  requiring that businesses operating in
the corn and rice industry not have more than 40% foreign  ownership.  Since the
NFA believes that  Agribrands  Philippines is in the corn and rice industry,  it
has  requested  Agribrands  Philippines  to file a  divestment  plan in order to
comply with the 40% maximum foreign ownership requirement.

         Agribrands  Philippines has appealed the denial of its license renewal,
and on January 23, 1998,  Agribrands  Philippines received  notification that it
may operate its warehouse under a "provisional permit" pending the resolution of
the  appeal.  The appeal is pending in the Office of the  President.  Agribrands
Philippines  believes it does not need a warehouse license, as it believes it is
not  engaged  in the corn and rice  industry  as  defined  by law.  Furthermore,
Agribrands  Philippines  believes  that  it  should  not be  subject  to the NFA
regulation  based upon its original  Board of  Investments  One Stop  investment
approval of a 100% foreign owned investment.  Agribrands  Philippines intends to
pursue its appeal in the Philippines legal system.

                                       19
<PAGE>

         In  the  event  that  Agribrands  Philippines  is  required  to  file a
divestiture plan, it is expected, based on previous case precedents, that a plan
would  be  approved  that  would  permit  the  necessary   divestiture   over  a
considerable period of time.

         Various tax and labor claims have been asserted  against the Agribrands
business in Brazil. The claims arose principally from monetary  corrections made
in  connection  with the  institution  of  economic  plans  by  prior  Brazilian
administrations to control inflation.

         Many of the legal matters are in preliminary  stages,  involve  complex
issues of law and fact and may  proceed  for  protracted  periods  of time.  The
amount of the  eventual  liability,  if any,  from these  proceedings  cannot be
determined with  certainty;  however,  in the opinion of Agribrands  management,
based upon the  information  presently  known, as well as upon the limitation of
certain  of its  liabilities  under  the  Agreement  and Plan of  Reorganization
between  Ralston and  Agribrands  for the spin-off of  Agribrands,  the ultimate
liability of Agribrands, if any, arising from the pending legal proceedings,  as
well as from asserted  legal claims and known  potential  legal claims which are
probable of assertion,  taking into account  established  accruals for estimated
liabilities,  should not be material to the financial position of Agribrands but
could be  material  to results  of  operations  or cash  flows for a  particular
quarter or annual period.


ITEM 4.       SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         None.

                                       20
<PAGE>

                                     PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         The  Company's  common  stock is traded on the New York Stock  Exchange
under the symbol "AGX".  There were 10,965  shareholders of record on October 1,
1999.  The  Company has not paid cash  dividends  in 1999 and does not intend to
begin paying cash dividends in fiscal year 2000.


         The following table sets forth,  for the twelve months ended August 31,
1999,  and the five months ended August 31, 1998, the range of high and low sale
prices of Agribrands common stock as reported on the NYSE Composite Tape.


                             AGRIBRANDS COMMON STOCK

                                                  MARKET PRICES
                                               HIGH         LOW        DIVIDENDS

1999
Fourth Quarter                                $48.75       $34.06         --
Third Quarter                                 $37.37       $30.94         --
Second Quarter                                $35.50       $26.69         --
First Quarter                                 $31.69       $21.44         --


1998
Fourth Quarter                                $35.69       $29.13         --
Third Quarter (April 1 - May 31)              $42.69       $32.25         --




                                       21
<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>

                                                  FIVE YEAR FINANCIAL SUMMARY
                                             (In millions except per share data)

                                                                        For the year ended August 31,
                                                  --------------------------------------------------------------------------
STATEMENT OF EARNINGS DATA                            1999           1998            1997           1996           1995
                                                  -------------  -------------   -------------  -------------  -------------
<S>                                                  <C>            <C>             <C>            <C>           <C>

Tons of feed product sold                                  5.0            5.2             5.1            4.8            4.3
Net sales                                            $ 1,261.5      $ 1,410.1       $ 1,527.6      $ 1,401.3      $ 1,147.2
Income over ingredient cost                              356.7          345.8           361.7          333.3          298.0

Depreciation and amortization                             24.8           21.2            21.9           20.4           17.5
Provisions for restructuring                               -              3.0             3.2            8.3            1.8
Gain on sale of property                                  (2.3)           -               -             (3.6)          (1.6)
Interest expense                                           8.0           12.0            10.9           13.0           12.1
Investment income                                        (10.2)          (5.2)           (4.2)          (3.6)          (4.9)
Foreign exchange loss                                      1.5           12.8             3.7            8.3            4.0

Earnings before income taxes                              70.4           34.2            33.1           24.9           33.4
Income taxes                                              26.4           20.4            24.4           14.0           18.7
Net earnings (a)(b)                                  $    44.0      $    13.8       $     8.7      $    10.9      $    14.7

Earnings per share:
       Basic (c)                                     $    4.16      $    1.29       $     .82      $    1.02      $    1.37
       Diluted (c)                                   $    4.11      $    1.29       $     .82      $    1.02      $    1.37


                                                                                 August 31,
                                                  --------------------------------------------------------------------------
BALANCE SHEET DATA                                    1999           1998            1997           1996           1995
                                                  -------------     ----------   -------------  -------------  -------------

Working capital                                      $   186.4      $   153.7       $    46.7      $    59.4      $    37.4
Net property                                             174.0          176.6           156.9          145.6          137.1
       Additions (during the period)                      25.9           44.6            44.1           28.5           27.1
       Depreciation (during the period)                   22.7           19.3            19.6           19.1           17.3
Total assets                                             566.2          578.4           481.2          497.8          407.8
Long-term debt                                            11.5           14.2            22.8           41.3           34.3
Shareholders equity                                  $   373.3      $   339.4       $   198.1      $   190.3      $   139.9

Average common shares outstanding:
       Basic (c)                                          10.6           10.7            10.7           10.7           10.7
       Diluted (c)                                        10.7           10.7            10.7           10.7           10.7

<FN>
------------------------------------------------

(a)    After-tax provisions for restructuring reduced net earnings by $1.7 in the year ended August 31, 1998, $3.2 in
       1997, $7.2 in 1996 and $1.0 in 1995.

(b)    After-tax gain on the sale of property increased net earnings by $1.5 in the year ended August 31, 1999, $2.9 in
       1996 and $1.1 in 1995.

(c)    Assumes 10.7 million shares outstanding for all periods prior to the Distribution Date.
</FN>
</TABLE>


                                       22
<PAGE>

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

         The  following  discussion  is a summary of the key factors  management
considers  necessary in reviewing  Agribrands  results of operations,  operating
segment results, liquidity and capital resources. Management has also included a
section on Key Measures and Concepts for Understanding the Business.

         Agribrands is a leading international  producer and marketer of formula
animal  feeds and  other  agricultural  products.  Prior to April 1,  1998,  the
Company  was  a  wholly-owned  subsidiary  of  Ralston. On  that  date,  Ralston
distributed  the common stock of the Company to its  shareholders  in a tax-free
spin-off.  The Company is a successor to Ralston's  over 100 years of experience
in the animal feeds and agricultural products industry.

         The  production  and sale of animal  feed was the  primary  business of
Ralston when it was established in 1894. From that date until the  Distribution,
Ralston built and maintained  its industry  position by  consistently  providing
high-quality,  research-proven  products and  customer  service.  Although  this
business  originated in the United  States,  it expanded  throughout  the world,
entering the Americas (outside of the United States) in 1927, Europe in 1957 and
Asia in 1967. The Company now operates 71 manufacturing  plants in 16 countries,
and has more than thirty years' experience operating across four continents. The
primary  animal feed  business of  Agribrands  is conducted  almost  exclusively
outside the United States.  In 1986,  Ralston sold Purina Mills,  Inc., its U.S.
animal feeds and agricultural  products  business,  to an unrelated third party.
Purina Mills is unrelated to Agribrands.


                                       23
<PAGE>

                  REVIEW OF CONSOLIDATED RESULTS OF OPERATIONS

         Unless  otherwise  noted,  all references to prices,  costs and margins
reflect U.S.  Dollar  results after  translation of foreign  currency  financial
statements in accordance with Statement of Financial Accounting Standards No. 52
(FAS 52).

Net Sales

     Consolidated  net sales decreased $148.6 million or 10.5% in 1999 as result
of lower volume and lower average selling prices.  Feed volume declined  215,000
metric  tons or 4.2% in 1999 with most of the  decline  occurring  in Europe and
Asia.  Average  selling prices  declined $18 per ton or 6.7% in 1999  reflecting
lower  commodity  costs relative to 1998,  consistent  with the feed  industry's
practice  of  adjusting   prices  to  reflect   changes  in  ingredient   costs.
Consolidated  net sales decreased  $117.5 million or 7.7% in 1998 primarily as a
result of lower commodity costs.

Operating Profit

     Operating  profit  increased  $8.1  million  or  13.7% in 1999 due to lower
operating  expenses in Europe and  improved  margins in Asia.  Operating  profit
increased  $12.6  million or 27.0% in 1998 as  improved  margins  and  increased
volume in the Americas region and lower  operating  expenses in Europe more than
offset a decline in Asia's  profitability  and higher  corporate  administrative
expenses. Operating profit excludes provisions for restructuring,  gains on sale
of property, interest expense and other income and expense.


Restructuring activities

     In 1998,  Agribrands  recorded  provisions for restructuring  which reduced
earnings  before income taxes and net earnings by $3.0 million and $1.7 million,
respectively.  These charges  represented  primarily  severance  costs and fixed
asset write-offs  associated with the streamlining of Agribrands'  operations in
Europe.  The  restructuring  provided  for the  severance  of  approximately  40
employees,  most  of  whom  were  released  prior  to  August  31,  1998.  These
restructuring  actions  resulted in pre-tax cost savings of $0.9 million in 1998
and were expected to result in annual savings of approximately $2.0 million.

         In 1997, Agribrands recorded provisions for restructuring which reduced
earnings  before  income taxes and net earnings by $3.2  million.  These charges
primarily  represented severance costs and fixed asset write-offs related to the
August 1997  closing of a production  facility in  Portugal.  Beginning in 1998,
these  restructuring  actions  were  expected  to result in  annual  savings  of
approximately $1.0 million.

Gain on Sale of Property

         In 1999, Agribrands realized a $1.8 million gain on the sale of land in
Korea and a $0.5  million  gain on the sale of  property  in Spain.  The sale of
these assets is not expected to have a material impact on future operations.

                                       24
<PAGE>

Interest Expense and Other Income/Expense

         Interest  expense  decreased  $4.0  million in 1999 as a result of both
lower average  borrowings and lower interest rates.  Interest expense  increased
$1.1 million in 1998 primarily due to higher interest rates in the markets where
the Company held debt.

         Other income/expense,  net, changed favorably by $18.8 million in 1999.
Foreign  exchange losses were $1.5 million in 1999 versus $12.8 million in 1998.
Investment  income  was $5.0  million  higher  in 1999 due to  higher  levels of
interest bearing investments. Other income/expense,  net, changed unfavorably by
$10.6  million  in  1998  compared  to  1997.   Foreign   exchange  losses  were
substantially  higher in 1998 as a result of losses on U.S.  Dollar  denominated
debt in Korea and Colombia and losses on local  currency  denominated  assets in
Mexico, where the Company then used  hyper-inflationary  accounting.  Investment
income was $1.0 million higher in 1998 compared to 1997 because of higher levels
of interest bearing investments.  Earnings for 1998 were also adversely impacted
by a $2.5 million charge to write off deferred financing costs associated with a
credit facility the Company elected not to close.

Net Earnings

         Net  earnings  were $44.0  million  for the year ended  August 31, 1999
compared to $13.8 million in 1998 and $8.7 million in 1997. Income taxes,  which
include federal, state and foreign taxes, were 37.5%, 59.6% and 73.7% of pre-tax
earnings in 1999,  1998 and 1997,  respectively.  The effective tax rate in 1999
was favorably  impacted by a reduction in valuation  allowances against tax loss
carryforwards in France and Spain and tax credit  carryforwards  in Mexico.  The
effective  tax rate in 1999 would have been lower had the Company not recorded a
$4.0 million  valuation  allowance  against  foreign tax credits  awarded in the
United States for which no tax benefit is expected to be realized. The effective
rates in 1998 and 1997 were unfavorably impacted by both losses in countries for
which no tax benefit  could be recognized  and  incremental  taxes  allocated by
Ralston.  See Note 10 of the Company's  Notes to Financial  Statements  for more
information concerning income taxes.

                                       25
<PAGE>

<TABLE>
<CAPTION>
                                                REVIEW OF SEGMENT RESULTS
                                                   (Dollars in millions)


                                                                                     Corporate and
                                         Americas        Europe         Asia            Tradico       Consolidated
                                      --------------  -------------  -------------   --------------   -------------
<S>                                     <C>           <C>            <C>               <C>             <C>

Year Ended August 31, 1999:
--------------------------
Net sales                               $    572.5    $    341.8     $    344.6        $   2.6         $  1,261.5
Operating profit                        $     33.4    $     15.6     $     33.0        $ (14.6)        $     67.4

Tons of feed product sold                2,165,000     1,500,000      1,297,000          1,000          4,963,000
Income over ingredient cost             $    147.3    $    115.0     $     94.5        $  (0.1)        $    356.7

Year Ended August 31, 1998:
--------------------------
Net sales                               $    625.6    $    397.2     $    387.3            -           $  1,410.1
Operating profit                        $     33.5    $     11.9     $     28.2        $ (14.3)        $     59.3

Tons of feed product sold                2,190,000     1,585,000      1,403,000            -            5,178,000
Income over ingredient cost             $    145.2    $    115.2     $     85.4            -           $    345.8

Year Ended August 31, 1997:
--------------------------
Net sales                               $    599.6    $    467.7     $    460.3            -           $  1,527.6
Operating profit                        $     16.0    $      5.1     $     32.8        $  (7.2)        $     46.7

Tons of feed product sold                2,004,000     1,686,000      1,388,000            -            5,078,000
Income over ingredient cost             $    127.1    $    123.2     $    111.4            -           $    361.7

</TABLE>

Refer to Note 4 of the  Consolidated  Financial  Statements for a description of
each segment.



                                       26
<PAGE>

Americas

         Net sales in the Americas  segment  (which  excludes the United States)
decreased $53.1 million or 8.5% in 1999. Average selling prices declined $21 per
ton in 1999 as a result  of  substantially  lower  ingredient  costs  everywhere
except in Colombia where a new value added tax on certain  ingredient  purchases
went into  effect on January 1, 1999.  Weakness  in  consumer  purchasing  power
caused  1999  volume to decline  in  Brazil,  Colombia  and Peru.  These  volume
declines  were mostly  offset by increased  volume in Mexico and  Venezuela.  In
Mexico,  volumes  increased  mainly in the hog and poultry lines.  In Venezuela,
volume to large  poultry  feeders  increased in 1999.  Net sales in the Americas
increased  $26.0  million or 4.3% in 1998  compared  to 1997 due to  incremental
revenue from higher  volume,  which was only  partially  offset by a $14 per ton
decline in average  selling  prices.  The 1998 decline in average selling prices
primarily  reflects  the decline in  commodity  costs.  Volume for the  Americas
segment increased 9.3% in 1998, primarily as a result of increased feed sales in
Mexico.  Agribrands'  operations in Mexico experienced  increased demand in 1998
due to improved economic conditions compared to the prior year.

         Operating  profit in the Americas stayed flat in 1999 as a $2.1 million
improvement in income over  ingredient cost ("IOIC") was mostly offset by a $1.8
million  charge to settle a claim by a former  joint  venture  partner in Chile.
IOIC  improved  on higher  volume and higher  margins in  Venezuela  and Mexico;
however,  the improvement was partially  offset by weakness in Brazil,  Colombia
and Peru.  Operating  profit  increased  $17.5  million  or 109.4% in 1998.  The
improvement  in  operating  profit  and  IOIC in 1998 was  broad-based  but most
notable in Mexico,  where increased shrimp feed sales, with their overall higher
margins, helped improve profitability.

Europe

         Net sales in Europe  decreased $55.4 million or 13.9% in 1999 and $70.5
million or 15.1% in 1998.  The decline in net sales for both years resulted from
a combination of lower volume and lower average selling prices.  Volume declined
85,000  tons  in  1999  mainly  as a  result  of the  December  1998  sale of an
unprofitable  subsidiary of the Company's subsidiary in France. The 1999 decline
in volume was  mitigated  somewhat by  increased  sales of cattle feed in Spain.
Volume declined 101,000 tons in 1998 due to plant closures and a rabbit epidemic
that caused a decline in feed  consumption.  Average selling prices declined $23
per ton or 9.1% in 1999  and  $27 per ton or 9.7% in  1998.  The  lower  selling
prices reflect lower  ingredient  costs  relative to the prior year,  consistent
with the feed  industry's  practice of  adjusting  prices to reflect  changes in
ingredient costs.

         IOIC in Europe declined $0.2 million in 1999 as the reduction in volume
was largely offset by an  improvement in margins.  IOIC declined $8.0 million in
1998 largely due to the reduction in volume.

         Operating  profit in Europe increased $3.7 million or 31.1% in 1999 and
$6.8  million or 133.3% in 1998 due to a reduction in  operating  expenses.  The
Europe segment's  operating  expenses declined in both years as a result of cost
savings from prior year  restructurings  and translation of local currency costs
at weaker foreign currency exchange rates.

Asia

         Net sales in Asia  decreased  $42.7  million  or 11.0% in 1999 due to a
combination of lower volume and lower ingredient costs.  Volume in Asia declined
106,000 tons or 7.6%. Nearly all of this volume decline occurred in Korea, where
low hog prices following last year's recession  reduced demand for the Company's
higher-price,  higher-performance  hog  feeds.  Average  selling  prices in Asia


                                       27
<PAGE>

declined by $10 per ton or 3.8% primarily as a result of lower ingredient costs.
Net sales in Asia decreased $73.0 million or 15.9% in 1998.  Volume for the Asia
region was  essentially  flat for 1998.  Net sales declined in 1998 due to lower
ingredient costs and devaluation of the local currencies against the U.S. Dollar
in excess of local currency  selling price  increases.  During fiscal year 1998,
both the Korean Won and Philippine Peso devalued approximately one-third against
the Dollar.

         In  1999,  the Asia  segment's  IOIC  improved  by $12 per ton and $9.1
million  overall  reflecting  a  significant  movement  toward  pre-crisis  unit
margins,  specifically  in Korea.  In 1998,  IOIC declined $19 per ton and $26.0
million  overall as local  pricing  adjustments  were  unable to offset the full
effect of the 1998 devaluation of the Asian currencies versus the U.S. Dollar.

         Operating  profit in Asia  increased  $4.8  million or 17.0% in 1999 as
some of the  increase in IOIC was offset by an increase in  operating  expenses.
This increase in operating  expenses  occurred  primarily as a result of capital
expenditures  made  in  1998  including  the  purchase  of  one  plant  and  the
construction  of  another  in China.  Operating  profit in Asia  decreased  $4.6
million  or 14.0% in 1998.  The 1998  decline  in IOIC was  largely  offset by a
reduction  in operating  expenses  which  primarily  resulted  from  translating
relatively stable local currency costs at significantly  weaker foreign currency
exchange rates versus the U.S. Dollar.

Corporate and Tradico

         The corporate and Tradico segment is located in the United States. This
segment  contains  certain  corporate  items  which are not  allocated  to other
segments.   Tradico,  a  division  within  the  Company,  acquires  and  resells
ingredients, equipment and feed products primarily to affiliates. In fiscal year
1999,  net sales to  non-affiliates  consisted  primarily  of  ingredient  sales
together with some shipments of feed products.

     On an operating  profit basis, the corporate and Tradico segment recorded a
loss (primarily related to unallocated corporate  administrative items) of $14.6
million  in 1999,  $14.3  million in 1998 and $7.2  million  in 1997.  Corporate
administrative   expenses  increased  $7.1  million  in  1998,   reflecting  the
stand-alone  cost structure of the Company  versus the lower  overhead  expenses
incurred while Ralston owned the Agribrands Businesses.


                         LIQUIDITY AND CAPITAL RESOURCES

     Cash flow from operations  increased by $77.3 million or 232.1% in 1999 due
to increased  cash  earnings and  favorable  changes in working  capital  items,
particularly accounts receivable and inventories.  Accounts receivable decreased
by $20 million in 1999  primarily as a result of  collecting  $12.9  million due
from Ralston at the end of last year. In addition, receivables in Italy declined
by around $5 million due to a  combination  of reduced  sales and  collection of
accounts receivable for value added tax.  Consolidated  inventories decreased by
$12.7 million in 1999 due to lower volumes in Asia,  lower  worldwide  commodity
prices and strategic  grain  purchases made by Mexico in August 1998.  Cash flow
from  operations  decreased by $34.5 million or 50.9% in 1998 due to unfavorable
changes in working  capital items  including the $12.9 million  receivable  from
Ralston recorded in connection with the Distribution.

         Capital   expenditures,   primarily  to  replace  or  enhance  existing
production facilities and equipment, were $25.9 million, $44.6 million and $44.1
million in fiscal years 1999, 1998 and 1997,  respectively.  The Company expects
capital  expenditures  in fiscal  year 2000 to be at or near the level for 1999.


                                       28
<PAGE>

The Company  has a formal  review  procedure  for the  authorization  of capital
expenditures.  Anticipated  capital  expenditures are expected to be funded with
existing cash reserves as well as cash generated from operations.

         Agribrands is continually evaluating new investment  opportunities.  In
fiscal year 1998,  Agribrands  invested $16.6 million to purchase  businesses in
Venezuela, Italy and China. These acquisitions were funded through a combination
of funds  provided  by Ralston  and local  country  borrowings.  Assuming  these
acquisitions  had occurred as of  September  1, 1997,  they would not have had a
material  effect  on  net  sales  or net  earnings  during  any  of the  periods
presented.

         Agribrands' capital  expenditures and acquisitions in fiscal years 1998
and 1997 were  partially  funded with  investments by and advances from Ralston.
Net  proceeds  from  Ralston  were $141.9  million in fiscal year 1998 and $13.7
million in fiscal  year  1997.  In  accordance  with the  Agreement  and Plan of
Reorganization,  Agribrands was spun off from Ralston in 1998 with approximately
$105.0 million of cash and  receivables  from Ralston  (offset by  approximately
$80.0 million of debt retained by Agribrands and its affiliates).

         The  Company's   working  capital   requirements  for  inventories  and
receivables  are influenced  somewhat by  seasonality,  the  availability of raw
materials and changes in commodity costs, and as a result may fluctuate  widely.
The Company has generally  financed its seasonal and other working capital needs
through  short-term  borrowings  provided by local foreign banks and branches of
multi-national banks. Intercompany loans are also used by the Company to finance
working  capital if the loans reduce external local borrowing costs by more than
the  opportunity  cost of lower U.S.  invested  reserves.  In 1999,  the Company
reduced its  short-term  borrowings to $18.5 million from $46.9 million in 1998.
The Company's foreign affiliates have established  uncommitted credit lines with
several lenders in order to assure  availability of working  capital.  On August
31, 1999,  total unused,  uncommitted  lines of credit were  approximately  $200
million. This includes  approximately $90 million of uncommitted lines of credit
for the Company's Korean subsidiary.

         Cash on hand,  cash flow from  operations and borrowings  under various
lines of credit are Agribrands'  primary sources of liquidity.  Management has a
strong  focus on cash  flow and the  effective  use of  excess  cash  flow.  The
combined  operating,  cash and equity position of Agribrands  should continue to
provide the capital flexibility  necessary to fund future  opportunities as well
as to meet existing obligations.

            KEY MEASURES AND CONCEPTS FOR UNDERSTANDING THE BUSINESS

Income over Ingredient Cost (IOIC)

         The commercial  animal feed industry  generally  prices products on the
basis of aggregate  ingredient cost plus a per-unit margin. As ingredient prices
fluctuate,  the changes are generally passed on to customers  through changes in
the Company's  product  pricing.  Income over ingredient cost (which is equal to
net sales minus the cost of ingredients),  rather than sales Dollars, is the key
indicator of revenue  performance  because of the  distortions  in sales Dollars
caused by changes in commodity prices.  Management also monitors IOIC per ton to
evaluate trends in pricing and relative product value.

Dollar-Responsive Economics of International Feed Operations

         Feed is manufactured  by processing a combination of grains,  proteins,
vitamins,  and minerals.  Approximately 80% of the total cost to produce feed is
the  cost  of  these   ingredients,   most  of  which  are   widely   traded  in


                                       29
<PAGE>

Dollar-denominated  global  commodity  markets.  Excluding  logistics costs, the
Dollar  values  (and  costs)  of  ingredients   around  the  world  are  broadly
comparable. Local currency prices for ingredients,  therefore,  typically adjust
quickly to reflect  changes in quoted  Dollar prices and changes in the exchange
rate between the local currency and the Dollar. As raw materials inventories are
replenished after an exchange rate change,  new local currency  ingredient costs
are reflected in local currency feed prices.

         The margin added to  ingredient  costs is less  responsive  to exchange
rate changes because industry pricing is often established by local competitors.
Nevertheless,  exchange rates between the U.S. and other countries (particularly
countries  with  systemic  high  inflation  like many of those where the Company
operates)  are  related  closely to  differentials  between  the U.S.  and local
inflation and interest rates. As a result,  Dollar-translated IOIC levels of the
Company's international  operations generally fluctuate closely around long-term
norms, particularly on a consolidated basis.

Dollar-Based  Earnings Before  Interest,  Taxes,  Depreciation  and Amortization
(EBITDA)

         Management believes the required method of translating foreign currency
financial statements for most of the Company's foreign affiliates (that is using
the local  currency as functional  currency) can distort the economic  impact of
certain items,  specifically  costs of goods sold and foreign exchange gains and
losses  (see Note 2 of the  Company's  Notes to  Financial  Statements  for more
information  concerning the Company's  translation  procedures).  Because of the
Company's earnings mix, these distortions can have a disproportionate  effect on
reported  results.  For this  reason,  management  believes it is  important  to
understand the Company's  operational  results computed using the U.S. Dollar as
the functional currency.

         Dollar-based  accounting was required practice prior to the issuance of
FAS 52 in 1981 and  continues  to be required for U.S.  affiliates  operating in
hyper-inflationary  environments.  This  exception  is  in  recognition  of  the
possible  distortions of local-currency  based accounting.  "Hyper-inflationary"
accounting  is  limited  under FAS 52 to  countries  with  cumulative  inflation
greater  than 100% over  three  years.  This fails to cover  numerous  countries
(including  those in which the Company  generates  the majority of its earnings)
with  consistently  higher inflation than the U.S., whose currency values remain
unstable (typically devaluing over time).

         When exchange rates fluctuate, earnings results using U.S. Dollar-based
accounting  differ from results under local currency  based  accounting in three
important ways:

         o    Cost of goods sold are  measured  using the  exchange  rate at the
              time inventory was purchased  rather than the exchange rate at the
              time finished product was sold.

         o    Foreign  exchange  gains and losses are computed on local currency
              denominated    assets   and    liabilities    rather   than   U.S.
              Dollar-denominated assets and liabilities.

         o    Depreciation is computed by applying the appropriate factor to the
              historical  Dollar  value of the asset rather than by applying the
              appropriate  factor to the  historical  local  currency  value and
              translating the result at the current exchange rate.

                                       30
<PAGE>

         Because  of  its  principal  focus  on  cash  flows,   management  uses
Dollar-based  EBITDA as a key  determinant  of awards for  corporate  management
under its annual  incentive plan. The following table provides a  reconciliation
of pre-tax earnings to Dollar-based  EBITDA for fiscal years 1999 and 1998 (Data
was not available to present 1997 numbers):

  ------------------------------------------------------------------------------
                               Dollar-based EBITDA
                              (Dollars in millions)

                                                           Year ended August 31,
                                                           ---------------------
                                                             1999         1998
                                                           ---------     -------

  Earnings before Income Taxes                              $   70.4     $ 34.2
  Add:   Provisions for restructuring                            -          3.0
         Gain on sale of property                               (2.3)       -
         Depreciation and amortization                          24.8       21.2
         Interest expense                                        8.0       12.0
                                                             -------     ------
  EBITDA reported under FAS 52                               $ 100.9     $ 70.4
  Adjustments to report EBITDA on a U.S. Dollar basis:
  1)     Difference in cost of sales for ingredient costs       (6.1)     (16.6)
  2)     Reversal of foreign exchange loss reported under
         FAS 52                                                  1.5       12.8
  3)     Dollar-based foreign exchange gain                      3.7       12.6
                                                             -------     ------
  EBITDA reported on a U.S. Dollar basis                     $ 100.0     $ 79.2
                                                             =======     =======

Explanation of adjustments to EBITDA:

1)     Difference in cost of sales for ingredient  costs--The  operations in the
       Americas (specifically Brazil and Colombia) accounted for the majority of
       the  adjustment  in 1999 while the  operations  in the  Americas and Asia
       accounted for nearly all of the adjustment in 1998. Ingredient costs were
       lower  under  FAS 52 in  both  years  due  to  devaluation  of the  local
       currencies against the Dollar. Under Dollar-based accounting, inventories
       are initially recorded and maintained in Dollars.

2)     Reversal of foreign exchange loss reported under FAS 52--In 1999, foreign
       exchange  losses  reported  under  FAS 52 in Brazil  were only  partially
       offset by gains in Mexico and Korea. In 1998, the operations in Colombia,
       Mexico and Korea accounted for most of the $12.8 million foreign exchange
       loss reported under FAS 52.

3)     Dollar-based   foreign  exchange  gain--In  1999,   Dollar-based  foreign
       exchange  gains  realized  in Brazil,  Colombia,  Italy and  Mexico  were
       partially  offset  by  losses  in Korea  and the  Philippines.  Except in
       Mexico,  the Company had net local currency  liabilities in each of these
       countries  during 1999.  Where the local  currency  weakened  against the
       Dollar (Brazil,  Colombia and Italy),  this liability decreased in Dollar
       terms (a foreign  exchange gain).  Where the local currency  strengthened
       against the Dollar, (Korea and the Philippines), this liability increased
       in Dollar terms (a loss).  In Mexico,  the Company had net local currency
       denominated assets during 1999 which increased in Dollar value (a foreign
       exchange gain) as the Mexican Peso  strengthened  against the Dollar.  In
       1998, Asian currencies  weakened against the Dollar generating nearly all
       of the $12.6 million foreign exchange gain on net obligations denominated
       in the local Asian currencies.

                                       31
<PAGE>

                   MARKET RISK SENSITIVITY AND INFLATION RISK

Commodity Price Risks

         The availability and price of agricultural products are subject to wide
fluctuations due to unpredictable factors such as weather conditions, government
regulations,  economic  climate or other unforeseen  circumstances.  The Company
utilizes  highly  correlative  and  effective  commodity  futures  contracts and
options to manage  certain of these  exposures.  The  Company  hedges  only firm
commitments or anticipated transactions, and Company policy prohibits the use of
commodity  derivatives  for  speculation.  The  potential  loss in fair value at
August  31,  1999  and  1998 of the  Company's  commodity  positions,  excluding
inventory on hand and fixed price  contracts,  resulting from a hypothetical 10%
adverse   change  in  commodity   prices  is  $0.4  million  and  $0.2  million,
respectively.

Interest Rate Risks

         At August 31, 1999,  the  Company's  debt  portfolio  was  comprised of
approximately  60% variable  rate debt and 40% fixed rate debt.  With respect to
the Company's  variable rate debt, a hypothetical 10% adverse change in interest
rates  would  have had an  unfavorable  impact of  around  $0.5  million  on the
Company's  interest  expense for 1999.  With respect to the Company's fixed rate
debt  outstanding  at August 31,  1999,  a  hypothetical  10% adverse  change in
interest rates would have resulted in approximately a $0.3 million change in the
market value of the Company's fixed rate debt.

Foreign Currency Exchange Risks

         International  operations account for almost all of Agribrands' revenue
and  operating  income.   Foreign  currency  accounting   exposures  arise  from
transactions,   including  firm   commitments  and   anticipated   transactions,
denominated  in a currency other than an entity's  functional  currency and from
foreign  denominated  revenues and profits  translated into U.S.  Dollars.  At a
consolidated  level,  economic  exposures to U.S. Dollar values of the Company's
assets and liabilities  arise because many assets or liabilities are denominated
in local currencies subject to fluctuating rates of exchange with the Dollar.

         Agribrands  periodically enters into foreign exchange forward contracts
to mitigate  Agribrands' economic exposure to changes in exchange rates. Company
policy  allows  foreign  currency  hedging  transactions  only for  identifiable
foreign  currency  exposures, and   therefore,  Agribrands  does not enter  into
foreign  currency  contracts  for trading  purposes  where the  objective  is to
generate  profits.  The potential loss in fair value at August 31, 1999 and 1998
for such net currency positions resulting from a hypothetical 10% adverse change
in  foreign   currency   exchange  rates  is  $0.8  million  and  $0.3  million,
respectively.

     Because of the U.S. Dollar  responsiveness  of the Company's  international
feed operations,  management does not believe that  fluctuations in the exchange
rate between the Dollar and a local currency materially impact the present value
of projected future  Dollar-translated cash flows from the local operation. As a
result,  Agribrands does not generally hedge the accounting  exposure of its net
investments in foreign  subsidiaries.  The net investment in Agribrands' foreign
subsidiaries and affiliates  translated into Dollars using the year-end exchange
rates is  approximately  $228 million and $205  million at August 31, 1999,  and
1998,  respectively.  The potential  accounting loss in value of Agribrands' net
investment in foreign  subsidiaries  resulting from a  hypothetical  10% adverse
change in quoted foreign currency  exchange rates at August 31, 1999 and 1998 is
approximately $20.7 million and $18.7 million, respectively.

                                       32
<PAGE>

Inflation

         Management  recognizes that inflationary  pressures may have an adverse
effect  on  Agribrands  through  higher  asset  replacement  costs  and  related
depreciation   and  higher  material   costs.  In  addition,   hyperinflationary
conditions have occurred in many of the countries in which Agribrands  operates.
Agribrands tries to minimize these effects through geographical diversification,
cost  reductions and  productivity  improvements  as well as price  increases to
maintain  reasonable profit margins.  It is management's view that inflation has
not had a significant  impact on the consolidated  operations in the three years
ended August 31, 1999.

Seasonality

     Sales  prices  and  volume  can  both  be  impacted  by  seasonal  factors.
Agricultural  product  sales  prices are directly  influenced  by changes in the
underlying  commodity  prices for the raw  materials  used to  formulate  animal
feeds.  Commodity  prices are usually at their lowest in the months  immediately
following the fall harvest.  Sales volume may fluctuate  somewhat  seasonally as
temperature  affects  caloric  intake and  breeding  cycles.  For  example,  the
Company's Mexican  subsidiary sells the vast majority of its shrimp feed between
June and October due to the nature of the shrimp farming cycle.

         Currently,  seasonal  factors  have a limited  impact on the  Company's
total performance in any given period.  Seasonality of commodity prices does not
materially  affect  earnings  due to  the  industry  practice  of  pricing  at a
relatively constant margin over ingredient costs. With the possible exception of
shrimp feed sales,  seasonally  driven changes in sales volume do not materially
affect sales or earnings due to the  geographic and species  diversification  of
Agribrands' operations.


                                 YEAR 2000 COSTS

     Many old computer systems, and other systems with embedded chip technology,
process  dates based on two digits for the year of a  transaction  rather than a
full four digits. These systems are unable to properly process dates in the year
2000 and beyond.  Agribrands  utilizes a number of computer  systems  across its
worldwide operations. The Company has identified its significant software coding
issues  related  to the  year  2000  date  recognition  for  key  financial  and
operational  systems.  The Company estimates that it has resolved  approximately
95% of its identified year 2000 coding issues.  Agribrands  spent  approximately
$1.2 million to replace  existing  hardware  and software  during the year ended
August 31,  1999.  The Company  incurred  costs for year 2000  reprogramming  of
existing systems of approximately $0.9 million and $0.6 million during the years
ended  August 31, 1999 and 1998,  respectively.  To make all of its systems year
2000 compliant,  the Company  estimates  incurring an additional $0.2 million of
reprogramming  costs.  In addition,  the Company  expects to spend an additional
$0.3 million on new  hardware and  software.  Completion  of all  reprogramming,
testing and  implementation of new hardware and software is expected to occur by
November 30, 1999. All costs related to the  reprogramming  of existing  systems
for the year 2000 issue are  expensed as  incurred.  Costs of new  hardware  and
software are capitalized.

         Based on the Company's  efforts to date,  management  believes that its
key computer systems and other systems containing  embedded chip technology will
be year 2000  compliant  before  January 1, 2000. The Company has identified its

                                       33
<PAGE>

key customers and suppliers and is working with them to obtain  assurances  that
their systems are year 2000  compliant.  However,  the Company does not have any
control over these third parties and, as a result, cannot currently determine to
what extent future operating results may be adversely affected by the failure of
these third parties to successfully address their year 2000 issues. In addition,
the Company  operates in sixteen  countries on four continents at various stages
of economic  development  and is dependent on systems  operated by  governments,
financial institutions,  utilities,  communications suppliers and others in each
of these  countries.  The failure of any of such  infrastructural  systems to be
year 2000  compliant  could disrupt the Company's  business for a period of time
and if not quickly resolved could have a material adverse effect on the Company.
The Company  believes  that its  geographic  diversification  and  transactional
independence between business units significantly  mitigate the risk of material
adverse effect from year 2000  disruptions.  In the event  disruptions do occur,
the Company's  local  operations  are expected to respond in the same fashion as
they periodically do for disruptions from local natural disasters.

                     EUROPEAN ECONOMIC MONETARY UNION (EMU)

         On January 1, 1999,  eleven of the European Union countries  (including
four countries  where  Agribrands'  operations are located)  adopted the Euro as
their single  currency,  and there is now a fixed  conversion rate between their
existing   currencies  ("legacy   currencies")  and  the  Euro.   Following  the
introduction of the Euro, the legacy  currencies will remain legal tender in the
participating  countries  during  the  transition  period  from  January 1, 1999
through January 1, 2002. Beginning on January 1, 2002, the European Central Bank
will issue Euro-denominated bills and coins for use in cash transactions.  On or
before July 1, 2002, the participating  countries will withdraw all legacy bills
and coins and use the Euro as their legal currency.

         The Company's key financial  information systems in Europe are equipped
to process both Euro and legacy  currency  transactions  through the  transition
period ending January 1, 2002; however, they are not ready to handle the July 1,
2002 withdrawal of all legacy  currencies.  Management is currently  planning to
modify the Company's  key financial  systems so they can handle the July 1, 2002
mandatory  conversion  to the Euro.  The Company has not yet  incurred any costs
associated with the conversion.  To modify the key financial systems so they can
handle the mandatory conversion,  the Company anticipates incurring $0.2 million
of reprogramming costs and spending  approximately $0.2 million on new software.
All  reprogramming  costs will be expensed as incurred,  and all software  costs
will be  capitalized.  The Company plans to complete  system  modifications  and
necessary testing by September 1, 2001.

         From a broader business  perspective,  conversion to the Euro may cause
pricing  disparities  in different  markets to narrow,  lowering  the  Company's
margins.  Nevertheless, the Company believes the conversion to the Euro will not
have a material impact on the Company's consolidated financial results.


                                     OUTLOOK

Near-Term Operating Results

         Excluding the combined effect of current local  environmental  factors,
near-term  earnings are likely to remain relatively  stable. The majority of the
Company's earnings come from affiliates that are well established in their local
markets and have achieved good coverage in the premium segment across most lines
of commercially raised animals. While certain product lines are growing steadily

                                       34
<PAGE>

in some  locations  (for  example,  shrimp feed in  Mexico),  other lines may be
declining elsewhere (for example, rabbit feed in Europe).

         It is difficult to forecast  near-term  earnings trends accurately also
due to the number of environmental factors that may move results up or down from
a "normalized"  level.  Local  agricultural  markets are highly  responsive to a
number of variables including  macro-economic  conditions,  weather, and current
concerns over food and environmental safety. Typically,  large and small changes
in factors like these across the 16 countries  where the Company  operates  will
randomly influence consolidated earnings.

         However,  in 1999 the  Company  enjoyed  strong,  or greatly  improved,
macro-economic  fundamentals  in a  majority  of its larger  markets,  including
Korea, the Philippines, Mexico, and Venezuela. The impact of local conditions in
these  markets  more than  offset  that of  difficult  conditions  in Brazil and
Hungary so that the combined  effect from local factors was unusually  positive.
Should  macro-economic  conditions  be less  positive in fiscal  year 2000,  the
Company will be challenged to match fiscal 1999 financial performance.


Longer-Term Operating Trends

         The Company's  traditional  operating  model is often most effective in
emerging  markets,  with large  numbers of small animal  producers.  Longer-term
prospects for the individual  operations  are heavily  dependent on the evolving
structures of the local animal  production  industries.  Commercial feed is only
one element of a  traditional  system of animal  production  where each stage is
performed  independently.  Under  appropriate  circumstances,  animal production
becomes more concentrated and efficient and the needs of animal producers change
with  consequences  for the feed  manufacturer.  In the most  extreme  case,  an
entirely integrated production model arises,  decreasing the potential number of
animals available to be fed by commercial feed producers.

         The extent of changes to local animal production  methods and the speed
at which those  changes arise is dependent on many  factors,  including  overall
economic  development,  trade policy  initiatives,  and popular and governmental
attitudes  toward food safety,  food security and  environmental  issues.  These
dynamics  already play an important role in the variation of  profitability  and
growth trends across the Agribrands portfolio.

         The  Company  has  built up  substantial  cash  reserves  (and  expects
existing  operations to continue producing free cash flows) which may be applied
toward  investments  and  programs  intended  to  leverage  the  Company's  core
capabilities   in  ingredient   knowledge,   nutritional   expertise  and  rural
distribution, and position the Company to prosper in environments both favorable
and hostile to the traditional commercial feed proposition.

Monetary Factors

     As with operating earnings,  financial costs and income can be difficult to
forecast due, in particular,  to foreign  exchange gains and losses generated by
volatile  exchange  rates and  changing  capital  structures  within the foreign
affiliates.  Currently,  the  Company's  most  significant  exposures to foreign
exchange gains and losses impacting net earnings are in Mexican Pesos, Brazilian
Real, Canadian Dollars,  Korean Won, and Colombian Pesos.  Management focuses on
the exchange gains and losses as computed using U.S.

                                       35
<PAGE>

Dollar-based  accounting.  These too can be volatile as management may not hedge
Dollar-based exchange risks when the benefit does not seem to outweigh the cost.

     With respect to income taxes,  management projects an ongoing effective tax
rate of around 35%, absent unforeseen  foreign losses.  This rate may be subject
to  one-time  reductions  should it become more likely than not that the Company
will be able to utilize  excess  foreign  tax  credits  and net  operating  loss
carryforwards  whose benefits have not been recognized due to uncertainty  about
the Company's long-term tax position.

                                       36
<PAGE>

ITEM 7A.          QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

         See  MARKET  RISK  SENSITIVITY  AND  INFLATION  RISK  and Note 5 of the
Company's  Notes to  Financial  Statements  for  management's  quantitative  and
qualitative disclosure about market risk.


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORT OF MANAGEMENT

         The  management  of  Agribrands  International,  Inc.  has prepared the
accompanying  consolidated  financial  statements for the years ended August 31,
1999, 1998 and 1997 and is responsible for their integrity and objectivity.  The
statements  were prepared in conformity  with  accounting  principles  generally
accepted in the United  States,  applying  certain  estimates  and  judgments as
required.

         The Company maintains  accounting and internal control systems which it
believes  are  adequate  to  provide   reasonable   assurance  that  assets  are
safeguarded  against loss from  unauthorized  use or  disposition  and financial
records are reliable for  preparing  financial  statements.  The  selection  and
training  of  qualified  personnel,   the  establishment  and  communication  of
accounting and administrative policies and procedures,  and an extensive program
of internal audits, are important elements of these control systems.

         The Board of Directors,  through its Audit Committee  consisting solely
of  non-management  directors,  meets  periodically  with  management,  internal
auditors  and  the  independent  accountants  to  discuss  audit  and  financial
reporting  matters.  Both the internal auditors and  PricewaterhouseCoopers  LLP
have direct access to the Audit Committee.

         The report of PricewaterhouseCoopers LLP appears below.


                                       37
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Shareholders and Board of Directors of Agribrands International, Inc.:

     In our  opinion,  the  accompanying  consolidated  balance  sheets  and the
related  consolidated  statements of earnings,  of cash flows,  of  shareholders
equity, of comprehensive income (loss) present fairly, in all material respects,
the financial position of Agribrands International, Inc. and its subsidiaries at
August 31,  1999 and 1998,  and the results of their  operations  and their cash
flows  for the  years  then  ended  in  conformity  with  accounting  principles
generally  accepted in the United  States.  These  financial  statements are the
responsibility of the Company's management;  our responsibility is to express an
opinion on these  financial  statements  based on our audits.  We conducted  our
audits of these  statements in  accordance  with  auditing  standards  generally
accepted in the United States,  which require that we plan and perform the audit
to obtain reasonable  assurance about whether the financial  statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and  disclosures in the financial  statements,  assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall  financial  statement  presentation.  We believe that our
audits provide a reasonable basis for the opinion expressed above.


/s/ PricewaterhouseCoopers LLP
------------------------------
PricewaterhouseCoopers LLP
St. Louis, Missouri
October 8, 1999




                                       38
<PAGE>

                                     AGRIBRANDS INTERNATIONAL, INC.
                                    CONSOLIDATED STATEMENT OF EARNINGS
                                           Year Ended August 31
                                           (Dollars in Millions)



                                                1999         1998        1997
                                             ----------   ----------  ----------

Net Sales                                    $ 1,261.5    $ 1,410.1   $ 1,527.6
                                             ----------   ----------  ----------
Costs and Expenses
     Cost of products sold                     1,050.6      1,207.2     1,322.0
     Selling, general and administrative         143.5        143.6       158.9
     Interest                                      8.0         12.0        10.9
     Provisions for restructuring                  -            3.0         3.2
     Gain on sale of property                     (2.3)         -           -
     Other (income)/expense, net                  (8.7)        10.1        (0.5)
                                             ----------   ----------  ----------
                                               1,191.1      1,375.9     1,494.5
                                             ----------   ----------  ----------

Earnings before Income Taxes                      70.4         34.2        33.1
Income Taxes                                      26.4         20.4        24.4
                                             ----------   ----------  ----------
Net Earnings                                 $    44.0    $    13.8   $     8.7
                                             ==========   ==========  ==========

Earnings Per Share
     Basic                                   $    4.16    $    1.29     $   .82
                                             ==========   ==========  ==========
     Diluted                                 $    4.11    $    1.29     $   .82
                                             ==========   ==========  ==========



The above financial  statement  should be read in conjunction  with the Notes to
Financial Statements.

                                       39
<PAGE>

                                     AGRIBRANDS INTERNATIONAL, INC.
                                       CONSOLIDATED BALANCE SHEET
                                               August 31
                                         (Dollars in Millions)

                                                            1999         1998
                                                          --------     --------
Assets
Current Assets
     Cash and cash equivalents                            $  174.5     $  136.5
     Short-term investments                                    3.5          1.5
     Receivables, less allowance for doubtful accounts        77.0        103.0
     Inventories                                              81.3         98.8
     Other current assets                                      4.6         11.1
                                                          --------     ---------
       Total Current Assets                                  340.9        350.9
                                                          --------     ---------

Investments and Other Assets                                  51.3         50.9
Property, Plant and Equipment - net                          174.0        176.6
                                                          --------     ---------
         Total                                            $  566.2     $  578.4
                                                          ========     =========

Liabilities and Shareholders Equity
Current Liabilities
     Current maturities of long-term debt                 $    2.4     $    8.7
     Notes payable                                            18.5         46.9
     Accounts payable and accrued liabilities                125.1        132.8
     Income taxes                                              8.5          8.8
                                                          ---------    ---------
       Total Current Liabilities                             154.5        197.2
                                                          ---------    ---------

Long-Term Debt                                                11.5         14.2
Deferred Income Taxes                                          3.7          2.7
Other Liabilities                                             23.2         24.9

Shareholders Equity
     Common stock, $.01 par value, authorized
       50,000,000 shares                                       0.1          0.1
     Capital in excess of par value                          419.5        419.5
     Retained earnings                                        50.1          6.1
     Common stock in treasury, at cost                       (10.8)         -
     Accumulated other comprehensive loss                    (85.6)       (86.3)
                                                          ---------    ---------
       Total Shareholders Equity                             373.3        339.4
                                                          ---------    ---------
         Total                                            $  566.2     $  578.4
                                                          =========    =========


The above financial  statement  should be read in conjunction  with the Notes to
Financial Statements.

                                       40
<PAGE>

<TABLE>

                                              AGRIBRANDS INTERNATIONAL, INC.
                                           CONSOLIDATED STATEMENT OF CASH FLOWS
                                                   Year Ended August 31
                                                  (Dollars in Millions)
<CAPTION>

                                                                                 1999          1998          1997
                                                                              -----------   -----------   -----------
<S>                                                                             <C>           <C>          <C>

Cash Flow from Operations
    Net earnings                                                                $  44.0       $  13.8      $    8.7
    Adjustments to reconcile net earnings to cash from operations:
      Depreciation and amortization                                                24.8          21.2          21.9
      Foreign exchange loss                                                         1.5          12.8           3.7
      Non-cash restructuring                                                        -             0.7           2.2
      Deferred income taxes                                                         1.9          (5.1)          1.9
      Gain on sale of property                                                     (2.3)          -             -
      Changes in assets and liabilities used in operations:
        Decrease (increase) in accounts receivable                                 20.0          (6.5)         (2.7)
        Decrease (increase) in inventories                                         12.7          (4.1)         16.6
        Decrease (increase) in other current assets                                 6.0          (1.2)         (1.1)
        Increase (decrease) in accounts payable and accrued liabilities             1.7          (6.0)         10.3
        (Decrease) increase in income taxes payable                                (0.4)          3.3           0.7
      Other, net                                                                    0.7           4.4           5.6
                                                                                ---------     ---------    ----------
          Net cash provided by operations                                         110.6          33.3          67.8
                                                                                ---------     ---------    ----------

Cash Flow from Investing Activities
    Acquisitions of businesses                                                      -           (16.6)         (3.3)
    Property additions                                                            (25.9)        (44.6)        (44.1)
    Proceeds from the sale of property                                              6.5           1.2           2.0
    Purchase of key man life insurance                                             (5.0)          -             -
    Other, net                                                                     (3.0)          0.3           6.9
                                                                                ---------     ---------    ----------
          Net cash used by investing activities                                   (27.4)        (59.7)        (38.5)
                                                                                ---------     ---------    ----------

Cash Flow from Financing Activities
    Proceeds from issuance of long-term debt                                       11.0          19.0           3.8
    Principal payments on long-term debt, including current maturities            (16.8)        (32.4)         (5.3)
    Net (decrease) increase in notes payable                                      (27.3)         16.7         (33.3)
    Treasury stock purchases                                                      (10.8)          -             -
    Net transactions with Ralston                                                   -           141.9          13.7
                                                                                ---------     ---------    ----------
          Net cash (used by) provided by financing activities                     (43.9)        145.2         (21.1)
                                                                                ---------     ---------    ----------

Effect of Exchange Rate Changes on Cash and Cash Equivalents                       (1.3)         (7.5)         (3.3)
                                                                                ---------     ---------    ----------
Net Increase in Cash and Cash Equivalents                                          38.0         111.3           4.9
Cash and Cash Equivalents, Beginning of Period                                    136.5          25.2          20.3
                                                                                ---------     ---------    ----------
Cash and Cash Equivalents, End of Period                                         $174.5        $136.5      $   25.2
                                                                                =========     =========    ==========

</TABLE>

The above financial  statement  should be read in conjunction  with the Notes to
Financial Statements.

                                       41
<PAGE>
<TABLE>
<CAPTION>

                                               AGRIBRANDS INTERNATIONAL, INC.
                                        CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY
                                              Three Years Ended August 31, 1999
                                                    (Dollars in Millions)

                                                                                                              Accumulated
                                         Ralston                    Capital in                  Common           Other
                                         Equity       Common        Excess of     Retained     Stock in      Comprehensive
                                       Investment     Stock         Par Value     Earnings     Treasury           Loss
                                       ----------     ------        -----------   --------     --------      -------------
<S>                                     <C>           <C>           <C>           <C>          <C>             <C>

Balance at August 31, 1996              $ 190.3
Net earnings                                8.7
Net transactions with Ralston              20.5
Translation adjustment                    (21.4)
                                        -------
Balance at August 31, 1997              $ 198.1
Net earnings                                7.7
Net transactions with Ralston             142.8
Translation adjustment                    (15.3)
                                        -------
Balance at March 31, 1998               $ 333.3
Distribution to Ralston's
     shareholders                        (333.3)      $   .1        $ 419.5       $   -        $   -           $ (86.3)
Net earnings                                -             -             -            6.1           -               -
Translation adjustment                      -             -             -             -            -               -
                                        -------       ------        -------       ------       ------           -------
Balance at August 31, 1998              $   -         $   .1        $ 419.5       $  6.1       $   -           $ (86.3)
Net earnings                                -             -             -           44.0           -               -
Treasury stock purchased                    -             -             -             -         (10.8)             -
Activity under stock plans                  -             -             -             -            -               -
Translation adjustment                      -             -             -             -            -               0.7
                                        -------       ------        -------       ------       ------          -------
Balance at August 31, 1999              $   -         $   .1        $ 419.5       $ 50.1       $(10.8)         $ (85.6)
                                        =======       ======        =======       ======       ======          =======
</TABLE>

The above financial  statement  should be read in conjunction  with the Notes to
Financial Statements.

                                       42
<PAGE>


                                      AGRIBRANDS INTERNATIONAL, INC.
                           CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)
                                           Year Ended August 31
                                           (Dollars in Millions)



                                              1999        1998         1997
                                             ------     --------    ---------
Net earnings                                 $ 44.0     $  13.8     $    8.7
Foreign currency translation adjustment         0.7       (15.3)       (21.4)
                                             ------     --------    ---------
Comprehensive Income (Loss)                  $ 44.7     $  (1.5)    $  (12.7)
                                             ======     ========    =========





The above financial  statement  should be read in conjunction  with the Notes to
Financial Statements.

                                       43
<PAGE>

                         AGRIBRANDS INTERNATIONAL, INC.
                          NOTES TO FINANCIAL STATEMENTS
                   (Dollars in millions except per share data)


1.       BASIS OF PRESENTATION

         Effective  April  1,  1998  (the   "Distribution   Date"),   Agribrands
International,  Inc.  (the  "Company" or  "Agribrands")  became an  independent,
publicly owned company as a result of the distribution by Ralston Purina Company
("Ralston")  of the Company's  $.01 par value Common Stock to holders of Ralston
Common Stock at a distribution ratio of one for ten (the "Distribution").  Prior
to the  Distribution,  the Company was formed as a wholly  owned  subsidiary  of
Ralston  for  the  purpose  of  effecting  the  Distribution.  Included  in this
transaction was the transfer of substantially  all of the assets and liabilities
related  to  the  animal  feeds  and  agricultural   products   businesses  (the
"Agribrands Businesses").  Ralston's international pet products businesses ("RPI
Consumer")  were not  included  in the  spin-off.  Ralston  did not  retain  any
ownership interest in the Company.

         Agribrands is one of the leading international  producers and marketers
of animal  feeds and,  through  its  subsidiaries  and joint  venture  partners,
operates 71  manufacturing  plants in 16  countries.  Its  products are marketed
outside the United States under the "Purina"(R) and "Chow"(R) trademarks and the
"Checkerboard"(R)  logo  through a network of  approximately  3,400  independent
dealers, as well as an independent and a direct sales force.

         The Balance Sheets   as of August 31, 1999  and 1998  and the Statement
of Earnings for the year ended August 31, 1999 are  presented on a  consolidated
basis. The Statement of Earnings for the year ended August 31, 1998 includes the
combined  results of operations of the Agribrands  Businesses  under Ralston for
the seven months prior to the Distribution Date and the consolidated  results of
operations  of the Company for the five month period ended August 31, 1998.  The
Statement  of  Earnings  for all  periods  prior  to the  Distribution  Date  is
presented on a combined  basis and reflects periods  during which the Agribrands
Businesses  operated  primarily as wholly-owned  subsidiaries of Ralston and its
subsidiaries.  The combined  financial  statements include revenues and expenses
that  are  directly  related  to  the  Agribrands  Businesses.  All  significant
intercompany  transactions  have been  eliminated  from the  combined  financial
statements.

         RPI  Consumer,   while  not  included  in  the  accompanying  financial
statements,  generally  operated within the same  subsidiaries and affiliates as
the Agribrands Businesses prior to the Distribution Date. See Note 13 for a more
complete discussion.

         Certain previously reported amounts have been reclassified to make them
consistent with the current year presentation.

                                       44
<PAGE>
                         AGRIBRANDS INTERNATIONAL, INC.
                          NOTES TO FINANCIAL STATEMENTS
                   (Dollars in millions except per share data)


2.       SUMMARY OF ACCOUNTING POLICIES

         Agribrands'   significant   accounting   policies,   which  conform  to
accounting principles generally accepted in the United States and are applied on
a consistent basis among years, except as indicated, are described below:

         Principles of  Consolidation - These financial  statements  include the
accounts of Agribrands  and its  majority-owned  subsidiaries.  All  significant
intercompany  transactions  have  been  eliminated.  Investments  in  affiliated
companies, 20% through 50%-owned, are carried at equity.

         Minority interests in earnings of subsidiaries and Agribrands' share of
the net earnings of  unconsolidated  companies carried at equity are included in
selling, general and administrative expenses.

         Foreign  Currency   Translation  -  Financial   statements  of  foreign
operations  where the local currency is the  functional  currency are translated
using  exchange  rates in effect at period end for assets  and  liabilities  and
average  exchange  rates  during the period for results of  operations.  Related
translation  adjustments  are reported as a separate  component of  Shareholders
Equity.

         For foreign operations where the U.S. Dollar is the functional currency
and  for  countries  which  are  considered  highly  inflationary,   translation
practices  differ  in that  inventories,  investments,  properties,  accumulated
depreciation  and  depreciation  accounts are translated at historical  rates of
exchange and related translation adjustments are included in earnings. Gains and
losses from foreign currency transactions are included in earnings.

         Derivative Financial Instruments - All derivative financial instruments
held by the Company are  designated as hedges of existing  assets,  liabilities,
firm  commitments  or  identifiable  transactions.  They  have a high  degree of
correlation with the underlying  exposure and are highly effective in offsetting
underlying  price movements.  Accordingly,  gains and losses from changes in the
fair value of  derivatives  are deferred and included in the  measurement of the
related  transaction.  Losses are not deferred if it is estimated  that deferral
would lead to recognizing losses in later periods. If the underlying transaction
was no  longer  expected  to  occur,  any  gain  or  loss  would  be  recognized
immediately in the Statement of Earnings. See Note 5 for additional information.

         Cash  Equivalents  are  considered to be all highly liquid  investments
with a maturity of three months or less when purchased,  including time deposits
of $19.2 and $12.8 at August 31, 1999 and 1998, respectively.

         Short-term Investments are valued at cost which approximates market.

         Inventories  are  valued  generally  at the  lower of  average  cost or
market.

         Property  at Cost -  Expenditures  for new  facilities  and those which
substantially  increase the useful  lives of the  property,  including  interest
during construction,  are capitalized.  Maintenance,  repairs and minor renewals
are expensed as incurred.  When properties are retired or otherwise disposed of,
the related cost and accumulated  depreciation are removed from the accounts and
gains or losses on the dispositions are reflected in earnings.

                                       45
<PAGE>
                         AGRIBRANDS INTERNATIONAL, INC.
                          NOTES TO FINANCIAL STATEMENTS
                   (Dollars in millions except per share data)


         Depreciation  is  generally  provided  on the  straight-line  basis  by
charges to costs or expenses at rates based on the estimated useful lives of the
properties.  Estimated  useful lives range from 3 to 15 years for  machinery and
equipment and 15 to 40 years for  buildings.  Depreciation  expense was $22.7 in
1999, $19.3 in 1998 and $19.6 in 1997.

         Goodwill, which is included in Investments and Other Assets, represents
the excess of cost over the net tangible  assets of acquired  businesses  and is
amortized over periods of up to 40 years, with the majority being amortized over
a 25 year period.

         Subsequent to acquisition,  Agribrands  continually  evaluates  whether
later  events and  circumstances  have  occurred  that  indicate  the  remaining
estimated  useful life of businesses  carrying  goodwill may warrant revision or
that the remaining  balance of goodwill may not be recoverable.  The measurement
of  possible  impairment  is based on the  ability  to  recover  the  balance of
goodwill from expected future operating cash flows on an undiscounted  basis. In
the opinion of management,  no such impairment existed as of August 31, 1999 and
1998.

         Revenue is recognized  when  products are shipped to  customers.  Sales
discounts,  returns and allowances are included in net sales.  The provision for
doubtful accounts is included in selling, general and administrative expenses.

         Advertising  Costs are  expensed  as  incurred  and were $13.9 in 1999,
$13.7 in 1998 and $16.8 in 1997.

         Research and  Development  Costs are expensed as incurred and were $7.0
in 1999, $6.8 in 1998 and $6.9 in 1997.

         Use  of  Estimates  -  The  preparation  of  financial   statements  in
conformity with accounting  principles  generally  accepted in the United States
requires  management to make estimates and assumptions  that affect the reported
amounts  of assets and  liabilities  and  disclosure  of  contingent  assets and
liabilities at the date of the financial statements, and the reported amounts of
revenues and expenses during the reporting  period.  Actual results could differ
from those estimates.

         Income Taxes - Agribrands  follows the  liability  method of accounting
for  income  taxes.  Deferred  income  taxes are  recognized  for the  effect of
temporary  differences  between financial and tax reporting.  No additional U.S.
taxes have been  provided  on earnings  of foreign  subsidiaries  expected to be
reinvested  indefinitely.  Additional  income taxes are  provided,  however,  on
planned  repatriation of foreign  earnings after taking into account  tax-exempt
earnings and applicable foreign tax credits.  Deferred tax assets are reduced by
valuation allowances when, based on the weight of available evidence, it is more
likely than not that some or all of the deferred tax asset will not be realized.

         Earnings per Share - Basic earnings per share are based on the weighted
average number of shares  outstanding  during the year including  assumed shares
outstanding  of 10.7  million for all periods  prior to the  Distribution  Date.
Diluted  earnings per share are adjusted for the dilutive effect of common stock
equivalents. See Note 11 for additional information.

                                       46
<PAGE>

                         AGRIBRANDS INTERNATIONAL, INC.
                          NOTES TO FINANCIAL STATEMENTS
                   (Dollars in millions except per share data)

         New Accounting  Standards - The Financial  Accounting  Standards  Board
issued FAS 133, "Accounting for Derivative  Instruments and Hedging Activities,"
in June 1998.  The Company is evaluating the effects this statement will have on
its  financial  reporting  and  disclosures.  The Company  will adopt FAS 133 in
fiscal year 2001.


3.       ACQUISITIONS

         In January 1998, the Company acquired feed mills in Maracay,  Venezuela
and Spessa,  Italy for $4.3 and $7.3,  respectively.  Agribrands  had previously
leased the feed mills in both Maracay and Spessa.

         In  December  1997,  Agribrands  invested  $5.0  in  Agribrands  Purina
(Langfang)  Feedmill Co., Ltd., a new wholly owned foreign  subsidiary.  The new
subsidiary  utilized  the funds to  acquire a feed  mill in  Langfang,  People's
Republic of China.

         These  acquisitions  were  accounted  for using the purchase  method of
accounting and the results of operations have been included in the  Consolidated
Statement of Earnings from the date of acquisition.  Assuming these acquisitions
had occurred as of the beginning of their  respective  fiscal years,  they would
not have had a material effect on net sales, net earnings or earnings per share.

                                       47
<PAGE>
                         AGRIBRANDS INTERNATIONAL, INC.
                          NOTES TO FINANCIAL STATEMENTS
                   (Dollars in millions except per share data)


4.       BUSINESS SEGMENT AND GEOGRAPHIC AREA INFORMATION

         In fiscal year 1999, the Company  adopted FAS 131,  "Disclosures  about
Segments of an  Enterprise  and Related  Information."  This  standard  requires
disclosure  of  segment  information  on the same basis as used  internally  for
evaluating segment performance. The Company and its subsidiaries are principally
engaged in the  production and sale of  agricultural  animal feed. The Company's
businesses are organized by geographic  area.

         o    The  Americas  segment  consists of the  Company's  businesses  in
              Brazil, Canada, Colombia, Guatemala, Mexico, Peru and Venezuela.
         o    The Europe segment consists of the Company's businesses in France,
              Hungary,  Italy,  Portugal,  Spain and Turkey.
         o    The Asia segment consists of the Company's  businesses  in  China,
              the Philippines and South Korea.
         o    The corporate and Tradico segment is located in the United States.
              It  includes  Tradico,  which  sources  and  resells  ingredients,
              equipment,  and  products  primarily to  affiliates.  This segment
              also includes certain  corporate  items that were not allocated to
              the other segments.

         Summarized below is the Company' business segment  information for the
years ended August 31, 1999,  1998 and 1997.  Prior years'  information has been
restated for the adoption of FAS 131.

                                          1999           1998           1997
                                       -----------   -----------    -----------
Net Sales - External
      Americas                          $   572.5    $    625.6      $   599.6
      Europe                                341.8         397.2          467.7
      Asia                                  344.6         387.3          460.3
      Corporate and Tradico (U.S.)            2.6           -              -
                                        ---------    ----------      ---------
           Total                        $ 1,261.5    $  1,410.1      $ 1,527.6
                                        =========    ==========      =========

Net Sales - Intersegment
      Americas                          $     -      $      -        $     -
      Europe                                  -             -              -
      Asia                                    -             -              -
      Corporate and Tradico (U.S.)          102.0          92.9           55.5
                                        ---------    ----------      ---------
           Total                        $   102.0        $ 92.9      $    55.5
                                        =========    ==========      =========

Depreciation & Amortization
      Americas                          $     7.9    $      6.8      $     6.9
      Europe                                  8.0           8.3            8.6
      Asia                                    8.1           5.9            6.4
      Corporate and Tradico (U.S.)            0.8           0.2            -
                                        ---------    ----------      ---------
           Total                        $    24.8    $     21.2      $    21.9
                                        =========    ==========      =========

                                       48
<PAGE>

                         AGRIBRANDS INTERNATIONAL, INC.
                          NOTES TO FINANCIAL STATEMENTS
                   (Dollars in millions except per share data)

                                               1999       1998        1997
                                             -------    -------      -------

Operating Profit
       Americas                              $ 33.4     $  33.5      $ 16.0
        Europe                                 15.6        11.9         5.1
        Asia                                   33.0        28.2        32.8
        Corporate and Tradico (U.S.)          (14.6)      (14.3)       (7.2)
                                             -------    --------     -------
                                               67.4        59.3        46.7
      Provisions for restructuring              -          (3.0)       (3.2)
      Gain on sale of property                  2.3         -           -
      Interest expense                         (8.0)      (12.0)      (10.9)
      Other income/(expense), net               8.7       (10.1)        0.5
                                             -------    --------     -------
           Earnings before Income Taxes      $ 70.4     $  34.2      $ 33.1
                                             =======    ========     =======

Capital Expenditures
      Americas                               $ 11.1     $  16.7      $ 13.3
      Europe                                    5.6         7.7        14.4
      Asia                                      9.1        19.5        16.4
      Corporate and Tradico (U.S.)              0.1         0.7         -
                                             -------    --------     -------
           Total                             $ 25.9     $  44.6      $ 44.1
                                             =======    ========     =======

Total Assets
      Americas                               $169.3     $ 188.7      $177.8
      Europe                                  116.0       139.7       143.9
      Asia                                    144.5       132.5       156.6
      Corporate and Tradico (U.S.)            136.4       117.5         2.9
                                             -------    --------     -------
           Total                             $566.2     $ 578.4      $481.2
                                             =======    ========     =======

         Net sales and total assets for each of the  Company's  businesses  were
assigned to the  geographic  area where that business is located.  The Company's
businesses are located in sixteen countries (and the United  States).  No single
customer  accounted  for more than 10% of sales.  Net sales  attributed to South
Korea were $238.8,  $281.4 and $330.3 in the years ended  August 31, 1999,  1998
and 1997,  respectively.  Net sales attributed to Mexico were $154.3, $162.0 and
$128.1 in the years ended  August 31,  1999,  1998 and 1997,  respectively.  Net
sales attributable to an individual country,  other than South Korea and Mexico,
were not material for disclosure.  Net property,  plant and equipment attributed
to South  Korea were  $101.8 and $94.0 in the years  ended  August 31,  1999 and
1998,  respectively.  Net  property,  plant  and  equipment  attributable  to an
individual country, other than South Korea, were not material for disclosure.

                                       49
<PAGE>
                         AGRIBRANDS INTERNATIONAL, INC.
                          NOTES TO FINANCIAL STATEMENTS
                   (Dollars in millions except per share data)


5.       FINANCIAL INSTRUMENTS

         Derivatives - The Company  currently uses forwards and option contracts
to manage  foreign  currency  risk and futures  and options to manage  commodity
price risk.  Derivatives used by the Company have an initial term of less than a
year,  and all currently  hedged  transactions  are expected to occur within the
next  year.   Because  the  Company  hedges  with  instruments  that  have  high
correlation with the underlying transaction pricing,  changes in derivative fair
values are expected to be offset by changes in pricing.

         The following  summarizes the notional  transaction  amounts,  carrying
amounts and fair values for all  outstanding  derivatives,  by risk category and
instrument type, at August 31:
<TABLE>
<CAPTION>

                                                    1999                                      1998
                                    --------------------------------------   ---------------------------------------
                                     Notional     Carrying       Fair         Notional     Carrying        Fair
                                      Amount       Amount        Value         Amount       Amount         Value
                                    ------------ ------------ ------------   ------------ ------------  ------------
<S>                                  <C>          <C>          <C>             <C>         <C>           <C>

Foreign Currency:
  Forwards                           $  7.3       $  -         $ (0.1)         $ 2.5       $  -          $  -
  Options                               -            -            -              -            -             -
                                     -------      ------       --------        -------     ------        --------
                                        7.3          -           (0.1)           2.5          -             -
                                     -------      ------       --------        -------     ------        --------

Commodity Price:
  Futures                               4.1          -           (0.2)           2.3          -             0.3
  Options                               0.5          -            -              1.8          -            (0.1)
                                     -------      ------       --------        -------     ------        --------
                                        4.6          -           (0.2)           4.1          -             0.2
                                     -------      ------       --------        -------     ------        --------

Total of outstanding derivatives     $ 11.9       $  -         $ (0.3)         $ 6.6       $  -          $  0.2
                                     =======      ======       ========        =======     ======        ========
</TABLE>

         The fair value of derivative  financial  instruments is the amount that
Agribrands  would  receive  (or  pay)  to  terminate  the  specific  agreements,
considering  first,  quoted market prices of  comparable  agreements,  or in the
absence of quoted market  prices,  such factors as currency  exchange  rates and
remaining maturities.

         Concentration  of Credit  Risk - The  Company  does not have a material
concentration  of credit  risk.  Concentrations  of credit risk with  respect to
accounts receivable are limited due to the large number of customers,  generally
short payment terms and their dispersion across geographic areas.

         Nonderivative   Financial   Instruments   -   Nonderivative   financial
instruments include cash equivalents, short-term investments, and short-term and
long-term  debt.  The  carrying   amounts  for  cash   equivalents,   short-term
investments and short-term debt approximate fair value. Agribrands has long-term
debt in numerous  countries under a variety of terms and arrangements.  Based on
quoted market prices for borrowing  arrangements that are the same or similar to
the major  components of its long-term  debt, the Company  believes the carrying
amounts for long-term debt approximate fair value.

                                       50
<PAGE>
                         AGRIBRANDS INTERNATIONAL, INC.
                          NOTES TO FINANCIAL STATEMENTS
                   (Dollars in millions except per share data)


6.       INCENTIVE COMPENSATION PLANS

         Under terms of the  Company's  1998  incentive  stock  plan,  officers,
directors and employees may be granted  non-qualified  stock options to purchase
the Company's  common stock at no less than 100% of the market price on the date
the  option  is  granted.  The  plan  also  authorizes  the  issuance  of  stock
appreciation  rights (SARs) settled by cash payment.  Options and SARs generally
vest over five years and have a maximum term of 10 years. At August 31, 1999 and
1998,  a  total  of 0.8  million  and 1.5  million  shares,  respectively,  were
available for future awards under the plan.

         There were 161,750 and 98,500 SARs  outstanding  at August 31, 1999 and
1998,  respectively.  The Company recognizes compensation expense for SARs based
on the amount that the Company's  common share price exceeds the exercise  price
and the  percentage  of vesting.  During the  year-ended  August 31,  1999,  the
Company  recognized  $0.7 of  compensation  expense  for SARs.  No  compensation
expense was recognized for SARs in 1998 because the exercise  prices of the SARs
were greater than the year-end market price of the common shares.

         The Company applies APB Opinion No. 25 and related  interpretations  in
accounting for its stock options.  Had compensation cost for the Company's stock
options  been  recognized  based on the fair  value on the grant  date under the
methodology  prescribed  by FAS 123, the Company's net earnings and earnings per
share  would  have  been  reduced  to the pro  forma  amounts  indicated  in the
following table. The pro forma amounts may not be  representative  of future pro
forma disclosures.

                                                   1999              1998
                                                 ----------        ----------
Reported net earnings                              $ 44.0            $ 13.8
Pro forma net earnings                               40.5              12.8

Reported diluted earnings per share                $ 4.11            $ 1.29
Pro forma diluted earnings per share                 3.78              1.20

         The fair value of options  granted  (which is amortized to expense over
the options  vesting period in determining the pro forma impact) is estimated on
the  date of  grant  using  the  Black-Scholes  option  pricing  model  with the
following weighted-average assumptions:

                                                    1999              1998
                                                 ----------        ----------
Risk-free interest rate                               4.6%              5.7%
Expected life of option                            8 years           9 years
Expected volatility of Agribrands stock              35.0%             30.0%
Expected dividend yield on Agribrands stock           0.0%              0.0%


                                       51
<PAGE>

                         AGRIBRANDS INTERNATIONAL, INC.
                          NOTES TO FINANCIAL STATEMENTS
                   (Dollars in millions except per share data)


The weighted  average fair value of options  granted  during 1999 and 1998 is as
follows:

                                                         1999           1998
                                                       ---------      --------
Fair value of each option granted                      $ 10.19        $ 18.62
Total number of options granted (in millions)             0.65           1.12
                                                       ---------      --------
Total fair value of options granted (in millions)      $  6.6         $ 20.9
                                                       =========      ========

         The following summarizes stock option plan activity during the year
ended August 31:


<TABLE>
<CAPTION>

                                                   1999                         1998
                                            ----------------------       ----------------------
                                                         Weighted                     Weighted
                                                          Average                      Average
                                                         Exercise                     Exercise
                                            Options        Price         Options        Price
                                            -------      --------        -------      --------
<S>                                         <C>           <C>             <C>           <C>

Outstanding at beginning of year            1,115,000      $ 36.43             -        $  -
  Granted                                     646,250        22.00        1,122,500       36.41
  Exercised                                    (1,500)       30.06             -           -
  Cancelled                                   (10,000)       29.85           (7,500)      34.25
                                            ---------                     ---------
Outstanding at end of year                  1,749,750      $ 31.14        1,115,000     $ 36.43
                                            =========                     =========
Options exercisable at year end                  -            -                -           -
                                            =========                     =========
</TABLE>


         A summary of stock options  currently  outstanding  and  exercisable at
August 31, 1999 is presented below:


<TABLE>
<CAPTION>

                           Options Outstanding         Options Exercisable
                         ------------------------    -----------------------
                         Wtd. Avg.      Wtd. Avg.                  Wtd. Avg.
Range of                 Remaining      Exercise                   Exercise
Prices     Number        Life           Price        Number          Price
--------   ------        ---------      --------     ------  ---------------
<S>        <C>           <C>            <C>          <C>            <C>


$21-30       627,250     9 years        $ 21.69         -           $    -
$31-40     1,122,500     9 years        $ 36.43         -           $    -
           ---------                                  -----
$21-40     1,749,750     9 years        $ 31.14         -           $    -

</TABLE>


                                      52
<PAGE>
                         AGRIBRANDS INTERNATIONAL, INC.
                          NOTES TO FINANCIAL STATEMENTS
                   (Dollars in millions except per share data)


7.       PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS

         Certain foreign employees are covered by defined benefit pension plans,
some of which are required by local law or coordinated with government-sponsored
plans.  These plans generally provide  retirement or severance benefits based on
years  of  service  and  compensation.  In  addition,   substantially  all  U.S.
administrative employees participate in the Company's defined contribution plan.

         Total pension  expense is presented  below for the Company's  principal
defined  benefit   pension  plans  (all  foreign)  and  the  Company's   defined
contribution plans for the three years ended August 31:

                                                      1999       1998      1997
                                                     -------    -------   ------
Defined benefit plans
  Service cost for benefits earned during the year   $ 1.6      $ 1.6     $ 1.7
  Interest cost on projected benefit obligation        2.0        2.3       2.6
  Assumed return on plan assets                       (1.6)      (2.6)     (3.0)
  Amortization of:
    Net actuarial (gain)/loss                          0.1       (0.1)      0.1
    Prior service cost                                 0.1        0.1       0.1
    Transition asset                                  (0.1)      (0.3)     (0.5)
                                                     ------     -------   ------
Total costs for defined benefit plans                  2.1        1.0       1.0
Defined contribution plans                             0.3        0.1       -
                                                     ------     -------   ------
            Total                                    $ 2.4      $ 1.1     $ 1.0
                                                     ======     =======   ======

         The key  actuarial  assumptions  used  in  determining  annual  pension
expense for the principal  defined benefit plans reflect  weighted  averages for
the component plans. These plans are located in various countries throughout the
world, and the assumptions were determined based on local economic conditions in
these countries. The assumptions were as follows:

                                                       1999       1998      1997
                                                      ------     ------    -----
Discount rate                                          9.2%       9.2%      9.2%
Rate of increase of future compensation levels         7.4%       7.4%      7.3%
Long-term rate of return on assets                     9.9%       9.4%      9.7%

         The following  tables  summarize  the changes in the projected  benefit
obligation  and the change in fair  market  value of plan  assets for all of the
Company's principal defined benefit pension plans for the two years ended August
31:

                                       53
<PAGE>

                         AGRIBRANDS INTERNATIONAL, INC.
                          NOTES TO FINANCIAL STATEMENTS
                   (Dollars in millions except per share data)



                                                              1999        1998
                                                             -------     -------
Change in Projected Benefit Obligation (PBO):
--------------------------------------------
PBO, beginning of year                                       $ 20.5      $ 32.6
Service cost                                                    1.6         1.6
Interest cost                                                   2.1         2.4
Employee contributions                                          0.2         0.2
Plan amendments                                                 0.3        (0.9)
Actuarial gain/(loss)                                           1.3        (0.5)
Transfer to Ralston                                             -          (6.4)
Benefits paid                                                  (3.5)       (2.1)
Translation adjustment                                          1.8        (6.4)
                                                             -------     -------

PBO, end of year                                             $ 24.3      $ 20.5
                                                             =======     =======
Change in Plan Assets:
---------------------
Fair market value, beginning of year                         $ 14.6      $ 38.5
Actual return on plan assets                                    1.6         1.0
Employer contributions                                          4.0         3.0
Employee contributions                                          0.2         0.2
Transfer to Ralston                                             -         (21.9)
Benefits paid                                                  (3.4)       (2.0)
Translation adjustment                                          1.5        (4.2)
                                                             -------     -------

Fair market value, end of year                               $ 18.5      $ 14.6
                                                             =======     =======

         The following table provides a  reconciliation  of the funded status of
the principal  defined  benefit  plans to the amounts  recognized in the balance
sheet at August 31:

                                                              1999        1998
                                                             --------    -------
Funded status - plan assets (under)/over benefit
     obligation                                              $ (5.8)     $ (5.9)
Unrecognized net loss                                           3.6         2.1
Unrecognized prior service cost                                 1.0         0.6
Unrecognized net asset at transition, net of
     amortization                                              (0.4)       (0.4)
                                                             --------    -------

Net pension liability                                        $ (1.6)     $ (3.6)
                                                             =======     =======

         The net pension  liability  disclosed  above does not  include  balance
sheet  accruals  for  unfunded  defined  benefit  plans of $12.3 and $12.4 as of
August 31, 1999 and 1998, respectively. These accruals approximate the actuarial
present value of vested  benefits for these plans or represent  accrual  amounts
that comply with local regulations for required termination payments.

         The Company  currently  does not provide other  postretirement  defined
benefits.  Prior to the  Distribution,  Ralston  provided defined benefit health
care and life  insurance  benefits  for a limited  group of  retired  employees.
Ralston also sponsored  plans whereby certain  management  employees could defer
compensation in exchange for defined cash benefits after retirement. The cost of
these  postretirement  benefits  allocated to Agribrands was not  significant in
1998 or 1997.


                                       54
<PAGE>
                         AGRIBRANDS INTERNATIONAL, INC.
                          NOTES TO FINANCIAL STATEMENTS
                   (Dollars in millions except per share data)




8.       PROVISIONS FOR RESTRUCTURING

         In 1998, Agribrands recorded provisions for restructuring which reduced
earnings  before  income taxes by $3.0 and net earnings by $1.7.  These  charges
represented primarily severance costs and fixed asset write-offs associated with
the   streamlining   of  Agribrands'   operations  in  Europe.   Provisions  for
restructuring  in 1997 related to the closing of production  facilities  and the
reorganization of certain administrative  functions. All severance costs related
to these restructuring provisions were paid by August 31, 1999.

         Components  of the  provisions  for the  years  ended  August 31 are as
follows:

                                                  1999        1998        1997
                                                  ------     -------     -------
Severance                                         $  -        $ 2.2       $ 0.6
Other cash costs                                     -          0.1         0.4
Fixed asset writedown                                -          0.7         2.2
                                                  ------     -------     -------
                                                  $  -        $ 3.0       $ 3.2
                                                  ======     =======     =======

         The following summarizes activity within the restructuring reserves:

                                                  1999        1998        1997
                                                  ------     -------     -------
Balance at beginning of year                      $ 1.3       $ 1.4       $ 4.3
Provision during year                                -          3.0         3.2
Spending/fixed asset writedown during year         (1.3)       (3.1)       (6.1)
                                                  ------      ------     -------
Balance at end of year                            $  -        $ 1.3       $ 1.4
                                                  ======      ======     =======


9.       OTHER (INCOME)/EXPENSE, NET

                                                  1999        1998        1997
                                                 -------    --------    --------
Foreign exchange loss                             $ 1.5       $12.8       $ 3.7
Investment income                                 (10.2)       (5.2)       (4.2)
Write-off financing costs                           -           2.5         -
                                                  ------      ------      ------
                                                  $(8.7)      $10.1       $(0.5)
                                                  ======      ======      ======

         In 1998,  the  Company  incurred a $2.5  charge to write off  financing
costs associated with a credit facility the Company elected not to close.


                                       55
<PAGE>

                         AGRIBRANDS INTERNATIONAL, INC.
                          NOTES TO FINANCIAL STATEMENTS
                   (Dollars in millions except per share data)


10.      INCOME TAXES

         The  provisions  for income taxes  consisted of the  following  for the
years ended August 31:

                                                  1999        1998        1997
                                                 -------   ---------    --------
Currently payable:
     United States                               $  2.1     $   1.7      $  3.8
     Foreign                                       16.7        19.1        14.5
     Taxes on repatriation of foreign earnings      5.7         4.7         4.2
                                                 -------    --------     -------
        Total current                              24.5        25.5        22.5
                                                 -------    --------     -------
Deferred:
     United States                                  0.3        (0.2)        -
     Foreign                                        1.6        (4.9)        1.9
                                                 -------    --------     -------
        Total deferred                              1.9        (5.1)        1.9
                                                 -------    --------     -------
                                                 $ 26.4     $  20.4      $ 24.4
                                                 =======    ========     =======

The source of pre-tax earnings was:

                                                  1999        1998        1997
                                                 -------    --------     -------
     United States                               $  6.2     $   1.2      $  3.2
     Foreign                                       64.2        33.0        29.9
                                                 -------    --------     -------
        Total                                    $ 70.4     $  34.2      $ 33.1
                                                 =======    ========     =======

         A  reconciliation  of income  taxes with the  amounts  computed  at the
statutory federal rate follows:

                                                  1999        1998        1997
                                                 -------    --------   --------
Computed tax at federal statutory rate           $ 24.6     $  12.0      $ 11.6
Increases (decreases) in taxes resulting from:
  Foreign tax rates other than domestic rate       (3.1)       (2.7)       (1.0)
  Taxes on repatriation of foreign earnings         5.7         4.7         4.2
  U.S. foreign tax credits                         (4.0)       (2.0)        -
  Change in valuation allowance                     0.2         3.0         6.9
  Incremental taxes allocated by Ralston            -           1.1         3.8
  Other, net                                        3.0         4.3        (1.1)
                                                 -------    --------   ---------
                                                 $ 26.4     $  20.4      $ 24.4
                                                 =======    ========   =========



                                       56
<PAGE>

                         AGRIBRANDS INTERNATIONAL, INC.
                          NOTES TO FINANCIAL STATEMENTS
                   (Dollars in millions except per share data)

         At August 31, deferred tax assets and deferred tax liabilities recorded
on the balance sheet are as follows:

                                                       1999            1998
                                                   -----------     -----------
Deferred Tax Liabilities:
     Depreciation and property differences            $  7.1         $   6.3
     Inventory differences                               4.5             6.2
     Retirement plans                                    3.4             2.3
     Other tax liabilities, current                      0.6             0.5
     Other tax liabilities, non-current                 10.1             9.2
                                                      --------       ---------
        Gross deferred tax liabilities                $ 25.7         $  24.5
                                                      --------       ---------

Deferred Tax Assets:
     Tax loss carryforwards                           $(11.2)        $ (13.9)
     Accrued expenses                                   (7.2)           (7.7)
     Depreciation and property differences              (6.3)           (5.8)
     Tax credits                                        (6.1)           (5.7)
     Other tax assets, current                          (7.3)           (5.8)
     Other tax assets, non-current                      (3.6)           (2.4)
                                                      --------       ---------
        Gross deferred tax (assets)                   $(41.7)        $ (41.3)
                                                      --------       ---------
     Valuation allowance                                19.7            19.5
                                                      --------       ---------
Net deferred tax liabilities                          $  3.7         $   2.7
                                                      ========       =========

         Approximately $0.6 of tax loss carryforwards and tax credits expired in
1999.  Future  expiration  of tax loss  carryforwards  and tax  credits,  if not
utilized,  are as follows:  2000 - $0.4,  2001 - $0.1, 2002 - $1.0, 2003 - $4.5,
2004 - $3.9 and beyond - $7.4. The valuation  allowance is primarily  attributed
to certain  tax loss  carryforwards  generated  outside  the  United  States and
foreign  tax  credits  awarded in the United  States for which no tax benefit is
expected to be realized.  If it becomes evident that  sufficient  future taxable
income will be  available  in the tax  jurisdictions  where these  deferred  tax
assets exist, the Company would release the valuation allowance accordingly.

         At August  31,  1999,  approximately  $90.0 of foreign  subsidiary  net
earnings was considered  permanently invested in those businesses.  Accordingly,
U.S.  income  taxes  have  not  been  provided  for  such  earnings.  It is  not
practicable  to determine the amount of  unrecognized  deferred tax  liabilities
associated with such earnings.

         Prior to the  Distribution  Date,  U.S.  income tax payments,  refunds,
credits,  provision and deferred tax components  were allocated to Agribrands in
accordance  with  Ralston's tax  allocation  policy.  Such policy  allocated tax
components  included  in the  consolidated  income  tax  return  of  Ralston  to
Agribrands  to the  extent  such  components  were  generated  by or  related to
Agribrands. Tax payments due on income earned prior to the Distribution Date are
the responsibility of Ralston.

         Had  Agribrands'  income tax provision been calculated as if Agribrands
was a single, stand-alone U.S. taxpayer during periods prior to the Distribution
Date, the income tax provision  would have been lower by  approximately  $1.1 in
the seven  months  ended  March 31,  1998 and $3.8 in the year ended  August 31,
1997.

                                       57
<PAGE>
                         AGRIBRANDS INTERNATIONAL, INC.
                          NOTES TO FINANCIAL STATEMENTS
                   (Dollars in millions except per share data)



11.      EARNINGS PER SHARE

         Basic  earnings per share ("EPS") is computed  using the average number
of common shares outstanding during the period.  Diluted EPS gives effect to the
dilution that would occur if stock options were exercised. Basic and diluted EPS
computations for the three years ended August 31 follow:
<TABLE>
<CAPTION>

                                                      1999         1998           1997
                                                  -----------   -----------    -----------
  <S>                                             <C>           <C>           <C>
  Numerator:
    Net earnings                                  $      44.0   $      13.8   $       8.7
                                                  ===========   ===========   ===========

  Denominator:
    Weighted average shares outstanding            10,570,405    10,668,571    10,668,571
    Assumed conversion of stock options               135,657        -             -
                                                  -----------   -----------   -----------
    Weighted average shares - assuming dilution    10,706,062    10,668,571    10,668,571
                                                  ===========   ===========   ===========

  Basic earnings per share                        $      4.16   $      1.29   $       .82
                                                  ===========   ===========   ===========
  Diluted earnings per share                      $      4.11   $      1.29   $       .82
                                                  ===========   ===========   ===========
</TABLE>

         There  were  10,668,571  shares  of  common  stock  outstanding  at the
Distribution   Date.  The  above  EPS  calculations   assume  10,668,571  shares
outstanding  for all periods prior to the  Distribution  Date.  Stock options to
purchase  1,107,500 and 1,115,000 shares of common stock were outstanding during
1999 and 1998, respectively, but were not included in the computation of diluted
EPS because the  exercise  prices of the options  were  greater than the average
market price of the common shares.


12.      PREFERRED AND COMMON STOCK

         At August 31, 1999, 10,000,000 shares of $.01 par value preferred stock
were  authorized  and unissued.  The  Company's  Board of Directors is expressly
authorized,  prior  to  issuance,  to set  preferences,  voting  powers,  annual
dividend rates (if any) and other terms and conditions relating to the shares.

         The Company has been authorized to issue 50,000,000  shares of $.01 par
value  common stock as of August 31, 1999.  Activity  for the  Company's  common
stock for the years ended August 31 is summarized below:



                                       58
<PAGE>

                         AGRIBRANDS INTERNATIONAL, INC.
                          NOTES TO FINANCIAL STATEMENTS
                   (Dollars in millions except per share data)

                                                     1999              1998
                                                 --------------    -------------
  Common Stock Issued
  Common stock issued at beginning of year         10,668,571             -
    Distribution to Ralston's shareholders              -            10,668,571
    Shares cancelled                                     (660)            -
                                                ---------------    -------------
  Common stock issued at end of year               10,667,911        10,668,571
                                                ---------------    -------------

  Common Stock in Treasury
  Treasury stock at beginning of year                   -                 -
    Treasury stock purchased                         (288,848)            -
    Shares issued under stock plans                       242             -
                                                 --------------    -------------
  Treasury stock at end of year                      (288,606)            -
                                                 --------------    -------------


  Common Stock Outstanding                         10,379,305        10,668,571
                                                 ==============    =============


         On September 25, 1998, the Company's Board of Directors  authorized the
purchase by the Company of up to 2,000,000 shares of Agribrands  common stock in
open market  transactions for general  corporate  purposes.  At August 31, 1999,
there were 1,711,152 shares available for repurchase under this authorization.


13.      RELATED PARTY ACTIVITY

         Prior to the  Distribution  Date,  the  Agribrands  Businesses  and RPI
Consumer shared some general and  administrative  functions and distributed some
product  through  a  combined  distribution  network.   Costs  of  these  shared
activities  were  allocated to the Company based on utilization or other methods
which  management  believes  to be  reasonable.  Total  costs  of  these  shared
activities  were $22.1 in the seven months ended March 31, 1998 and $46.0 in the
year ended August 31, 1997. Of such costs,  allocations to Agribrands were $19.1
in the seven  months ended March 31, 1998 and $38.7 in the year ended August 31,
1997.

         Ralston also provided  certain general and  administrative  services to
the Agribrands  Businesses  including  finance,  legal,  facilities and systems.
These  expenses  were  allocated to  Agribrands  based on  utilization  or other
methods which management believes to be reasonable.  These allocations were $1.2
in the seven  months  ended March 31, 1998 and $2.0 in the year ended August 31,
1997.


                                       59
<PAGE>
                         AGRIBRANDS INTERNATIONAL, INC.
                          NOTES TO FINANCIAL STATEMENTS
                   (Dollars in millions except per share data)


14.      LEGAL AND ENVIRONMENTAL MATTERS

         The Company is subject to legal  proceedings  and claims arising out of
its business  that cover a wide range of matters,  including  trade  regulation,
contracts,   environmental  issues,  product  liability,  patent  and  trademark
matters, and taxes.

         In August 1999,  Agribrands (together with Cargill,  Incorporated,  The
Iams Company and by  subsequent  amended  pleading  Carl S. Akey,  Inc.) filed a
complaint  in the U.S.  District  Court for the  Northern  District  of Illinois
against a group of vitamin producers.  The complaint alleges that the defendants
conspired  globally  to fix the prices of vitamins  and  allocate  customers  in
support  of such  arrangement  in  violation  of the U.S.  antitrust  laws.  The
defendants  have  admitted  in criminal  proceedings  to  participating  in such
practices.  Agribrands believes that it will be successful in recovering damages
arising from these  practices.  The timing of recovery and the amount of damages
are difficult to determine due to the multiple  variables  which will  influence
the  determination  of  damages  such as  period  of time  covered,  percent  of
overcharge, purchasing entity, as well as other issues and defenses which may be
asserted  by the  defendants.  As of  August  31,  1999,  the  Company  has  not
recognized any gain in its financial statements for this matter.

         In the fall of 1997,  Agribrands'  wholly owned subsidiary,  Agribrands
Philippines, Inc. (formerly Purina Philippines,  Inc.), applied for renewal of a
warehouse  license  to  store  corn  and rice  and  by-products  at its  Pulilan
facility.  The Philippines  National Food Authority  ("NFA"),  the  governmental
agency that administers the Philippines laws and regulations  governing the corn
and rice industry,  advised  Agribrands  Philippines by letter dated October 31,
1997  that  its  license  renewal  application  was  denied.  The  letter  cited
Philippines  legislation and regulations  requiring that businesses operating in
the corn and rice industry not have more than 40% foreign  ownership.  Since the
NFA believes that  Agribrands  Philippines is in the corn and rice industry,  it
has  requested  Agribrands  Philippines  to file a  divestment  plan in order to
comply with the 40% maximum foreign ownership requirement.

         Agribrands  Philippines has appealed the denial of its license renewal,
and on January 23, 1998, received notification that it may operate its warehouse
under a "provisional permit" pending the resolution of the appeal. The appeal is
pending in the Office of the President.  Agribrands Philippines believes it does
not need a warehouse  license,  as it believes it is not engaged in the corn and
rice industry as defined by law.  Furthermore,  Agribrands  Philippines believes
that it should  not be  subject to the NFA  regulation  based upon its  original
Board of  Investments  One Stop  investment  approval  of a 100%  foreign  owned
investment.   Agribrands  Philippines  intends  to  pursue  its  appeal  in  the
Philippines legal system.

         In  the  event  that  Agribrands  Philippines  is  required  to  file a
divestiture plan, it is expected, based on previous case precedents, that a plan
would  be  approved  that  would  permit  the  necessary   divestiture   over  a
considerable period of time.

         Various tax and labor claims have been asserted  against the Agribrands
Business in Brazil. The claims arose principally from monetary  corrections made
in  connection  with the  institution  of  economic  plans  by  prior  Brazilian
administrations to control inflation.

         Many of the legal matters are in preliminary  stages,  involve  complex
issues of law and fact and may  proceed  for  protracted  periods  of time.  The
amount of the  eventual  liability,  if any,  from these  proceedings  cannot be
determined with  certainty;  however,  in the opinion of Agribrands  management,

                                       60
<PAGE>

                         AGRIBRANDS INTERNATIONAL, INC.
                          NOTES TO FINANCIAL STATEMENTS
                   (Dollars in millions except per share data)

based upon the  information  presently  known, as well as upon the limitation of
certain  of its  liabilities  under  the  Agreement  and Plan of  Reorganization
between  Ralston and  Agribrands  for the spin-off of  Agribrands,  the ultimate
liability of Agribrands, if any, arising from the pending legal proceedings,  as
well as from asserted  legal claims and known  potential  legal claims which are
probable of assertion,  taking into account  established  accruals for estimated
liabilities,  should not be material to the financial position of Agribrands but
could be  material  to results  of  operations  or cash  flows for a  particular
quarter or annual period.


15.      OTHER CONTINGENCIES AND COMMITMENTS

         Guarantees - At August 31, 1999,  Agribrands had third party guarantees
outstanding in the aggregate  amount of  approximately  $9.4.  These  guarantees
relate to financial  arrangements  with customers,  suppliers and other business
relations.

         Sale of  Receivables - Agribrands  sells certain of its trade  accounts
receivable and notes  receivable to others subject to defined  limited  recourse
provisions. The Company is responsible for collection of the accounts and remits
the proceeds to the purchaser on a monthly basis. During 1999,  Agribrands sold,
on average,  accounts  receivable  totaling $0.8 each month. At August 31, 1999,
$0.5 of  transferred  receivables  were  outstanding  and  subject  to  recourse
provisions.

         Other   Commitments  -  Future   minimum   rental   commitments   under
noncancellable  operating  leases in effect as of August 31,  1999 were:  2000 -
$2.0,  2001 - $1.7, 2002 - $1.3, 2003 - $1.0, 2004 - $0.8 and thereafter - $0.5.
Total rental expense for all operating leases was $6.2 in 1999, $7.1 in 1998 and
$10.8 in 1997.

                                       61
<PAGE>
                         AGRIBRANDS INTERNATIONAL, INC.
                          NOTES TO FINANCIAL STATEMENTS
                   (Dollars in millions except per share data)


16.      NOTES PAYABLE

         Notes  payable  of  $18.5  and  $46.9 at  August  31,  1999  and  1998,
respectively,  had  a  weighted  average  interest  rate  of  10.3%  and  18.0%,
respectively.   At  August  31,  1999,   substantially  all  notes  payable  are
denominated  in local  currencies  and are due to  banks.  Compensating  balance
arrangements   ensure  future  credit  availability  and  do  not  restrict  the
withdrawal of funds.  Under these  arrangements,  Agribrands  maintained average
compensating bank balances of $18.0 in 1999.

         On  August  31,  1999,  total  unused  uncommitted  lines of  credit to
affiliates of Agribrands were approximately $200.


17.      LONG-TERM DEBT

The detail of long-term debt as of August 31 follows:
                                                              1999     1998
                                                            --------  --------

Korean subsidiary, interest rate of 8.9%; due 2002          $  6.7    $  -

Korean subsidiary, interest rate of 10.0%                      -         5.8

Korean subsidiary, interest rate of 11.0%                      -         3.7

Italian subsidiary, interest rate of 3.17%; due in annual
installments through 2004                                      2.5       -

Italian subsidiary, interest rate of 3.35% at August 31,       1.6       3.2
1999; due 2000

Other long-term debt with interest rates ranging from 1.0%
to 26.0%
                                                               3.1      10.2
                                                            --------  -------
                                                              13.9      22.9
Less: Current Maturities                                      (2.4)     (8.7)
                                                            --------  -------
                                                            $ 11.5    $ 14.2
                                                            ========  =======

         Aggregate  maturities of long-term debt are $1.2,  $8.1,  $1.3 and $0.5
for the years ending August 31, 2001 through 2004, respectively.

                                       62
<PAGE>
                         AGRIBRANDS INTERNATIONAL, INC.
                          NOTES TO FINANCIAL STATEMENTS
                   (Dollars in millions except per share data)


18.      SUPPLEMENTAL BALANCE SHEET INFORMATION

                                                                August 31
                                                         -----------------------
                                                           1999          1998
                                                         ----------    ---------
Receivables (current)
     Trade                                                $  69.1       $  79.8
     Value added tax                                          5.1           6.9
     Receivable from Ralston                                  -            12.9
     Other                                                   14.2          13.8
     Allowance for doubtful accounts                        (11.4)        (10.4)
                                                          ---------     --------
                                                          $  77.0       $ 103.0
                                                          =========     ========

Inventories
     Raw materials and supplies                           $  61.1       $  77.8
     Finished products                                       20.2          21.0
                                                          ---------     --------
                                                          $  81.3       $  98.8
                                                          =========     ========

Investments and Other Assets
     Goodwill (net of accumulated amortization of         $  29.1       $  32.4
         $6.5 in 1999 and $5.8 in 1998)
     Investments in affiliated companies                      6.3           6.5
     Cash surrender value of key man life insurance           5.0           -
     Long-term receivable for value added tax                 4.6           3.8
     Deferred charges and other assets                        6.3           8.2
                                                          ---------     --------
                                                          $  51.3       $  50.9
                                                          =========     ========

Property, Plant and Equipment - net
     Land                                                 $  11.8       $  11.0
     Buildings                                               81.9          81.8
     Machinery and equipment                                249.1         241.9
     Construction in progress                                 3.5          12.2
                                                          ---------     --------
                                                            346.3         346.9
     Accumulated depreciation                              (172.3)       (170.3)
                                                          ---------     --------
                                                          $ 174.0       $ 176.6
                                                          =========     ========

Accounts Payable and Accrued Liabilities
     Trade accounts payable                               $  75.2       $  81.4
     Incentive compensation, salaries and vacations          15.4          15.8
     Restructuring reserves                                   -             1.3
     Other items                                             34.5          34.3
                                                          ---------     --------
                                                          $ 125.1       $ 132.8
                                                          =========     ========

                                       63
<PAGE>
                         AGRIBRANDS INTERNATIONAL, INC.
                          NOTES TO FINANCIAL STATEMENTS
                   (Dollars in millions except per share data)

                                                                August 31
                                                       ------------------------
                                                           1999          1998
                                                       -----------   ----------
Other Liabilities
     Retirement and other employee benefits               $  18.1       $  20.3
     Minority interests                                       2.1           2.7
     Other                                                    3.0           1.9
                                                          --------      -------
                                                          $  23.2       $  24.9
                                                          ========      =======


19.      ALLOWANCE FOR DOUBTFUL ACCOUNTS

                                          1999           1998           1997
                                        --------       --------       ---------
Balance, beginning of year              $ 10.4         $  9.8         $  7.2
Provision charged to expense               3.6            6.4            4.6
Write-offs, less recoveries               (2.4)          (4.0)          (1.0)
Translation adjustment                    (0.2)          (1.8)          (1.0)
                                        --------       --------       --------
Balance, end of year                    $ 11.4         $ 10.4         $  9.8
                                        ========       ========       ========


20.      SUPPLEMENTAL CASH FLOW STATEMENT INFORMATION

                                         1999           1998           1997
                                        --------       --------       --------
Interest paid                           $  8.6         $ 11.8         $ 10.4
                                        ========       ========       ========
Income taxes paid                       $ 24.8         $ 22.6         $ 21.1
                                        ========       ========       ========

                                       64
<PAGE>

                         AGRIBRANDS INTERNATIONAL, INC.
                         QUARTERLY FINANCIAL INFORMATION
                       (In millions except per share data)
                                   (Unaudited)

         The results of any single  quarter are not  necessarily  indicative  of
Agribrands'  results for the year.  The sum of the four  quarters'  earnings per
share will not  necessarily  equal the full year amount.  The  following  tables
assume 10.7 million shares outstanding for all periods prior to the Distribution
Date.
<TABLE>
<CAPTION>

Fiscal 1999
                                   First         Second        Third        Fourth          Full
                                  Quarter       Quarter       Quarter       Quarter         Year
                               ------------    ----------    ----------   -------------   ----------
<S>                               <C>           <C>           <C>           <C>           <C>

Net sales                         $ 332.4       $ 310.7       $ 311.8       $ 306.6       $ 1,261.5
Gross profit                         58.7          50.0          49.9          52.3           210.9
Net earnings                         11.1           7.8          13.5          11.6            44.0

Diluted earnings per share           1.03           .72          1.27          1.08            4.11

</TABLE>


         Fourth  quarter 1999 net earnings  include an after-tax gain on sale of
property of $1.2 ($.11 per share).

<TABLE>
<CAPTION>

Fiscal 1998
                                   First         Second        Third        Fourth          Full
                                  Quarter       Quarter       Quarter       Quarter         Year
                               ------------    ----------    ----------    ------------   ----------
<S>                               <C>           <C>           <C>           <C>           <C>

Net sales                         $ 374.8       $ 333.0       $ 351.1       $ 351.2       $ 1,410.1
Gross profit                         56.1          46.4          46.7          53.7           202.9
Net earnings                          4.0           2.0           3.4           4.4            13.8

Diluted earnings per share            .37           .19           .32           .41           1.29
</TABLE>


         Second  quarter 1998 net earnings were reduced by $1.1 ($.10 per share)
due to  provisions  for  restructuring.  Fourth  quarter 1998 net earnings  were
reduced by $0.6 ($.06 per share) due to provisions for restructuring.

                                       65
<PAGE>


ITEM 9.  CHANGES  IN  AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
         FINANCIAL DISCLOSURE

         Not applicable.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         The information regarding directors and the information appearing under
"Compliance  with Section  16(a) of the  Exchange  Act" will be contained in the
Notice of the 2000 Annual Meeting and Proxy  Statement,  to be filed pursuant to
Regulation 14A, which is incorporated herein by reference.

         The  executive  officers of the Company are listed under Item 1 of this
document.

ITEM 11. EXECUTIVE COMPENSATION

         Information  appearing under  "Executive  Compensation",  "Compensation
Committee  Interlocks and Insider  Participation",  "Nominating and Compensation
Committee  Report  on  Executive  Compensation",   "Performance  Graph",  "Stock
Ownership"  and  the  remuneration   information   under  "Directors   Meetings,
Committees  and Fees" will be contained in the Notice of the 2000 Annual Meeting
and  Proxy  Statement,  to  be  filed  pursuant  to  Regulation  14A,  which  is
incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The discussion of the security  ownership of certain  beneficial owners
and management appearing under "Stock Ownership" will be contained in the Notice
of the  2000  Annual  Meeting  and  Proxy  Statement,  to be filed  pursuant  to
Regulation 14A, which is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         Information  appearing  under  "Compensation  Committee  Interlocks and
Insider  Participation"  will be  contained  in the  Notice  of the 2000  Annual
Meeting and Proxy  Statement,  to be filed pursuant to Regulation  14A, which is
incorporated herein by reference.

                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)(1.)  Financial Statements

         The following financial statements are filed as a part of this document
under Item 8. Financial Statements and Supplementary Data.

         Consolidated  Statement  of Earnings - for years ended August 31, 1999,
1998 and 1997

         Consolidated Balance Sheet - for years ended August 31, 1999 and 1998

                                       66
<PAGE>

         Consolidated Statement of Cash Flows - for years ended August 31, 1999,
         1998 and 1997

         Consolidated  Statement of Shareholders Equity - for years ended August
         31, 1999, 1998, 1997 and 1996

         Consolidated Statement of Comprehensive Income (loss)- for  years ended
         August 31, 1999, 1998 and 1997

         Notes to Consolidated Financial Statements

         Report of Independent Accountants

(a)(2.)  Financial Statement Schedules

         All   financial   statement   schedules   have  been  included  in  the
consolidated   financial   statements  or  are  either  not  applicable  or  not
significant.

(a)(3.)  Exhibits (Listed by numbers corresponding to the Exhibit Table of Item
601 in Regulation S-K)

2.1           Agreement and Plan of Reorganization  (Filed as Exhibit (10)(i) to
              the Company's 10-Q filed for the Quarter Ending February 28, 1998)

3.1           Articles of Incorporation of Agribrands International, Inc. (Filed
              as Exhibit 3.1 to the Company's  Amendment  No. 1 to  Registration
              Statement on Form 10 dated February 9, 1998)

3.2           Bylaws of Agribrands International,  Inc. (Filed as Exhibit 3.2 to
              the Company's Amendment No. 1 to Registration Statement on Form 10
              dated February 9, 1998)

4.1           Rights Agreement (Filed as Exhibit 4.1 to the Company's  Amendment
              No. 1 to Registration Statement on Form 10 dated February 9, 1998)

10.1          Technology  Transfer  and  License  Agreement  (Filed  as  Exhibit
              (10)(ii) to the Company's Form 10-Q for the Period Ending February
              28, 1998)

10.2          Trademark  Agreement (Filed as Exhibit  (10)(iii) to the Company's
              Form 10-Q for the Period Ending February 28, 1998)

10.3          Credit Agreements (Long and Short Term) (Filed as Exhibit (10)(iv)
              to the  Company's  Form 10-Q for the Period  Ending  February  28,
              1998)

10.4          Tax  Sharing  Agreement  (Filed as  Exhibit  2.2 to the  Company's
              Amendment No. 3 to  Registration  Statement on Form 10 dated March
              19, 1998)

10.5          Bridging   Agreement  (Filed  as  Exhibit  2.3  to  the  Company's
              Amendment No. 3 to  Registration  Statement on Form 10 dated March
              19, 1998)

*10.6         Incentive  Stock  Plan  (Filed as  Exhibit  10.1 to the  Company's
              Amendment No. 3 to  Registration  Statement on Form 10 dated March
              19, 1998)

*10.7         Form of Management  Continuity  Agreement  (Filed as Exhibit 10 to
              the Company's Amendment No. 3 to Registration Statement on Form 10
              dated February 9, 1998)

                                       67
<PAGE>

*10.8         Non-Qualified Deferred Compensation Plan (Filed as Exhibit 10.2 to
              the Company's Amendment No. 3 to Registration Statement on Form 10
              dated March 19, 1998)

*10.9         Form of  Non-Qualified  Stock Option Agreement dated May 12, 1998,
              with Chief Executive Officer of the Company (Filed as Exhibit 10.1
              to Company's Form 10-Q for the Period Ending May 31, 1998)

*10.10        Form of  Non-Qualified  Stock Option Agreement dated May 29, 1998,
              with certain  executive  officers of the Company (Filed as Exhibit
              10.2 to the  Company's  Form 10-Q for the  Period  Ending  May 31,
              1998)

10.11         First Amendment to Agreement and Plan of Reorganization  dated May
              29, 1998 (Filed as Exhibit  10.11 to the  Company's  Form 10-K for
              the fiscal year ended August 31, 1998)

*10.12        Form of  Notice of Stock  Appreciation  Right  dated May 29,  1998
              (Filed as Exhibit 10.12 to the Company's  Form 10-K for the fiscal
              year ended August 31, 1998)

*10.13        Form of  Indemnification  Agreement  between  the  Company and its
              Directors  (Filed as Exhibit 10.13 to the Company's  Form 10-K for
              the fiscal year ended August 31, 1998)

*10.14        Form of  Indemnification  Agreement  between  the  Company and its
              executive  officers  (Filed as Exhibit 10.14 to the Company's Form
              10-K for the fiscal year ended August 31, 1998)

*10.15        Financial Planning  Reimbursement  Program (Filed as Exhibit 10.15
              to the  Company's  Form 10-K for the fiscal year ended  August 31,
              1998)

*10.16        Form of Split Dollar Life  Insurance  Agreement  (Filed as Exhibit
              10.16 to the Company's  Form 10-K for the fiscal year ended August
              31, 1998)

*10.17        Form of  letter  amending  the May 29,  1998  Non-Qualified  Stock
              Option  Agreements  (Filed as Exhibit 10.17 to the Company's  Form
              10-K for the fiscal year ended August 31, 1998)

10.18         Form of Separation Agreement with Gonzalo Dal Borgo dated April 7,
              1999  (Filed as Exhibit  10.1 to the  Company's  Form 10-Q for the
              period ending May 31, 1999)

21            Subsidiaries of the Company

23            Consent of PricewaterhouseCoopers LLP

27            Financial Data Schedule

*Denotes a management contract or compensatory plan or arrangement.

(b)      Reports on Form 8-K.

         No Current  Reports on Form 8-K were  filed by the  Company  during the
fourth quarter of its fiscal year ended August 31, 1999.



                                       68
<PAGE>

                                   SIGNATURES

         Pursuant to the  requirements  of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, Agribrands International, Inc. has duly caused
this  report to be  signed on its  behalf  by the  undersigned,  thereunto  duly
authorized.

                                           AGRIBRANDS INTERNATIONAL, INC.


                                           /s/ William P. Stiritz
                                           -------------------------------------
                                           William P. Stiritz
                                           Chairman of the Board,
                                           Chief Executive Officer and President

Date:  October 27, 1999


         KNOW ALL MEN BY THESE  PRESENTS,  that the  below-named  directors  and
officers  of  Agribrands  International,  Inc.  whose  signature  appears  below
constitutes and appoints  Michael J. Costello and William P. Stiritz and each of
them,  his true and  lawful  attorney-in-fact  and  agent,  with  full  power of
substitution and resolution,  for him and in his name,  place, and stead, in any
and all capacities,  to sign any and all amendments to this report,  and to file
the  same,  with  all  exhibits  thereto,  and  other  documents  in  connection
therewith,  with the  Securities  and Exchange  Commission,  granting  unto said
attorneys-in-fact and agents full power and authority to do and perform each and
every  act and  thing  requisite  and  necessary  to be done  in and  about  the
premises,  as fully and to all intents  and  purposes as he might or could do in
person,  hereby  ratifying and  confirming all that said  attorneys-in-fact  and
agents or their  substitute or substitutes,  may lawfully do or cause to be done
by virtue hereof.

         Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended,  this report has been signed by the following  persons on behalf of the
registrant and in the capacities and on the dates indicated.

SIGNATURE                          TITLE                               DATE

/s/ William P. Stiritz             Chairman of the Board,       October 27, 1999
---------------------              Chief Executive Officer,
William P. Stiritz                 and President

/s/ David R. Wenzel                Chief Financial Officer      October 27, 1999
----------------------
David R. Wenzel

/s/ Douglas W. Faust               Controller (Chief            October 27, 1999
----------------------             Accounting Officer)
Douglas W. Faust

                                       69
<PAGE>

/s/ David R. Banks                 Director                     October 27, 1999
----------------------
David R. Banks

/s/ Jay W. Brown                   Director                     October 27, 1999
----------------------
Jay W. Brown

/s/ M. Darrell Ingram              Director                     October 27, 1999
----------------------
M. Darrell Ingram

/s/ H. Davis McCarty               Director                     October 27, 1999
----------------------
H. Davis McCarty

/s/ Joe R. Micheletto              Director                     October 27, 1999
----------------------
Joe R. Micheletto

/S/ Martin K. Sneider              Director                     October 27, 1999
----------------------
Martin K. Sneider


                                       70