<PAGE>
                    RALSTON PURINA COMPANY AND SUBSIDIARIES

                          FIVE YEAR FINANCIAL SUMMARY

(In millions except per share and percentage data)

<TABLE>
<CAPTION>
                                                                                   FOR THE YEAR ENDED SEPTEMBER 30,
                                                                       --------------------------------------------------------
STATEMENT OF EARNINGS DATA                                             1996       1995<Fd>     1994<Fg>       1993         1992
                                                                       ----       --------     --------       ----         ----
<S>                                                                  <C>          <C>          <C>          <C>          <C>
Net Sales.........................................................   $6,114.3     $7,171.6     $7,676.6     $7,874.8     $7,725.9
Depreciation and Amortization.....................................      237.1        289.5        309.4        309.7        292.4
Earnings before Interest Expense, Income Taxes, Equity Earnings,
  Extraordinary Item and Cumulative Effect of Accounting
  Changes.........................................................      752.6        714.0        642.1        818.5        785.0
    As a Percent of Sales.........................................       12.3%        10.0%         8.4%        10.4%        10.2%
Earnings before Income Taxes, Equity Earnings,
  Extraordinary Item and Cumulative Effect of
  Accounting Changes..............................................   $  562.3     $  514.2     $  421.7     $  580.4     $  542.1
Income Taxes......................................................      212.2        215.0        203.3        239.1        221.4
Earnings before Extraordinary Item and Cumulative Effect of
  Accounting Changes<Fa>..........................................      361.7        300.1        218.4        341.3        320.7
    As a Percent of Sales.........................................        5.9%         4.2%         2.8%         4.3%         4.2%
Net Earnings<Fb>..................................................   $  359.6     $  296.4<Fe> $  208.9     $  122.6     $  313.2
Earnings Available to Common Shareholders.........................      345.5        277.6        188.7        101.6        292.2

<CAPTION>
                                                                                            SEPTEMBER 30,
                                                                       --------------------------------------------------------
BALANCE SHEET DATA                                                     1996       1995<Fd>     1994<Fg>       1993         1992
                                                                       ----       --------     --------       ----         ----
<S>                                                                  <C>          <C>          <C>          <C>          <C>
Working Capital...................................................   $  (22.1)    $   21.8     $   61.7     $  188.7     $   35.0
Property at Cost, Net.............................................    1,455.9      1,350.9      1,897.4      2,331.6      2,306.4
    Additions (during the year)...................................      314.1        284.6        332.1        320.8        325.4
    Depreciation (during the year)................................      181.3        238.5        264.7        263.5        254.7
Total Assets......................................................    4,785.1      4,567.2      4,622.3      5,071.9      5,150.5
Long-Term Debt....................................................    1,437.0      1,602.1      1,594.6      2,054.5      2,111.3
Redeemable Preferred Stock........................................      323.5        348.7<Ff>    469.7        509.8        509.8
Shareholders Equity...............................................      689.0        494.2        355.6        469.8        655.2
Common Shares Outstanding:
    RAL Stock<Fc>.................................................      101.7        101.7        100.0        101.8
    CBG Stock.....................................................                                 20.6         20.7
    Ralston Purina Company Common Stock...........................                                                          103.7

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

<Fa>     Before extraordinary charges for early retirement of debt of $2.1 for 1996, $3.7 for 1995, $9.5 for 1994, $11.8 for 1993
         and $7.5 for 1992. Also, before charges for the cumulative effect of accounting changes of $206.9 in 1993.

<Fb>     After-tax provisions reduced earnings by $15.5 in 1996, $70.0 in 1995, $82.4 in 1994 and $32.9 in 1992. Provisions were
         for restructuring in all years and also included gains on disposition of property in 1992. Also, the incremental impact
         of adopting FAS 106 and FAS 109 resulted in a reduction of net earnings of $15.1 in 1993.

<Fc>     Does not include 4.2, 4.1 and 4.0 shares of RAL Stock held by the Company's Grantor Trust in 1996, 1995 and 1994,
         respectively.

<Fd>     Effective July 22, 1995, the Company sold its Continental Baking Company (CBC) subsidiary. The Company's earnings and
         cash flows reflect the operations of CBC through July 22, 1995. Pro forma results of operations of the Company without
         CBC appear on page 14.

<Fe>     Includes an after-tax gain on the sale of CBC of $42.0.

<Ff>     Reflects conversion of 1.0 shares of Redeemable Preferred Stock in connection with the sale of CBC.

<Fg>     On March 31, 1994, the Company effected a spin-off of Ralcorp Holdings, Inc., (Ralcorp), its private label and branded
         cereal, baby food, crackers and cookies, ski resort and coupon redemption businesses. The Company's earnings and cash
         flows reflect the operations of those businesses through March 31, 1994. Pro forma results of operations of the Company
         without Ralcorp appear on page 14.
</TABLE>

                                      12

<PAGE>
                    RALSTON PURINA COMPANY AND SUBSIDIARIES

                    FIVE YEAR FINANCIAL SUMMARY (Continued)

(In millions except per share data)

<TABLE>
<CAPTION>
                                                                                FOR THE YEAR ENDED SEPTEMBER 30,
                                                                      ----------------------------------------------------
PER SHARE DATA                                                        1996        1995        1994       1993<Fa>     1992
                                                                      ----        ----        ----       -------      ----
<S>                                                                  <C>         <C>         <C>         <C>         <C>
RAL Stock (pro forma in 1995 and 1994 assuming one class of common
  stock):
    Earnings before Extraordinary Item............................
        Primary...................................................   $  3.41     $  2.76     $  1.93
        Fully Diluted.............................................      3.23        2.66        1.88
    Net Earnings
        Primary...................................................      3.39        2.72        1.84
        Fully Diluted.............................................      3.21        2.63        1.80
    Average Shares Outstanding....................................     101.8       101.9       102.4
RAL Stock (based on RPG Group earnings through May 15, 1995 and
  consolidated Ralston earnings thereafter):
    Earnings before Extraordinary Item and Cumulative Effect of
      Accounting Changes
        Primary...................................................               $  2.89     $  2.12     $   .40
        Fully Diluted.............................................                  2.77        2.05         .39
    Net Earnings
        Primary...................................................                  2.85        2.04         .36
        Fully Diluted.............................................                  2.74        1.98         .35
CBG Stock (through May 15, 1995):
    Earnings (Loss) before Extraordinary Item and Cumulative
      Effect of Accounting Changes
        Primary...................................................               $  (.45)    $  (.74)    $   .21
        Fully Diluted.............................................                  (.45)       (.74)        .19
    Net Earnings (Loss)
        Primary...................................................                  (.45)       (.78)        .19
        Fully Diluted.............................................                  (.45)       (.78)        .17
Ralston Purina Company Common Stock (through July 30, 1993):
    Earnings before Extraordinary Item and Cumulative Effect of
      Accounting Changes..........................................
        Primary...................................................                                       $  2.65     $  2.82
        Fully Diluted.............................................                                          2.52        2.65
    Net Earnings
        Primary...................................................                                           .59        2.75
        Fully Diluted.............................................                                           .63        2.59
Average Shares Outstanding:
    RAL Stock.....................................................                 100.7       100.5       102.2
    CBG Stock (through May 15, 1995)..............................                  20.6        20.5        20.7
    Ralston Purina Company Common Stock...........................                                         103.6       106.3
Dividends Declared:
    RAL Stock.....................................................   $  1.20     $  1.20     $  1.20     $   .60<Fb>
    CBG Stock.....................................................                                           .16<Fb>
    Ralston Purina Company Common Stock...........................                                          .632<Fb> $  1.20

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

<Fa>     Actual earnings per share for 1993 are segregated due to the redesignation of Ralston Purina Company Common Stock and
         the issuance of CBG Stock, both occurring on July 30, 1993. RAL Stock and CBG Stock earnings are for the period after
         July 30 through September 30, 1993.

<Fb>     Represents dividends declared on redesignated RAL Stock and newly issued CBG Stock from July 30, 1993 through September
         30, 1993 and dividends declared on Ralston Purina Company Common Stock from October 1, 1992 through July 30, 1993.
</TABLE>

                                      13

<PAGE>
                    RALSTON PURINA COMPANY AND SUBSIDIARIES

                 PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS

                  (Dollars in millions except per share data)

      Effective July 22, 1995, the Company sold Continental Baking Company
(CBC) to Interstate Bakeries Corporation (IBC). On May 15, 1995, the Company
exchanged each outstanding share of Ralston-Continental Baking Group Common
Stock (CBG Stock) for shares of its Ralston-Ralston Purina Group Common Stock
(CBG Stock Exchange). On March 31, 1994, the Company effected a spin-off of its
private label and branded cereal, baby food, crackers and cookies, ski resort
and coupon redemption businesses (Ralcorp).

     In order to analyze the Company's results on a comparable basis, pro forma
results are presented for the fiscal years ended September 30, 1995 and 1994.
The following pro forma consolidated statement of earnings reflects the results
of operations of the Company for the years ended September 30, 1995 and 1994 as
if the sale of CBC, the spin-off of Ralcorp and the CBG Stock Exchange had
occurred as of October 1, 1993. The pro forma financial statement has been
prepared by adjusting the historical statement for the effect of revenues,
expenses, assets and liabilities and the recapitalization which might have
occurred had the sale of CBC, the spin-off of Ralcorp and the CBG Stock
Exchange been effected as of October 1, 1993. The pro forma financial statement
may not necessarily reflect the consolidated results of operations that would
have existed had the sale of CBC, the spin-off of Ralcorp and the CBG Stock
Exchange occurred on October 1, 1993.

<TABLE>
<CAPTION>
                                                                                            (UNAUDITED)
                                                                                             YEAR ENDED
                                                                                           SEPTEMBER 30,
                                                                                       ----------------------
                                                                                       1995              1994
                                                                                       ----              ----
<S>                                                                                  <C>               <C>
Net Sales<Fa>...................................................................     $5,583.4          $5,206.1
                                                                                     --------          --------
Cost and Expenses
    Cost of products sold<Fa>...................................................      3,271.9           3,029.6
    Selling, general and administrative<Fa>.....................................      1,012.8             921.0
    Advertising and promotion<Fa>...............................................        554.2             577.3
    Interest<Fb>................................................................        190.8             202.2
    Provisions for restructuring<Fa>............................................         90.8              83.9
    Other (income)/expense, net<Fa>.............................................         (3.0)             17.1
                                                                                     --------          --------
                                                                                      5,117.5           4,831.1
                                                                                     --------          --------
Earnings before Income Taxes, Equity Earnings and Extraordinary Item............        465.9             375.0
Income Taxes<Fc>................................................................       (207.5)           (186.1)
                                                                                     --------          --------
Earnings before Equity Earnings and Extraordinary Item..........................        258.4             188.9
Equity Earnings (Loss), Net of Taxes<Fd>........................................          4.5              (1.2)
                                                                                     --------          --------
Earnings before Extraordinary Item..............................................     $  262.9          $  187.7
                                                                                     ========          ========
Earnings per Share
    Primary<Fe>.................................................................     $   2.42          $   1.66
    Fully Diluted<Fe>...........................................................     $   2.32          $   1.62
Average Shares Outstanding Used in Earnings per Share Computation
    Primary<Fe>.................................................................        101.9             102.4
    Fully Diluted<Fe>,<Ff>......................................................        110.6             111.3

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

<Fa>     Excludes results of operations for CBC and Ralcorp.

<Fb>     Reflects reduction of interest expense at an average rate of 6.75% assuming debt repayment of $160 by the Company from a
         portion of the CBC sales proceeds, and the reduction of interest expense at an average rate of 3.9% assuming debt
         repayment of $370 by the Company from the proceeds of debt issued in connection with the Ralcorp spin-off.

<Fc>     Reflects the applicable federal and state statutory tax rates for the pro forma adjustments.

<Fd>     Reflects the Company's 46% share of IBC pro forma earnings (loss).

<Fe>     Reflects exchange of CBG Stock for 1.8 million shares of RAL Stock.

<Ff>     Reflects conversion of Redeemable Preferred Stock allocated to CBC ESOP participants.
</TABLE>

                                      14

<PAGE>
                    RALSTON PURINA COMPANY AND SUBSIDIARIES

                               FINANCIAL REVIEW

    The following discussion is a summary of the key factors management
considers necessary in reviewing the Company's results of operations,
liquidity, capital resources, and operating segment results. This discussion
should be read in conjunction with the Business Segment Information,
Consolidated Financial Statements and related Notes to Financial Statements.

                            HIGHLIGHTS AND OUTLOOK

     Net earnings were $359.6 million for the year compared to $296.4 million
in 1995. Included in net earnings in 1996 is an extraordinary loss on early
debt retirement of $2.1 million, after taxes, and restructuring charges in the
Pet Products, Agricultural Products and Battery Products segments of $15.5
million, after taxes. Net earnings in 1995 included an extraordinary loss on
early debt retirement of $3.7 million, after taxes, and charges for battery
products restructuring of $70.0 million, after taxes.

     Effective July 22, 1995, the Company sold CBC to IBC and recognized an
after-tax gain on the sale of $42.0 million. On May 15, 1995, the Company
exchanged each outstanding share of its CBG Stock for .0886 shares of its
Ralston-Ralston Purina Group Common Stock (RAL Stock). On March 31, 1994, the
Company distributed all of the capital stock of Ralcorp to holders of the RAL
Stock. Pro forma earnings assume that each of these events had occurred on
October 1, 1993, and do not include the gain on the sale of CBC.

     Earnings before charges described in the first paragraph, increased $44.3
million in 1996 to $377.2 million, compared to pro forma earnings before
charges of $332.9 million in 1995. The 1996 earnings increase resulted from
higher operating profit in all business segments, a lower tax rate and
increased IBC equity earnings. Earnings per share for 1996, on this basis, were
$3.56 and $3.37 on a primary and fully diluted basis, respectively, compared to
$3.10 and $2.95 in the prior year.

     In 1995, net earnings increased $87.5 million. Unusual or non-recurring
charges in 1994 include an extraordinary loss on early debt retirement of $9.5
million, after taxes, and restructuring charges in the Battery Products and
Bakery Products segments of $82.4 million, after taxes. Excluding the effect of
these 1994 charges, the 1995 charges previously discussed and earnings related
to sold and spun-off businesses, net earnings increased in 1995 by $72.4
million primarily on higher operating profit, higher returns on other
investments and a lower income tax rate. Earnings per share on this basis
increased in 1995 by $.73 and $.67 on a primary and fully diluted basis,
respectively.

     Net earnings in the fourth quarter of 1996 were $89.8 million compared to
$75.7 million in the 1995 fourth quarter. Net earnings, exclusive of
restructuring provisions of $15.5 million, after taxes, in the current quarter
increased $28.4 million compared to pro forma earnings before an extraordinary
loss of $3.7 million, after taxes, restructuring provisions of $37.7 million,
after taxes, and a $42.0 million after-tax gain on the sale of CBC in the prior
year quarter. This increase is primarily due to higher operating profit, a
lower tax rate and higher equity earnings. Primary and fully diluted earnings
per share on this basis were $1.00 and $.94, respectively, in the current
quarter compared to $.72 and $.68 in the prior year.

                                      15

<PAGE>
                    RALSTON PURINA COMPANY AND SUBSIDIARIES

                         FINANCIAL REVIEW (Continued)

                TRANSACTIONS AFFECTING COMPARABILITY OF RESULTS

     During 1996, the Company acquired an interest in several agricultural
products businesses for approximately $25 million.

     On April 7, 1995 the Company acquired the assets of Golden Cat
Corporation, the leading manufacturer and marketer of branded cat box filler in
the United States and Canada, for $340 million.

     Effective July 22, 1995, the Company sold CBC to IBC for $220 million in
cash and 16,923,077 shares of common stock of IBC. The Company's earnings and
cash flows reflect the operations of CBC through July 22, 1995, and reflect an
equity interest in IBC thereafter.

     On March 31, 1994, the Company effected a spin-off of Ralcorp. The
Company's earnings and cash flows reflect the operations of those businesses
through March 31, 1994.

                                   NET SALES

     Net sales decreased $1,057.3 million or 14.7% in 1996 on the exclusion of
sales of CBC, partially offset by increases in all segments and the inclusion
of a full years' sales of Golden Cat. Excluding CBC sales in 1995, net sales
increased 9.5% in 1996. In 1995, net sales decreased $505.0 million or 6.6% due
to the exclusion of Ralcorp sales and the exclusion of sales of CBC after July
22, 1995, partially offset by increases in all segments and the inclusion of
sales from Golden Cat. Excluding sold and spun-off businesses, sales increased
7.2% in 1995. Comments on sales changes by business segment may be found on
pages 22 and 23 of this report.

                                 GROSS PROFIT

     Gross profit decreased 20.7% in 1996 and 9.1% in 1995 on the exclusion of
divested businesses. Excluding such operations, gross profit increased 5.8% in
1996 and 6.2% in 1995 on increases in all segments. On this basis, gross profit
as a percentage of sales was 40.0% in 1996 compared to 41.4% in 1995 and 41.8%
in 1994. The decreased percentage in 1996 reflects improvements in battery and
soy protein products which were more than offset by decreased percentages in
pet and agricultural products. In 1996, the battery products' 1995 plant
closings had a favorable impact on margins. Pet and agricultural products'
margins were unfavorably impacted by higher grain prices as price increases in
these segments were insufficient to maintain historical margin levels. In
addition, sales increases in the lower margin Agricultural Products segment
negatively impacted Company margin percentages in 1996. The 1995 percentage was
unfavorably impacted by a lower Pet Products segment percentage associated with
price reductions under simplified promotion practices and by sales growth in
segments with generally lower margin percentages. These unfavorable factors
were partially offset by the inclusion of the acquired Golden Cat operations
and higher margin percentages in the Battery Products and Soy Protein Products
segments.

     Cost of products sold in the Pet Products, Agricultural Products, and Soy
Protein Products segments are somewhat dependent on agricultural commodity
market prices. Prices may fluctuate due to weather conditions, government
regulations, economic climate or other unforeseen circumstances. The Company
manages exposure to changes in the commodities markets as considered necessary
by hedging certain of its ingredient requirements such as soybean meal, corn or
wheat. Agricultural commodity costs of the Company's continuing businesses have
represented 30% to 35% of cost of products sold during the three year period
ended September 30, 1996. The Company used futures contracts to hedge
approximately 15% to 20% of such commodity purchases or 4% to 7% of cost of
products sold during that period. As of September 30, 1996, the Company owned
futures contracts with an aggregate face value of approximately $20.0 million.

                                      16

<PAGE>
                    RALSTON PURINA COMPANY AND SUBSIDIARIES

                         FINANCIAL REVIEW (Continued)

                              OPERATING EXPENSES

     Selling, general and administrative expenses, exclusive of CBC operations
in the prior year, increased 5.5% in 1996 primarily due to acquisitions and to
the inclusion of a full year of Golden Cat expenses. In 1995, selling, general
and administrative expenses, excluding sold and spun-off businesses, increased
10% due to the Golden Cat acquisition and higher spending on cost reduction
programs. Selling, general and administrative expenses on this basis were
17.5%, 18.1% and 17.7% of sales in 1996, 1995 and 1994, respectively.

     Advertising and promotion expense, exclusive of CBC operations in the
prior year, increased 7.0% in 1996 on the inclusion of a full year of Golden
Cat expenses and on increased brand development spending in pet products. Pro
forma advertising and promotion expense decreased 4.0% in 1995 as a result of
simplified promotion practices in the Pet Products segment, partially offset by
the inclusion of Golden Cat operations. Excluding sold and spun-off businesses,
advertising and promotion expense was 9.7% of sales in 1996 compared to 9.9% in
1995 and 11.1% in 1994.

                   INTEREST EXPENSE AND OTHER INCOME/EXPENSE

     Interest expense decreased in 1996 to $190.3 million compared to $199.8
million in 1995 and $220.4 million in 1994. The 1996 decrease resulted
primarily from lower interest rates associated with the Company's maintaining a
larger percentage of its total debt on a short-term basis. The decrease in 1995
was attributable to lower interest rates and the reduction of debt due to the
spin-off of Ralcorp. Other income/expense, net, was unfavorable by $18.1
million in 1996 due to lower returns on other investments and higher foreign
currency translation and exchange losses, primarily related to Mexican and
Venezuelan operations. In 1995, other income/expense, net, improved by $23.0
million on higher returns on other investments and lower foreign currency
translation and exchange losses.

                                 INCOME TAXES

     Income taxes, which include federal, state and foreign taxes, were 37.7%
of pre-tax earnings before equity earnings and extraordinary item in 1996,
41.8% in 1995 and 48.2% in 1994. Income taxes in the current year are lower due
to the elimination or moderation of operating losses in certain foreign
jurisdictions where valuation allowances had been established for tax benefits
on such losses and due to the realization of certain previously unrecognized
net operating loss carryforwards. The higher income tax percentage in 1994, and
to a lesser extent in 1995, reflects pre-tax restructuring provisions which did
not result in tax benefits due to tax loss situations or particular statutes of
a country. The 1995 provision was favorably impacted by a lower tax rate on the
gain on sale of CBC. Income tax percentages, excluding the impact of
restructuring provisions and the sale gain, were 37%, 41% and 42.3% in 1996,
1995 and 1994, respectively.

                        LIQUIDITY AND CAPITAL RESOURCES

     Cash flow from operations is the Company's primary source of liquidity.
Management continues to have a strong orientation toward cash flows and
effective management of cash generated. In addition, the Company uses financial
leverage to minimize the overall cost of capital and maintain adequate
operating and financial flexibility. Management monitors leverage through its
interest coverage ratio (defined as earnings before interest expense,
amortization, provisions for restructuring, gain on the sale of CBC, income
taxes, equity earnings and extraordinary items divided by interest expense),
debt to internal funds ratio (defined as average debt divided by earnings
before non-cash restructuring reserves, depreciation and amortization, deferred
income tax provision and gain on the sale of CBC (cash earnings)) and total
debt as a percentage of total capitalization.

<TABLE>
<CAPTION>
DOLLARS IN MILLIONS                                                         1996       1995       1994
-------------------                                                         ----       ----       ----
<S>                                                                        <C>        <C>        <C>
Cash Flow from Operations.............................................     $464.4     $473.7     $471.0
Interest Coverage.....................................................        4.3        4.0        3.6
Debt to Internal Funds................................................        4.0        4.3        4.6
Total Debt as a Percent of Total Capitalization.......................         73%        78%        81%
</TABLE>

                                      17

<PAGE>
                    RALSTON PURINA COMPANY AND SUBSIDIARIES

                         FINANCIAL REVIEW (Continued)

     On a current equity market basis, total debt as a percentage of total
capitalization was 25% at September 30, 1996, compared to 28% at September 30,
1995 and 34% at September 30, 1994. For purposes of the debt ratios, the
guarantee of the ESOP debt is treated as debt and redeemable preferred stock
and related unearned compensation are treated as capital. The historical cost
basis ratio is significantly influenced by the large amount of stock
repurchased by the Company.

     Cash flow from operations decreased slightly in 1996 due to changes in
working capital items, primarily accounts payable and accrued liabilities as a
result of spending against restructuring accruals established in the prior
year, largely offset by higher cash earnings. Cash flow from operations was
flat in 1995 as higher cash earnings were offset by higher working capital
requirements. In 1995, higher cash earnings from continuing businesses more
than offset loss of cash flows from divested businesses. The interest coverage
ratio improved in 1996 and in 1995 on higher earnings and lower interest
expense. The debt to internal funds ratio also improved in 1996 and 1995 on
higher cash earnings and, in 1995, on a lower average debt balance.

     The Company's working capital requirements for inventories and receivables
are influenced by seasonality, the availability of raw materials and changes in
raw materials costs, and as a result, may fluctuate widely. The Company has
traditionally used short-term debt to finance these seasonal and other working
capital requirements and, from time to time, to finance capital expenditures on
a temporary basis. In addition, the Company is currently using international
short-term debt to minimize its overall after-tax cost of debt. Bank lines of
credit provide future credit availability and support the sale of commercial
paper. Payment for lines of credit is effected primarily through fees. At
September 30, 1996 the total unused lines of credit were $183.2 million.

     At September 30, 1996, current liabilities exceeded current assets by
$22.1 million. Working capital (current assets less current liabilities) was
$21.8 million at September 30, 1995 compared to $61.7 million at September 30,
1994. The decreases in working capital are primarily due to the Company's
maintaining a larger percentage of its total debt on a short-term basis. This
trend was partially offset by higher inventories and accounts receivable in
1996 and by lower accounts payable and accrued liabilities in 1995.

                             INVESTING ACTIVITIES

     Cash flow used for investing activities decreased to $307.5 million in
1996 from $428.0 million in 1995. The 1995 acquisition of the assets of Golden
Cat Corporation for $340 million represented a significant investment, which
was partially offset by the cash proceeds of $220 million from the sale of CBC.
Capital expenditures were $314.1 million, $284.6 million and $332.1 million in
fiscal years 1996, 1995 and 1994, respectively. Anticipated capital
expenditures of approximately $450 million in 1997 are expected to be financed
with funds generated from operations.

                             FINANCING ACTIVITIES

     Long-term financings are arranged as necessary to meet the Company's
capital or other requirements, with the timing of issue, principal amount and
form depending on the prevailing securities markets and general economic
conditions. The Company received $199.7 million, $272.8 million and $37.7
million in proceeds from new debt issuances, offset by payments on long-term
debt of $355.3 million, $318.1 million and $233.8 million in 1996, 1995 and
1994, respectively. The Company also increased short-term obligations by $203.2
million in 1996 and $222.6 million in 1995. At September 30, 1996, the Company
has an unused shelf registration statement for the issuance of $400.0 million
of debt securities.

     The Company returned cash to its common shareholders during the three
years ended September 30, 1996 through dividends on common stock and common
stock repurchases. These outflows totaled $121.9 million and $9.4 million for
dividends and stock repurchases, respectively, in 1996 compared to $120.9
million and $15.3 million in 1995 and $122.0 million and $103.2 million in
1994. As of November 18, 1996, 1,438,362 shares of RAL Stock remained under the
current Board of Director's authorization for the purchase of up to 3 million
shares of RAL Stock.

                                      18

<PAGE>
                    RALSTON PURINA COMPANY AND SUBSIDIARIES

                         FINANCIAL REVIEW (Continued)

     To meet ongoing share redemption requirements of the ESOP, in 1996 shares
of the Company's Series A 6.75% Preferred Stock (Redeemable Preferred Stock)
were converted into RAL Stock and simultaneously repurchased from the ESOP for
$24.3 million. In connection with the sale of CBC in 1995, $69.0 million of
allocated and $57.0 million of unallocated Redeemable Preferred Stock was
converted into RAL Stock and simultaneously repurchased from the ESOP.

     In accordance with the Shareholder Agreement signed upon closing of the
sale of CBC to IBC, the Company's ownership of IBC Stock must be reduced to no
more than 14.9% of total outstanding shares of IBC by July 22, 2000. At
September 30, 1996, the current fair market value of the Company's investment
in IBC, calculated based upon the closing market price of IBC shares traded on
the New York Stock Exchange, was $617.7 million, as compared to the Company's
recorded basis of $286.9 million.

                             ENVIRONMENTAL MATTERS

     The operations of the Company, like those of other companies engaged in
similar businesses, are subject to various federal, state, and local laws and
regulations intended to protect the public health and the environment,
including regulations related to air and water quality, underground fuel
storage tanks and waste handling and disposal. The Company has received notices
from the U.S. Environmental Protection Agency, state agencies, and/or private
parties seeking contribution, that it has been identified as a ``potentially
responsible party'' (PRP), under the Comprehensive Environmental Response,
Compensation and Liability Act, and may be required to share in the cost of
cleanup with respect to 14 ``Superfund'' sites. The Company's ultimate
liability in connection with those sites may depend on many factors, including
the volume of material contributed to the site, the number of other PRP's and
their financial viability, and the remediation methods and technology to be
used. While it is difficult to quantify the potential financial impact of
actions involving environmental matters, particularly remediation costs at
waste disposal sites and future capital expenditures for environmental control
equipment, in the opinion of management, the ultimate liability arising from
such environmental matters, taking into account established accruals for
estimated liabilities, should not be material to the financial position of the
Company, but could be material to results of operations or cash flows for a
particular quarter or annual period.

                                   INFLATION

     Management recognizes that inflationary pressures may have an adverse
effect on the Company through higher asset replacement costs and related
depreciation and higher material costs. The Company tries to minimize these
effects through cost reductions and productivity improvements as well as price
increases to maintain reasonable profit margins. It is management's view,
however, that inflation has not had a significant impact on operations in the
three years ended September 30, 1996.

                               FOREIGN EXCHANGE

     The Company is engaged in the manufacture and sale of products in over 160
countries on a global basis. The Company enters into foreign exchange forward
contracts and options to mitigate the Company's economic exposure to changes in
exchange rates. See Financial Instruments and Risk Management note to the
financial statements for additional information about foreign currency
contracts.

     The Company generally views as long-term its investments in foreign
subsidiaries with a functional currency other than the U.S. dollar. As a
result, the Company does not generally hedge these net investments. However,
the Company uses capital structuring techniques to manage its net investment in
foreign currencies as considered necessary. Additionally, the Company attempts
to limit its U.S. dollar net monetary liabilities in currencies of
hyperinflationary countries primarily in South America. Net foreign investments
as of September 30, 1996 were:

<TABLE>
<CAPTION>
                                                                                                       NET INVESTMENT
          REGION                                                                                       (IN MILLIONS)
          ------                                                                                       --------------
<S>                                                                                                    <C>
Europe..............................................................................................       $ 357.1
Asia Pacific........................................................................................         212.0
South and Central America...........................................................................         167.7
Other...............................................................................................          32.6
                                                                                                           -------
                                                                                                           $ 769.4
                                                                                                           =======
</TABLE>

                                      19

<PAGE>
                    RALSTON PURINA COMPANY AND SUBSIDIARIES

                         FINANCIAL REVIEW (Continued)

                           RESTRUCTURING ACTIVITIES

     In 1996, the Company recorded provisions for restructuring which reduced
earnings before income taxes, net earnings and net earnings per primary share
by $18.0 million, $15.5 million and $.15, respectively. These charges are
associated with the closing of the Company's European cereal operations, the
streamlining of operations of the international agricultural animal feeds
business in advance of the planned spin-off and additional battery products'
restructuring. Charges were $8.4 million, pre-tax and after-tax, for the cereal
operations, $5.6 million and $4.5 million, pre-tax and after-tax, respectively,
for agricultural products and $4.0 million and $2.6 million, pre-tax and
after-tax, respectively, for battery products. The 1996 provision for
restructuring consisted of termination benefits of $10.8 million, relating to
the termination of approximately 315 employees, other cash exit costs of $1.8
million and non-cash charges of $5.4 million, primarily related to impairment
losses on land, buildings and machinery and equipment.

     During 1996, approximately 180 employees associated with the Company's
foreign operations were terminated and termination benefits of $5.3 million
were paid in connection with the 1996 provision. The remaining reserve balance
of $7.3 million, which excludes the portion of the provision classified as
property and other asset write-downs, is expected to be utilized during 1997.

     Pre-tax cost savings from these restructuring actions are expected to be
as follows: 1997-$12.1; 1998-$14.1; and ultimate annual reduction-$14.3.

     During 1995 and 1994, the Company recorded provisions for restructuring of
its world-wide carbon zinc battery production capacity and certain
administrative functions. The provisions provided for the closing of a total of
ten plants and the severance of approximately 2,600 employees. The 1995
provisions reduced earnings before income taxes, net earnings and net earnings
per pro forma primary share by $90.8 million, $70.0 million and $.68,
respectively. The 1995 provision for restructuring consisted of termination
benefits of $46.2 million, other cash exit costs of $11.6 million and non-cash
charges of $33.0 million, primarily related to anticipated losses on disposal
of land, buildings and machinery and equipment.

     The 1994 provisions were $83.9 million before income taxes and $72.8
million after taxes. The provision included cash costs for termination benefits
of $26.2 million, payment of guaranteed debt of $4.3 million and other exit
costs of $7.0 million. Non-cash charges of $46.4 million primarily related to
anticipated losses on disposal of land, buildings and machinery and equipment.

     As of September 30, 1996, 8 plants have been closed and approximately
2,250 employees have been terminated in connection with the 1994 and 1995
restructuring provisions. Activity related to these provisions is summarized as
follows:

<TABLE>
<CAPTION>
                                                                                                      (IN MILLIONS)
                                                                                                    1996         1995
                                                                                                    ----         ----
<S>                                                                                                <C>          <C>
Reserve balance at beginning of year............................................................   $ 43.9       $ 36.5
Provision recorded..............................................................................       --         90.8
Termination benefits paid.......................................................................    (20.7)       (32.6)
Other cash exit costs incurred..................................................................     (7.3)       (21.2)
Portion of current period provision classified as property and other asset writedowns...........       --        (33.0)
Increase due to translation.....................................................................       .8          3.4
                                                                                                   ------       ------
Reserve balance at September 30.................................................................   $ 16.7       $ 43.9
                                                                                                   ======       ======
</TABLE>

     Restructuring actions are expected to be completed by 1997 for the
remaining 2 plants. The Company expects to fund the remaining costs from
internal sources and available borrowing capacity.

     As a result of the restructuring actions covered under the 1994 and 1995
provisions, pre-tax cost savings have been or are expected to be as follows:
1995-$9.1; 1996-$29.2; 1997-$44.9; and ultimate annual reduction-$47.7.

     In 1994, bakery products' restructuring provisions were recorded which
reduced 1994 earnings before income taxes and net earnings by $16.0 million and
$9.6 million, respectively. The charge covered severance and related payroll
costs for 435 headquarters and field employees.

                                      20

<PAGE>
                    RALSTON PURINA COMPANY AND SUBSIDIARIES

                         FINANCIAL REVIEW (Continued)

                         BUSINESS SEGMENT INFORMATION

     Summarized financial information on a worldwide basis by business segment
for the three years ended September 30, 1996 is set forth below. During these
years, the segments comprised the following:

PET PRODUCTS--pet foods, cat box filler and cereal and other foods
(international)

     Pet Products is the world's largest producer of dry dog and dry and
soft-moist cat foods, the leading producer of soft-moist dog food in the United
States and the leading manufacturer and marketer of cat box filler in the
United States. Pet products are marketed primarily through a direct sales force
to grocery, mass merchandisers and speciality retailers, wholesalers and other
customers.

BATTERY PRODUCTS--alkaline, carbon zinc, lithium and rechargeable batteries,
miniatures, flashlights and other related products

     Battery Products is the world's leading manufacturer of dry cell batteries
and flashlights and a global leader in the dynamic business of providing
portable power. Battery products' brands are recognized around the world and
are marketed and sold in more than 160 countries. Battery products are marketed
through a direct sales force to mass merchandisers, wholesalers and other
customers.

SOY PROTEIN PRODUCTS--dietary soy protein, fiber food ingredients and polymer
products

     Soy Protein Products is the world's leading producer and marketer of
high-quality dietary isolated soy protein and fiber food ingredients, and a
leading marketer of polymer products worldwide. Principal markets served
include food, meat, paper/paperboard and animal feed industries. Food protein
and industrial polymer products are marketed through a direct sales force.

AGRICULTURAL PRODUCTS (INTERNATIONAL)--animal feeds

     Agricultural Products is one of the world's largest producers and
marketers of formula animal feeds and operates 62 manufacturing plants.
Agricultural products are marketed through a worldwide network of 3,300
independent dealers, as well as an independent and a direct sales force.

DIVESTED BUSINESSES

     Bakery products--bread and sweet baked goods (sold as of July 22, 1995)

     Cereals and other specialty grocery products--domestic (spun-off March 31,
1994)

     All seasons resorts (spun-off March 31, 1994)

     Baby food products (spun-off March 31, 1994)

                                      21

<PAGE>
                    RALSTON PURINA COMPANY AND SUBSIDIARIES

                         FINANCIAL REVIEW (Continued)

                            BUSINESS SEGMENT REVIEW

     Pet products includes restructuring provisions of $8.4 million in 1996.
Battery products includes restructuring provisions of $4.0 million in 1996,
$90.8 million in 1995 and $80.5 million in 1994. Agricultural products includes
restructuring provisions of $5.6 million in 1996. Comments, amounts and
percentages in the remaining Business Segment discussion exclude the effects of
divestitures and restructuring provisions.

                                 PET PRODUCTS

     Sales for the Pet Products segment increased 12.0% in 1996 on the
inclusion of a full year's sales of Golden Cat, acquired in April 1995, higher
pet food volume and higher prices. In 1995, sales increased 7.5% on the
inclusion of Golden Cat and higher volume, partially offset by lower domestic
prices reflecting expansion of simplified promotion practices.

     Operating profit for the Pet Products segment increased 4.9% in 1996 on
the inclusion of a full year's results of Golden Cat. In addition, higher pet
food volume and pricing were offset by higher ingredient and advertising and
promotion costs. Gross profit margins declined significantly in 1996,
reflecting the higher ingredient costs. In 1995, operating profit increased
10.4% on higher volume, favorable product mix, the inclusion of Golden Cat, and
lower ingredient costs, partially offset by spending for cost reduction
programs. Lower sales prices in 1995 were offset by reductions in advertising
and promotion expenses associated with the new promotional practices.

     The domestic pet food and cat box filler industry is well developed and
non-cyclical with strong cash flows. The improvement in pet ownership trends in
recent years is supporting modest volume growth in the industry. The
competitive environment continues to be challenging, particularly as
manufacturers consolidate. Consolidation of the retail industry, growth of the
mass merchandiser and category-dominant retailer segments and an increase in
store-branded product has resulted, and will continue to result, in significant
changes in the product distribution pattern and trade promoting and pricing
practices of the Company. Increased profitability depends on maintaining brand
loyalty, developing higher performance capabilities and on the successful
development of mutually beneficial trading relationships with our customers.

     The international pet food market presents opportunities for sales and
profit growth for pet products. Continued growth of the global network of
technology and operational expertise that has been created should enable pet
products to capitalize on these opportunities.

                               BATTERY PRODUCTS

     Sales for the Battery Products segment increased slightly in 1996 on
higher volumes in the Asia Pacific region and higher alkaline volume and prices
and favorable mix in the United States. These gains were nearly offset by
volume declines and unfavorable mix in Europe, by volume declines and
unfavorable foreign exchange rates in South and Central America and by
decreased volume of rechargeable batteries sold to Original Equipment
Manufacturer (OEM) customers. In 1995, sales increased 4.0% on strong alkaline
volume growth in the Asia Pacific and North America regions and favorable
foreign currency exchange rates, primarily in Europe, partially offset by
declines in South and Central America.

     Battery products' operating profit increased 4.8% in 1996 on strong
performances in Asia Pacific and in the United States, partially offset by
lower rechargeable sales to the OEM market segment, sales declines in Europe
and higher information systems development costs in the first half of the year.
Margin percentages in Europe and South America improved in 1996 reflecting
benefits from the 1995 plant closings. In 1995, operating profit increased
10.1% primarily as a result of higher Asia Pacific and North American sales and
improved results in Europe.

     The battery products business faces intense competition. There continues
to be a shift from carbon zinc batteries to alkaline batteries in most world
areas. In each of the last three years, the Company has recorded provisions
related to restructuring its world-wide carbon zinc battery production capacity
and certain administrative functions. The Company continues to review its
battery production capacity and its business structure, particularly in Europe,
in light of pervasive global trends, including the continuing shift from carbon
zinc to alkaline products and easing of trade restrictions in many regions.
(See Restructuring Activities discussion in this section.)

                                      22

<PAGE>
                    RALSTON PURINA COMPANY AND SUBSIDIARIES

                         FINANCIAL REVIEW (Continued)

                             SOY PROTEIN PRODUCTS

     Sales for the Soy Protein Products segment increased 7.0% in 1996 and
10.6% in 1995 on strong volume in food protein products. Operating profit
increased slightly in 1996 as higher volumes and prices were largely offset by
increased business development costs and higher raw material costs in the
second half of the year. In 1995, operating profit increased 23.5% on higher
volume, increased productivity, lower raw material prices and favorable foreign
currency exchange rates, partially offset by increased selling, general and
administrative costs.

                             AGRICULTURAL PRODUCTS

     Sales in the Agricultural Products segment increased 22.7% in 1996 on
higher volumes, acquisitions and higher prices in most world areas related to
increased raw material prices. In 1995, sales increased 12.0% on higher volume
and prices and favorable foreign currency exchange rates in most world areas.

     Operating profit increased 15.8% in 1996 on higher volumes, acquisitions
and prior year one-time management costs. In 1995, operating profit declined
3.4% as higher volumes in most world areas were more than offset by one-time
management costs and lower earnings in South and Central America.

     On March 29, 1996, the Company announced its intention to separate its
international agricultural animal feeds business in a tax-free spin-off to
shareholders. Completion of the spin-off is expected during 1997 and is
contingent upon a favorable tax ruling from the Internal Revenue Service and
approval by the Ralston Purina Board of Directors.

                              DIVESTED BUSINESSES

     In 1994 and continuing through the July 22, 1995 sale of CBC, the Bakery
Products segment experienced sales declines primarily on an unfavorable product
mix in bread, lower sweet baked goods volume and lower thrift store volume.
Operating results for 1995, exclusive of restructuring charges, declined on
lower sales combined with higher material and labor costs, which were partially
offset by cost reduction actions.

     Sales and operating profit for the first half of 1994 include the results
of the Company's domestic cereal, baby food, crackers and cookies, and
all-season resorts which were spun-off on March 31, 1994.

                                      23

<PAGE>
                    RALSTON PURINA COMPANY AND SUBSIDIARIES

                         BUSINESS SEGMENT INFORMATION

    Export sales and sales between geographic segments were immaterial. No
single customer accounted for 10% or more of sales. Intersegment sales have
been recorded at amounts approximating market.

<TABLE>
<CAPTION>
DOLLARS IN MILLIONS                                                1996         1995         1994
-------------------                                                ----         ----         ----
<S>                                                              <C>          <C>          <C>
SALES
Pet Products................................................     $2,161.2     $1,929.4     $1,794.2
Battery Products<Fa>........................................      2,183.5      2,168.4      2,084.0
Soy Protein Products........................................        420.7        393.1        355.5
    Intersegment Sales......................................        (35.3)       (35.7)       (34.8)
                                                                 --------     --------     --------
                                                                    385.4        357.4        320.7
Agricultural Products.......................................      1,384.2      1,128.2      1,007.2
                                                                 --------     --------     --------
                                                                  6,114.3      5,583.4      5,206.1
Divested Businesses<Fb><Fc>.................................           --      1,588.2      2,470.5
                                                                 --------     --------     --------
            Total...........................................     $6,114.3     $7,171.6     $7,676.6
                                                                 ========     ========     ========
OPERATING PROFIT
Pet Products
    Operating profit before amortization....................     $  389.3<Fd> $  374.2     $  333.7
    Amortization of goodwill and other intangibles..........        (11.8)        (6.2)         (.5)
                                                                 --------     --------     --------
                                                                    377.5        368.0        333.2
                                                                 --------     --------     --------
Battery Products
    Operating profit before amortization....................        347.5<Fe>    248.7<Fe>    231.0<Fe>
    Amortization of goodwill and other intangibles..........        (41.2)       (43.4)       (42.5)
                                                                 --------     --------     --------
                                                                    306.3        205.3        188.5
                                                                 --------     --------     --------
Soy Protein Products
    Operating profit before amortization....................         84.5         82.8         67.1
    Amortization of goodwill and other intangibles..........          (.2)         (.2)         (.2)
                                                                 --------     --------     --------
                                                                     84.3         82.6         66.9
                                                                 --------     --------     --------
Agricultural Products
    Operating profit before amortization....................         47.8<Ff>     45.2         46.9
    Amortization of goodwill and other intangibles..........         (1.3)         (.2)         (.3)
                                                                 --------     --------     --------
                                                                     46.5         45.0         46.6
                                                                 --------     --------     --------
                                                                    814.6        700.9        635.2
Divested Businesses<Fb><Fg>.................................           --          7.1         65.3
                                                                 --------     --------     --------
            Total...........................................        814.6        708.0        700.5
Unallocated Corporate and Miscellaneous Expenses............        (62.0)       (44.3)       (58.4)
Interest Expense............................................       (190.3)      (199.8)      (220.4)
Gain on Sale of CBC.........................................           --         50.3           --
                                                                 --------     --------     --------
            Earnings before Income Taxes, Equity Earnings
              and Extraordinary Item........................     $  562.3     $  514.2     $  421.7
                                                                 ========     ========     ========

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

<Fa>     A reclassification between sales and advertising and promotion expense was made in 1995 and 1994 to conform to current
         year presentation.

<Fb>     Effective July 22, 1995, the Company sold CBC. The Company's sales and earnings reflect the operations of CBC through
         that date. On March 31, 1994, the Company effected a spin-off of Ralcorp. The Company's sales and earnings reflect the
         operations of Ralcorp through that date. Pro forma results of operations of the Company without CBC and Ralcorp appear
         on page 14.

<Fc>     Divested Businesses include bakery products with sales of $1,588.2 in 1995 and $1,948.6 in 1994 and other businesses
         with sales of $521.9 in 1994.

<Fd>     Includes restructuring provisions of $8.4.

<Fe>     Includes restructuring provisions of $4.0 in 1996, $90.8 in 1995 and $80.5 in 1994.

<Ff>     Includes restructuring provisions of $5.6.

<Fg>     Operating profit (losses) for bakery products were $7.1 in 1995 and $(2.6) in 1994 which includes restructuring
         provisions of $16.0. Operating profit for other businesses were $67.9 in 1994.
</TABLE>

                                      24

<PAGE>
                    RALSTON PURINA COMPANY AND SUBSIDIARIES

                   BUSINESS SEGMENT INFORMATION (Continued)

<TABLE>
<CAPTION>
DOLLARS IN MILLIONS                                                 1996         1995         1994
-------------------                                                 ----         ----         ----
<S>                                                               <C>          <C>          <C>
ASSETS AT YEAR END
Pet Products................................................      $  992.0     $  955.7     $  515.4
Battery Products............................................       2,107.8      2,098.9      2,114.3
Soy Protein Products........................................         388.7        340.8        324.1
Agricultural Products.......................................         460.2        375.8        318.9
Divested Businesses<Fa>.....................................            --           --        797.5
                                                                  --------     --------     --------
            Subtotal........................................       3,948.7      3,771.2      4,070.2
Corporate...................................................         836.4        796.0        552.1
                                                                  --------     --------     --------
            Total...........................................      $4,785.1     $4,567.2     $4,622.3
                                                                  ========     ========     ========
DEPRECIATION AND AMORTIZATION EXPENSE
Pet Products................................................      $   56.8     $   48.5     $   40.4
Battery Products............................................         126.2        128.0        126.3
Soy Protein Products........................................          22.4         22.2         21.7
Agricultural Products.......................................          19.3         17.8         16.0
Divested Businesses<Fb>.....................................            --         65.9         97.5
                                                                  --------     --------     --------
            Subtotal........................................         224.7        282.4        301.9
Corporate...................................................          12.4          7.1          7.5
                                                                  --------     --------     --------
            Total...........................................      $  237.1     $  289.5     $  309.4
                                                                  ========     ========     ========
PROPERTY ADDITIONS
Pet Products................................................      $   74.4     $   68.2     $   58.4
Battery Products............................................         150.2        100.7        114.6
Soy Protein Products........................................          55.7         21.1         20.6
Agricultural Products.......................................          28.4         26.7         21.5
Divested Businesses<Fc>.....................................            --         49.8        109.4
                                                                  --------     --------     --------
            Subtotal........................................         308.7        266.5        324.5
Corporate...................................................           5.4         18.1          7.6
                                                                  --------     --------     --------
            Total...........................................      $  314.1     $  284.6     $  332.1
                                                                  ========     ========     ========

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

<Fa>     Represents the bakery products business.

<Fb>     Depreciation and amortization expense was $65.9 in 1995 and $76.5 in 1994 for bakery products and $21.0 in 1994 for
         other divested businesses.

<Fc>     Property additions were $49.8 in 1995 and $89.6 in 1994 for bakery products and $19.8 in 1994 for other divested
         businesses.
</TABLE>

                                      25

<PAGE>
                    RALSTON PURINA COMPANY AND SUBSIDIARIES

                   BUSINESS SEGMENT INFORMATION (Continued)

                        GEOGRAPHIC SEGMENT INFORMATION

     Financial information by geographic location for the past three years is
set forth below.

<TABLE>
<CAPTION>
DOLLARS IN MILLIONS                                                                1996         1995         1994
-------------------                                                                ----         ----         ----
<S>                                                                              <C>         <C>          <C>
Sales<Fa>
    United States..........................................................      $2,994.2    $4,354.6<Fb> $5,112.8<Fb>
    Europe.................................................................       1,147.1     1,018.7        920.9
    South & Central America................................................         821.8       770.5        721.9
    Asia Pacific...........................................................         904.0       806.7        683.0
    Other..................................................................         247.2       221.1        238.0
                                                                                 --------    --------     --------
        Total..............................................................      $6,114.3    $7,171.6     $7,676.6
                                                                                 ========    ========     ========
Operating Profit<Fc>
    United States..........................................................      $  620.0    $  604.4<Fb> $  599.6<Fb>
    Europe.................................................................          21.3         8.3           .8
    South & Central America................................................          43.7        15.7         26.2
    Asia Pacific...........................................................         116.9        72.0         68.5
    Other..................................................................          12.7         7.6          5.4
                                                                                 --------    --------     --------
        Total..............................................................      $  814.6    $  708.0     $  700.5
                                                                                 ========    ========     ========
Assets
    United States..........................................................      $2,154.1    $2,077.7<Fb> $2,465.0<Fb>
    Europe.................................................................         882.5       856.6        834.2
    South & Central America................................................         307.6       272.1        252.4
    Asia Pacific...........................................................         507.6       468.2        414.1
    Other..................................................................          96.9        96.6        104.5
                                                                                 --------    --------     --------
        Total..............................................................      $3,948.7    $3,771.2     $4,070.2
                                                                                 ========    ========     ========

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

<Fa>     See Note (a) on page 24.

<Fb>     See Note (b) on page 24.

<Fc>     Includes restructuring provisions of:

<CAPTION>
        Area                                                                        1996                 1995               1994
        ----                                                                        ----                 ----               ----
<S>                                                                                <C>                  <C>                <C>
United States..............................................................        $ 1.5                $10.7              $18.9
Europe.....................................................................         17.1                 34.4               32.8
South & Central America....................................................          1.1                 28.8               21.7
Asia Pacific...............................................................           --                 16.9               14.7
Other......................................................................         (1.7)                  --                8.4
</TABLE>

                                      26

<PAGE>
                    RESPONSIBILITY FOR FINANCIAL STATEMENTS

    The preparation and integrity of the financial statements of Ralston Purina
Company are the responsibility of its management. These statements have been
prepared in conformance with generally accepted accounting principles, and in
the opinion of management, fairly present the Company's financial position,
results of operations and cash flows.

     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 that the
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 report of Price Waterhouse LLP, independent accountants, on their
audits of the accompanying financial statements is shown below. This report
states that the audits were made in accordance with generally accepted auditing
standards. These standards include a study and evaluation of internal control
for the purpose of establishing a basis for reliance thereon relative to the
scope of their audits of the financial statements.

     The Board of Directors, through its Audit Committee consisting solely of
nonmanagement directors, meets periodically with management, internal audit and
the independent accountants to discuss audit and financial reporting matters.
To assure independence, Price Waterhouse LLP has direct access to the Audit
Committee.

                       REPORT OF INDEPENDENT ACCOUNTANTS

To the Shareholders and Board of Directors of
  Ralston Purina Company

     In our opinion, the accompanying consolidated balance sheet and the
related consolidated statements of earnings, of shareholders equity and of cash
flows present fairly, in all material respects, the financial position of
Ralston Purina Company and its subsidiaries at September 30, 1996 and 1995, and
the results of their operations and their cash flows for each of the three
years in the period ended September 30, 1996, in conformity with generally
accepted accounting principles. 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 generally accepted auditing
standards 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/ PRICE WATERHOUSE LLP

St. Louis, Missouri
November 1, 1996

                                      27

<PAGE>
                    RALSTON PURINA COMPANY AND SUBSIDIARIES

                      CONSOLIDATED STATEMENT OF EARNINGS

                            Year ended September 30

<TABLE>
<CAPTION>
(DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)                                                     1996         1995         1994
-------------------------------------------                                                     ----         ----         ----
<S>                                                                                           <C>          <C>          <C>
Net Sales................................................................................     $6,114.3     $7,171.6     $7,676.6
                                                                                              --------     --------     --------
Costs and Expenses
    Cost of products sold................................................................      3,668.1      4,088.0      4,282.5
    Selling, general and administrative..................................................      1,068.1      1,734.1      1,861.3
    Advertising and promotion............................................................        592.8        598.4        771.2
    Interest.............................................................................        190.3        199.8        220.4
    Provisions for restructuring.........................................................         18.0         90.8         99.9
    Gain on sale of CBC..................................................................           --        (50.3)          --
    Other (income)/expense, net..........................................................         14.7         (3.4)        19.6
                                                                                              --------     --------     --------
                                                                                               5,552.0      6,657.4      7,254.9
                                                                                              --------     --------     --------
Earnings before Income Taxes, Equity Earnings and Extraordinary Item.....................        562.3        514.2        421.7
Income Taxes.............................................................................       (212.2)      (215.0)      (203.3)
                                                                                              --------     --------     --------
Earnings before Equity Earnings and Extraordinary Item...................................        350.1        299.2        218.4
Equity Earnings, Net of Taxes............................................................         11.6           .9           --
                                                                                              --------     --------     --------
Earnings before Extraordinary Item.......................................................        361.7        300.1        218.4
Extraordinary Item--Loss on Early Retirement of Debt.....................................         (2.1)        (3.7)        (9.5)
                                                                                              --------     --------     --------
Net Earnings.............................................................................        359.6        296.4        208.9
Preferred Stock Dividend, Net of Taxes...................................................        (14.1)       (18.8)       (20.2)
                                                                                              --------     --------     --------
Earnings Available to Common Shareholders................................................     $  345.5     $  277.6     $  188.7
                                                                                              ========     ========     ========
Earnings per share of RAL Stock (Pro forma in 1995 and 1994 assuming one class of common
  stock, unaudited):
    Primary
        Earnings before Extraordinary Item...............................................     $   3.41     $   2.76     $   1.93
        Extraordinary Item...............................................................         (.02)        (.04)        (.09)
                                                                                              --------     --------     --------
        Net Earnings.....................................................................     $   3.39     $   2.72     $   1.84
                                                                                              ========     ========     ========
    Fully Diluted
        Earnings before Extraordinary Item...............................................     $   3.23     $   2.66     $   1.88
        Extraordinary Item...............................................................         (.02)        (.03)        (.08)
                                                                                              --------     --------     --------
        Net Earnings.....................................................................     $   3.21     $   2.63     $   1.80
                                                                                              ========     ========     ========
Earnings per share of RAL Stock (Based on RPG Group earnings through May 15, 1995 and
  consolidated Ralston Purina Company earnings thereafter):
    Primary
        Earnings before Extraordinary Item...............................................                  $   2.89     $   2.12
        Extraordinary Item...............................................................                      (.04)        (.08)
                                                                                                           --------     --------
        Net Earnings.....................................................................                  $   2.85     $   2.04
                                                                                                           ========     ========
    Fully Diluted
        Earnings before Extraordinary Item...............................................                  $   2.77     $   2.05
        Extraordinary Item...............................................................                      (.03)        (.07)
                                                                                                           --------     --------
        Net Earnings.....................................................................                  $   2.74     $   1.98
                                                                                                           ========     ========

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

<CAPTION>
                                                                                                             1995         1994
                                                                                                             ----         ----
<S>                                                                                                        <C>          <C>
Loss per share of CBG Stock (Through May 15, 1995):
    Primary and Fully Diluted
        Loss before Extraordinary Item...................................................                  $ (.45)      $ (.74)
        Extraordinary Item...............................................................                      --         (.04)
                                                                                                           ------       ------
        Net Loss.........................................................................                  $ (.45)      $ (.78)
                                                                                                           ======       ======

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

                                      28

<PAGE>
                    RALSTON PURINA COMPANY AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEET

                                 September 30

<TABLE>
<CAPTION>
(DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)                                                   1996             1995
-------------------------------------------                                                   ----             ----
<S>                                                                                         <C>              <C>
ASSETS
Current Assets
    Cash and cash equivalents............................................................   $   62.3         $   44.3
    Receivables, less allowance for doubtful accounts....................................      845.6            801.4
    Inventories..........................................................................      816.2            766.2
    Other current assets.................................................................      149.3            151.1
                                                                                            --------         --------
        Total Current Assets.............................................................    1,873.4          1,763.0
Investments and Other Assets.............................................................    1,455.8          1,453.3
Property at Cost
    Land.................................................................................       48.4             50.4
    Buildings............................................................................      504.6            495.6
    Machinery and equipment..............................................................    2,069.3          1,946.1
    Construction in progress.............................................................      175.0            113.9
                                                                                            --------         --------
                                                                                             2,797.3          2,606.0
        Accumulated depreciation.........................................................    1,341.4          1,255.1
                                                                                            --------         --------
                                                                                             1,455.9          1,350.9
                                                                                            --------         --------
            Total........................................................................   $4,785.1         $4,567.2
                                                                                            ========         ========
LIABILITIES AND SHAREHOLDERS EQUITY
Current Liabilities
    Current maturities of long-term debt.................................................   $   98.0         $  303.2
    Notes payable........................................................................      881.9            503.2
    Accounts payable and accrued liabilities.............................................      843.9            875.5
    Dividends payable....................................................................       36.0             36.4
    Income taxes.........................................................................       35.7             22.9
                                                                                            --------         --------
        Total Current Liabilities........................................................    1,895.5          1,741.2
Long-Term Debt...........................................................................    1,437.0          1,602.1
Deferred Income Taxes....................................................................       50.0             53.6
Other Liabilities........................................................................      500.7            479.3
Redeemable Preferred Stock--Series A 6.75%, $1 par value, issued 2,919,209 and 3,146,209
  shares in 1996 and 1995, respectively..................................................      323.5            348.7
Unearned ESOP Compensation...............................................................     (110.6)          (151.9)
Shareholders Equity
    Preferred stock, $1 par value, none outstanding
    Common Stock--$.10 par value, issued 114,688,225 and 114,687,476 shares in 1996 and
     1995, respectively..................................................................       11.5             11.5
    Capital in excess of par value.......................................................      217.3            169.6
    Retained earnings....................................................................    1,302.9          1,089.7
    Cumulative translation adjustment....................................................      (66.6)           (50.3)
    Common stock in treasury, at cost, 8,739,872 and 8,831,457 shares in 1996 and 1995,
     respectively........................................................................     (482.3)          (481.7)
    Unearned portion of restricted stock.................................................       (4.2)            (5.3)
    Value of 4,228,314 and 4,135,314 shares of Common Stock held in Grantor Trust in 1996
     and 1995, respectively..............................................................     (289.6)          (239.3)
                                                                                            --------         --------
        Total Shareholders Equity........................................................      689.0            494.2
                                                                                            --------         --------
            Total........................................................................   $4,785.1         $4,567.2
                                                                                            ========         ========

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

                                      29

<PAGE>
                    RALSTON PURINA COMPANY AND SUBSIDIARIES

                     CONSOLIDATED STATEMENT OF CASH FLOWS

                            Year ended September 30

<TABLE>
<CAPTION>
(DOLLARS IN MILLIONS)                                                                    1996        1995        1994
---------------------                                                                    ----        ----        ----
<S>                                                                                     <C>         <C>         <C>
Cash Flow from Operations
    Net earnings...................................................................     $ 359.6     $ 296.4     $ 208.9
    Adjustments to reconcile net earnings to net cash flow provided by operations
        Extraordinary item.........................................................         2.1         3.7         9.5
        Non-cash restructuring reserves............................................         5.4        33.0        46.4
        Depreciation and amortization..............................................       237.1       289.5       309.4
        Deferred income tax provision..............................................        (2.8)       (8.6)      (34.3)
        Gain on sale of CBC........................................................          --       (50.3)         --
        Changes in assets and liabilities used in operations
            (Increase) in accounts receivable......................................       (48.6)      (75.4)     (137.4)
            (Increase) decrease in inventories.....................................       (56.8)      (73.2)        1.0
            (Increase) decrease in other current assets............................        (1.3)       11.5       (27.8)
            Increase (decrease) in accounts payable and accrued liabilities........       (48.2)        7.4        73.3
            Increase in other current liabilities..................................        29.0        12.7         2.8
        Other, net.................................................................       (11.1)       27.0        19.2
                                                                                        -------     -------     -------
              Net cash flow from operations........................................       464.4       473.7       471.0
                                                                                        -------     -------     -------
Cash Flow from Investing Activities
    Property additions.............................................................      (314.1)     (284.6)     (332.1)
    Proceeds from the sale of property.............................................        22.5        17.7        40.1
    Proceeds from the sale of CBC..................................................          --       220.0          --
    Acquisitions of businesses.....................................................       (25.1)     (358.0)      (39.2)
    Other, net.....................................................................         9.2       (23.1)       (6.6)
                                                                                        -------     -------     -------
              Net cash used by investing activities................................      (307.5)     (428.0)     (337.8)
                                                                                        -------     -------     -------
Cash Flow from Financing Activities
    Proceeds from issuance of debt for spin-off....................................          --          --       370.0
    Proceeds from sale of long-term debt...........................................       199.7       272.8        37.7
    Principal payments on long-term debt, including current maturities.............      (355.3)     (318.1)     (233.8)
    Net increase in notes payable..................................................       203.2       222.6        40.9
    Treasury stock purchases.......................................................        (9.4)      (15.3)     (103.2)
    Dividends paid.................................................................      (145.0)     (153.8)     (155.8)
    Stock repurchases in connection with the ESOP..................................       (24.3)     (126.0)         --
    Other, net.....................................................................        (3.8)       (8.8)        (.6)
                                                                                        -------     -------     -------
              Net cash used by financing activities................................      (134.9)     (126.6)      (44.8)
                                                                                        -------     -------     -------
Effect of Exchange Rate Changes on Cash............................................        (4.0)        (.8)      (20.3)
                                                                                        -------     -------     -------
Net Increase (Decrease) in Cash and Cash Equivalents...............................        18.0       (81.7)       68.1
Cash and Cash Equivalents, Beginning of Year.......................................        44.3       126.0        57.9
                                                                                        -------     -------     -------
Cash and Cash Equivalents, End of Year.............................................     $  62.3     $  44.3     $ 126.0
                                                                                        =======     =======     =======

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

                                      30

<PAGE>
                    RALSTON PURINA COMPANY AND SUBSIDIARIES

                 CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY

                     Three years ended September 30, 1996


<TABLE>
<CAPTION>
                                                                    NUMBER OF SHARES                       AMOUNT
                                                                     (IN THOUSANDS)                 (DOLLARS IN MILLIONS)
                                                               --------------------------        --------------------------
                                                               1996       1995       1994        1996       1995       1994
                                                               ----       ----       ----        ----       ----       ----
<S>                                                           <C>        <C>        <C>         <C>        <C>        <C>
Common Stocks:
    RAL Stock:
        Balance at beginning of year........................  114,687    114,685    114,679     $  11.5    $  11.5    $  11.5
             Common stock issued on conversion of
              debentures....................................        1          2          6
                                                              -------    -------    -------     -------    -------    -------
        Balance at end of year..............................  114,688    114,687    114,685     $  11.5    $  11.5    $  11.5
                                                              =======    =======    =======     =======    =======    =======
    CBG Stock:
        Balance at beginning of year........................              20,857     20,694                $   2.1    $   2.1
             Shares issued in connection with preferred
              stock redemption..............................                            162
             Common stock issued on conversion of
              debentures....................................                   1          1
             Exchange of CBG Stock for RAL Stock............             (20,858)                             (2.1)
                                                                         -------    -------                -------    -------
        Balance at end of year..............................                  --     20,857                $    --    $   2.1
                                                                         =======    =======                =======    =======
Common Stocks in Treasury:
    RAL Stock:
        Balance at beginning of year........................   (8,831)   (10,620)   (12,917)    $(481.7)   $(577.4)   $(744.3)
             Shares issued in connection with CBG Stock
              exchange......................................               1,816                              98.7
             Activity under stock plans.....................      237        210        100        11.7       12.6        7.5
             Treasury stock purchased.......................     (146)      (300)    (2,560)       (9.4)     (15.3)    (100.9)
             Shares issued in connection with preferred
              stock redemption/conversion...................      391      2,319        789        21.4      125.7       43.9
             Share repurchases in connection with the
              ESOP..........................................     (391)    (2,256)                 (24.3)    (126.0)
             Restricted Stock Award transfer in connection
              with Ralcorp spin-off.........................                            (65)                             (2.9)
             Establishment of grantor trust.................                          4,033                             219.3
                                                              -------    -------    -------     -------    -------    -------
        Balance at end of year..............................   (8,740)    (8,831)   (10,620)    $(482.3)   $(481.7)   $(577.4)
                                                              =======    =======    =======     =======    =======    =======
    CBG Stock:
        Balance at beginning of year........................                (270)        (1)               $  (2.6)   $    --
             Activity under stock plans.....................                   2        (17)                              (.2)
             Treasury stock purchased.......................                           (242)                             (2.3)
             Restricted Stock Award transfer in connection
              with Ralcorp spin-off.........................                            (10)                              (.1)
             Cancellation of shares.........................                 268                               2.6
                                                                         -------    -------                -------    -------
        Balance at end of year..............................                  --       (270)               $    --    $  (2.6)
                                                                         =======    =======                =======    =======
Grantor Trust:
        Balance at beginning of year........................   (4,135)    (4,033)               $(239.3)   $(166.9)   $    --
             Establishment of grantor trust.................                         (4,033)                           (169.4)
             Shares purchased...............................      (93)      (102)                  (6.0)      (5.0)
             Market value adjustment........................                                      (44.3)     (67.4)       2.5
                                                              -------    -------    -------     -------    -------    -------
        Balance at end of year..............................   (4,228)    (4,135)    (4,033)    $(289.6)   $(239.3)   $(166.9)
                                                              =======    =======    =======     =======    =======    =======
</TABLE>

                                      31
<PAGE>
                    RALSTON PURINA COMPANY AND SUBSIDIARIES

                 CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY
                                                   (Continued)

                     Three years ended September 30, 1996

<TABLE>
<CAPTION>
                                                                                                  AMOUNT
                                                                                          (DOLLARS IN MILLIONS)
                                                                                 ----------------------------------------
                                                                                 1996              1995              1994
                                                                                 ----              ----              ----
<S>                                                                            <C>               <C>               <C>
Capital in Excess of Par Value:
        Balance at beginning of year.......................................    $  169.6          $  108.7          $  115.2
             Effect of exchange of CBG Stock for RAL Stock.................                          (5.8)
             Effect of preferred stock conversion..........................                          (3.2)
             Activity under stock plans....................................         3.4               2.5                .6
             Establishment of grantor trust................................                                            (4.6)
             Market value adjustment of grantor trust......................        44.3              67.4              (2.5)
                                                                               --------          --------          --------
        Balance at end of year.............................................    $  217.3          $  169.6          $  108.7
                                                                               ========          ========          ========
Retained Earnings:
        Balance at beginning of year.......................................    $1,089.7          $1,043.2          $1,159.3
             Net earnings..................................................       359.6             296.4             208.9
             Effect of exchange of CBG Stock for RAL Stock.................                         (93.8)
             Effect of preferred stock conversion..........................        (2.5)            (10.4)
             Activity under stock plans....................................        (7.7)             (5.3)             (4.4)
             Dividends declared on preferred stock, net of taxes...........       (14.1)            (18.8)            (20.2)
             Dividends declared on RAL Stock...............................      (122.1)           (121.6)           (121.5)
             Impact of Ralcorp spin-off....................................                                          (133.6)
             Establishment of grantor trust................................                                           (45.3)
                                                                               --------          --------          --------
        Balance at end of year.............................................    $1,302.9          $1,089.7          $1,043.2
                                                                               ========          ========          ========
Unearned Portion of Restricted Stock:
        Balance at beginning of year.......................................    $   (5.3)         $   (4.3)         $   (3.9)
             Activity under stock plans....................................                          (1.2)             (2.0)
             Market value adjustment on restricted stock...................                           (.5)
             Amortization of restricted stock..............................         1.1                .7               1.6
                                                                               --------          --------          --------
        Balance at end of year.............................................    $   (4.2)         $   (5.3)         $   (4.3)
                                                                               ========          ========          ========
Cumulative Translation Adjustment:
        Balance at beginning of year.......................................    $  (50.3)         $  (58.7)         $  (70.1)
             Translation adjustments.......................................       (16.3)              8.4              11.4
                                                                               --------          --------          --------
        Balance at end of year.............................................    $  (66.6)         $  (50.3)         $  (58.7)
                                                                               ========          ========          ========

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

                                      32

<PAGE>
                    RALSTON PURINA COMPANY AND SUBSIDIARIES

                         NOTES TO FINANCIAL STATEMENTS

                  (Dollars in millions except per share data)

                        SUMMARY OF ACCOUNTING POLICIES

     Ralston Purina Company's (the Company) significant accounting policies,
which conform to generally accepted accounting principles and are applied on a
consistent basis among years, except as indicated, are described below:

     PRINCIPLES OF CONSOLIDATION -- The consolidated financial statements
include the accounts of the Company and its majority-owned subsidiaries. All
significant intercompany transactions are eliminated. Investments in affiliated
companies, 20% through 50%-owned, are carried at equity.

     FOREIGN CURRENCY TRANSLATION -- Foreign currency 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, 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 generally included in
earnings.

     FINANCIAL INSTRUMENTS -- The Company uses financial instruments in its
management of foreign currency and interest rate exposures. Financial
instruments are not held or issued for trading purposes.

     Interest rate swap and cap agreements are utilized in the management of
interest rate exposure. The differential to be paid or received is normally
accrued as interest rates change and is recognized as a component of interest
expense over the life of the agreements. In addition, in order to hedge foreign
currency exposures on firm commitments, the Company regularly enters into
foreign currency forward and option contracts. Realized and unrealized gains
and losses resulting from financial instruments which are effective as hedges
are deferred in the cost basis of the asset or liability being hedged and are
recognized in the same period as the underlying hedged transaction. Cash flow
from hedging transactions are classified in the same category as the cash flow
from the item being hedged. Other realized and unrealized gains and losses on
financial instruments are recognized currently in earnings.

     CASH EQUIVALENTS for purposes of the statement of cash flows are
considered to be all highly liquid investments with a maturity of three months
or less when purchased.

     INVENTORIES are valued generally at the lower of cost or market, with cost
being determined using average cost or the first-in, first-out (FIFO) method.
The Company hedges certain of its grain and commodity purchases as considered
necessary to reduce the risk associated with market price fluctuations. Gains
and losses on hedges of future grain and commodity purchases are recognized in
the same period as the related inventory is sold.

     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.

     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 25 years for machinery and
equipment and 10 to 50 years for buildings.

     GOODWILL AND OTHER INTANGIBLE ASSETS, which are included in Investments
and Other Assets, represent the excess of cost over the net tangible assets of
acquired businesses and are amortized over estimated periods of related benefit
ranging from 7 to 40 years.

     Subsequent to acquisition, the Company continually evaluates whether later
events and circumstances have occurred that indicate the remaining estimated
useful life of an intangible asset may warrant revision or that the remaining
balance of an intangible asset may not be recoverable. The measurement of
possible impairment is based on the ability to recover the balance of
intangible assets from expected future operating cash flows on an undiscounted
basis. In the opinion of management, no such impairment existed as of September
30, 1996 and 1995.

     ADVERTISING COSTS -- The Company expenses advertising costs as incurred.

     RESEARCH AND DEVELOPMENT costs are expensed as incurred and were $84.2,
$80.9 and $74.9 in 1996, 1995 and 1994, respectively.

     USE OF ESTIMATES -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, the 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.

                                      33

<PAGE>
                    RALSTON PURINA COMPANY AND SUBSIDIARIES

                   NOTES TO FINANCIAL STATEMENTS (Continued)

                  (Dollars in millions except per share data)

     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 repatriations of foreign earnings after taking into account tax-exempt
earnings and applicable foreign tax credits.

     EARNINGS PER SHARE -- Primary earnings per share are based on the average
number of shares outstanding during the period for which earnings per share are
reported. The average number of shares of RAL Stock outstanding for the year
ended September 30, 1996 was 101,776,000.

     As discussed in the CBG Stock Exchange note to the financial statements,
on May 15, 1995, the Company exchanged all outstanding shares of Ralston-
Continental Baking Group Common Stock (CBG Stock) for shares of Ralston-Ralston
Purina Group Common Stock (RAL Stock), which remains the Company's sole
outstanding class of common stock. The average number of shares of RAL Stock
outstanding for the year ended September 30, 1995 was 100,700,000. For the
period October 1, 1994 through May 15, 1995, the average number of shares of
CBG Stock outstanding was 20,589,000. The average number of shares of RAL Stock
and CBG Stock outstanding for the year ended September 30, 1994 was 100,547,000
and 20,542,000, respectively.

     The 1995 and 1994 pro forma earnings per share are based on the assumption
that the CBG Stock exchange had occurred as of the beginning of the periods
presented. The average number of shares of RAL Stock assumed outstanding was
101,850,000 in 1995 and 102,363,000 in 1994. The pro forma earnings per share
are not necessarily indicative of the results that would have occurred had the
RAL Stock been the sole class of common stock outstanding during the periods
presented.

     Fully diluted earnings per share assumes the conversion of the Series A
6.75% Preferred Stock (Redeemable Preferred Stock) and other dilutive
securities into common stock. For purposes of calculating fully diluted
earnings per share, net earnings have been adjusted for the additional
contribution to the ESOP portion of the Company's Savings Investment Plan and
its related trust (ESOP) that would have been required had the Redeemable
Preferred Stock been converted as of the beginning of the period.

     ACCOUNTING FOR STOCK-BASED COMPENSATION -- In October 1995, the Financial
Accounting Standards Board issued Statement of Financial Accounting Standards
No. 123 ``Accounting for Stock-Based Compensation'' (SFAS No. 123). SFAS 123
establishes a fair value based method of accounting for the issuance of stock
or similar equity instruments to employees. The Company currently accounts for
stock compensation using Accounting Principles Board Opinion No. 25
``Accounting for Stock Issued to Employees'' (APB 25). SFAS 123 allows
companies to elect fair value based accounting for stock compensation or
continue using the intrinsic value method of accounting for stock compensation
as required by APB 25. For companies electing to continue the use of APB 25,
SFAS 123 requires pro forma disclosures of net earnings and earnings per share
as if the provisions of SFAS 123 had been adopted. The Company will continue to
apply APB 25 in its consolidated financial statements and will provide required
disclosures effective in fiscal 1997. As a result, SFAS 123 will have no effect
on the financial condition or results of operations of the Company.

     RECLASSIFICATIONS -- Certain reclassifications have been made to the 1995
and 1994 financial statements to conform with the 1996 presentation.

                         BUSINESS SEGMENT INFORMATION

     The Business Segment Information and Geographic Segment Information
sections, appearing on pages 21 through 26 herein, are an integral part of
these financial statements.

                                 ACQUISITIONS

     On April 7, 1995, the Company purchased the assets of Golden Cat
Corporation, the leading manufacturer and marketer of branded cat box filler in
the United States and Canada for $340. Also in the third quarter of 1995, the
Company acquired the assets of a Mexican pet food company for $18.

     These acquisitions were accounted for using the purchase method of
accounting, and accordingly, the results of operations are 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 or net earnings.

                              CBG STOCK EXCHANGE

     On May 15, 1995, the Company exchanged each outstanding share of CBG Stock
for .0886 shares of RAL Stock as permitted by the Company's Restated Articles
of Incorporation (Articles). The exchange represented a 15% premium to the
relative trading values of the CBG Stock and RAL Stock for the period March 31
through April 6, 1995, as provided in the Articles.

                                      34

<PAGE>
                    RALSTON PURINA COMPANY AND SUBSIDIARIES

                   NOTES TO FINANCIAL STATEMENTS (Continued)

                  (Dollars in millions except per share data)

                                 DIVESTITURES

     Effective July 22, 1995, the Company sold its Continental Baking Company
(CBC) subsidiary to Interstate Bakeries Corporation (IBC) and its wholly owned
subsidiary, Interstate Brands Corporation, for $220.0 in cash and 16,923,077
shares of common stock of IBC (the IBC Stock). The Company recorded a pre-tax
and after-tax gain on the sale of CBC of $50.3 and $42.0, respectively, or $.41
per pro forma primary share. Due to the Company's continuing ownership interest
in IBC, an additional $18.5 after-tax gain was deferred.

     On March 31, 1994 the Company effected a spin-off of its private label and
branded cereal, baby food, crackers and cookies, ski resort and coupon
redemption businesses. One share of stock of the new company, Ralcorp Holdings,
Inc. (Ralcorp), was distributed for each three shares of RAL Stock held by
shareholders.

     The Company's earnings and cash flows reflect the operations of CBC
through July 22, 1995 and reflect the operations of spun-off businesses through
March 31, 1994.

                 INVESTMENT IN INTERSTATE BAKERIES CORPORATION

     The Company's equity investments in affiliated companies includes a 45.2%
interest in IBC at September 30, 1996. The Company accounts for its investment
in IBC by the equity method of accounting. The carrying value of this
investment was $286.9 and $281.2 at September 30, 1996 and 1995, respectively.
The market value of the Company's investment in IBC was $617.7 and $357.5 at
September 30, 1996 and 1995, respectively. As of the July 1995 sale of CBC, the
market value of the IBC shares received exceeded the underlying net assets of
IBC by $95.2. This excess is included in the carrying value of the Company's
investment in IBC, and is amortized over 30 years. Cash dividends received from
IBC were $8.5 in 1996.

     Terms of a shareholder agreement provide that, with certain limited
exceptions, the Company will not acquire any additional shares of IBC Stock for
a period of six years from the July 1995 closing of the sale of CBC. The
agreement also provides that within five years of closing, the Company's
ownership of IBC Stock will be reduced to no more than 14.9% of the total
outstanding shares. The Company has registration rights with respect to the IBC
Stock, but the shareholder agreement provides that, with certain limited
exceptions, the Company may not sell any of the IBC Stock without first
offering the securities to IBC. IBC also has the right, during the fifth year
following closing, to acquire any of the IBC Stock then held by the Company at
a price equal to 110% of its then current market price. The shareholder
agreement provides that the Company will vote the shares of IBC Stock in
accordance with the recommendation of IBC's Board with respect to shareholder
proposals and nominations to that Board, and with respect to other proposals,
in proportion to the votes of all other shareholders; provided, however, that
the Company may vote as it deems appropriate with respect to proposals for the
merger of IBC, the sale of all IBC assets, or the issuance of any other class
of voting stock of IBC. The Company has two representatives on the IBC Board of
Directors.

                                      35

<PAGE>
                    RALSTON PURINA COMPANY AND SUBSIDIARIES

                   NOTES TO FINANCIAL STATEMENTS (Continued)

                  (Dollars in millions except per share data)

     Presented below is summary financial information of IBC:
<TABLE>
<CAPTION>
                                                                              AUGUST 24,        AUGUST 26,
                                                                                 1996              1995
                                                                              ----------        ----------
<S>                                                                           <C>              <C>
Current assets.............................................................    $  331.3          $  321.6
Noncurrent assets..........................................................     1,160.7           1,167.9
                                                                               --------          --------
    Total assets...........................................................    $1,492.0          $1,489.5
                                                                               ========          ========
Current liabilities........................................................    $  371.2          $  300.3
Noncurrent liabilities.....................................................       644.8             744.7
Stockholders equity........................................................       476.0             444.5
                                                                               --------          --------
    Total liabilities and stockholders equity..............................    $1,492.0          $1,489.5
                                                                               ========          ========

<CAPTION>
                                                                               52 WEEKS          12 WEEKS
                                                                                ENDED              ENDED
                                                                              AUGUST 24,        AUGUST 26,
                                                                                 1996              1995
                                                                              ----------        ----------
<S>                                                                           <C>              <C>
Net sales..................................................................    $3,160.4          $  471.4
Cost of products sold......................................................     1,586.0             241.3
                                                                               --------          --------
Gross profit...............................................................    $1,574.4          $  230.1
                                                                               ========          ========
Net income.................................................................    $   37.4          $    5.7
Company equity income, net of taxes (1995 amount represents July 23 through
  August 26, 1995).........................................................    $   11.6          $     .9
</TABLE>

                           RESTRUCTURING ACTIVITIES

     In 1996, the Company recorded provisions for restructuring which reduced
earnings before income taxes, net earnings and net earnings per primary share
by $18.0, $15.5 and $.15, respectively. These charges are associated with the
closing of the Company's European cereal operations, the streamlining of
operations of the international agricultural animal feeds business in advance
of the planned spin-off and additional battery products' restructuring. Charges
were $8.4, pre-tax and after-tax, for the cereal operations, $5.6 and $4.5,
pre-tax and after-tax, respectively, for agricultural products and $4.0 and
$2.6, pre-tax and after-tax, respectively, for battery products. The 1996
provision for restructuring consisted of termination benefits of $10.8,
relating to the termination of approximately 315 employees, other cash exit
costs of $1.8 and non-cash charges of $5.4, primarily related to impairment
losses on land, buildings and machinery and equipment.

     During 1996, approximately 180 employees associated with the Company's
foreign operations were terminated and termination benefits of $5.3 were paid
in connection with the 1996 provision. The remaining reserve balance of $7.3,
which excludes the portion of the provision classified as property and other
asset write-downs, is expected to be utilized during 1997.

     During 1995 and 1994, the Company recorded provisions for restructuring of
its world-wide carbon zinc battery production capacity and certain
administrative functions. The provisions provided for the closing of a total of
ten plants and the severance of approximately 2,600 employees. The 1995
provisions reduced earnings before income taxes, net earnings and net earnings
per pro forma primary share by $90.8, $70.0 and $.68, respectively. The 1995
provision for restructuring consisted of termination benefits of $46.2, other
cash exit costs of $11.6 and non-cash charges of $33.0, primarily related to
anticipated losses on disposal of land, buildings and machinery and equipment.

     The 1994 provisions were $83.9 before income taxes and $72.8 after taxes.
The provision included cash costs for termination benefits of $26.2, payment of
guaranteed debt of $4.3 and other exit costs of $7.0. Non-cash charges of $46.4
primarily related to anticipated losses on disposal of land, buildings and
machinery and equipment.

                                      36

<PAGE>
                    RALSTON PURINA COMPANY AND SUBSIDIARIES

                   NOTES TO FINANCIAL STATEMENTS (Continued)

                  (Dollars in millions except per share data)

     As of September 30, 1996, 8 plants have been closed and approximately
2,250 employees have been severed in connection with the 1994 and 1995
restructuring provisions. Activity related to these provisions is summarized as
follows:

<TABLE>
<CAPTION>
                                                                               1996        1995
                                                                               ----        ----
<S>                                                                           <C>         <C>
Reserve balance at beginning of year.......................................   $ 43.9      $ 36.5
Provision recorded.........................................................       --        90.8
Termination benefits paid..................................................    (20.7)      (32.6)
Other cash exit costs incurred.............................................     (7.3)      (21.2)
Portion of current period provision classified as property and other asset
  writedowns...............................................................       --       (33.0)
Increase due to translation................................................       .8         3.4
                                                                              ------      ------
Reserve balance at September 30............................................   $ 16.7      $ 43.9
                                                                              ======      ======
</TABLE>

     Restructuring actions are expected to be completed in 1997 for the
remaining 2 plants.

     In 1994, bakery products' restructuring provisions were recorded which
reduced 1994 earnings before income taxes and net earnings by $16.0 and $9.6,
respectively. The charge covered severance and related payroll costs for 435
headquarters and field employees.

                                 INCOME TAXES

     The provisions for income taxes consisted of the following:

<TABLE>
<CAPTION>
                                                                                 1996         1995         1994
                                                                                 ----         ----         ----
<S>                                                                             <C>          <C>          <C>
Currently payable
    United States..........................................................     $154.1       $161.0       $167.8
    State..................................................................       12.3         16.5         18.3
    Foreign................................................................       48.6         46.1         51.5
                                                                                ------       ------       ------
        Total current......................................................      215.0        223.6        237.6
                                                                                ------       ------       ------
Deferred
    United States..........................................................       (7.2)        (9.0)       (17.6)
    State..................................................................         --         (1.7)        (2.3)
    Foreign................................................................        4.4          2.1        (14.4)
                                                                                ------       ------       ------
        Total deferred.....................................................       (2.8)        (8.6)       (34.3)
                                                                                ------       ------       ------
Income taxes before equity earnings and extraordinary item.................     $212.2       $215.0       $203.3
                                                                                ======       ======       ======
</TABLE>

     The source of pre-tax earnings follows:

<TABLE>
<CAPTION>
                                                                                 1996         1995         1994
                                                                                 ----         ----         ----
<S>                                                                             <C>          <C>          <C>
United States..............................................................     $442.3       $465.4       $398.0
Foreign....................................................................      120.0         48.8         23.7
                                                                                ------       ------       ------
Pre-tax earnings before equity earnings and extraordinary item.............     $562.3       $514.2       $421.7
                                                                                ======       ======       ======
</TABLE>

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

<TABLE>
<CAPTION>
                                                                      1996                  1995                  1994
                                                                -----------------     -----------------     -----------------
<S>                                                             <C>          <C>      <C>          <C>      <C>          <C>
Computed tax at federal statutory rate.......................   $196.8       35.0%    $180.0       35.0%    $147.6       35.0%
State income taxes, net of federal tax benefit...............      8.0        1.4        9.6        1.9       10.4        2.5
Foreign tax in excess of domestic rate.......................      5.3         .9       26.1        5.1       28.8        6.8
Taxes on repatriation of foreign earnings....................     21.0        3.7       16.0        3.1       20.5        4.9
Taxes on gain on sale of CBC less than domestic rate.........       --         --      (10.3)      (2.0)        --         --
Other, net...................................................    (18.9)      (3.3)      (6.4)      (1.3)      (4.0)      (1.0)
                                                                ------       ----     ------       ----     ------       ----
                                                                $212.2       37.7%    $215.0       41.8%    $203.3       48.2%
                                                                ======       ====     ======       ====     ======       ====
</TABLE>

                                      37

<PAGE>
                    RALSTON PURINA COMPANY AND SUBSIDIARIES

                   NOTES TO FINANCIAL STATEMENTS (Continued)

                  (Dollars in millions except per share data)

     The tax benefit related to the extraordinary loss on early retirement of
debt was $1.3 in 1996, $2.3 in 1995 and $6.1 in 1994.

     The deferred tax assets and deferred tax liabilities recorded on the
balance sheet as of September 30, 1996 and 1995 are as follows:

<TABLE>
<CAPTION>
                                                                                 1996        1995
                                                                                 ----        ----
<S>                                                                             <C>         <C>
Deferred Tax Liabilities:
    Depreciation and property differences..................................     $(165.2)    $(165.6)
    Pension plans..........................................................       (74.3)      (65.0)
    Other..................................................................       (57.7)      (47.3)
                                                                                -------     -------
        Gross deferred tax liabilities.....................................      (297.2)     (277.9)
                                                                                -------     -------
Deferred Tax Assets:
    Postretirement benefits other than pensions............................       177.1       164.2
    Accrued liabilities....................................................        72.4        74.9
    Tax loss carryforwards and tax credits.................................        61.2        62.8
    Self-insurance reserves................................................         6.0         5.7
    Intangible assets......................................................        34.7        31.3
    Other..................................................................        16.0        16.5
                                                                                -------     -------
        Gross deferred tax assets..........................................       367.4       355.4
                                                                                -------     -------
    Valuation allowance....................................................       (63.8)      (72.3)
                                                                                -------     -------
    Net deferred tax assets................................................     $   6.4     $   5.2
                                                                                =======     =======
</TABLE>

     Total net deferred tax assets shown above include current and noncurrent
elements.

     Tax loss carryforwards and tax credits totaling $7.6 expired in 1996.
Future expiration of tax loss carryforwards and credits, if not utilized, are
as follows: 1997, $4.4; 1998, $4.2; 1999, $4.8; 2000, $10.3; 2001, $5.8;
thereafter or no expiration, $31.7. The valuation allowance is primarily
attributed to certain accrued liabilities, tax loss carryforwards and tax
credits outside the U.S. The valuation allowance decreased in 1996 by $8.5.

     At September 30, 1996, $202.0 of foreign subsidiary net earnings were
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.

                            INCENTIVE COMPENSATION

     The Company's 1996 Incentive Stock Plan (1996 Plan), adopted in February,
1996, replaces the 1988 Incentive Stock Plan (the 1988 Plan). No additional
awards may be granted under the 1988 Plan, or the 1982 Incentive Stock Plan,
both of which will continue in existence until granted awards are exercised or
terminated.

     The 1996 Plan provides that eligible employees may receive stock option
awards and other stock awards payable in whole or in part by the issuance of
RAL Stock. Stock option awards are issued at an option price at least equal to
the fair market value of RAL Stock at the date of grant. Performance-based
options granted under the various plans result in charges to earnings. These
charges may reverse in future periods if performance triggers are not met.
Charges to earnings for performance based options were $2.1 in 1996.

     Changes in nonqualified RAL Stock options outstanding are summarized as
follows:

<TABLE>
<CAPTION>
                                                                                                        SHARES
                                                                                                         UNDER
                                                                                                        OPTION
                                                                                                       ---------
<S>                                                                                                    <C>
    Outstanding beginning of year ($31.71 to $132.63 per share).....................................   5,250,233
    Granted ($67.25 per share)......................................................................   1,928,000
    Exercised ($31.71 to $48.00 per share)..........................................................    (380,327)
    Cancelled.......................................................................................     (79,424)
                                                                                                       ---------
    Outstanding September 30, 1996 ($31.71 to $132.63 per share)....................................   6,718,482
                                                                                                       =========
    Exercisable at September 30, 1996...............................................................     965,662
                                                                                                       =========
</TABLE>

                                      38

<PAGE>
                    RALSTON PURINA COMPANY AND SUBSIDIARIES

                   NOTES TO FINANCIAL STATEMENTS (Continued)

                  (Dollars in millions except per share data)

     At September 30, 1996 and 1995, there were 3,072,000 and 4,077,679 shares
of RAL Stock available for future awards.

     In addition, at September 30, 1996 and 1995, there were 141,944 and
155,728 restricted shares of RAL Stock outstanding. Restrictions on shares of
restricted stock issued to eligible employees lapse over various periods,
provided continued employment and, in certain cases, minimum stock price
requirements are met. Compensation cost is recognized over this vesting period.
Charges to earnings were $1.1 in 1996, $.7 in 1995 and $1.6 in 1994.

                                 PENSION PLANS

     The Company has several noncontributory defined benefit pension plans
covering substantially all regular employees in the United States not
participating in a multiemployer pension plan and certain employees in other
countries. The plans provide retirement benefits based on years of service and
earnings. It is the Company's practice to fund pension liabilities in the
United States in accordance with the minimum and maximum limits imposed by the
Employee Retirement Income Security Act of 1974 (ERISA) and federal income tax
laws. In prior years, the Company also contributed to jointly administered
multiemployer defined benefit pension plans covering certain CBC union
employees.

     Certain foreign pension arrangements, which include various retirement and
termination benefit plans, some of which are required by local law or
coordinated with government-sponsored plans, are not material in the aggregate
and are not included in these disclosures.

     Pension cost and other retirement savings plan costs included the
following components:

<TABLE>
<CAPTION>
                                                                                 1996        1995        1994
                                                                                 ----        ----        ----
<S>                                                                             <C>         <C>         <C>
Defined benefit plans
    Service cost for benefits earned during the year.......................     $  22.0     $  28.5     $  31.4
    Interest cost on projected benefit obligation..........................        65.5        64.6        64.5
    Return on plan assets..................................................      (169.1)     (221.0)      (33.2)
    Net amortization and deferral..........................................        62.7       123.7       (68.7)
                                                                                -------     -------     -------
Total defined benefit plans................................................       (18.9)       (4.2)       (6.0)
Multiemployer plans........................................................          --        46.9        56.1
Defined contribution plans.................................................        22.9        29.0        34.3
                                                                                -------     -------     -------
        Total..............................................................     $   4.0     $  71.7     $  84.4
                                                                                =======     =======     =======
</TABLE>

     The following table presents the funded status of the Company's principal
defined benefit plans and amounts recognized in the balance sheet at September
30:

<TABLE>
<CAPTION>
                                                                                  1996         1995
                                                                                  ----         ----
<S>                                                                             <C>          <C>
Actuarial present value of:
    Vested benefits........................................................     $ (752.4)    $ (727.0)
    Nonvested benefits.....................................................        (30.7)       (28.4)
                                                                                --------     --------
    Accumulated benefit obligation.........................................       (783.1)      (755.4)
    Effect of future salary increases......................................       (123.6)      (107.5)
                                                                                --------     --------
    Projected benefit obligation...........................................       (906.7)      (862.9)
Plan assets at fair value..................................................      1,380.0      1,265.2
                                                                                --------     --------
Plan assets in excess of projected benefit obligation......................        473.3        402.3
Unrecognized net gain......................................................       (273.8)      (222.6)
Unrecognized prior service cost............................................          6.7          7.8
Unrecognized net asset at transition, net of amortization..................        (13.5)       (17.4)
                                                                                --------     --------
Prepaid pension cost included in Investments and Other Assets..............     $  192.7     $  170.1
                                                                                ========     ========
</TABLE>

     The sale of CBC in 1995 reduced the projected benefit obligation by $39.0.
This pension curtailment gain was recognized in the gain on sale of CBC.

                                      39

<PAGE>
                    RALSTON PURINA COMPANY AND SUBSIDIARIES

                   NOTES TO FINANCIAL STATEMENTS (Continued)

                  (Dollars in millions except per share data)

     The assumptions used in determining the information above, which reflect
weighted averages for the component plans, were as follows:

<TABLE>
<CAPTION>
                                                                           1996     1995
                                                                           ----     ----
<S>                                                                        <C>      <C>
Discount rate.........................................................      7.8%     7.8%
Rate of increase of future compensation levels........................      5.5%     5.4%
Long-term rate of return on assets....................................      8.9%     8.9%
</TABLE>

     Assets of the plans consist primarily of listed common stocks and bonds,
including 1,731,005 shares of RAL Stock with a market value of $118.6 at
September 30, 1996.

     Substantially all U.S. regular employees are eligible to participate in
the Company-sponsored leveraged ESOP. The Company makes a matching contribution
of up to 100% of the participant's contribution based on specified limits of
the participant's salary. The cost of the ESOP is recognized as incurred and
was $20.7 for 1996, $26.8 for 1995 and $31.0 for 1994.

                  POSTRETIREMENT BENEFITS OTHER THAN PENSIONS

     The Company currently provides health care and life insurance benefits for
certain groups of retired employees who meet specified age and years of service
requirements. The Company also sponsors plans whereby certain management
employees may defer compensation in exchange for cash benefits after
retirement.

     The net periodic costs for postretirement benefits included the following
components for the year ended September 30:

<TABLE>
<CAPTION>
                                    1996                     1995                     1994
                            --------------------     --------------------     --------------------
                            MEDICAL        OTHER     MEDICAL        OTHER     MEDICAL        OTHER
                            -------        -----     -------        -----     -------        -----
<S>                         <C>            <C>       <C>            <C>       <C>            <C>
Service cost.............    $  .6         $ 3.2      $ 1.0         $ 3.5      $ 1.2         $ 5.3
Interest cost............      8.1          17.4       12.4          16.5       15.0          14.8
Net amortization.........     (1.8)           --        (.8)           --         --            --
                             -----         -----      -----         -----      -----         -----
                             $ 6.9         $20.6      $12.6         $20.0      $16.2         $20.1
                             =====         =====      =====         =====      =====         =====
</TABLE>

     The following table presents the status of the Company's postretirement
benefit plans at September 30:

<TABLE>
<CAPTION>
                                                                          1996                        1995
                                                                 ----------------------      ----------------------
                                                                 MEDICAL          OTHER      MEDICAL          OTHER
                                                                 -------          -----      -------          -----
<S>                                                              <C>              <C>        <C>              <C>
Accumulated benefit obligation
    Retirees................................................      $ 66.8          $154.1      $ 63.3          $148.3
    Fully eligible plan participants........................        33.5            57.8        30.6            51.2
    Other active plan participants..........................        10.1            28.8        11.1            26.8
                                                                  ------          ------      ------          ------
Accumulated benefit obligation..............................       110.4           240.7       105.0           226.3
Fair value of plan assets...................................         5.1              --         5.2              --
                                                                  ------          ------      ------          ------
Accumulated benefit obligation in excess of plan assets.....       105.3           240.7        99.8           226.3
Unrecognized experience gain (loss).........................        28.2           (12.4)       30.6            (7.6)
Unrecognized prior service gain.............................         9.4              --        10.0              --
                                                                  ------          ------      ------          ------
Accrued postretirement benefit liability....................       142.9           228.3       140.4           218.7
Less current portion........................................        (3.7)          (12.0)       (3.7)          (10.0)
                                                                  ------          ------      ------          ------
Non-current portion included in Other Liabilities...........      $139.2          $216.3      $136.7          $208.7
                                                                  ======          ======      ======          ======
</TABLE>

     In 1995, the accumulated medical benefit obligation decreased
approximately $50.4 due to the assumption by IBC of accumulated benefits
related to CBC employees.

     The discount rate used in determining the information above was 7.9% in
1996 and 1995. The assumed health care cost trend rate for participants under
age 65 is 9% for 1997, declining 1% per year to 6% in 2000 and thereafter. For
participants age 65 and over, the trend rate is 6% in 1997 and thereafter.

                                      40

<PAGE>
                    RALSTON PURINA COMPANY AND SUBSIDIARIES

                   NOTES TO FINANCIAL STATEMENTS (Continued)

                  (Dollars in millions except per share data)

     If the assumed health care cost trend rate increased by 1 percentage
point, the accumulated benefit obligation as of September 30, 1996 would
increase by approximately $11.3 and expense would increase by $1.4 annually.

     Coincident with the adoption of the ESOP in January of 1989, the Company
began phasing out its subsidy of medical benefits for future retirees. In
addition, retiree contributions are adjusted periodically and it is expected
that such adjustments will continue in the future.

                                 NOTES PAYABLE

     Notes payable at September 30, 1996 and 1995 consisted of notes payable to
financial institutions and had a weighted average interest rate of 6% and 8% at
September 30, 1996 and 1995, respectively.

     At September 30, 1996, total unused lines of credit were $183.2.

                                LONG-TERM DEBT

     The detail of long-term debt as of September 30 follows:

<TABLE>
<CAPTION>
                                                                             1996         1995
                                                                             ----         ----
<S>                                                                        <C>          <C>
Debentures
    9 1/4% due 2009...................................................     $  181.0     $  181.0
    9 1/2% due 2016...................................................           --         40.5
    9 3/8% due 2016...................................................           --         27.0
    9.30% due 2021....................................................        200.0        200.0
    8 5/8% due 2022...................................................        250.0        250.0
    8 1/8% due 2023...................................................        175.0        175.0
    7 7/8% due 2025...................................................        225.0        225.0
    7 3/4% due 2015...................................................        175.0           --
Other Debt
    ESOP loan guarantee...............................................        110.6        151.9
    Medium-term Notes, 7.75% to 10.18%................................         84.5         84.5
    9% Notes due 1996.................................................           --        200.0
    Capitalized lease obligations, 5.8% to 11.1%......................          6.2          5.4
Industrial revenue bonds, 4.7% to 12.75%..............................         29.1         36.5
Other.................................................................         98.6        155.2
Notes payable reclassified as long-term...............................           --        173.3
                                                                           --------     --------
                                                                            1,535.0      1,905.3
    Less current portion..............................................        (98.0)      (303.2)
                                                                           --------     --------
                                                                           $1,437.0     $1,602.1
                                                                           ========     ========
</TABLE>

     On October 2, 1995, the Company refinanced $173.3 of short-term notes
payable with the issuance of $175.0 of 7 3/4% debentures due in 2015. Such
notes have been reclassified as long-term debt at September 30, 1995.

     Aggregate maturities on all long-term debt, exclusive of debentures held
in treasury, are $63.5, $42.0, $14.8 and $5.2 for the years ending September
30, 1998 through 2001, respectively. These aggregate maturities do not include
the future maturities of the ESOP loan guarantee.

     To fund its purchase of the Company's Redeemable Preferred Stock, the
trust for the Company-sponsored ESOP borrowed $500.0 principal amount in ten-
year 8.25% notes (ESOP loan). The ESOP loan is unconditionally guaranteed by
the Company and is included in the Company's consolidated balance sheet as
long-term debt, along with corresponding unearned ESOP compensation. In
connection with the sale of CBC in 1995, approximately $56.7 of the ESOP loan
was assigned to the Company's Employee Stock Ownership Plan for Continental
Baking Company Employees (CBC ESOP) which utilized the proceeds of unallocated
Redeemable Preferred Stock held in that plan to prepay such portion of the ESOP
loan. Both the remaining long-term debt and the unearned ESOP compensation will
be reduced

                                      41

<PAGE>
                    RALSTON PURINA COMPANY AND SUBSIDIARIES

                   NOTES TO FINANCIAL STATEMENTS (Continued)

                  (Dollars in millions except per share data)

as employee and employer contributions to the ESOP are used to reduce the
outstanding ESOP loan. During 1996 and 1995, the ESOP incurred $12.2 and $20.3,
respectively, of interest expense on the ESOP loan.

                          REDEEMABLE PREFERRED STOCK

     At September 30, 1996, the Company had 10,600,000 shares of $1 par value
preferred stock authorized, of which 4,600,000 shares were authorized as Series
A 6.75% Preferred Stock (Redeemable Preferred Stock). Redeemable Preferred
Stock has a guaranteed minimum value of $110.83 per share and is convertible
into the Company's $.10 par value RAL Stock at the ratio of 2.29 shares of RAL
Stock for each share of Redeemable Preferred Stock. The shares have a
preference in liquidation and each share has one voting right. Dividends are
cumulative, compounded and payable semi-annually. In accordance with financial
reporting requirements of the Securities and Exchange Commission, the
Redeemable Preferred Stock has been classified outside of permanent equity.

     Approximately 227,000 shares of its Redeemable Preferred Stock in 1996 and
78,955 shares in 1995 were redeemed or converted to meet ongoing share
redemption requirements of the ESOP. In addition, as a result of the 1995 sale
of CBC, 1,012,503 shares of Redeemable Preferred Stock were converted into
shares of RAL Stock. Following the above described redemptions and conversions,
2,919,209 shares of Redeemable Preferred Stock remained issued and outstanding
and continued to be held by the ESOP at September 30, 1996. Of these shares,
approximately 1,921,600 shares have been allocated to participant accounts at
September 30, 1996.

     Redeemable Preferred Stock shares are held, on behalf of the ESOP, by the
ESOP's trustee and are allocated to individual participants' accounts based on
the amount of employee and employer matching contributions to the ESOP.
Dividends on unallocated Redeemable Preferred Stock are used to fund the debt
service requirements of the ESOP. The trustee, as holder of Redeemable
Preferred Stock, may convert its shares into RAL Stock at any time, or may
require the Company to redeem the Redeemable Preferred Stock shares, under
certain limited circumstances, at the guaranteed minimum value, in cash or in
shares of RAL Stock. The Company may elect to redeem the Redeemable Preferred
Stock, under limited circumstances, in cash or in shares of RAL Stock.

                              SHAREHOLDERS EQUITY

     From July 30, 1993 through May 15, 1995, the Company had two classes of
common stock, RAL Stock and CBG Stock. The CBG Stock was intended to reflect
the performance of the CBG Group, which consisted of the Company's bakery
products business. The RAL Stock was intended to reflect the performance of the
RPG Group, which consisted of the Company's other businesses.

     On May 15, 1995, the Company exchanged each outstanding share of CBG Stock
for .0886 shares of RAL Stock, now the Company's sole outstanding class of
common stock. The exchange represented a 15% premium to the relative trading
values of the CBG Stock and the RAL Stock for the period March 31 through April
6, 1995, as provided in the Company's Articles.

     On February 1, 1996, shareholders approved the amendment of the Company's
Restated Articles of Incorporation to reduce the number of authorized shares of
common stock from 730,600,000 to 610,600,000 (reflecting the elimination of the
authorization to issue 120,000,000 shares of CBG Stock), redesignate the
Company's Ralston-Ralston Purina Group Common Stock as Ralston Purina Common
Stock, and eliminate various provisions relating to CBG Stock. The amendments
did not change the voting power or other rights of holders of RAL Stock nor the
rights of the Company with respect to the outstanding RAL Stock.

     On March 28, 1996, the Board of Directors declared a dividend distribution
of one share purchase right (``Right'') for each outstanding share of RAL
Stock. The Rights were intended to replace the previously issued share purchase
rights which were initially distributed in January of 1986 and which expired on
March 28, 1996.

     Each Right entitles a shareholder of RAL Stock to purchase an additional
share of RAL Stock at an exercise price of $200 per share, subject to
antidilution adjustments. The Rights, however, only become exercisable at the
time a person or group acquires, or commences a public tender for, shares of
RAL Stock representing 20% or more of the RAL Stock then outstanding (except
pursuant to a tender or exchange offer which is for all outstanding shares of
RAL Stock at a price and on terms which a majority of the Board of Directors
determines to be adequate and in the best interests of shareholders). If an
acquiring person or group acquires shares representing 20% or more of the RAL
Stock then outstanding, the exercise price will be further adjusted so that a
holder of a Right (other than the acquiring person or group) may purchase a
share of RAL Stock at one-third of its then market price. In the event that the
Company merges with, or transfers 50% or more of its assets or earnings power
to, any person or group after the Rights become exercisable, holders of Rights
may purchase, at the exercise price, common stock of the acquiring entity
having a value equal to twice the exercise price. The Rights can be redeemed by
the Board of Directors at $.01 per Right, only up to the date a person or group
acquires shares representing 20% or more of the RAL Stock then outstanding.
Also, following the acquisition by a person or group of beneficial ownership of
shares representing 20% but less than 50% of the RAL Stock then outstanding,
the Board may exchange each Right for one share of RAL Stock. The terms of the
Rights may be amended by the Board of Directors at any time prior to the
acquisition by a person or group of beneficial ownership of shares

                                      42

<PAGE>
                    RALSTON PURINA COMPANY AND SUBSIDIARIES

                   NOTES TO FINANCIAL STATEMENTS (Continued)

                  (Dollars in millions except per share data)

representing 20% of the RAL Stock then outstanding, including an amendment to
lower such threshold to not less than the greater of (i) any percentage greater
than the largest percentage then held by any shareholder, or (ii) 10%. The
Rights expire on March 28, 2006. At September 30, 1996, 123,733,468 shares of
RAL Stock have been reserved for issuance upon exercise of the Rights.

     At September 30, 1996, there were 6,684,989 shares of RAL Stock reserved
for conversion of Redeemable Preferred Stock, 20,078 shares of RAL Stock
reserved for conversion of the 5 3/4% subordinated debentures and 11,080,048
shares of RAL Stock reserved under various employee incentive compensation and
benefit plans.

                                 GRANTOR TRUST

     On September 15, 1994, the Company established the Ralston Purina Company
Grantor Trust (the Trust) to provide a source of funds to assist the Company in
meeting its obligations under various employee benefit plans and programs. The
Trust supports certain employee benefit plans and does not change those plans
or the amounts of stock expected to be issued for those plans. However, payment
of certain benefits would be accelerated if minimum funding requirements of the
Trust are not met.

     Among the assets used to initially fund the Trust were 4,033,347 shares of
RAL Stock having a fair market value on the date of transfer of $169.4. The RAL
Stock transferred to the Trust was issued out of treasury.

     For financial reporting purposes, the Trust is consolidated with the
Company. The fair market value of the shares held by the Trust is shown as a
reduction to shareholders equity in the Company's consolidated balance sheet.
Any dividend transactions between the Company and the Trust are eliminated, and
the difference between the fair value of the shares on the date of contribution
to the Trust, plus the fair value of shares on the date of purchase by the
Trust, and the fair value of the shares at September 30 is included in
consolidated additional paid-in capital. RAL Stock held in the Trust is not
considered outstanding in the computation of earnings per share. The Trust held
4,228,314 and 4,135,314 shares of RAL Stock at a fair market value of $289.6
and $239.3 at September 30, 1996 and 1995, respectively.

     The Trustee is responsible for voting the shares of RAL Stock held in the
Trust.

                         COMMITMENTS AND CONTINGENCIES

     LEGAL AND ENVIRONMENTAL MATTERS -- The Company is a party to a number of
legal proceedings in various state, federal and foreign jurisdictions. These
proceedings are in varying stages and many may proceed for protracted periods
of time. Some proceedings involve highly complex questions of fact and law.

     On January 4, 1993, the Company was served with the first of nine
substantively identical actions currently pending in the United States District
Court for the District of New Jersey. The suits have been consolidated in Re
Baby Food Antitrust Litigation. The consolidated proceeding is a certified
class action by and on behalf of all direct purchasers of baby foods (other
than the defendants and governmental entities), alleging that the Beech-Nut
baby food business (owned by the Company from November, 1989 until April, 1994,
and now owned by Ralcorp) and its predecessor Nestle Holdings, Inc., together
with Gerber Products Company and H.J. Heinz Company, conspired to fix, maintain
and stabilize the prices of baby foods during the period January 1, 1975 to
August 31, 1992. The suit seeks treble damages.

     On January 19 and 21, 1993, the Company was served with two class actions
on behalf of indirect purchasers (consumers) of baby food in California, which
contain substantially identical charges. These actions have been consolidated
in the Superior Court for the County of San Francisco in Bruce, et al. v.
Gerber Products Company, et al. On January 19, 1993, the Company was served
with a similar action filed in Alabama state court on behalf of indirect
purchasers of baby food in Alabama, Johnson, et al. v. Gerber Products Company,
et al. The California and Alabama state actions allege violations of state
antitrust laws, seek treble damages and are substantively identical to each
other. Similar state actions may be filed in states having laws permitting
suits by indirect purchasers. The Company and Ralcorp have agreed that all
liability and expenses related to the above antitrust matters will be shared
equally, except that the Company will be solely responsible for any settlement
or judgment exceeding a certain set amount.

     The operations of the Company, like those of other companies engaged in
similar businesses, are subject to various federal, state, and local laws and
regulations intended to protect the public health and the environment,
including regulations related to air and water quality, underground fuel
storage tanks and waste handling and disposal. The Company has received notices
from the U.S. Environmental Protection Agency, state agencies, and/or private
parties seeking contribution, that it has been identified as a ``potentially
responsible party'' (PRP), under the Comprehensive Environmental Response,
Compensation and Liability Act, and may be required to share in the cost of
cleanup with respect to 14 ``Superfund'' sites. The Company's ultimate
liability in connection with those sites may depend on many factors, including
the volume of material contributed to the site, the number of other PRP's and
their financial viability, and the remediation methods and technology to be
used.

                                      43

<PAGE>
                    RALSTON PURINA COMPANY AND SUBSIDIARIES

                   NOTES TO FINANCIAL STATEMENTS (Continued)

                  (Dollars in millions except per share data)

     In the opinion of management, based on the information presently known,
the ultimate liability for all such matters, together with the liability for
all other pending legal proceedings, asserted legal claims and known potential
legal claims which are probable of assertion, taking into account established
accruals of $13.9 for estimated liabilities, should not be material to the
financial position of the Company, but could be material to results of
operations or cash flows for a particular quarter or annual period.

     OTHER COMMITMENTS -- At September 30, 1996, the Company had third party
guarantees outstanding in the aggregate amount of approximately $100. These
guarantees relate primarily to workers compensation claims associated with CBC
prior to the sale, and revenue bonds for various facilities.

     Future minimum rental commitments under noncancellable operating leases in
effect as of September 30, 1996 were: 1997--$12.1, 1998--$9.6, 1999--$6.5,
2000--$4.7, 2001--$4.0 and thereafter--$22.7.

     Total rental expense for all operating leases was $48.5 in 1996, $67.9 in
1995 and $72.4 in 1994, of which $20.1 and $28.7 in 1995 and 1994,
respectively, related to CBC operations.

                   FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

     FOREIGN CURRENCY CONTRACTS -- The Company enters into foreign exchange
forward contracts and options to mitigate the Company's economic exposure to
changes in exchange rates. The Company views these exposures as arising from
three major areas: (a) non-U.S. dollar cash flows to the U.S. from foreign
subsidiaries expected within a year or less, (b) cash flows to a foreign
country in a currency other than the subsidiary's functional currency, and (c)
future cash flows at the operating margin level. The level of such actions is
dependent on seasonality of the Company's activities and on specific market
conditions involving various currencies.

     The tables below summarize by instrument and by major currency the
contractual amounts of the Company's forward exchange contracts and purchased
currency options in U.S. dollar equivalents at year end. Foreign currency
contracts are generally for one year or less.

<TABLE>
<CAPTION>
INSTRUMENT                                                        1996             1995
                                                                  ----             ----
<S>                                                              <C>              <C>
    Forwards................................................     $301.2           $224.2
    Options.................................................       11.5             12.8
CURRENCY
    Belgian franc<Fa>.......................................     $242.7           $156.5
    French franc............................................       17.5             11.4
    Indonesian rupiah.......................................       10.5              4.5
    Swiss franc.............................................       10.1             16.2
    Japanese yen............................................        6.2             10.0
    Other currencies........................................       25.7             38.4

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

<Fa>     The Company has a Belgian Coordination Center which functions as an intragroup bank. The exposures and hedges in Belgium
         result primarily from funding affiliated companies in various European currencies.
</TABLE>

     INTEREST RATE SWAP AGREEMENTS -- The Company utilizes interest rate swap
agreements to reduce exposure to changes in interest rates and manage the mix
of fixed and variable rate debt. The swaps mature in fiscal 1998.

     The Company had $41.6 notional amount of interest rate swap agreements
outstanding at September 30, 1996. These agreements effectively convert Swiss
franc variable rate debt into fixed interest rate debt with a weighted average
pay rate of 4.2%.

     At September 30, 1995, the Company had $136.4 notional amount of interest
rate swap agreements outstanding. These agreements effectively converted French
franc, Hong Kong dollar, Australian dollar and Swiss franc variable rate debt
into fixed interest rate debt with a weighted average pay rate of 7.6%.

     CONCENTRATION OF CREDIT RISK -- The counterparties to foreign currency
contracts and interest rate swap agreements consist of a number of major
international financial institutions and are generally institutions with which
the Company maintains lines of credit. The Company does not enter into foreign
exchange contracts through brokers nor does it trade foreign exchange contracts
on any other exchange or over the counter markets. Risk of currency positions
and mark-to-market valuation of positions are strictly monitored at all times.
The Company continually monitors the credit ratings of its counterparties both
internally

                                      44

<PAGE>
                    RALSTON PURINA COMPANY AND SUBSIDIARIES

                   NOTES TO FINANCIAL STATEMENTS (Continued)

                  (Dollars in millions except per share data)

and by using outside rating agencies. The Company has implemented policies which
limit the amount of agreements it enters into with any one party. While
nonperformance by these counterparties exposes the Company to potential credit
losses, such losses are not anticipated due to the control features mentioned.

     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.

     FAIR VALUE OF FINANCIAL INSTRUMENTS -- The Company's financial instruments
include cash and cash equivalents, short- and long-term debt, Redeemable
Preferred Stock, foreign currency contracts and interest rate swap agreements.
As of September 30, 1996 and 1995, the fair value of long-term debt was
$1,630.5 and $2,050.9, respectively, compared to its carrying value of $1,535.0
and $1,905.3, respectively. The fair value of the Company's long-term debt has
been estimated using quoted market prices and yields obtained through
independent pricing sources for the same or similar types of borrowing
arrangements, taking into consideration the underlying terms of the debt, such
as the coupon rate, term to maturity, tax impact to investors and imbedded call
options.

     Redeemable Preferred Stock had a fair value of $457.9 and $417.0 at
September 30, 1996 and 1995, respectively, based upon the greater of the fair
market value of RAL Stock into which the Redeemable Preferred Stock may be
converted or the guaranteed minimum value.

     Due to the nature of cash equivalents and short-term borrowings, including
current notes payable, carrying amounts on the balance sheet approximate fair
value.

     The fair value of foreign currency contracts and interest rate management
agreements is the amount that the Company 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 interest
rates, currency exchange rates and remaining maturities. Based on these
considerations, the calculated fair values of foreign currency contracts and
interest rate management agreements outstanding at September 30, 1996 and 1995
were not material.

                           OTHER INCOME AND EXPENSE

     Other (income)/expense, net consists of the following:

<TABLE>
<CAPTION>
                                                                              YEAR ENDED SEPTEMBER 30,
                                                                       --------------------------------------
                                                                       1996             1995             1994
                                                                       ----             ----             ----
<S>                                                                   <C>              <C>              <C>
Translation and exchange loss....................................     $ 22.5           $ 16.1           $ 22.0
Investment income................................................       (8.7)            (9.4)           (15.4)
Miscellaneous (income)/expense...................................        0.9            (10.1)            13.0
                                                                      ------           ------           ------
                                                                      $ 14.7           $ (3.4)          $ 19.6
                                                                      ======           ======           ======
</TABLE>

                                      45

<PAGE>
                    RALSTON PURINA COMPANY AND SUBSIDIARIES

                   NOTES TO FINANCIAL STATEMENTS (Continued)

                  (Dollars in millions except per share data)

                    SUPPLEMENTAL BALANCE SHEET INFORMATION

<TABLE>
<CAPTION>
                                                                                                            SEPTEMBER 30,
                                                                                                       -----------------------
                                                                                                       1996               1995
                                                                                                       ----               ----
<S>                                                                                                  <C>                <C>

Receivables (current)--
    Trade......................................................................................      $  788.5           $  743.1
    Notes and other............................................................................          93.0               92.6
    Allowance for doubtful accounts............................................................         (35.9)             (34.3)
                                                                                                     --------           --------

                                                                                                     $  845.6           $  801.4
                                                                                                     ========           ========
Inventories--
    Raw materials and supplies.................................................................      $  242.1           $  209.1
    Work in process............................................................................         123.6              111.4
    Finished products..........................................................................         450.5              445.7
                                                                                                     --------           --------
                                                                                                     $  816.2           $  766.2
                                                                                                     ========           ========
Other Current Assets--
    Prepaid expenses...........................................................................      $   92.9           $   92.3
    Deferred income tax benefits...............................................................          56.4               58.8
                                                                                                     --------           --------
                                                                                                     $  149.3           $  151.1
                                                                                                     ========           ========
Investments and Other Assets--
    Goodwill (net of accumulated amortization: 1996--$100.0 and 1995--$75.0)...................      $  509.1           $  519.6
    Other intangible assets (net of accumulated amortization: 1996--$309.5 and 1995--$279.3)...         256.3              286.9
    Equity investments in affiliated companies.................................................         301.6              292.6
    Deferred charges and other assets..........................................................         388.8              354.2
                                                                                                     --------           --------
                                                                                                     $1,455.8           $1,453.3
                                                                                                     ========           ========
Accounts Payable and Accrued Liabilities--
    Trade accounts payable.....................................................................      $  407.9           $  400.5
    Incentive compensation, salaries and vacations.............................................         122.0               98.4
    Accrued interest...........................................................................          40.5               43.8
    Restructuring reserves.....................................................................          24.0               43.9
    Other......................................................................................         249.5              288.9
                                                                                                     --------           --------
                                                                                                     $  843.9           $  875.5
                                                                                                     ========           ========
Other Liabilities--
    Postretirement medical benefits............................................................      $  139.2           $  136.7
    Other postretirement benefits..............................................................         216.3              208.7
    Minority interests.........................................................................          10.6               15.3
    Other......................................................................................         134.6              118.6
                                                                                                     --------           --------
                                                                                                     $  500.7           $  479.3
                                                                                                     ========           ========
</TABLE>

<TABLE>
<CAPTION>
                 SUPPLEMENTAL CASH FLOW STATEMENT INFORMATION

                                                                                      YEAR ENDED SEPTEMBER 30,
                                                                             ----------------------------------------
                                                                             1996              1995              1994
                                                                             ----              ----              ----
<S>                                                                         <C>               <C>               <C>
Interest paid.........................................................      $185.2            $201.0            $217.2
Income taxes paid.....................................................       187.6             203.2             236.8

<CAPTION>
                        ALLOWANCE FOR DOUBTFUL ACCOUNTS

                                                                             1996              1995               1994
                                                                             ----              ----               ----
<S>                                                                         <C>               <C>               <C>
Balance, beginning of year............................................      $34.3             $29.2             $ 31.2
Provision charged to expense..........................................        9.6              11.8                5.8
Writeoffs, less recoveries............................................       (8.0)             (6.7)              (7.8)
                                                                            -----             -----             ------
Balance, end of year..................................................      $35.9             $34.3             $ 29.2
                                                                            =====             =====             ======
</TABLE>

                                      46

<PAGE>
                    RALSTON PURINA COMPANY AND SUBSIDIARIES

                        QUARTERLY FINANCIAL INFORMATION

                                  (UNAUDITED)
                  (DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
FISCAL 1996                                                FIRST             SECOND            THIRD            FOURTH<Fa>
-----------                                                -----             ------            -----            ----------
<S>                                                       <C>               <C>               <C>               <C>
Net sales<Fb>..........................................   $1,639.3          $1,432.1          $1,478.6          $1,564.3
Gross profit...........................................      694.7             564.6             572.3             614.6
Earnings before extraordinary item.....................      128.5              59.1              84.3              89.8
Net earnings...........................................      128.5              59.1              82.2              89.8
Earnings per share of RAL Stock
    Primary
        Earnings before extraordinary item.............       1.23               .55               .79               .85
        Net earnings...................................       1.23               .55               .77               .85
    Fully diluted
        Earnings before extraordinary item.............       1.15               .52               .75               .80
        Net earnings...................................       1.15               .52               .73               .80
    Dividends paid per share...........................        .30               .30               .30               .30
Market price range of RAL Stock........................         67-               69-           67 3/4-           68 7/8-
                                                            57 1/4            57 7/8                56            57 3/4

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

<Fa>     Net earnings in the fourth quarter of 1996 were reduced by $15.5 or $.15 and $.14 per primary and fully diluted share,
         respectively, due to restructuring charges.

<Fb>     Reflects a reclassification between sales and advertising and promotion expense.
</TABLE>

                                      47

<PAGE>
                    RALSTON PURINA COMPANY AND SUBSIDIARIES

                  QUARTERLY FINANCIAL INFORMATION (Continued)

                                  (UNAUDITED)
                  (DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
FISCAL 1995                                               FIRST<Fa>         SECOND<Fa>        THIRD<Fa>         FOURTH<Fa><Fb><Fc>
-----------                                               ---------         ----------        ---------         ------------------
<S>                                                       <C>               <C>               <C>               <C>
Net sales<Fd>..........................................   $1,978.1          $1,743.9          $1,853.0             $ 1,596.6
Gross profit...........................................      867.8             748.9             803.7                 663.2
Earnings before extraordinary item.....................      101.1              51.4              68.2                  79.4
Net earnings...........................................      101.1              51.4              68.2                  75.7
Earnings per share of RAL Stock<Fe>
    Primary
        Earnings before extraordinary item.............       1.02               .50               .63                   .74
        Net earnings...................................       1.02               .50               .63                   .70
    Fully diluted
        Earnings before extraordinary item.............        .95               .48               .60                   .70
        Net earnings...................................        .95               .48               .60                   .67
Loss per share of CBG Stock
    Primary
        Loss before extraordinary item.................       (.28)             (.15)             (.02)<Ff>
        Net loss.......................................       (.28)             (.15)             (.02)<Ff>
    Fully diluted
        Loss before extraordinary item.................       (.28)             (.15)             (.03)<Ff>
        Net loss.......................................       (.28)             (.15)             (.03)<Ff>
Dividends paid per share:
    RAL Stock..........................................        .30               .30               .30                   .30
Market price range of RAL Stock........................         45 3/4-           50 1/8-           51 3/4-               59-
                                                                40 1/2            43 1/2            46 3/8                48 5/8
Market price range of CBG Stock........................          5 1/2-            4 5/8-            4 1/2-<Ff>
                                                                 3 5/8             3 1/4             3 5/8

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

<Fa>     Net earnings and earnings per share in 1995 were reduced by the following amounts due to provisions for restructuring:

<CAPTION>
                                                                   NET          PRIMARY          FULLY
                                                                 EARNINGS         EPS         DILUTED EPS
                                                                 --------       -------       -----------
<S>                                                              <C>            <C>           <C>
First quarter...............................................      $16.3          $.16            $.15
Second quarter..............................................       11.7           .12             .11
Third quarter...............................................        4.3           .04             .04
Fourth quarter..............................................       37.7           .37             .34

<Fb>   Excludes results of operations of CBC after sale, effective July 22, 1995.

<Fc>   Includes an after-tax gain on the sale of CBC of $42.0 or $.41 and $.38 per primary and fully diluted share,
       respectively.

<Fd>   Reflects a reclassification between sales and advertising and promotion expense.

<Fe>   Based on RPG Group earnings through May 15, 1995 and consolidated Ralston Purina Company earnings thereafter.

<Ff>   Through exchange of CBG Stock on May 15, 1995.
</TABLE>
 
                                  48