<PAGE>   1
MANAGEMENT STATEMENT                                                 EXHIBIT-13
--------------------

The management of The Dexter Corporation has prepared the financial statements
and review contained on pages 18 through 43 in conformity with generally
accepted accounting principles. Dexter's management is responsible for the
integrity and objectivity of this annual report, including the financial
statements, charts, tables and other supplementary information. The financial
statements and review are presented on the accrual basis of accounting and,
accordingly, include some amounts based on judgment. Information included on
these pages is an integral part of the statement of financial position and
related statements of income, cash flows and changes in shareholders' equity
which have been audited by Coopers & Lybrand L.L.P.

Dexter has a clearly stated business ethics policy and code of conduct which
require employees to maintain high standards in their conduct of company
affairs. The company's accounting and control systems are designed to provide
reasonable assurance that financial records accurately reflect the transactions
of The Dexter Corporation and that the company's assets are protected from
unauthorized use, in accordance with established policies and procedures, as
implemented by qualified personnel. We modify and improve our systems in
response to changes in business conditions and operations, the advice of
independent certified public accountants, and the recommendations of our own
internal auditors and other independent experts on procedures and controls.
There are no known significant accounting control weaknesses.

Coopers & Lybrand L.L.P., independent certified public accountants, are engaged
to perform quarterly reviews and annual audits. Their audits are conducted in
accordance with generally accepted auditing standards which include
consideration of the company's internal control structure. The Audit Committee
of the Board of Directors, made up entirely of outside directors, meets
regularly both separately and jointly with the independent certified public
accountants, internal auditors and management to review accounting policies,
adequacy of controls, quality of financial reporting, and the scope and results
of audits. Both the internal auditors and the independent accountants have free
and direct access to the Audit Committee without the presence of management.

A company with a good reputation is not only a good supplier, customer and
citizen but a good employer. Dexter has enjoyed a reputation based on integrity
for over two centuries. We are all the guardians of that reputation, and that
responsibility requires vigilance.

<TABLE>
<S>                                    <C>                      <C>
K. Grahame Walker                      Kathleen Burdett         George Collin
Chairman and Chief Executive Officer   Vice President and       Controller
                                       Chief Financial Officer  Chief Accounting Officer
</TABLE>
February 1, 1996

REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------

To the Shareholders and Board of Directors of The Dexter Corporation:

We have audited the accompanying consolidated statement of financial position of
The Dexter Corporation as of December 31, 1995, 1994 and 1993 and the related
consolidated statements of income, cash flows and changes in shareholders'
equity for the years then ended. These financial statements are the
responsibility of The Dexter Corporation's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above, contained on pages
18 through 43, present fairly, in all material respects, the consolidated
financial position of The Dexter Corporation as of December 31, 1995, 1994 and
1993 and the consolidated results of its operations and its cash flows for the
years then ended in conformity with generally accepted accounting principles.

In 1994, the Corporation, as more fully described in the accompanying financial
review, adopted Statement of Financial Accounting Standards (SFAS) No. 115,
Accounting for Certain Investments in Debt and Equity Securities. In 1993, the
Corporation, as more fully described in the accompanying financial review,
adopted SFAS No. 106, Employers' Accounting for Postretirement Benefits Other
Than Pensions; SFAS No. 109, Accounting for Income Taxes; and SFAS No. 112,
Employers' Accounting for Postemployment Benefits.

/s/Coopers & Lybrand L.L.P.

Springfield, Massachusetts
February 1, 1996

                                                                             17
<PAGE>   2
SUMMARY OF FINANCIAL DATA 
-------------------------

All share and per share amounts throughout the Financial Statements and Review
have been adjusted for a 3-for-2 stock split in 1986.



<TABLE>
<CAPTION>
In thousands of dollars
(except per share amounts)                       1995           1994            1993           1992 
----------------------------------------------------------------------------------------------------------
<S>                                          <C>              <C>              <C>            <C>
OPERATING RESULTS
Net sales                                    $1,088,905       $  974,719       $887,112       $  951,439
  % increase (decrease)                              12%              10%            (7%)              1%
Gross profit                                    346,699          316,541        293,345          314,275
  As % of sales                                    31.8%            32.5%          33.1%            33.0%
LIFO charge (credit)                                                                             
  included in cost of sales                       1,881            2,231         (1,290)           1,626
Marketing and administrative expenses           206,708          188,272        175,141          188,263
  As % of sales                                    19.0%            19.3%          19.7%            19.8%
Research and development expenses                49,375           46,644         43,803           42,216
  As % of sales                                     4.5%             4.8%           4.9%             4.4%
Interest expense                                 20,931           20,509         18,756           18,799
Income before taxes                              79,824           73,612         66,438           73,132
  As % of sales                                     7.3%             7.6%           7.5%             7.7%
Tax rate                                           35.5%            36.0%          36.5%            37.7%
Income (loss) before minority interests          51,487           47,112         42,188           45,577
  As % of sales                                     4.7%             4.8%           4.8%             4.8%
Income (loss) from continuing operations         40,578           37,898         34,053           38,203
  As % of sales                                     3.7%             3.9%           3.8%             4.0%
Discontinued operations (loss) gain                                                              
Cumulative effect of change in                                                                   
  accounting principles                                                          (9,875)         
Net income (loss)                            $   40,578       $   37,898       $ 24,178       $   38,203
  As % of sales                                     3.7%             3.9%           2.7%             4.0%
Return on                                                                                        
  Average shareholders' equity*                    11.1%            11.2%          10.7%            12.1%
  Average total capital*                            9.2%             9.0%           8.8%            10.0%
  Average shareholders' equity                     11.4%            11.5%           7.7%            12.1%
  Average total capital                             9.4%             9.2%           7.0%            10.0%
Income (loss) per share                                                                          
  Continuing operations                      $     1.67       $     1.56       $   1.40       $     1.58
  Discontinued operations                                                                        
  Cumulative effect of change in                                                                 
    accounting principles                                                      $   (.41)                           
      Total net income (loss)                $     1.67       $     1.56       $    .99       $     1.58
Cash dividends declared per share            $      .88       $      .88       $    .88       $      .88
Rate of dividend payout*                             53%              56%            63%              56%
* Before cumulative effect of 1993                                                               
  change in accounting principles                                                                
--------------------------------------------------------------------------------------------------------------
FINANCIAL POSITION                                                                               
Working capital                              $  248,623       $  209,024       $199,146       $  207,146
Property, plant and equipment, net              325,203          328,935        309,954          298,869
Total assets                                    934,161          880,609        820,691          782,025
Long-term debt                                  215,839          225,402        227,307          179,024
Shareholders' equity                         $  369,615       $  343,633       $313,295       $  315,614
Percent long-term debt to capital                  36.9%            39.6%          42.0%            36.2%
Equity per share at year-end                 $    15.26       $    14.11       $  12.87       $    12.98
--------------------------------------------------------------------------------------------------------------
OTHER DATA                                                                                       
Capital expenditures                         $   28,969       $   45,097       $ 44,784       $   51,793
Depreciation and amortization                $   43,727       $   40,923       $ 36,655       $   35,672
Shares outstanding at year-end (000)             24,220           24,350         24,340           24,308
Average shares outstanding (000)                 24,364           24,345         24,325           24,220
Market price per share -- high               $   26-7/8       $       26       $ 28-7/8       $   28-1/8
                       -- low                $   20-3/8       $   19-7/8       $ 20-3/8       $   20-7/8
                       -- close              $   23-5/8       $   21-3/4       $ 23-1/2       $   25-7/8
Price-earnings ratio range*                       16-12            17-13          21-15            18-13
Number of shareholders at year-end                3,400            3,600          3,900            4,000
Number of employees at year-end**                 4,800            4,700          4,700            4,800
% payroll and benefits to sales**                    24%              25%            25%              25%
% raw material costs to sales**                      44%              43%            41%              42%
*   Before cumulative effect of 1993 
    change in accounting principles                            
**  From continuing operations                                                                   
--------------------------------------------------------------------------------------------------------------
INFLATION ADJUSTED DATA                                                                        
Net sales*                                   $1,088,905       $1,002,087       $935,773       $1,033,261
% increase (decrease)                                 9%               7%            (9%)             (2%)
Cash dividends declared per share*           $      .88       $      .90       $    .93       $      .96
Market price per share - year-end**          $   23-5/8       $   22-1/4       $ 24-3/4       $       28
*   Stated in average 1995 dollars using the Consumer Price Index.           
**  Stated in year-end 1995 dollars using the Consumer Price Index.           
-------------------------------------------------------------------------------------------------------------
</TABLE>

18
<PAGE>   3
<TABLE>
<CAPTION>
                                                                                   THE DEXTER CORPORATION
In thousands of dollars
(except per share amounts)                       1991             1990             1989         1988
---------------------------------------------------------------------------------------------------------
<S>                                           <C>             <C>              <C>          <C>
OPERATING RESULTS                            
Net sales                                     $ 937,734       $  907,946       $  848,724   $  827,266
  % increase (decrease)                               3%               7%               3%           9%
Gross profit                                    309,157          314,449          284,142      269,416
  As % of sales                                    33.0%            34.6%            33.5%        32.6%
LIFO charge (credit)
  included in cost of sales                        (173)           1,100           (4,063)       4,193
Marketing and administrative expenses           198,334          191,656          168,935      159,448
  As % of sales                                    21.2%            21.1%            19.9%        19.3%
Research and development expenses                42,056           39,880           37,359       32,685
  As % of sales                                     4.5%             4.4%             4.4%         4.0%
Interest expense                                 16,800           17,484           10,926       12,178
Income before taxes                              11,192           77,407           77,643       71,923
  As % of sales                                     1.2%             8.5%             9.1%         8.7%
Tax rate                                          109.5%            37.0%            38.0%        38.0%
Income (loss) before minority interests          (1,059)          48,766           48,139       44,592
  As % of sales                                    (0.1%)            5.4%             5.7%         5.4%
Income (loss) from continuing operations         (7,119)          42,150           42,977       39,889
  As % of sales                                    (0.8%)            4.6%             5.1%         4.8%
Discontinued operations (loss) gain                                                             (4,393)
Cumulative effect of change in
  accounting principles
Net income (loss)                             $  (7,119)      $   42,150       $   42,977   $   35,496
  As % of sales                                    (0.8%)            4.6%             5.1%         4.3%
Return on
  Average shareholders' equity*                    (2.2%)           12.6%            13.6%        11.8%
  Average total capital*                            0.7%            11.0%            11.6%        10.7%
  Average shareholders' equity                     (2.2%)           12.6%            13.6%        11.8%
  Average total capital                             0.7%            11.0%            11.6%        10.7%
Income (loss) per share
  Continuing operations                       $    (.29)      $     1.74       $     1.73   $     1.61
  Discontinued operations                                                                   $     (.18)
  Cumulative effect of change in             
    accounting principles                    
      Total net income (loss)                 $    (.29)      $     1.74       $     1.73   $     1.43
Cash dividends declared per share             $     .88       $      .88       $      .82   $      .80
Rate of dividend payout*                             --               51%              47%          56%
* Before cumulative effect of 1993            
  change in accounting principles             
---------------------------------------------------------------------------------------------------------
FINANCIAL POSITION
Working capital                               $ 193,873       $  215,410       $  189,006   $  182,284
Property, plant and equipment, net              299,342          274,147          252,895      186,894
Total assets                                    784,471          762,383          694,490      626,391
Long-term debt                                  188,702          160,478          130,834       92,830
Shareholders' equity                          $ 313,782       $  343,698       $  325,281   $  307,226
Percent long-term debt to capital                  37.6%            31.8%            28.7%        23.2%
Equity per share at year-end                  $   12.99       $    14.24       $    13.14   $    12.36
---------------------------------------------------------------------------------------------------------
OTHER DATA                                   
Capital expenditures                          $  61,749       $   43,910       $   33,119   $   26,145
Depreciation and amortization                 $  34,095       $   30,272       $   26,243   $   24,349
Shares outstanding at year-end (000)             24,149           24,136           24,761       24,855
Average shares outstanding (000)                 24,145           24,282           24,877       24,842
Market price per share -- high                $  26-1/8       $   24-1/2       $   34-3/4   $   28-3/4
                       -- low                 $  18-1/2       $       18       $   20-1/8   $   20-1/4
                       -- close               $  21-5/8       $       21       $   21-7/8   $   22-1/4
Price-earnings ratio range*                          --            14-10            20-12        20-14
Number of shareholders at year-end                4,300            4,400            4,500        4,400
Number of employees at year-end**                 5,600            5,500            5,400        5,400
% payroll and benefits to sales**                    25%              24%              23%          23%
% raw material costs to sales**                      41%              42%              46%          45%
*   Before cumulative effect of 1993          
    change in accounting principles           
**  From continuing operations                
---------------------------------------------------------------------------------------------------------
INFLATION ADJUSTED DATA
Net sales*                                   $1,049,257       $1,058,965       $1,043,428   $1,065,878
% increase (decrease)                                (1%)              1%              (2%)          5%
Cash dividends declared per share*           $      .98       $     1.03       $     1.01   $     1.03
Market price per share - year-end**          $   24-1/8       $   24-1/8       $   26-5/8   $   28-3/8

 * Stated in average 1995 dollars using the Consumer Price Index.
** Stated in year-end 1995 dollars using the Consumer Price Index.
---------------------------------------------------------------------------------------------------------

<CAPTION>
In thousands of dollars
(except per share amounts)                       1987          1986             1985
----------------------------------------------------------------------------------------
<S>                                          <C>             <C>           <C>
OPERATING RESULTS                           
Net sales                                    $  757,710      $623,438      $ 598,150
  % increase (decrease)                             22%            4%            (2%)
Gross profit                                    263,120       228,276        214,181
  As % of sales                                    34.7%         36.6%          35.8%
LIFO charge (credit)
  included in cost of sales                       5,961          (809)          (754)
Marketing and administrative expenses           152,357       136,052        133,999
  As % of sales                                    20.1%         21.8%          22.4%
Research and development expenses                28,690        27,340         25,470
  As % of sales                                     3.8%          4.4%           4.3%
Interest expense                                 14,127        12,351         11,513
Income before taxes                              76,858        54,271         58,557
  As % of sales                                    10.1%          8.7%           9.8%
Tax rate                                           38.0%         38.0%          35.3%
Income (loss) before minority interests          47,652        33,649         37,867
  As % of sales                                     6.3%          5.4%           6.3%
Income (loss) from continuing operations         43,391        32,251         31,684
  As % of sales                                     5.7%          5.2%           5.3%
Discontinued operations (loss) gain                (606)        1,384         (3,102)
Cumulative effect of change in
  accounting principles
Net income (loss)                            $   42,785      $ 33,635       $ 28,582
  As % of sales                                     5.6%          5.4%           4.8%
Return on
  Average shareholders' equity*                    15.5%         13.7%          13.0%
  Average total capital*                           13.3%         12.2%          12.1%
  Average shareholders' equity                     15.5%         13.7%          13.0%
  Average total capital                            13.3%         12.2%          12.1%
Income (loss) per share
  Continuing operations                      $     1.74      $   1.30       $   1.28
  Discontinued operations                    $     (.02)     $    .05       $   (.13)
  Cumulative effect of change in             
    accounting principles
      Total net income (loss)                $     1.72      $   1.35       $   1.15
Cash dividends declared per share            $      .60      $.56-2/3       $.53-1/3
Rate of dividend payout*                             35%           42%            46%
* Before cumulative effect of 1993          
  change in accounting principles           
----------------------------------------------------------------------------------------
FINANCIAL POSITION
Working capital                              $  181,106      $137,980       $129,605
Property, plant and equipment, net              183,972       174,644        160,345
Total assets                                    612,517       570,335        484,567
Long-term debt                                  106,338       112,553         65,310
Shareholders' equity                         $  293,788      $258,843       $232,796
Percent long-term debt to capital                  26.6%         30.3%          21.9%
Equity per share at year-end                 $    11.84      $  10.40       $   9.39
----------------------------------------------------------------------------------------
OTHER DATA                                  
Capital expenditures                         $   23,619      $ 23,861       $ 26,456
Depreciation and amortization                $   22,775      $ 18,482       $ 18,541
Shares outstanding at year-end (000)             24,821        24,893         24,800
Average shares outstanding (000)                 24,895        24,860         24,794
Market price per share -- high               $   32-3/8      $ 23-3/8       $ 17-7/8
                       -- low                $       17      $ 16-7/8       $ 12-3/8
                       -- close              $   23-3/8      $ 22-1/4       $ 17-1/4
Price-earnings ratio range*                       19-10         17-13          16-11
Number of shareholders at year-end                4,500         4,500          4,900
Number of employees at year-end**                 5,200         5,400          5,400
% payroll and benefits to sales**                    23%           25%            26%
% raw material costs to sales**                      43%           42%            43%
*   Before cumulative effect of 1993
    change in accounting principles
**  From continuing operations
----------------------------------------------------------------------------------------
INFLATION ADJUSTED DATA
Net sales*                                   $1,016,127      $866,561       $847,358
% increase (decrease)                                17%            2%            (6%)
Cash dividends declared per share*           $      .80      $    .79       $    .76
Market price per share - year-end**          $   31-1/8      $ 30-7/8       $ 24-1/4

 * Stated in average 1995 dollars using the Consumer Price Index.
** Stated in year-end 1995 dollars using the Consumer Price Index.
----------------------------------------------------------------------------------------
</TABLE>
 
                                                                              19
<PAGE>   4
STATEMENT OF INCOME                                       THE DEXTER CORPORATION
-------------------                                       


<TABLE>
<CAPTION>
                                                        Years ended December 31
In thousands of dollars                        -------------------------------------
(except per share amounts)                           1995          1994         1993
------------------------------------------------------------------------------------
<S>                                            <C>             <C>          <C>
REVENUES
Net sales                                      $1,088,905      $974,719     $887,112
Equity in net income of affiliates                  1,348         3,836        2,369
Other income                                        8,791         8,660        8,796
                                               -------------------------------------
                                                1,099,044       987,215      898,277

EXPENSES
Cost of sales                                     742,206       658,178      593,767
Marketing and administrative                      206,708       188,272      175,141
Research and development                           49,375        46,644       43,803
Interest                                           20,931        20,509       18,756
Provision for environmental costs                                              1,000
Divestiture and restructuring activities
  Gain on divestiture of product lines                                       (13,016)
  Charge for restructuring businesses, net                                    12,388
                                               -------------------------------------


INCOME BEFORE TAXES                                79,824        73,612       66,438
Income taxes                                       28,337        26,500       24,250
                                               -------------------------------------
INCOME BEFORE MINORITY INTERESTS                   51,487        47,112       42,188
Minority interests                                 10,909         9,214        8,135
                                               -------------------------------------
INCOME BEFORE CUMULATIVE EFFECT OF
  CHANGE IN ACCOUNTING PRINCIPLES                  40,578        37,898       34,053
Cumulative effect of change in
  accounting principles                                                       (9,875)
                                               -------------------------------------
NET INCOME                                     $   40,578      $ 37,898     $ 24,178
                                               =====================================
INCOME (LOSS) PER SHARE
Income before cumulative effect
  of change in accounting principles           $     1.67      $   1.56     $   1.40
Cumulative effect of change in
  accounting principles                                                         (.41)
                                               -------------------------------------
NET INCOME PER SHARE                           $     1.67      $   1.56     $    .99
                                               ===================================== 
DIVIDENDS DECLARED PER SHARE                   $      .88      $    .88     $    .88

------------------------------------------------------------------------------------
See accompanying financial review.                                           
</TABLE>
20
<PAGE>   5
STATEMENT OF CASH FLOWS                                   THE DEXTER CORPORATION
-----------------------




<TABLE>
<CAPTION>
                                                                    Years ended December 31
                                                            -------------------------------------
In thousands of dollars                                          1995          1994          1993
-------------------------------------------------------------------------------------------------
<S>                                                         <C>            <C>           <C>
OPERATIONS
Net income                                                  $  40,578      $ 37,898      $ 24,178
  Noncash items
   Depreciation                                                38,246        34,857        32,038
   Amortization                                                 5,481         6,066         4,617
   Provision for environmental costs                                                        1,000
   Gain on divestiture of product lines                                                   (13,016)
   Charge for restructuring businesses, net                                                12,388
   Cumulative effect of change in accounting principles                                     9,875
   Income taxes (paid)/not due                                 (5,262)        9,508         4,981
   Minority interests                                          10,909         9,214         8,135
   LIFO inventory charge (credit)                               1,881         2,231        (1,290)
   Equity in net income of affiliates                          (1,348)       (3,836)       (2,369)
   Other                                                       (1,547)       (2,538)         (136)
Operating working capital increase                            (31,512)      (12,824)      (24,437)
                                                            -------------------------------------
                                                               57,426        80,576        55,964
                                                            -------------------------------------
INVESTMENTS
Property, plant and equipment                                 (30,235)      (45,842)      (46,993)
Acquisitions                                                     (525)       (8,767)      (32,114)
Joint ventures                                                 (3,133)          749        (7,370)
Divestitures                                                                               23,924
Notes receivable                                                3,150
Proceeds from sale of investments                               1,048         5,658
Purchases of investments                                         (771)       (6,082)
Proceeds from exercise of LTI stock options                     2,990           308           374
Other                                                             850        (2,308)       (2,513)
                                                            -------------------------------------
                                                              (26,626)      (56,284)      (64,692)
                                                            -------------------------------------
FINANCING
New long-term debt                                                                        108,452
Repayment of long-term debt                                    (4,260)       (4,063)      (65,378)
Short-term debt, net                                            8,825         3,806
Dividends paid                                                (21,441)      (21,421)      (21,393)
Funding of the accumulated postretirement
  benefit obligation                                                                      (23,700)
LTI dividends paid to minority interest shareholders           (1,374)       (1,360)       (1,355)
Purchase of treasury stock                                     (4,205)
Other                                                             276           215          (120)
                                                            -------------------------------------
                                                              (22,179)      (22,823)       (3,494)
                                                            -------------------------------------
INCREASE (DECREASE) IN CASH AND
  SHORT-TERM SECURITIES                                     $   8,621      $  1,469      $(12,222)
                                                            =====================================   
CHANGES IN MAJOR ELEMENTS WHICH INCREASE
  (DECREASE) OPERATING WORKING CAPITAL
Accounts receivable, net                                    $  20,085      $ 16,260      $  9,205
Inventories at FIFO                                            10,441         8,100         4,214
Prepaid and deferred expenses                                   1,343        (1,699)           10
Accounts payable                                               (6,690)      (15,259)        6,675
Accrued liabilities and expenses                                6,333         5,422         4,333
                                                            -------------------------------------
                                                            $  31,512      $ 12,824      $ 24,437
                                                            =====================================
RECONCILIATION OF INCREASE (DECREASE) IN
  CASH AND SHORT-TERM SECURITIES
Cash and short-term securities at beginning of year         $  55,012      $ 52,746      $ 65,028
Cash and short-term securities at end of year                  65,542        55,012        52,746
                                                            -------------------------------------
Increase (decrease) in cash and short-term
  securities per Statement of Financial Position               10,530         2,266       (12,282)
Currency translation effects                                      225          (797)           60
Cash included from consolidation of a subsidiary
  which became majority-owned in 1995                          (2,134)

                                                            -------------------------------------
                                                            $   8,621      $  1,469      $(12,222)
                                                            =====================================

INTEREST PAID                                               $  19,113      $ 20,522      $ 18,645

TAXES PAID                                                  $  33,599      $ 16,992      $ 19,269
-------------------------------------------------------------------------------------------------
</TABLE>

See accompanying financial review.                                            

                                                                              21
<PAGE>   6
STATEMENT OF FINANCIAL POSITION
-------------------------------


<TABLE>
<CAPTION>
                                                               December 31
                                                ---------------------------------------
In thousands of dollars                              1995           1994           1993
---------------------------------------------------------------------------------------
<S>                                             <C>            <C>            <C>
ASSETS
Current assets
  Cash                                          $   9,577      $  10,854      $   3,406
  Short-term securities                            55,965         44,158         49,340
  Accounts receivable, net                        201,389        168,957        141,726
  Inventories
   Materials and supplies                          60,099         58,967         59,794
   In process and finished goods                  121,644        106,703         91,626
   LIFO reserve                                   (24,709)       (22,828)       (20,597)
                                                ---------------------------------------
                                                  157,034        142,842        130,823

  Current deferred tax assets                      20,890         16,122         20,382
  Prepaid and deferred expenses                    11,866          9,720         10,649
                                                ---------------------------------------
                                                  456,721        392,653        356,326
Property, plant and equipment
  Land                                             19,307         18,581         17,776
  Buildings and improvements                      153,071        143,436        130,658
  Machinery and equipment                         457,611        429,416        395,547
  Construction in progress                         12,250         16,911         11,931
                                                ---------------------------------------
                                                  642,239        608,344        555,912
  Less accumulated depreciation                  (317,036)      (279,409)      (245,958)
                                                ---------------------------------------
                                                  325,203        328,935        309,954
Investments of wholly owned captive
  insurance companies                               5,878          7,224          6,638
Investment in unconsolidated affiliates            47,982         49,390         46,452
Patents, technology, formulas and covenants         2,857          4,233          3,891
Excess of cost over net assets of
  businesses acquired                              74,102         74,034         69,301
Other assets                                       21,418         24,140         28,129
                                                ---------------------------------------
                                                $ 934,161      $ 880,609      $ 820,691
                                                =======================================
=======================================================================================

</TABLE>


See accompanying financial review.

22
<PAGE>   7
                                                          THE DEXTER CORPORATION

<TABLE>
<CAPTION>
                                                               December 31
                                                ------------------------------------
In thousands of dollars                             1995          1994          1993
------------------------------------------------------------------------------------
<S>                                             <C>           <C>           <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
  Short-term debt                               $ 13,598      $  3,806
  Accounts payable                                92,447        82,851      $ 64,677
  Dividends payable                                5,351         5,357         5,353
  Accrued and deferred income taxes               26,622        24,259        19,566
  Accrued liabilities and expenses                55,037        60,625        59,732
  Current environmental liabilities                1,395         2,660         4,030
  Current installments of long-term debt          13,648         4,071         3,822
                                                ------------------------------------
                                                 208,098       183,629       157,180

Long-term debt                                   215,839       225,402       227,307
Deferred items                                    23,693        22,316        30,150
Long-term deferred income taxes                   21,486        21,517        17,151
Deferred tax credits                               3,313         4,005         4,751
Long-term environmental liabilities               15,745        17,632        18,736
Minority interests - principally
  Life Technologies, Inc.                         76,372        62,475        52,121

Shareholders' equity
  Common stock, par value $1 per share
    (authorized 100,000,000 shares; issued
    24,983,907 shares in 1995, 1994
    and 1993)                                     24,984        24,984        24,984
  Additional paid-in capital                      12,316        11,979        11,966
  Retained earnings                              347,544       328,401       311,928
  Currency translation effects                     1,614        (7,364)      (22,137)
  Other equity items                              (2,184)       (2,433)
  Treasury stock, at cost
    (763,782 shares in 1995, 634,403 shares
    in 1994 and 643,578 shares in 1993)          (14,659)      (11,934)      (13,446)
                                                ------------------------------------
      Total shareholders' equity                 369,615       343,633       313,295
                                                ------------------------------------
                                                $934,161      $880,609      $820,691
                                                ====================================
====================================================================================

</TABLE>


See accompanying financial review.

                                                                              23
<PAGE>   8
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY              THE DEXTER CORPORATION
--------------------------------------------
<TABLE>
<CAPTION>

                                                Add'l                  Currency       Other                           Total 
In thousands of dollars             Common    Paid-in    Retained   Translation     Equity        Treasury    Shareholders' 
(except per share amounts)           Stock    Capital    Earnings       Effects       Items          Stock           Equity 
---------------------------------------------------------------------------------------------------------------------------
<S>                                <C>        <C>       <C>            <C>          <C>           <C>         <C>
DECEMBER 31, 1992                  $24,960    $11,474   $309,157       $(16,361)                   $(13,616)       $315,614 
Net income                                                24,178                                                     24,178 
Dividends - $.88 per share                               (21,407)                                                   (21,407)
Currency effects                                                         (5,776)                                     (5,776)
Stock options                           24        459                                                   170             653 
Pooling tax benefits                               33                                                                    33 
                                   ----------------------------------------------------------------------------------------
DECEMBER 31, 1993                   24,984     11,966    311,928        (22,137)                    (13,446)        313,295 
Net income                                                37,898                                                     37,898 
Dividends - $.88 per share                               (21,425)                                                   (21,425)
Currency effects                                                         14,773                                      14,773 
Unrealized loss on investments                                                      $(1,468)                         (1,468)
Stock options                                     (11)                                                  192             181 
Restricted stock                                   (8)                                 (965)          1,320             347 
Pooling tax benefits                               32                                                                    32 
                                   ----------------------------------------------------------------------------------------
DECEMBER 31, 1994                   24,984     11,979    328,401         (7,364)     (2,433)        (11,934)        343,633 
Net income                                                40,578                                                     40,578 
Dividends - $.88 per share                               (21,435)                                                   (21,435)
Currency effects                                                          8,978                                       8,978 
Stock purchases                                                                                      (4,205)         (4,205)
Unrealized gain on                                                                                               
  investments                                                                         1,340                           1,340 
Stock options                                     (33)                                                  854             821 
Pension liability adjustment                                                           (473)                           (473)
Restricted stock                                  338                                  (618)            626             346 
Pooling tax benefits                               32                                                                    32 
                                   ----------------------------------------------------------------------------------------
DECEMBER 31, 1995                  $24,984    $12,316   $347,544       $  1,614     $(2,184)       $(14,659)       $369,615 
                                   ========================================================================================
---------------------------------------------------------------------------------------------------------------------------

</TABLE>

See accompanying financial review.


QUARTERLY FINANCIAL INFORMATION (unaudited)
-------------------------------
<TABLE>
<CAPTION>
                                       In millions of dollars                                                   Market Price
                               -----------------------------------                                         -----------------------
                                                               Net      Net Income
                                  Net           Cost        Income      (Loss) per      Dividends
Quarter                         Sales       of Sales        (Loss)           Share      per Share            High            Low
----------------------------------------------------------------------------------------------------------------------------------
<S>                            <C>          <C>             <C>         <C>             <C>                <C>             <C>
1993*
First                          $217.2         $144.3        $(2.2)          $(.09)           $.22          $28-7/8         $23-7/8
Second                          228.6          152.1          9.8             .40             .22           26              21
Third                           220.1          148.6          8.3             .34             .22           23-1/2          20-3/8
Fourth                          221.2          148.8          8.3             .34             .22           24-1/2          22-1/4
                               ------------------------------------------------------------------
Year                           $887.1         $593.8        $24.2           $ .99            $.88                Close $23-1/2
                               ====================================================================================================
</TABLE>

*The first quarter net income included a $9.9 million, or $.41 per share, charge
for the cumulative effect of change in accounting principles.

Second quarter pretax income included a $9.5 million gain on the sale of the
company's coil coatings business and $3.5 million of income related to the sale
of the company's pultrusions business resulting from the proceeds of the sale
being in excess of the book value of the business which had been written down at
year-end 1991. Also reducing pretax income in the second quarter was a $12
million charge for restructuring businesses and a provision for environmental
costs of $1 million.

<TABLE>
<CAPTION>
The fourth quarter included a $0.4 million charge for restructuring businesses at majority-owned Life Technologies, Inc.
----------------------------------------------------------------------------------------------------------------------------------
1994
<S>                          <C>              <C>           <C>             <C>              <C>           <C>             <C>    
First                        $  233.5         $155.4        $ 9.3           $ .38            $.22          $25-7/8         $23-1/8
Second                          247.1          165.4         11.0             .45             .22           25-3/8          22-3/4
Third                           243.3          165.6          8.4             .35             .22           26              22-1/2
Fourth                          250.8          171.8          9.2             .38             .22           23-1/2          19-7/8
                             --------------------------------------------------------------------
Year                         $  974.7         $658.2        $37.9           $1.56            $.88                Close $21-3/4
                             =====================================================================================================
----------------------------------------------------------------------------------------------------------------------------------
                                                                                  
1995                                                                              
First                        $  266.8         $181.1        $10.5           $ .43            $.22          $22-7/8         $20-3/8
Second                          283.0          193.1         11.9             .49             .22           25-1/8          21-5/8
Third                           268.5          183.9          9.4             .39             .22           25-7/8          23   
Fourth                          270.6          184.1          8.8             .36             .22           26-7/8          23-1/8
                             --------------------------------------------------------------------
Year                         $1,088.9         $742.2        $40.6           $1.67            $.88                Close $23-5/8
                             =====================================================================================================
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>


24
<PAGE>   9
ANALYSIS OF FINANCIAL CONDITION AND OPERATIONS
----------------------------------------------



PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the
accounts of all majority-owned subsidiaries. All consolidated subsidiaries are
wholly owned except Life Technologies, Inc. (LTI) (54% owned) and a few other
subsidiaries, primarily outside the United States, in which aggregate minority
interests are not significant. Intercompany accounts, transactions and profits
have been eliminated in the consolidated financial statements. Companies owned
20% to 50% are accounted for by the equity method. 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 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. Certain amounts for prior years have been
reclassified to conform to and be consistent with the 1995 presentation.

ACQUISITIONS AND DIVESTITURES In September 1995, Life Technologies, Inc.
acquired an additional 1% ownership in its Japanese subsidiary, which resulted
in a 51% controlling interest, and, therefore, the subsidiary's financial
results are consolidated as of the acquisition date.

In October 1995, the company announced that it would sell its 50% equity
interest in D & S Plastics International and also its acoustic materials
business. These transactions are expected to be completed during 1996.

In January 1996, Life Technologies, Inc. acquired the remaining 75% of Custom
Primers, Inc. located in California.

None of these businesses acquired or to be divested, either individually or in
the aggregate, constitute a significant subsidiary of The Dexter Corporation.

EVENTS, TRENDS, AND VULNERABILITIES Dexter is subject to a multitude of events
and trends which influence its business prospects, profitability and liquidity.
Many of these events and trends are outside the control of the company. However,
the consequent effects need to be managed as part of the ongoing business
environment.

The most significant event of 1995 was the unprecedented increase in the cost of
commodity raw materials including wood pulp, solvents and polypropylene. As
expected, the heightened degree of competition throughout the world made it
difficult to obtain sufficient price increases from our customers to recover
these higher costs. Aggressive efforts continue in order to raise prices and
regain full value for our product offerings. Although the cost of raw materials
has moderated and in some cases has been reduced, it is not yet apparent that
the issue will not arise again in the short or medium term. Any substantial
increases in future demand for the materials we purchase, with no additional
capacity for production, will inevitably support higher levels of cost to
Dexter. Following the divestiture of the corporation's equity interest in D&S
Plastics International, the impact of changes in the price of polypropylene
will be negligible. The company's Life Technologies, Inc. subsidiary is subject
to volatility in the cost of fetal bovine serum which stems from a fundamental
limit to supply. Further, for less critical applications, additional competition
can be expected consequent to the development of substitute products for cell
culture which do not depend on traditional raw materials.

Unit volume growth of sales was strong in the first half of 1995 and slowed in
the second half, particularly in the fourth quarter. To the extent that this
slowdown continues into 1996 as a result of some weakness in domestic and
European economies, revenue and earnings growth may be negatively impacted. The
consequences of domestic interest rate changes, tax policy and the results of
the upcoming presidential and congressional elections, may influence total
demand in our served markets.

With over 60% of Dexter's profits derived from products sold outside the United
States, weakening international currencies against the U.S. dollar could have a
significant negative effect on the company's results. Revenues and profits in
the food packaging, electronics and medical markets are the most sensitive to
currency rate fluctuations. Geographical expansion will continue to provide
opportunities and challenges as we learn how to create profitable growth in
developing countries.

There will continue to be increasing costs necessary to respond to heightened
regulatory pressures. Although we expect such increased costs might be moderate
in areas of corporate governance and securities regulation, such increases may
continue to be significant in areas of environmental, health, social and
administrative regulation. Heightened worldwide environmental concerns have led
to greater capital requirements and increased operating expenses. While the
company, based on known facts and circumstances, has provided substantial
environmental reserves as shown at year end in the "Statement of Financial
Position" and discussed below, the ultimate cost of compliance and remediation
cannot be ascertained and, therefore, there is no assurance that such reserves
will prove to be adequate over time.

Substantial national and local deficits in several parts of the world may
dictate the need for greater tax receipts or significant reductions in
government spending. Future increases in taxes by countries, states and
localities may be the ultimate outcome of this imbalance. Lower government
spending may adversely affect Life Technologies, Inc. by reducing the overall
availability of government funding for life science research. Additionally,
LTI may be subject to delayed or reduced research funding, especially in the
United States, as appropriations are suspended during budget negotiations.

Other areas which will no doubt have an important impact on the future of the
company will be the increasing rate of technological change, a continued
universal move toward higher quality products, shortened product life cycles and
further globalization of our customers and competitors. Technology is the
lifeblood of the corporation. In order to remain competitive we must
successfully introduce new products that not only replace our current products
but also those of our competitors, otherwise we are potentially exposed to
reduced margins and loss of business.

The general aging of the U.S. population will create challenges with respect to
the availability of employees as well as amplifying trends in increased health
care costs. Dexter's ability to hire and retain a qualified work force will be
fundamental to our growth and success. Increased training and developmental
needs will require additional resources to maintain and improve our overall
competencies.

The complexities of ever-changing worldwide events and trends including the
international political environment, the emergence of the global marketplace,
and the advancement of technology generate numerous vulnerabilities and
challenges. The company believes that it will face these challenges with
continued innovation and increased productivity.


                                                                              25
<PAGE>   10
LIQUIDITY The company's liquidity is strong and ample lines of credit are
available to the company and its subsidiaries. The current ratio (current assets
divided by current liabilities) is 2.2 to 1, and the quick ratio (cash,
short-term securities and accounts receivable divided by current liabilities) is
1.3 to 1. During 1995, the company's financing and investment needs were met
through funds provided from operations. As shown in the Statement of Cash Flows,
cash provided from operations of $57.4 million exceeded the sum of investments
of $26.6 million and financing activity of $22.2 million, thereby increasing
year-end cash and short-term securities by $8.6 million. Excluding LTI, cash
provided from operations exceeded cash needed for investments by $19.7 million.
Financing activities, excluding LTI, used funds of $20.8 million, resulting in a
net reduction of cash and short-term securities of $1.1 million. Financing
activities during 1995 included the company's purchase of 170,900 shares of its
outstanding common stock for $4.2 million. 

The company plans to meet its future working capital, capital expenditure, and
share repurchase program needs with funds provided from operations, the
reduction of short-term securities, proceeds from the sale of its 50% equity
interest in D & S Plastics International and the sale of its automotive acoustic
materials business and, as needed, short-term and long-term borrowings.

           SUPPLEMENTAL CONSOLIDATING STATEMENT OF FINANCIAL POSITION
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                             December 31, 1995
                                  -------------------------------------------------------------------------------
                                     Dexter       Captive                                 Reclasses
                                  Operating     Insurance                     D & S             and        Dexter
In thousands of dollars           Companies     Companies        LTI       Plastics    Eliminations  Consolidated
-----------------------------------------------------------------------------------------------------------------
<S>                               <C>          <C>          <C>           <C>           <C>           <C>      
Current assets
  Cash and short-               
   term securities                $  21,614    $  20,727    $  23,201     $   1,396     $  (1,396)    $  65,542
  Accounts receivable
   and inventories                  248,563          293      109,567        28,151       (28,151)      358,423
  Prepaid and
   deferred expenses                 23,502                     9,254            33           (33)       32,756
                                  -------------------------------------------------------------------------------
     Total current assets           293,679       21,020      142,022        29,580       (29,580)      456,721
                                  -------------------------------------------------------------------------------

Property, plant and
  equipment, net                    273,342                    51,861       32,317        (32,317)      325,203
Investments of
  wholly owned captive
  insurance companies                              5,878                                                  5,878
Other assets                         92,789                    14,861        35,868         2,841       146,359
                                  -------------------------------------------------------------------------------
     Total assets                 $ 659,810    $  26,898    $ 208,744     $  97,765     $ (59,056)    $ 934,161
                                  ===============================================================================

Current liabilities
  Short-term debt                 $  12,631                 $     967                                 $  13,598
  Accounts payable and
   accrued liabilities              117,092    $   2,864       28,923     $  20,346     $ (20,346)      148,879
  Income taxes                       12,977                    13,645                                    26,622
  Dividends payable                   5,351                       759                        (759)        5,351
  Current installments of
    long-term debt                   12,681                       967                                    13,648

                                  -------------------------------------------------------------------------------
     Total current liabilities      160,732        2,864       45,261        20,346       (21,105)      208,098
                                  -------------------------------------------------------------------------------

Long-term debt                      214,388                     1,451                                   215,839
Deferred items                       45,132       13,350        5,755                                    64,237
Minority interests                    2,455                     2,352                      71,565        76,372
Shareholders' equity                237,103       10,684      153,925        77,419      (109,516)      369,615
                                  -------------------------------------------------------------------------------
     Total liabilities and
      shareholders' equity        $ 659,810    $  26,898    $ 208,744     $  97,765     $ (59,056)    $ 934,161
                                  ===============================================================================
Current ratio                      1.8 to 1     7.3 to 1      3.1 to 1      1.5 to 1                   2.2 to 1
Quick ratio                        1.1 to 1     7.3 to 1      1.6 to 1      0.7 to 1                   1.3 to 1
-----------------------------------------------------------------------------------------------------------------
</TABLE>

26
<PAGE>   11
ANALYSIS OF OPERATIONS

1995 COMPARED WITH 1994

Revenues: Net sales were a record $1.1 billion in 1995, an increase of $114
million, or 12%, over sales of $975 million for 1994. The 12% increase in sales
was due to unit volume increases of 7%, a 3% increase due to the effect of
higher translation rates on international sales, price increases averaging 1%,
and increased consolidated sales of 1% through acquisition of a controlling
interest in a Japanese subsidiary of Life Technologies, Inc. (LTI).

Equity in net income of affiliates decreased $2.5 million to $1.3 million in
1995. This decrease is due to a $3 million decrease in results of D & S Plastics
International partially offset by improved results at Akzo Dexter Aerospace
Finishes VoF of $0.5 million. 

EXPENSES: Cost of sales increased as a percentage of sales in 1995 thereby
reducing consolidated gross margin by .7 percentage points to 31.8% of sales
from 32.5% in 1994. Substantially improved gross margin at LTI improved overall
gross margin by 1.3 percentage points. Gross margin, excluding LTI, decreased 2
percentage points and more than offset the favorable impact of LTI.
Unprecedented increases in the cost of commodity raw materials, principally wood
pulp, solvents, and polypropylene, more than accounted for the margin erosion,
excluding LTI. Somewhat offsetting these cost increases were the favorable
effects of overall selling price increase, productivity improvements and cost
containment.

Marketing and administrative expenses increased $18.4 million, or 10%, in 1995
compared with 1994 principally due to increased marketing efforts at LTI and the
third quarter consolidation of its subsidiary in Japan. Marketing and
administrative costs, excluding LTI, increased less than one-half of one percent
over 1994. Overall marketing and administrative costs continued to decrease as a
percentage of sales from 19.3% in 1994 to 19% in 1995. Research and development
expenses increased $2.7 million, or 6%, due to increases at LTI and in the can
coatings business. 

Interest expense increased $0.4 million, or 2%, in 1995 compared with 1994
primarily due to higher average short-term borrowing throughout the year. The
company does not capitalize interest on facilities under construction. If
interest had been capitalized, there would have been no impact on earnings per
share in 1995 or 1994. 

Income Taxes: The effective tax rate was 35.5% in 1995 compared with 36% in
1994. 

Minority Interests: Income attributed to minority interest shareholders
increased 18% from 1994 due primarily to increased profits at LTI. 

Net Income: Net income for the year 1995 was $40.6 million, or $1.67 per share,
a 7% increase compared with $37.9 million, or $1.56 per share, in 1994. The 1995
net income includes a decrease due to the effect of higher raw material cost,
net of selling price increases, of approximately $.43 per share. Somewhat
offsetting this negative impact was a $.07 per share increase due to favorable
currency translation rates and a $.02 per share increase due to a reduction of
the effective income tax rate from 36% in 1994 to 35.5% in 1995.

1994 COMPARED WITH 1993

Revenues: Net sales were $974.7 million in 1994, an increase of $87.6 million,
or 10%, over sales of $887.1 million for 1993. The 10% increase in sales was due
to unit volume increases. A 1% increase due to the effect of higher currency
translation rates on international sales was offset by selling price decreases
averaging 1%. Acquisitions and divestitures accounted for a net increase in
sales of $1 million. 

Equity in net income of affiliates increased $1.4 million to $3.8 million in
1994. This increase is due to a $0.7 million increase in the results of D & S
Plastics International and a full year of earnings from Akzo Dexter Aerospace
Finishes VoF representing a $0.7 million increase in earnings. 

Expenses: Cost of sales increased as a percent of sales in 1994 thereby reducing
consolidated gross margin by .6 percentage points to 32.5% of sales from 33.1%
in 1993. Excluding Life Technologies, Inc., gross margin remained relatively
constant at 27.8% for 1994 compared with 27.9% for 1993. Two-thirds of the total
 .6 percentage point decrease is due to the unfavorable impact of a LIFO charge
of $2.2 million in 1994 compared to $1.3 million of LIFO income in 1993. Gross
margin declined in 1994 at LTI due to lower fetal bovine serum (FBS) unit
selling prices and increased unit costs combined with higher royalty expense.
Excluding LTI, productivity improvements, reductions in fixed manufacturing
costs as a percent of sales and the benefit of lower gas costs for our
cogeneration facility almost fully offset the negative impact of selling price
reductions on gross margin. 

Marketing and administrative expenses increased $13.1 million, or 7%, in 1994
compared with 1993 due primarily to increased marketing efforts at Life
Technologies, Inc. and cost associated with 1994 Dexter acquisitions. Marketing
and administrative costs decreased as a percentage of sales from 19.7% in 1993
to 19.3% in 1994. Research and development expenses increased $2.8 million, or
6%, due to increases in the food packaging and electronics markets and at LTI.

Interest expense increased $1.8 million, or 9%, in 1994 compared with 1993
primarily due to higher long-term borrowings beginning in the fourth quarter of
1993. If interest had been capitalized, there would have been no impact on
earnings per share in 1994 and earnings per share would have increased by $.02
in 1993. 

In 1993, there was a gain on divestiture of product lines of $13 million
partially offset by a $12.4 million charge for restructuring businesses and a $1
million provision for estimated environmental costs. 

Income Taxes: The effective tax rate was 36% in 1994 compared with 36.5% in
1993. 

Minority Interests: Income attributed to minority interest shareholders
increased 13% from 1993 due primarily to increased profits at LTI. 

Net Income: The year 1994 resulted in net income of $37.9 million, or $1.56 per
share, compared with $34.1 million, or $1.40 per share, in 1993 before deducting
the $9.9 million, or $.41 per share cumulative effect of accounting principle
changes in 1993. The 1994 net income includes a $.04 per share decrease due to
the net effect of acquisitions and divestitures, a $.02 per share increase from
the effect of changes in currency translation rates, a $.01 per share increase
due to the reduction of the effective income tax rate from 36.5% to 36% for the
year, and an unfavorable comparison of $.08 per share resulting from a LIFO
charge of $.05 per share in 1994 compared with LIFO income of $.03 per share in
1993. Also included in earnings for 1993 was a charge of $.03 per share due to
environmental costs and a net favorable impact to earnings from divestitures net
of restructuring charges of $.02 per share. 

                                                                              27
<PAGE>   12

1993 COMPARED WITH 1992 

Revenues: Net sales were $887.1 million, a decrease of $64.3 million, or 7%,
compared with sales of $951.4 million for 1992. Volume increases of 1% were more
than offset by a 4% decrease due to the effect of lower currency translation
rates on international sales and a 4% decrease due to the net effect of
acquisitions and divestitures. Average selling prices remained largely
unchanged. 

Equity in net income (loss) of affiliates improved $4.1 million, from a loss in
1992 of $1.7 million to earnings of $2.4 million in 1993. This was primarily due
to the results of D & S Plastics International. Other income increased $0.9
million principally due to increased income from non-compete agreements.

Expenses: Cost of sales decreased slightly as a percent of sales in 1993,
thereby increasing consolidated gross margin to 33.1% of sales versus 33% for
1992. This almost flat comparison actually represents a gross margin increase of
 .9% due to increased productivity and cost containment programs in ongoing
businesses, offset by an .8% decrease due to the divestiture of the high-margin
water management business in mid-1992. 

Marketing and administrative expenses decreased $13.1 million, or 7%, in 1993
compared with 1992 due primarily to the divestiture of the water management
business which had significantly higher marketing costs stated as a percent of
sales. Research and development expenses increased $1.6 million, or 4%, due to
increases at ongoing businesses. 

Interest expense remained constant at $18.8 million in both 1993 and 1992
despite additional higher average long-term borrowings in 1993 as the company
took advantage of reductions in interest rates. If interest had been
capitalized, earnings per share would have increased by $.02 in 1993 and $.04 in
1992. 

In 1993, there was a $1 million provision for the estimated environmental costs
related to the assessment, monitoring, and remediation of the Industry,
California location and possible participation in such potential costs with
respect to the surrounding San Gabriel Valley.

In 1993, there was a $13 million gain on the divestiture of product lines
compared to a $16.2 million gain on divestitures in 1992. The 1993 gain of $13
million includes a gain of $9.5 million on the sale of the coil coatings
business. In addition, there was $3.5 million of income related to the sale of
the pultrusions business resulting from the proceeds of the sale being in excess
of the book value of the business as written down at year-end 1991. Also in
1993, there was a $12.4 million charge for restructuring businesses compared
with a $14.2 million charge in 1992. For 1993, approximately one-half of this
charge was for the consolidation, relocation and integration of the domestic
aerospace coatings business, with the remainder divided equally between
severance programs and asset write-down resulting from the realignment of our
businesses. 

Income Taxes: The effective income tax rate for 1993 was 36.5%. For 1992, an
effective income tax rate of 37% was applied to results other than the 1992 gain
on divestitures, which was subject to higher state tax rates, yielding a
consolidated effective tax rate in 1992 of 37.7%. 

Minority Interests: Income attributed to minority interest shareholders
increased 10% from 1992 due primarily to increased profits at LTI.

Net Income: Net income for the year 1993, before deducting the $9.9 million, or
$.41 per share cumulative effect of accounting principle changes, was $34.1
million, or $1.40 per share, compared with $38.2 million, or $1.58 per share in
1992. Increased earnings of $.13 per share from ongoing operations and a $.01
per share increase due to the reduction of the effective income tax rate on
earnings from ongoing operations were more than offset by a $.15 per share
decrease from the effect of changes in currency translation rates and a $.13 per
share decrease due to the effect of divestitures net of acquisitions. In
addition, 1993 included a provision of $1 million, or $.03 per share, for
estimated environmental costs and a $.02 per share gain from divestitures net of
restructuring charges in 1993. There was a favorable net impact from divestiture
and restructuring activities of $.03 per share in 1992.
--------------------------------------------------------------------------------
TAXES The effective income tax rate was 35.5% in 1995, 36% in 1994 and 36.5% in
1993. The tax rate is currently expected to approximate 37% in 1996. The income
tax rate differs from the statutory U.S. federal income tax rate as shown below:

<TABLE>
<CAPTION>
                                    1995      1994     1993
                                    ------------------------
<S>                                 <C>       <C>       <C>  
U.S. federal rate                   35.0%     35.0%     35.0%
State taxes, net of federal benefit  1.7       1.8       2.1
Investment and R&E tax credits      (1.0)     (2.2)     (2.1)
International taxation differences  (0.7)     (0.8)     (0.4)
Nondeductible excess
  acquisition costs                  1.1       1.1       1.8
Other                               (0.6)      1.1       0.1
                                    ------------------------
Effective income tax rate           35.5%     36.0%     36.5%
                                    ========================
--------------------------------------------------------------------------------
</TABLE>


Investment tax credits are accounted for by the deferred method, which credits
the benefit to income over the productive lives of the related assets. Research
and experimentation (R&E) tax credits reduce income tax expense in the year
earned. 

On January 1, 1993, the company adopted SFAS No. 109, Accounting for Income
Taxes, which requires the use of an asset and liability method of accounting for
income taxes. The cumulative effect of the adoption of SFAS No. 109 was a
one-time increase to earnings of $5.3 million, or $.22 per share, as of January
1, 1993. This increase in earnings was principally due to differences in the tax
rates in effect when the deferred taxes were originally recorded and the lower
rates in effect upon adoption and the recognition of previously unrecognized
deferred tax assets. 

Pretax income from international operations amounted to $57.3 million in 1995,
$46.4 million in 1994 and $38.8 million in 1993. U.S. and international income
and withholding taxes have not been provided on temporary differences related to
investments in foreign subsidiaries. These differences principally include
unremitted earnings of approximately $170 million, differences between the
financial reporting amount and the tax basis of investments in foreign
subsidiaries and cumulative translation adjustments. The investment in these
subsidiaries is considered to be permanent in nature. It is impracticable to
estimate the total tax liability, if any, which these differences could cause
should such investments cease to be treated as permanently reinvested.

28
<PAGE>   13

<TABLE>
<CAPTION>
-------------------------------------------------------------
TAXES, OTHER THAN SALES TAXES

In thousands of dollars          1995        1994        1993
-------------------------------------------------------------
<S>                          <C>         <C>         <C>     
Income taxes
  Current
   United States             $  5,932    $  3,012    $  5,717
   State                        1,691         755       1,521
   International               18,752      14,783      12,560
                             --------------------------------
                               26,375      18,550      19,798
                             --------------------------------
  Deferred
   United States                  754       5,298       2,117
   State                          348       1,353         (22)
   International                  860       1,299       2,357
                             --------------------------------
                                1,962       7,950       4,452
                             --------------------------------

Total income taxes             28,337      26,500      24,250

Payroll taxes                  20,201      18,195      16,851
Property taxes                  4,082       3,576       3,759
Other taxes                       624         454         363
                             --------------------------------
   Total taxes               $ 53,244    $ 48,725    $ 45,223
                             ================================
</TABLE>

-------------------------------------------------------------------------------
DEFERRED INCOME TAXES The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and deferred tax liabilities at
December 31, 1995, 1994 and 1993 are presented below:

<TABLE>
<CAPTION>
In thousands of dollars               1995         1994         1993 
--------------------------------------------------------------------
<S>                               <C>          <C>          <C>     
Deferred tax assets:
  Postretirement health
    benefits                      $ 11,210     $  9,976     $  8,727
  Accrued expenses, not
    currently deductible             7,301        8,721        6,515
  Foreign loss carryforwards         6,234        5,617        4,147
  Environmental reserves             6,061        4,972        4,374
  Reserves for insurance             5,409        4,597        2,372
  Inventory, principally
    valuation reserves               5,039        4,466        3,350
  Alternative minimum tax
    credit carryforwards             3,820          961
  Restructuring activities           1,048        2,174        6,756
  Other                             11,223       11,999       12,912
                                  ----------------------------------
    Gross deferred tax assets     $ 57,345     $ 53,483     $ 49,153
                                  ----------------------------------
Deferred tax liabilities:
  Fixed assets, principally
    depreciation                  $(49,828)    $(54,182)    $(40,011)
  Other                             (5,333)      (1,023)      (2,498)
                                  ----------------------------------
   Gross deferred tax
     liabilities                  $(55,161)    $(55,205)    $(42,509)
                                  ----------------------------------
Net deferred tax asset
  (liability) before valuation
     allowance                    $  2,184     $ (1,722)    $  6,644
Valuation allowance                 (3,585)      (3,121)      (2,452)
                                  ----------------------------------
Net deferred tax (liability)
  asset after valuation
     allowance                    $ (1,401)    $ (4,843)    $  4,192
                                  ==================================
</TABLE>
-------------------------------------------------------------------------------
On December 31, 1995, 1994 and 1993, valuation allowances of $3.6 million, $3.1
million and $2.5 million, respectively, reduced the deferred tax asset
attributable to foreign loss carryforwards to the amount that, based upon all
available evidence, is more likely than not to be realized. Reversal of the
valuation allowance is contingent upon the recognition of future taxable income
and capital gains in specific foreign countries or changes in circumstances
which cause the recognition of the benefits to become more likely than not. The
increase of $0.5 million in the valuation allowance during 1995 was due
principally to the generation of additional foreign loss carryforwards. 

The components of deferred taxes at December 31, 1995, 1994 and 1993 are as
follows: 

<TABLE>
<CAPTION>
In thousands of dollars                1995         1994         1993 
---------------------------------------------------------------------
<S>                                <C>          <C>          <C>     
Current deferred tax assets        $ 20,890     $ 16,122     $ 20,382
Long-term tax asset                     930        1,965        1,499
  (included in other assets)
Current deferred tax liability       (1,735)      (1,413)        (538)
  (included in accrued
     and deferred income taxes)
Long-term deferred income
     taxes                          (21,486)     (21,517)     (17,151)
                                   ----------------------------------
Net deferred tax (liability)
     asset                         $ (1,401)    $ (4,843)    $  4,192
                                   ==================================
</TABLE>
------------------------------------------------------------------------------
NET INCOME PER SHARE Net income of $1.67 per share increased 7.1% over net
income of $1.56 per share in 1994. Net income per share is calculated by
dividing net income by the weighted average number of shares of common stock
outstanding during the year. The increase in the average number of shares in
1995 resulted from the exercise of stock options. This increase was partially
offset by Dexter's purchase of 170,900 shares of its outstanding common stock.
No effect has been given to common stock equivalents related to stock options
outstanding or restricted stock, as no material dilutive effect would result
from these items.


                                                                           29
<PAGE>   14
MARKET SEGMENT DATA

1995 COMPARED WITH 1994

Sales to the Aerospace market increased $0.6 million, or 1%. Increased sales of
aerospace adhesives were mostly offset by decreased sales of aerospace coatings
in 1995. Operating losses increased $0.7 million in 1995. Lower aerospace
coatings sales volume and increased costs in 1995 due to the consolidation of
the domestic aerospace coatings business and start-up of the new coatings
facility in Waukegan, Illinois, decreased operating results. Partially
offsetting this decrease was increased operating income from aerospace adhesives
principally due to higher sales volume. 

Sales to the Automotive market increased $1.5 million, or 3%. Sales increased
primarily due to increased sales of acoustic materials and nonwoven headliner
materials. Partially offsetting these increases were decreased sales of
automotive coatings. Operating income decreased $3.4 million in 1995 principally
due to decreased gross margins in the acoustic materials business. This decrease
was primarily due to high start-up costs of a new product line in acoustic
materials, in addition to increased cost of raw materials compared with 1994.

Sales to the Electronics market increased $27.1 million, or 17%. Sales of all
products were strong in 1995. Operating income increased $3.8 million, or 25%,
in 1995 primarily due to increased gross margins from higher sales volume,
partially offset by increased raw material costs as well as higher marketing and
administrative costs associated with products in the Electronics market. 

Sales to the Food Packaging market increased $22.8 million, or 9%. Sales
increased primarily due to strong sales of food and beverage can coatings
serving the European market, in addition to higher currency translation rates on
international sales. Operating income decreased $0.2 million in 1995. This
decrease was primarily due to higher raw material costs in both the domestic and
European nonwovens and food and beverage can coatings businesses. Increased
marketing and research and development costs in the food and beverage can
coatings business also had an unfavorable impact on operating income. Partially
offsetting these decreases were increased gross margins on European food and
beverage can coatings primarily due to sales volume increases and higher
currency translation rates on international results. 

Sales to the Medical market increased $48.7 million, or 15%. The effect of the
consolidation of LTI's Japanese subsidiary increased net sales by $4.9 million.
Net of this impact, sales increased 14%. Both LTI and medical nonwoven product
sales were strong. Higher currency translation rates on international sales also
contributed to this increase. Operating income increased $5.8 million, or 16%,
in 1995. Operating income increased at LTI in 1995 primarily due to the
favorable impact of higher unit sales, a favorable product mix, and increased
selling prices. Partially offsetting this increase was lower operating income
from medical nonwovens, which decreased slightly in 1995 compared with 1994
despite strong sales as substantially higher raw material costs, particularly in
wood pulp were not offset by selling price increases. 

Sales of the "Other" category increased $13.5 million, or 10%, primarily due to
stronger European nonwoven wallcover and vacuum bag sales in 1995 and higher
currency translation rates on international sales. Operating income decreased
$0.8 million in 1995. This decrease was primarily due to increases in raw
material costs.

1994 COMPARED WITH 1993

Sales to the Aerospace market increased $3 million, or 7%. Net of acquired
businesses, sales increased 2%. Operating losses decreased $5.4 million in 1994
principally due to the effect of restructuring charges of $5.2 million in 1993.
These 1993 charges were primarily for the consolidation, relocation and
integration of the domestic aerospace coatings business into a world-class
manufacturing facility on the Waukegan, Illinois site. 

Sales to the Automotive market increased $19.8 million, or 51%. The effect of
acquired businesses increased sales by $9.4 million. Net of acquired businesses,
sales increased 27% principally due to increased sales of acoustic materials.
Operating income increased $3.9 million in 1994 primarily attributable to higher
sales volume and improved gross margins in the acoustic materials business. 

Sales to the Electronics market increased $16 million, or 11%. Sales of
electronic encapsulation materials and magnetic materials were strong in 1994.
Operating income increased $5 million, or 48%, primarily due to increased gross
margins from higher sales volume of electronic encapsulation materials and
magnetic materials. Restructuring and environmental charges of $1.9 million
related to 1993 favorably impacted the comparison of operating income in 1994.
Partially offsetting these increases were higher research and development costs
associated with products in the Electronics market. Decreased gross margins from
printed wiring board products attributable to selling price decreases and raw
material cost increases also impacted operating income unfavorably in 1994. 

Sales to the Food Packaging market increased $27.2 million, or 12%. Sales
increased due to strong sales of food and beverage can coatings and nonwoven
materials serving the international markets. Sales volume increases and higher
currency translation rates on international sales more than offset selling price
decreases. Operating income increased $3.3 million, or 11%, in 1994. The
operating income comparison was favorably impacted in 1994 due to restructuring
charges of $2.2 million in 1993. Increased gross margins on international food
and beverage can coatings due to volume increases and higher currency
translation rates favorably impacted operating income in 1994. These increases
were partially offset by selling price decreases and higher research and
development costs for food and beverage can coatings. 

Sales to the Medical market increased $30.9 million, or 11%, primarily due to
strong unit sales at LTI. Operating income in 1994 increased $0.1 million.
Operating income increased at LTI in 1994 primarily due to the favorable impact
of higher unit sales. Offsetting this increase was a decrease in operating
income from medical nonwovens due principally to selling price decreases and raw
material cost increases in the United States. Operating income in 1993 was
reduced by $2 million related to restructuring activities. 

Sales of the "Other" category decreased $9.3 million, or 6%. The effect of
divested businesses decreased sales by $11 million. Net of divested businesses,
sales increased 1%. Operating income decreased $9.2 million in 1994. Lower gas
cost for our cogeneration facility favorably impacted operating income in 1994.
However, in 1993 operating income included pretax gains of $13 million related
to the sales of our coil coatings and pultrusions businesses offset by
restructuring charges of $1.3 million. 

30

<PAGE>   15

<TABLE>
<CAPTION>

MARKET SEGMENT DATA
-------------------
In thousands of dollars                                1995           1994            1993            1992            1991
----------------------------------------------------------------------------------------------------------------------------
<S>                                                <C>             <C>             <C>             <C>             <C>
NET SALES 
Aerospace                                           $   45,387      $ 44,769        $ 41,815        $ 45,998        $ 47,000
Automotive*                                             59,993        58,511          38,702          59,923          51,734
Electronics                                            188,461       161,353         145,359         137,622         118,232
Food Packaging                                         282,183       259,398         232,164         225,493         225,969
Medical                                                364,334       315,616         284,733         288,817         265,233
Other                                                  148,547       135,072         144,339         193,586         229,566
                                                    ------------------------------------------------------------------------
 Consolidated                                       $1,088,905      $974,719        $887,112        $951,439        $937,734
                                                    ========================================================================

Unit Volume and Product Mix Change                           7%           10%              1%              3%             --
Field Sales Force                                          241           229             230             242             434
* Does not include sales of
  D & S Plastics International                      $   89,850     $  81,105       $  69,438       $  49,392       $  39,847
----------------------------------------------------------------------------------------------------------------------------
DEPRECIATION AND AMORTIZATION
Aerospace                                          $   3,373       $   3,479       $   3,414       $   3,524       $   3,299
Automotive                                             3,049           2,943           2,265           2,289           2,300
Electronics                                            4,719           4,627           4,466           4,057           3,706
Food Packaging                                         9,563           9,114           7,160           6,030           5,304
Medical                                               13,449          11,606          10,588           9,389           8,186
Other                                                  9,198           8,741           8,452          10,055          11,051
General Corporate                                        376             413             310             328             249
                                                   -------------------------------------------------------------------------
  Consolidated                                     $  43,727       $  40,923       $  36,655       $  35,672       $  34,095
                                                   =========================================================================
------------------------------------------------------------------------------------------------------------------------------------
RESEARCH AND DEVELOPMENT
Aerospace                                          $   3,973       $   3,742       $   3,474       $   3,480       $   3,458
Automotive                                             2,929           2,656           2,161           2,695           3,951
Electronics                                            6,878           6,547           5,496           5,128           5,015
Food Packaging                                        12,478          10,967           9,898           8,026           7,587
Medical                                               17,147          17,109          17,052          16,511          14,930
Other                                                  5,703           5,277           5,155           6,376           7,115
General Corporate                                        267             346             567
                                                   -------------------------------------------------------------------------
  Consolidated                                     $  49,375       $  46,644       $  43,803       $  42,216       $  42,056
                                                   =========================================================================
Laboratory Staff                                         454             452             439             395             470
----------------------------------------------------------------------------------------------------------------------------
DIVESTITURE, RESTRUCTURING & ENVIRONMENTAL
  (Charge)/Credit
Aerospace                                                                          $  (5,170)      $  (1,853)      $    (899)
Automotive                                                                              (278)           (413)         (2,078)
Electronics                                                                           (1,864)         (3,034)           (476)
Food Packaging                                                                        (2,234)         (1,496)        (11,146)
Medical                                                                               (2,008)         (1,686)         (9,247)
Other                                                                                 11,683          11,199         (22,594)
General Corporate                                                                       (501)           (712)         (1,084)
                                                                                   -----------------------------------------
  Consolidated                                                                     $    (372)      $   2,005       $ (47,524)
                                                                                   =========================================
----------------------------------------------------------------------------------------------------------------------------
CONSOLIDATED OPERATING INCOME (LOSS)

Aerospace                                          $  (1,533)      $    (844)      $  (6,215)      $  (1,469)      $     578
Automotive                                              (444)          2,996            (872)         (1,438)         (5,957)
Electronics                                           19,038          15,248          10,295           8,699           5,188
Food Packaging                                        31,809          32,031          28,765          34,667          27,099
Medical                                               41,979          36,164          36,089          34,306          24,280
Other                                                 15,637          16,411          25,655          29,849         (10,291)
                                                   -------------------------------------------------------------------------
  Consolidated Operating Income                      106,486         102,006          93,717         104,614          40,897

Other Income, net                                      9,993           9,386           8,586           3,351           3,453
Interest Expense                                     (20,931)        (20,509)        (18,756)        (18,799)        (16,800)
General Corporate Expense                            (15,724)        (17,271)        (17,109)        (16,034)        (16,358)
                                                   -------------------------------------------------------------------------
  Consolidated Income before Taxes                 $  79,824       $  73,612       $  66,438       $  73,132       $  11,192
                                                   =========================================================================
----------------------------------------------------------------------------------------------------------------------------
CAPITAL EXPENDITURES

Aerospace                                          $   4,336       $   8,397       $   3,062       $   1,315       $   2,059
Automotive                                             1,017           2,062           1,590           4,778          12,232
Electronics                                            3,364           6,370           7,457           4,280           4,742
Food Packaging                                         3,986           6,239           6,771          13,512          15,868
Medical                                               12,643          16,536          19,081          22,138          14,204
Other                                                  3,549           5,306           6,702           5,613          11,180
General Corporate                                         74             187             121             157           1,464
                                                   -------------------------------------------------------------------------
  Consolidated                                     $  28,969       $  45,097       $  44,784       $  51,793       $  61,749
                                                   =========================================================================
----------------------------------------------------------------------------------------------------------------------------
ASSETS AT YEAR-END

Aerospace                                          $  64,201       $  60,753       $  56,878       $  50,613       $  55,808
Automotive                                            42,769          43,034          38,920          43,979          60,574
Electronics                                          103,571          97,646          87,978          83,628          81,338
Food Packaging                                       191,107         179,927         158,884         107,669         119,207
Medical                                              258,084         235,191         218,129         194,197         178,719
Other                                                137,295         143,350         133,160         155,405         180,325
                                                   -------------------------------------------------------------------------
  Consolidated Operating Assets                      797,027         759,901         693,949         635,491         675,971
General Corporate*                                   137,134         120,708         126,742         146,534         108,500
                                                   -------------------------------------------------------------------------
  Consolidated Assets                                934,161         880,609         820,691         782,025         784,471
  Consolidated Liabilities                          (564,546)       (536,976)       (507,396)       (466,411)       (470,689)
                                                   -------------------------------------------------------------------------
    Net Assets                                     $ 369,615       $ 343,633       $ 313,295       $ 315,614       $ 313,782
                                                   =========================================================================

* Corporate assets consist primarily of cash, securities and investments, which
include the investment in D & S Plastics International of $38,709 in 1995,
$39,435 in 1994, $37,110 in 1993, $35,496 in 1992 and $35,795 in 1991, and, in
addition, corporate assets of Life Technologies, Inc. 

----------------------------------------------------------------------------------------------------------------------------
</TABLE>


                                                                              31


<PAGE>   16
GEOGRAPHIC DATA
---------------
Operations outside the United States continue to be increasingly important to
Dexter giving geographic diversification to sales and earnings. Over the past
five years, profits attributable to operations in countries outside the United
States represented a disproportionately higher percent of the total than sales.

1995 COMPARED WITH 1994

Net sales increased in all geographic areas. In North America, net sales
increased $23.5 million, or 4%. Strong sales increases in North America in the
Medical and Electronic markets were partially offset by decreases in the
Aerospace, Automotive and Food Packaging markets, and in the "Other" category.
Sales outside of North America increased $90.7 million, or 23%. Higher currency
translation rates contributed $31 million, or approximately one-third of the
increase. Net sales increased in all markets in which we operate outside of
North America. Sales to the Food Packaging market and at LTI in the Medical
market were strong in Western Europe. The 34% increase in sales in the Pacific
area was primarily due to increases in the Electronics market and from the
acquisition of a controlling interest in a Japanese subsidiary by LTI in the
Medical market. Net sales outside of North America were 44% of consolidated net
sales in 1995 and 40% in 1994. Export sales increased $5 million to $73 million
and represent 7% of consolidated net sales in 1995.

Operating income increased in Western Europe and the Pacific area and decreased
in North America. In North America, operating income decreased in all markets
except the Electronics market. These decreases in operating income were mainly
due to lower sales volumes in all markets except the Medical market and the
unfavorable impact of higher raw material costs, net of selling price increases.
Operating income outside of North America increased $14.3 million, or 28%. The
increase in Western Europe was principally due to increases in food and beverage
can coatings in the Food Packaging market and at LTI in the Medical market.
Operating income increased in the Pacific area primarily due to increases in the
Electronics market and at LTI in the Medical market. The acquisition of a
controlling interest in a subsidiary by LTI contributed to LTI's increase in the
Pacific area. Operating income outside of North America was 61% of total
operating income in 1995 and 50% in 1994.

Total net assets increased 8%, or $26 million, in 1995. Net assets increased in
all geographic areas. Net assets increased 8% in North America, 5% in Western
Europe, and 23% in the Pacific area. The increase in assets in the Pacific area
was primarily due to the consolidation of LTI's Japanese subsidiary. Currency
translation rates increased assets outside of North America by $9 million. Net
assets outside of North America were 61% of total net assets in 1995 and 1994.

1994 COMPARED WITH 1993

Net sales increased in all geographic areas. In North America, net sales
increased $34.8 million, or 6%. Net sales increased in all markets in North
America but decreased in the "Other" category. The decrease in the "Other"
category was primarily due to divested businesses. The majority of the increase
in North America was due to increased sales in the Automotive, Electronics and
Medical markets. Sales to the Medical market increased principally due to LTI.
Sales outside of North America increased $52.8 million, or 15%. Higher currency
translation rates contributed $10 million to this increase. Net sales increased
in all markets in which we operate outside of North America. The majority of
this increase was due to sales in the Electronics and Food Packaging markets and
at LTI in the Medical market. Net sales outside of North America were 40% of
consolidated net sales in 1994 and 38% in 1993. Export sales increased $8
million to $68 million and represent 7% of consolidated net sales in 1994.

Operating income increased in all geographic areas. In North America, operating
income increased in all markets but decreased in the "Other" category. The
decrease in the "Other" category was primarily due to the effect of businesses
divested in 1993. Operating income outside of North America increased $7.8
million, or 18%, principally due to increases in the Electronics and Food
Packaging markets and higher currency translation rates. Operating income
outside of North America was 50% of total operating income in 1994 and 46% in
1993.

Total net assets increased 10%, or $30.3 million, in 1994. The net asset
decrease in North America was more than offset by increases in Western Europe
and the Pacific area. Corporate assets decreased in North America and increased
in Western Europe principally due to cash and short-term securities. Net assets
increased 17% in Western Europe and 21% in the Pacific area. Currency
translation rates increased net assets outside of North America by $14.8
million. Net assets outside of North America were 61% of total net assets in
1994 compared with 57% in 1993.

32

<PAGE>   17


GEOGRAPHIC DATA
<TABLE>
<CAPTION>
In thousands of dollars                                1995            1994           1993            1992            1991 
-------------------------------------------------------------------------------------------------------------------------------
<S>                                                <C>             <C>             <C>             <C>             <C>       
NET SALES*
North America
  Total Net Sales                                  $  672,386      $  634,230      $  586,868      $  633,987      $  638,100
  Intercompany Sales                                   67,982          53,302          40,731          40,589          36,258
                                                   --------------------------------------------------------------------------
  Net Sales                                        $  604,404      $  580,928      $  546,137      $  593,398      $  601,842
                                                   ==========================================================================
Western Europe
  Total Net Sales                                  $  392,267      $  331,397      $  290,814      $  313,970      $  290,118
  Intercompany Sales                                   11,132          14,513          13,156          16,289          11,036
                                                   --------------------------------------------------------------------------
  Net Sales                                        $  381,135      $  316,884      $  277,658      $  297,681      $  279,082
                                                   ==========================================================================

Pacific Area
  Total Net Sales                                  $  104,719      $   76,907      $   63,317      $   60,360      $   56,810
  Intercompany Sales                                    1,353
                                                   --------------------------------------------------------------------------
  Net Sales                                        $  103,366      $   76,907      $   63,317      $   60,360      $   56,810
                                                   ==========================================================================

Consolidated
  Total Net Sales                                  $1,169,372      $1,042,534      $  940,999      $1,008,317      $  985,028
  Intercompany Sales                                   80,467          67,815          53,887          56,878          47,294
                                                   --------------------------------------------------------------------------
  Net Sales                                        $1,088,905      $  974,719      $  887,112      $  951,439      $  937,734
                                                   ==========================================================================

* Intercompany sales between areas are based on estimated market prices or on
amounts computed to provide profits to each unit. Excluded from net sales is
Dexter's share of the sales of 50% or less owned joint ventures which are
accounted for under the equity or cost methods.
-----------------------------------------------------------------------------------------------------------------------------------
OPERATING INCOME (LOSS)
North America                                      $   43,014      $   51,555      $   50,863      $   57,422      $      (50)
Western Europe                                         54,576          45,155          40,298          44,831          39,081
Pacific Area                                           10,881           6,013           3,080           3,266           3,195
Consolidated, net of
  eliminations                                     $  106,486      $  102,006      $   93,717      $  104,614      $   40,897
                                                   ==========================================================================
------------------------------------------------------------------------------------------------------------------------------
NET ASSETS AT YEAR-END
North America
  Operating Assets                                 $  440,416      $  450,478      $  429,395      $  423,419      $  454,280
  Corporate Assets*                                   103,813          97,579         116,041         135,293          97,337
  Liabilities                                        (400,622)       (415,330)       (411,988)       (373,039)       (372,894)
                                                   --------------------------------------------------------------------------
  Net Assets                                       $  143,607      $  132,727      $  133,448      $  185,673      $  178,723
                                                   ==========================================================================

Western Europe
  Operating Assets                                 $  282,277      $  257,288      $  224,634      $  174,177      $  187,785
  Corporate Assets*                                    30,236          22,476          10,541          10,202          11,086
  Liabilities                                        (115,634)        (92,551)        (74,915)        (73,059)        (81,806)
                                                   --------------------------------------------------------------------------
  Net Assets                                       $  196,879      $  187,213      $  160,260      $  111,320      $  117,065
                                                   ==========================================================================
Pacific Area
  Operating Assets                                 $   74,334      $   52,135      $   39,920      $   37,895      $   33,906
  Corporate Assets*                                     3,085             653             160           1,039              77
  Liabilities                                         (48,290)        (29,095)        (20,493)        (20,313)        (15,989)
                                                   --------------------------------------------------------------------------
  Net Assets                                       $   29,129      $   23,693      $   19,587      $   18,621      $   17,994
                                                   ==========================================================================

Consolidated
  Operating Assets                                 $  797,027      $  759,901      $  693,949      $  635,491      $  675,971
  Corporate Assets*                                   137,134         120,708         126,742         146,534         108,500
  Liabilities                                        (564,546)       (536,976)       (507,396)       (466,411)       (470,689)
                                                   --------------------------------------------------------------------------
  Net Assets                                       $  369,615      $  343,633      $  313,295      $  315,614      $  313,782
                                                   ==========================================================================


* Corporate assets consist primarily of cash, securities and investments, which
include the investment in D & S Plastics International of $38,709 in 1995,
$39,435 in 1994, $37,110 in 1993, $35,496 in 1992 and $35,795 in 1991, and, in
addition, corporate assets of Life Technologies, Inc.
-----------------------------------------------------------------------------------------------------------------------------------

</TABLE>

                                                                              33



<PAGE>   18

LIFE TECHNOLOGIES, INC.
--------------------------------------------------------------------------------
On September 1, 1983, Dexter's GIBCO subsidiary merged with Bethesda Research
Laboratories, Inc. (BRL). The resulting free-standing company was renamed Life
Technologies, Inc. (LTI) and at December 31, 1995 was owned 54% by Dexter, with
the remainder owned by the public. The common stock of LTI is publicly traded on
the over-the-counter market under the Nasdaq symbol LTEK. Since 1983, Dexter's
proportionate ownership of LTI has decreased from 64% in 1983 to 54% due
principally to the effect of the exercise of stock options and the conversion of
LTI subordinated debentures held by parties other than Dexter into LTI common
stock.

LTI is reported as part of the Medical market segment although LTI, as a
publicly owned company, issues its own annual report including audited financial
statements. These statements are shown on this page in condensed form. 

On September 1, 1995, LTI acquired an additional 1% ownership in its Japanese
subsidiary, which resulted in a 51% controlling interest and the consolidation
of the subsidiary's financial results as of the acquisition date. 

Net sales of LTI increased $37 million, or 16%, in 1995. This improvement was
due to a $28.5 million, or 15%, increase in sales of product lines other than
fetal bovine serum (FBS). Higher currency translation rates increased 1995 net
sales by $8.7 million compared with 1994. 

Gross margins for 1995 were 50.1% of net sales compared with 47.3% in 1994.
Gross margins improved in 1995 as LTI consolidated the gross margins of its
Japanese subsidiary. LTI also reported higher gross margins in markets it served
directly in 1995 where these markets were served by distributors for a
substantial portion of 1994. 

Marketing and administrative expenses increased 26% to $86.8 million in 1995 and
represented 31.9% of net sales in 1995 compared with 29.2% of net sales in 1994.
This increase was principally attributable to higher expenses in 1995 as LTI
consolidated its Japanese subsidiary in 1995, a full year of expenses in 1995
for sales offices in Sweden, Taiwan and Australia opened during 1994, and
increased expenses in 1995 for its worldwide information systems implementation.
R&D expenses were $15.9 million in 1995, an increase of 6% over 1994. 

Pretax income increased 22%. Income taxes were provided at a rate of 34.8% in
1995 compared with 36% in 1994. Net income increased 22% to $22.3 million in
1995 from $18.2 million in 1994.

LTI declared quarterly dividends totaling $.20 per share in both 1995 and 1994.

After the deduction of minority interests, LTI contributed $12.1 million to
Dexter's net income, or $.50 per share, in 1995, compared with $9.9 million, or
$.41 per share, in 1994. Dexter's portion of LTI shareholders' equity, per share
of Dexter, increased to $3.42 at December 31, 1995, up from $2.91 at year-end
1994. 

At year-end 1995, LTI had $23.2 million in cash and short-term securities,
$118.8 million in other current assets and $45.3 million of current liabilities.
In 1995, LTI had capital expenditures of $12.3 million and was self funding.
Capital expenditures in 1996 are expected to range between $25 million and $30
million largely due to LTI's corporate R&D center and facilities modernization
program. It is expected that LTI will be self funding in 1996.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
CONTRIBUTION OF LTI TO DEXTER NET INCOME

                                                  Years ended December 31
In thousands of dollars                           -----------------------
(except per share amounts)                          1995            1994
--------------------------------------------------------------------------------
<S>                                              <C>             <C>      
Net income of LTI                                $  22,277       $  18,207
Portion attributable to minority interests          10,213           8,279
                                                 -------------------------
Dexter's portion of net income of LTI            $  12,064       $   9,928
                                                 =========================
Net income per share of Dexter                   $     .50       $     .41
--------------------------------------------------------------------------------
CONDENSED STATEMENT OF INCOME
                                                  Years ended December 31
                                                  -----------------------
In thousands of dollars                             1995           1994
--------------------------------------------------------------------------------
REVENUES
Net sales                                        $ 272,232       $ 235,195
Net royalties                                           67              67
                                                 -------------------------
                                                   272,299         235,262
                                                 -------------------------
EXPENSES
Cost of sales                                      135,784         123,988
Marketing and administrative                        86,821          68,768
Research and development                            15,871          15,000
                                                 -------------------------
                                                   238,476         207,756
                                                 -------------------------
Other income, net                                    1,120           1,119
                                                 -------------------------
INCOME BEFORE INCOME TAXES                          34,943          28,625
Income taxes                                        12,160          10,305
                                                 -------------------------
INCOME BEFORE MINORITY INTERESTS                    22,783          18,320
Minority interests                                     506             113
                                                 -------------------------
NET INCOME                                       $  22,277       $  18,207
                                                 =========================
--------------------------------------------------------------------------------
CONDENSED STATEMENT OF FINANCIAL POSITION
                                                         December 31
                                                         -----------
In thousands of dollars                              1995            1994
--------------------------------------------------------------------------------
ASSETS
Cash and short-term securities                   $  23,201       $  13,246
Other current assets                               118,821          94,322
Property, plant and equipment, net                  51,861          48,043
Investments and other assets                         8,671           9,796
Excess of cost over net assets of
  businesses acquired                                6,190           6,340
                                                 -------------------------
    Total assets                                 $ 208,744       $ 171,747
                                                 =========================

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities                              $  45,261       $  36,313
Other liabilities                                    9,558           5,305
Shareholders' equity                               153,925         130,129
                                                 -------------------------
  Total liabilities and
    shareholders' equity                         $ 208,744       $ 171,747
                                                 =========================
--------------------------------------------------------------------------------
CONTRIBUTION OF LTI TO DEXTER BOOK VALUE

                                                         December 31
In thousands of dollars                                  -----------
(except per share amounts)                          1995             1994
--------------------------------------------------------------------------------
LTI shareholders' equity                         $ 153,925       $ 130,129
Portion attributable to minority interests          71,214          59,210
                                                 -------------------------
Dexter's portion of LTI
shareholders' equity                             $  82,711       $  70,919
                                                 =========================
Book value per share of Dexter stock             $    3.42       $    2.91
--------------------------------------------------------------------------------
CONDENSED STATEMENT OF CASH FLOWS
                                                   Years ended December 31
                                                   -----------------------
In thousands of dollars                             1995            1994
--------------------------------------------------------------------------------
OPERATIONS
Net income                                       $  22,277       $  18,207
Noncash items
  Depreciation and amortization                      7,728           6,508
  Other                                               (474)          1,646
Operating working capital increase                  (8,180)         (5,008)
                                                 -------------------------
                                                    21,351          21,353
                                                 -------------------------
INVESTMENTS
Property, plant and equipment                      (12,279)        (12,533)
Acquisitions and joint ventures                       (825)         (1,287)
Other                                                  (28)             17
                                                 -------------------------
                                                   (13,132)        (13,803)
                                                 -------------------------
FINANCING
Dividends paid                                      (3,007)         (2,993)
Exercise of stock options                            2,990             308
                                                 -------------------------
                                                       (17)         (2,685)
                                                 -------------------------
EFFECT OF TRANSLATION RATE CHANGES ON
  CASH AND SHORT-TERM SECURITIES                      (381)            454
                                                 -------------------------

INCREASE IN CASH AND
  SHORT-TERM SECURITIES                              7,821           5,319

Cash included from consolidation
  of a subsidiary which became
  majority-owned in 1995                             2,134       
                                                 -------------------------

TOTAL INCREASE IN CASH AND
  SHORT-TERM SECURITIES                          $   9,955       $   5,319
                                                 =========================
</TABLE>

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

34

<PAGE>   19

D & S PLASTICS INTERNATIONAL

On March 31, 1990, Dexter and Solvay S.A., of Belgium, completed the formation
of D & S Plastics International, an equally owned joint venture based in Auburn
Hills, Michigan. D & S Plastics is the leading North American supplier of
automotive engineered polyolefin materials. These modified olefins are used for
front and rear bumper facias, ground-effects packages, air bag covers, and many
other exterior and interior automobile components.

D & S Plastics' sales have increased from $81.1 million in 1994 to $89.9 million
in 1995, an increase of 11%. For the year ended December 31, 1995, D & S
Plastics reported a net loss of $1.5 million compared to net income of $4.5
million in 1994. The $6 million decrease in earnings was the result of
significantly higher raw material cost principally related to polypropylene
prices. D & S Plastics' results are not consolidated in Dexter's financial
statements. Dexter accounts for the results of D & S Plastics under the equity
method. Included in Dexter's equity in net income (loss) of affiliates is 50% of
D & S Plastics' results. A condensed statement of financial position for D & S
Plastics International is included in the supplementary table on page 26. During
1995, D & S Plastics had capital expenditures of $9.5 million principally
related to its new manufacturing facility in Texas.

In October 1995, the company announced its intention to sell its 50% equity
interest in D & S Plastics International.

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
CONDENSED STATEMENT OF INCOME
                                                 Years ended December 31
                                                 -----------------------
In thousands of dollars                             1995           1994
--------------------------------------------------------------------------------
<S>                                              <C>             <C>      
Revenues                                         $  89,850       $  81,105

Net (loss) income                                $  (1,452)      $   4,544

Amount included in Dexter's
"Equity in net (loss) income of
affiliates"                                      $    (726)      $   2,272

</TABLE>
--------------------------------------------------------------------------------
ANALYSIS OF FINANCIAL POSITION

WORKING CAPITAL

Working capital, including cash and short-term securities, increased $39.6
million from 1994. Operating working capital increased $47.9 million to $246.1
million at year-end 1995. The current ratio at December 31, 1995 was 2.2 to 1.
The company's target is to have a current ratio of greater than 2 to 1. The
company's liquidity is strong, and ample lines of credit are available to the
company and its subsidiaries. The sum of cash, short-term securities and
accounts receivable exceeded total current liabilities at December 31, 1995. As
of year-end 1995, the company has short-term lines of credit in excess of $100
million of which the Board has authorized borrowing only $50 million at any one
time. At year-end 1995, $13.6 million were borrowed against these lines of
credit. Additionally, there is authorized $50 million in medium-term notes,
which were all unissued at year-end. As of year-end 1995, the company has eight
multi-currency, revolving credit agreements aggregating $50 million. Nothing was
borrowed under these agreements at year-end 1995; however, the funds are
immediately available should the company so desire.
--------------------------------------------------------------------------------
INCREASE/(DECREASE) IN OPERATING WORKING CAPITAL AND WORKING CAPITAL IN 1995
<TABLE>
<CAPTION>
                                                                   Business                       Change in
                                                                 Acquisitions      Currency     Consolidated
                                                     Cash       and Accounting   Translation      Account
In thousands of dollars                            Changes         Accruals         Effects       Balances
------------------------------------------------------------------------------------------------------------
<S>                                               <C>             <C>            <C>             <C>     
Accounts receivable, net                          $ 20,085        $  8,574       $  3,773        $ 32,432
Inventories at FIFO                                 10,441           3,322          2,310          16,073
Prepaid and deferred expenses                        1,343             737             66           2,146
Accounts payable                                    (6,690)           (764)        (2,142)         (9,596)
Accrued liabilities and expenses                     6,333           1,308           (788)          6,853
                                                  -------------------------------------------------------
   Operating working capital                        31,512          13,177          3,219          47,908
                                                  -------------------------------------------------------

Cash                                               (3,480)           2,134             69          (1,277)
Short-term securities                               12,101                           (294)         11,807
LIFO reserve                                        (1,881)                                        (1,881)
Current deferred tax assets                                          4,768                          4,768
Short-term debt                                     (8,825)         (1,228)           261          (9,792)
Other current liabilities and taxes                (10,832)           (953)          (149)        (11,934)
                                                  -------------------------------------------------------
   Working capital                                $ 18,595        $ 17,898       $  3,106        $ 39,599
                                                  =======================================================
---------------------------------------------------------------------------------------------------------
</TABLE>
                                                                             35
<PAGE>   20


CASH AND SHORT-TERM SECURITIES Cash principally comprises in transit amounts and
uncollected funds in the United States and amounts in operating bank accounts in
other countries.

Short-term securities have maturities of less than 90 days when purchased and
represent cash awaiting use in the business, funds available for future
investment, and partial offsets of net nonlocal currency exposures relating to
current accounts payable and accounts receivable. Short-term securities are held
in interest-bearing overnight securities, time deposits, prime commercial paper
and other fixed income investments. The carrying value of short-term securities
approximates fair value because of the short maturity of these instruments. At
December 31, 1995, there were $56 million in short-term securities, of which
$35.6 million were directly available to Dexter and $20.4 million were
maintained separately by Life Technologies, Inc. due to its different
shareholder constituency. All of the short-term securities directly available to
Dexter were held outside the United States, including $20.7 million which was
held by Dexter's captive insurance companies. Of the $20.4 million maintained by
Life Technologies, Inc., $19.7 million was held outside the United States. 

ACCOUNTS RECEIVABLE Gross accounts receivable of $208.9 million at December 31,
1995 are reduced by allowances of $7.5 million. Such allowances were $6.6
million at December 31, 1994 and $6.1 million at December 31, 1993. Currency
translation effects increased net accounts receivable by $3.8 million in 1995.
Included in accounts receivable are non-trade account receivables of $25.8
million in 1995 compared with $18.9 million in 1994 and $15 million in 1993.
These amounts principally comprise tax receivables and amounts due from
affiliates. The collection period for accounts receivable increased to
approximately 59 days at December 31, 1995 from approximately 54 days as of
December 31, 1994 and 50 days as of December 31, 1993. The collection period for
accounts receivable has increased as the company has expanded into new
geographies which have extended terms of credit. 

INVENTORIES Inventories are valued at the lower of cost or market. Inventories
located in the United States represented 47% of total inventories. The LIFO
(last-in, first-out) method was used for determining the cost of 63% of U.S.
inventories in 1995 and 62% in 1994 and 1993. The FIFO (first-in, first-out)
method was used for determining the cost of remaining inventories in the United
States and the 53% of total inventories which were outside the United States.
The reduction in levels of LIFO valued inventories (LIFO liquidation) was not
significant in 1995, 1994 or 1993. Inventories at December 31 were:


<TABLE>
<CAPTION>
In thousands of dollars              1995          1994        1993
---------------------------------------------------------------------------
<S>                                <C>          <C>        <C>      
Materials and supplies             $  60,099    $  58,967  $  59,794
Work-in-process                       17,038       11,319     11,527
Finished goods                       104,606       95,384     80,099
                                   ----------------------------------------
   Total FIFO cost                   181,743      165,670    151,420
LIFO reserve                         (24,709)     (22,828)   (20,597)
                                   ----------------------------------------
                                   $ 157,034    $ 142,842  $ 130,823
                                   ========================================
---------------------------------------------------------------------------
</TABLE>
Before deducting the LIFO reserve, FIFO inventories increased $16.1 million in
1995 to $181.7 million. FIFO inventories at LTI increased $8.4 million including
$3.3 million from the consolidation of its Japanese subsidiary in 1995.
Inventory values at operations outside the U.S. increased approximately $2.3
million as a result of translating to a weakened U.S. dollar.

SHORT-TERM DEBT Short-term borrowings were denominated principally in U.S. and
Singapore dollars, Italian lira, Japanese yen, French francs, Deutsche marks,
and pound sterling and had maturities of three months or less. The company uses
short-term borrowings of less than three-month maturity to partially offset net
nonlocal currency exposures relating to current accounts receivable and accounts
payable. It can be expected that short-term borrowings will continue to be
utilized for this purpose. The $13.6 million short-term borrowings outstanding
at year-end included $1 million of short-term debt of Life Technologies, Inc.
The company had outstanding letters of credit at December 31, 1995 totaling $8.8
million for liabilities already reflected in the Statement of Financial
Position.

<TABLE>
<CAPTION>
In millions of dollars            1995       1994       1993
---------------------------------------------------------------------
<S>                               <C>         <C>       <C>   
Average borrowings                $  8.4      $  4.3    $  4.5
Weighted average month-end
  interest rate                      6.0%        5.7%      3.8%
Maximum month-end borrowings      $ 14.4      $  6.3    $ 22.0
Year-end borrowings               $ 13.6      $  3.8    $ -0-
Year-end average interest rate       6.1%        5.3%       -
---------------------------------------------------------------------
</TABLE>

The company has authorized up to $50 million of commercial paper, none of which
was issued during 1995 and all of which was available for issue at December 31,
1995. Available short-term lines of bank credit are in excess of $100 million.

ACCRUED LIABILITIES AND EXPENSES Accrued liabilities and expenses at December 31
were:
<TABLE>
<CAPTION>
In thousands of dollars                1995       1994        1993
---------------------------------------------------------------------
<S>                                <C>         <C>         <C>    
Salaries, wages and benefits       $17,106     $15,352     $13,892
Pension and profit sharing           9,082      11,192      10,255
Customer rebates and volume
  discounts                          3,551       3,110       1,659
Interest                             3,280       1,462       1,475
Provision for claims and
  warranties                         3,194       3,872       3,570
Taxes, other than income taxes       1,975       1,795       2,059
Royalties                            1,964       1,278         531
Restructuring accruals               1,791       6,294      10,735
Professional services                1,433       1,661       1,592
Deferred income                      1,362       3,837       4,737
Other, principally accruals
  for unbilled obligations           10,299      10,772      9,227
                                    ------------------------------
                                    $55,037     $60,625    $59,732
                                    ==============================
</TABLE>
--------------------------------------------------------------------------------

LEASES The company leases facilities, vehicles, computers and other equipment
under long-term operating leases with varying terms and expiration dates. Some
leases contain renewal provisions, purchase options and escalation clauses.
Aggregate future minimum lease payments under noncancellable operating leases
are as follows (in thousands of dollars):
<TABLE>
                <S>                <C>     
                1996               $  9,347
                1997                  5,695
                1998                  3,634
                1999                  2,620
                2000                  1,677
                Later years          14,182
                                    -------
                                    $37,155
                                    =======
</TABLE>


Total rent expense incurred under noncancellable leases, net of minor sublease
rentals, amounted to $11.1 million in 1995, $10.5 million in 1994 and $10.3
million in 1993. 

The company has no contingent rentals. Obligations under capital leases were not
significant at December 31, 1995, 1994 or 1993.

36
<PAGE>   21
PROPERTY, PLANT AND EQUIPMENT Capital expenditures on the accrual basis were $29
million in 1995, $45.1 million in 1994 and $44.8 million in 1993. Capital
expenditures in 1996 are currently estimated to range between $45 million and
$50 million.

For financial reporting purposes, the company uses the straight-line method of
computing depreciation on plant and equipment. This method charges the cost to
income evenly over the useful lives of the assets, principally 20 to 45 years
for buildings, 16 years for nonwovens related machinery and equipment, and 10 to
15 years for all other machinery and equipment. For tax purposes the company
uses shorter lives and accelerated depreciation methods. Capital investment
incentive grants are recorded as a reduction of the cost of assets, which
spreads the benefits over the lives of the related assets through reduced
depreciation. Management evaluates, on an ongoing basis, the carrying value of
property, plant and equipment and makes a specific provision against the asset
when impairment is identified. Property, plant and equipment is written down
when the asset has become redundant or the remaining book value exceeds its
anticipated future productive asset value. Maintenance and repairs are charged
to operations as incurred and amounted to $17 million in 1995, $15.3 million in
1994 and $14.9 million in 1993. Betterments and major renewals are capitalized.
The cost of assets sold or retired and the related amounts of accumulated
depreciation are eliminated from the accounts, and the resulting gains or losses
are included in income.

The cost and accumulated depreciation of property, plant and equipment at
December 31, were as follows:

<TABLE>
<CAPTION>
In thousands of dollars              1995        1994        1993 
-------------------------------------------------------------------------
<S>                             <C>             <C>           <C>       
Land                            $    19,307     $  18,581     $  17,776 
Buildings and improvements          153,071       143,436       130,658 
Machinery and equipment             457,611       429,416       395,547 
Construction in progress             12,250        16,911        11,931 
                                -----------------------------------------
   Total cost                       642,239       608,344       555,912 
Less accumulated                                            
  depreciation                     (317,036)     (279,409)     (245,958)
                                -----------------------------------------
Property, plant and                                         
  equipment, net                $   325,203     $ 328,935     $ 309,954
                                =======================================

------------------------------------------------------------------------
</TABLE>

                                                            
                                                           
Changes in property, plant and equipment for the past three years were as
follows:

<TABLE>
<CAPTION>
In thousands of dollars              1995        1994        1993 
------------------------------------------------------------------------
<S>                             <C>             <C>           <C>       
January 1                       $   328,935     $ 309,954     $ 298,869 
Capital expenditures                 28,969        45,097        44,784 
Assets of businesses acquired           212           355        10,591 
Write-down of asset values                           (359)       (4,638)
Assets of businesses divested                                   
  or held for sale                                               (3,488)
Depreciation                        (38,246)      (34,857)      (32,038)
Currency effects                      5,333         8,745        (4,126)
                                ----------------------------------------
December 31                     $   325,203     $ 328,935     $ 309,954 
                                ========================================
                                                               
------------------------------------------------------------------------
</TABLE>



PATENTS, TECHNOLOGY, FORMULAS AND COVENANTS
Patents, technology, formulas and covenants not to compete are stated at cost
less accumulated amortization of $18.6 million, $17.2 million and $15 million at
December 31, 1995, 1994 and 1993, respectively. Such items which have been
acquired by purchase or merger are capitalized and amortized on a straight-line
basis over periods ranging from 3 to 15 years. Research and development costs
and any costs associated with internally developed patents, formulas or other
proprietary technology are expensed in the year incurred. 

EXCESS ACQUISITION COST Excess acquisition cost was $74.1 million at year-end
1995 and $74 million at year-end 1994. Excess acquisition cost increased $3.2
million due to currency translation effects. This increase was offset by
amortization of excess acquisition cost. The excess of cost over the net asset
value of businesses acquired (goodwill) prior to 1991 is amortized on a
straight-line basis over 25 to 40 years. Excess acquisition cost of businesses
acquired after 1990 is amortized over periods not exceeding 25 years.
Accumulated amortization amounted to $16.5 million, $12.9 million and $9.7
million at December 31, 1995, 1994 and 1993, respectively. Management evaluates,
on an ongoing basis, the carrying value of excess acquisition cost and makes a
specific provision against the asset when impairment is identified. When a loss
is expected from the proposed sale of a business or product line, a diminution
in the value of the excess of cost over the net asset value of the business
acquired is identified. In the instance of an ongoing business, such a
diminution is recognized when there has been a history of the business'
inability to generate operating income after the amortization of goodwill and in
management's judgment, the business will not recover from this position in the
future. There were no impairment charges in 1995 or 1994. Impairment charges
were $0.6 million in 1993. 

LEGAL PROCEEDINGS The company is involved in various environmental and other
lawsuits and claims, many of which are covered by insurance. At December 31,
1995, $0.3 million of current and $4.1 million of long-term receivables from
third-party insurance companies are included as assets of the company. Equal and
offsetting payables to third parties are included as liabilities of the company.
Estimated amounts for claims which are probable and are not covered by
third-party insurance are properly reflected as liabilities of the company.
While the outcome of these lawsuits and claims cannot be forecast with
certainty, management believes that such matters should not result in any
liability which would have a material adverse effect on the company's financial
position, results of operations, or cash flows.


                                                                             37
<PAGE>   22
POSTRETIREMENT BENEFITS The company has pension (defined benefit) or deferred
profit sharing (defined contribution) plans for substantially all U.S.
employees. Retirement benefits for most employees of international operations
are provided by government-sponsored or insured programs and, in certain
countries, by defined benefit plans.

With respect to its qualified defined benefit pension plans, the company's
policy is to fund amounts as are necessary on an actuarial basis to provide for
benefits in accordance with the requirements of ERISA for domestic plans and in
accordance with local laws and income tax regulations for international plans.
The plans covering domestic employees of the company's Aerospace Materials,
Automotive Materials, Electronic Materials and Packaging Products divisions and
Life Technologies, Inc. provide benefits that are generally based upon the
employee's highest average compensation in any consecutive five-year period in
the ten years before retirement. In addition to the above qualified plans, the
company sponsors an unfunded nonqualified executive supplemental plan for
certain key employees that provides an annual benefit equal to 55% of their
average compensation during the highest 60 consecutive calendar months of a
participant's last ten years, which benefit is then offset by other benefits
payable to the participant.

In computing the company's year-end funded status for domestic plans, discount
rates of 6.5%, 8.5%, and 6.75% were used in 1995, 1994, and 1993, respectively.
The discount rates used in computing the year-end funded status for
international plans ranged from 4% to 9% in 1995, 5.5% to 9.75% in 1994, and
5.5% to 9% in 1993.

In 1995, there was a net periodic pension cost of $4.8 million for all plans
combined, including international plans. Net periodic pension cost was $6.3
million for 1994 and $3.9 million for 1993.
-------------------------------------------------------------------------------

The funded status of the company's plans are as follows:

<TABLE>
<CAPTION>
In thousands of dollars          December 31, 1995                     December 31, 1994               December 31, 1993
------------------------------------------------------------------------------------------------------------------------------------
                                 Plans Where      Plans Where      Plans Where     Plans Where   Plans Where      Plans Where 
                                Assets Exceed     Accumulated     Assets Exceed   Accumulated    Assets Exceed   Accumulated 
                                 Accumulated        Benefits       Accumulated      Benefits     Accumulated       Benefits 
                                   Benefits       Exceed Assets     Benefits      Exceed Assets    Benefits      Exceed Assets 
------------------------------------------------------------------------------------------------------------------------------------
<S>                                 <C>             <C>             <C>             <C>             <C>             <C>     
Actuarial present value
  of benefit obligations
    Vested benefit obligation       $ 63,864        $  7,356        $ 41,589        $  5,512        $ 47,291        $  6,059
    Accumulated benefit
     obligation                     $ 66,497        $  8,768        $ 42,972        $  6,068        $ 49,682        $  6,617
    Projected benefit
     obligation                     $ 99,947        $ 10,743        $ 67,489        $  7,779        $ 80,359        $  8,282
Plan assets at fair value,
  primarily equity securities
  and insurance contracts           $ 83,110        $    999        $ 69,521        $    818        $ 69,107        $    571
                                    ------------------------------------------------------------------------------------------------
Projected benefit obligation
  (in excess of) less than
  plan assets                       $(16,837)       $ (9,744)       $  2,032        $ (6,961)       $(11,252)       $ (7,711)
Unrecognized net loss (gain)          14,811           2,194          (3,091)            836          14,590              69
Unrecognized prior
  service cost                         3,265           1,802           3,501             781           2,299             852
Unamortized net (asset)
  obligation                            (635)            254            (705)            284          (1,356)            354
Adjustment required to
  recognize minimum liability                         (2,732)                           (606)                           (995)
                                    ------------------------------------------------------------------------------------------------
Prepaid pension cost
  (accrued pension liability)       $    604        $ (8,226)       $  1,737        $ (5,666)       $  4,281        $ (7,431)
                                    ================================================================================================

------------------------------------------------------------------------------------------------------------------------------------
</TABLE>




Net periodic pension cost for 1995, 1994 and 1993 included the following
components:

<TABLE>
<CAPTION>
In thousands of dollars                 1995             1994             1993
---------------------------------------------------------------------------------
<S>                                   <C>              <C>              <C>     
Service cost                          $  4,276         $  5,806         $  4,216
Interest cost                            6,429            6,016            5,060
Actual return on assets                (13,678)            (152)          (9,933)
Net amortization and deferral            7,725           (5,343)           4,509
                                      -------------------------------------------
Net periodic pension cost             $  4,752         $  6,327         $  3,852
                                      ===========================================
---------------------------------------------------------------------------------
</TABLE>


Assumptions used in the accounting for pension cost in 1995, 1994, and 1993 for
domestic plans were:


<TABLE>
<CAPTION>
                                        1995             1994             1993
---------------------------------------------------------------------------------
<S>                                        <C>             <C>               <C> 
Discount rate                              8.5%            6.75%             7.5%
Average wage increase                        6%               6%               6%
Expected long-term rate                  
  of return on plan assets                   9%               9%               9%
---------------------------------------------------------------------------------
</TABLE>



Assumptions used in the accounting for pension cost in 1995, 1994, and 1993 for
international plans were:

<TABLE>
<CAPTION>
                                        1995             1994             1993
---------------------------------------------------------------------------------
<S>                                 <C>                 <C>           <C>        
Discount rate                       5.5 - 9.75%         5.5 - 9%      5.5 - 10.5%
Average wage increase                  4.5 - 7%           4 - 7%           4 - 7%
Expected long-term rate
  of return on plan assets               4 - 9%           4 - 9%           4 - 9%
---------------------------------------------------------------------------------
</TABLE>


The discount rate is the estimated rate at which the obligation for pension
benefits could effectively be settled. The method used to develop the estimate
for year-end rates in 1995, 1994 and 1993 in the U.S. was to estimate the rate
at which AA grade industrial and utility bonds would sell over U.S. government
obligations of a duration similar to that of domestic pension plans. Similar
methods were used in other countries.


38


<PAGE>   23
The average wage increase assumption will be reduced from the 6% used in 1995,
1994 and 1993 to 5% in 1996 for computing pension cost for domestic plans. Based
on the last several years and our current expectations, this rate is believed to
be the best estimate of future compensation increases. The average wage increase
to be used in the international plans ranges from 3% to 7% in 1996.

The expected long-term rate of return on plan assets reflects the average rate
of earnings that the company estimates will be generated on the assets of the
plan over the long term. The rate of return on plan assets in the U.S. was 22%
in 1995, -0.5% in 1994, 15.4% in 1993 and averaged 12.8% over the past five-year
period. The 1995 rate of return is not considered indicative of future long-term
returns and, therefore, a long-term rate adjustment was not made. We continue to
believe 9% is appropriate for a 60% equity and 40% debt securities asset mix
over the long term. Rates in other countries are based on expected long-term
rates of return attainable there.

The provisions of SFAS No. 87, Employers' Accounting for Pensions, require the
recognition of an additional minimum liability for each defined benefit plan for
which the accumulated benefit obligation exceeds plan assets. This amount has
been recorded as a long-term liability with an offsetting intangible asset.
Because the asset recognized may not exceed the amount of unrecognized prior
service cost and transition obligation on an individual plan basis, the balance,
net of tax benefits, is reported as a separate reduction of shareholders' equity
at December 31, 1995 for certain domestic nonqualified plans as follows:


<TABLE>
<CAPTION>
In thousands of dollars                            1995
--------------------------------------------------------------------------------
<S>                                                <C>   
Minimum liability adjustment                       $2,052
Intangible asset                                    1,318
                                                   ------
                                                      734
Tax benefit                                           261
                                                   ------
Pension liability adjustment to                   
  shareholders' equity                             $  473
                                                   ======
--------------------------------------------------------------------------------
</TABLE>
                                     
The company sponsors deferred profit sharing plans for substantially all
domestic employees not covered under pension plans. Contributions and cost are
determined based on a percentage of each covered employee's pay and totaled $6.6
million in 1995, $6.5 million in 1994 and $5.8 million in 1993.

In addition to providing pension benefits, certain businesses of Dexter provide
some health care and life insurance benefits for retired employees. Such
benefits and similar benefits for active employees have been either paid
directly or are provided through insurance companies whose premiums are based on
the benefits paid during the year.


The provisions of SFAS No. 106, Employers' Accounting for Postretirement
Benefits Other Than Pensions, were implemented using the immediate recognition
transition option, effective as of January 1, 1993. SFAS No. 106 requires
recognition, during employees' service with the company, of the cost of their
retiree health and life insurance benefits. Upon adoption, the accumulated
postretirement benefit obligation of $24.7 million was charged against earnings
resulting in an after-tax charge of $15.2 million, or $.63 per share. Of the
$24.7 million accumulated benefit, $23.7 million was funded on March 31, 1993
into trusts for the ultimate benefit of retired employees whose medical costs
are covered by those plans. The assets in the trusts established for
postretirement benefits other than pensions amounted to $29.1 million at
December 31, 1995, $23.4 million at December 31, 1994 and $24.4 million at
December 31, 1993 and were invested as follows:

<TABLE>
<CAPTION>
In thousands of dollars                   1995      1994       1993
--------------------------------------------------------------------------------
<S>                                      <C>       <C>        <C>    
Indexed fund                             $12,031   $10,683    $10,483
Equity funds                              10,492     5,496      2,558
Convertible preferred stocks               6,237     4,962      5,331
Preferred stock fund                                 1,814      5,056
Short-term liquid investment            
  funds                                      352       477      1,002
                                         ----------------------------
                                         $29,112   $23,432    $24,430
                                         ============================
--------------------------------------------------------------------------------
</TABLE>

The investment objective of the indexed fund is to track the Standard & Poor's
500 and is long-term in nature. The remaining funds, with the exception of the
short-term liquid investment funds, are also long-term in nature. The combined
results of these funds, which are managed for the company by independent money
managers, are expected to achieve returns in excess of 10% over the long term.

The components of net periodic postretirement benefit (income) cost for the
years ended December 31, 1995, 1994 and 1993 are:

<TABLE>
<CAPTION>
In thousands of dollars                   1995      1994       1993 
--------------------------------------------------------------------------------
<S>                                      <C>       <C>        <C>      
Service cost                             $   666   $   878    $ 1,463  
Interest cost                              1,447     1,488      1,827 
Actual return on assets                   (6,953)      566     (1,163)
Net amortization and deferral              4,005    (3,391)      (615)
                                         ----------------------------
Net periodic postretirement             
  benefit (income) cost                  $  (835)  $  (459)   $ 1,512 
                                         ============================
--------------------------------------------------------------------------------
</TABLE>

The net periodic postretirement benefit income is expected to be $0.5 million in
1996.

The funded status of the plan at December 31, 1995, 1994 and 1993 is:

<TABLE>
<CAPTION>
In thousands of dollars                   1995            1994            1993
--------------------------------------------------------------------------------
<S>                                     <C>             <C>             <C>     
Accumulated postretirement
  benefit obligation
   Retirees and dependents              $  8,103        $  7,905        $  5,909
   Actives fully eligible                  4,469           4,539           7,062
   Actives not yet fully eligible         11,885           7,985          11,076
                                        ----------------------------------------
Total accumulated postretirement
  benefit obligation                      24,457          20,429          24,047
Plan assets at fair value                 29,112          23,432          24,430
                                        ----------------------------------------
Accumulated postretirement
  benefit obligation less than
   plan assets                             4,655           3,003             383
Unrecognized net (gain) loss                 (90)          1,111           3,688
Unrecognized prior service
  effect from plan amendment              (4,838)         (5,375)         (5,913)
                                        ----------------------------------------
Accrued postretirement benefit          $   (273)       $ (1,261)       $ (1,842)
                                        ========================================
--------------------------------------------------------------------------------
</TABLE>


The discount rates used in determining the accumulated postretirement benefit
obligation were 6.5% at December 31, 1995, 8.5% at December 31, 1994 and 6.75%
at December 31, 1993. The assumed health care cost trend rate used in measuring
the accumulated postretirement benefit obligation was 10.5% in 1995, declining
gradually to 5% in 2005 and remaining level thereafter. If the health care cost
trend rate assumptions were increased by 1%, the accumulated postretirement
benefit obligation as of December 31, 1995 would be increased by $1 million,
while the aggregate of the service and interest cost components of the net
periodic postretirement benefit cost for 1995 would be increased by $0.1
million. As with pension benefits, the assumptions utilized in these
calculations are periodically reviewed and adjusted if deemed appropriate.

The company adopted SFAS No. 112, Employers' Accounting for Postemployment
Benefits, as of January 1, 1993. There was no material impact on the financial
results of the company. 

                                                                            39

<PAGE>   24
LONG-TERM DEBT Long-term debt at December 31, 1995 consisted of
promissory notes, sinking fund debentures and industrial development bonds.

In 1995, LTI increased its ownership in its Japanese subsidiary to 51% and
therefore consolidated the subsidiary's financial statements, including its
long-term debt. LTI's long-term debt consists of two yen denominated promissory
notes totaling 250 million yen with interest rates ranging from 2.25% to 4.5%.
In 1996, 100 million yen is due, and 30 million yen per year is due from 1997
through 2001. 

In November 1993, Dexter privately placed with The Prudential
Insurance Company of America, $35 million, 20-year senior unsecured notes at a
rate of 6.21% due in 2013. Required prepayments began in 1994 and are scheduled
to continue with installments of $1.75 million per year through the year 2013.
In December 1993, Dexter privately placed with The Prudential Insurance Company
of America, the equivalent of $15 million, 15-year senior unsecured notes
denominated in Swiss francs at a rate of 4.86% due in 2008. Required prepayments
began in 1994 and are scheduled to continue with installments of Swiss franc 2.2
million per year through the year 1997. The installments decrease to Swiss franc
1.5 million from 1998 through the year 2004 and decrease further to Swiss franc
0.8 million from 2005 through the year 2008. Also in 1993, the company
refinanced 250 million yen debt and borrowed an additional 100 million yen at an
all-in-rate of 2.665%. The borrowing of 350 million yen (equivalent to
approximately $3.5 million) is scheduled to mature in 1996. 

In November 1991, Dexter privately placed with The Prudential Insurance Company
of America $50 million, 20-year senior unsecured notes at a rate of 8.96% due in
2011. Required prepayments are scheduled to begin in 1998 in installments of
$2.5 million per year through the year 2000. The installments increase to $3.5
million per year from 2001-2010, with a final lump sum payment of $7.5 million
due at maturity. 

In July 1990, Dexter privately placed with The Prudential Insurance Company of
America $75 million, 20-year senior unsecured notes at a rate of 9.72% due in 
2010. The notes carry a sinking fund beginning in 1996 to retire the issue in 
equal installments of $5 million per year. 

In December 1986, the company sold publicly $50 million, 9.25% sinking fund 
debentures due in 2016. The sinking fund payments commence in 1997 and are 
designed to retire 95% of the debt prior to maturity. 

The company has $50 million of authorized and unissued medium-term notes. 

Multi-currency, revolving credit agreements maintained with eight banks 
aggregate another $50 million. This revolving credit is for a three-year 
evergreen term and carries a commitment fee of 0.125% per annum on the 
unborrowed portion. At December 31, 1995 there were no borrowings under the 
revolving credit agreements. 

Long-term debt represented 36.9% of total capital at December 31, 1995. The 
weighted average interest rate of long-term debt outstanding at 
December 31, 1995 was 8.45%. 

Certain long-term debt agreements include provisions that restrict the amount of
dividend increases if consolidated equity falls below $175 million. Consolidated
equity at December 31, 1995 was $370 million. There are also provisions placing
limits on the amount of additional debt the company may incur without amendment
of the agreements. At December 31, 1995 there is approximately $169 million of
additional debt allowable under these terms. 

Life Technologies, Inc. has guaranteed approximately $0.1 million of bank loans
to others. 

At December 31, 1995 and 1994 the fair value of net long-term debt
was $231 million and $230 million, respectively, compared with the carrying
value of $216 million and $225 million, respectively. The fair value of
long-term debt is based on quoted market prices for similar issues or on the
current rates offered to the company for debt of the same remaining maturities.
In 1995, the fair value of long-term debt exceeds the carrying value by $15
million due to the net reduction in interest rates subsequent to the issuance of
the long-term debt and the consequent increase in fair value. The company is
only obligated to repay the amounts reflected in the carrying value of this
debt.

--------------------------------------------------------------------------------
DEBT OUTSTANDING

<TABLE>
<CAPTION>
                                                  December 31
                                   ---------------------------------------------
In thousands of dollars              1995             1994             1993 
--------------------------------------------------------------------------------
<S>                                <C>              <C>              <C>      
Promissory notes                   $ 177,437        $ 176,773        $ 177,829
Sinking fund debentures               50,000           50,000           50,000
Industrial development bonds           2,050            2,700            3,300
                                   ---------------------------------------------
                                     229,487          229,473          231,129
Less:
Payments due within one year         (13,648)          (4,071)          (3,822)
                                   ---------------------------------------------
Net long-term debt                 $ 215,839        $ 225,402        $ 227,307
                                   =============================================
</TABLE>


--------------------------------------------------------------------------------
DEBT MATURITIES BY CURRENCY AND TYPE
Amounts in thousands

<TABLE>
<CAPTION>
                                                      Multi-currency Promissory Notes
                                           ------------------------------------------------------
                Industrial      Sinking                                                   Total        Total         Weighted
               Development       Fund                         Swiss      Japanese      U.S. Dollar   U.S. Dollar      Average
                  Bonds       Debentures     U.S. Dollar      Franc         Yen        Equivalent    Equivalent   Interest Rate
--------------------------------------------------------------------------------------------------------------------------------
<S>            <C>             <C>        <C>             <C>          <C>             <C>           <C>                <C>
1996              $  650                  $     6,756     SF  2,180      Y450,000      $   12,998    $  13,648          6.15%
1997                 700       $  2,500         6,753         2,180        30,000           8,933       12,133          8.03 
1998                 500          2,500         9,250         1,454        30,000          10,801       13,801          8.36 
1999                 200          2,500         9,250         1,454        30,000          10,801       13,501          8.42 
2000                              2,500         9,250         1,454        30,000          10,801       13,301          8.45 
2001                              2,500        10,250         1,454        30,000          11,801       14,301          8.49 
2002                              2,500        10,250         1,454                        11,511       14,011          8.57 
2003                              2,500        10,250         1,454                        11,511       14,011          8.57 
2004                              2,500        10,250         1,454                        11,511       14,011          8.57 
2005                              2,500        10,250           727                        10,880       13,380          8.75 
2006-2016                        27,500        64,000         2,181                        65,889       93,389          8.76 
                 ---------------------------------------------------------------------------------------------
Total             $2,050       $ 50,000   $   156,509     SF 17,446      Y600,000      $  177,437    $ 229,487          8.45%
                 ===============================================================================================================
                                                                                       
Rates of                                                                               
Interest     5.70 - 6.50%          9.25%  6.21 - 9.72%         4.86%  2.25 - 4.50%  
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>


40

<PAGE>   25
ENVIRONMENTAL LIABILITIES Environmental expenditures attributed to ongoing
operations of the company are expensed or capitalized as appropriate.
Environmental expenditures attributed to previously owned properties and third
party off-site facilities are expensed. Liabilities for expenses related to
environmental assessments, site remediation and other response activities are
expensed and recorded when incurrence of the liability is probable and the costs
can be reasonably estimated. Generally, the incurrence of such liability is
deemed probable when an environmental condition for which the company is likely
to be legally responsible is determined to exist. Probable expenses are
estimated, on an ongoing basis, as facts become available which indicate the
scope of the condition to be addressed and the likely response measures for
addressing it. Due to such factors as the wide discretion of regulatory
authorities regarding cleanup levels and uncertain allocation of liability at
multiple party sites, estimates made prior to approval of a formal plan of
action represent management's best judgment as to estimates of reasonably
foreseeable expenses based upon comparison to similar activities at other sites.
Environmental reserves at December 31, 1995, with respect to 19 sites, were
$17.1 million, including current reserves of $1.4 million, which are expected to
be spent in 1996, and long-term reserves of $15.7 million. Such reserves, which
are not discounted, were decreased during 1995 by expenditures of $1.1 million.
Additionally, an estimated $2.7 million in 1995, $4.7 million in 1994, and $5.6
million in 1993 of claims payable by third-party insurance companies were
included in the reserve at year-end. The related receivables from insurance
companies of $2.7 million, $4.7 million, and $5.6 million were included as
assets of the company at year-end 1995, 1994, and 1993, respectively.
Environmental reserves at December 31, 1994 were $20.3 million and at year-end
1993 were $22.8 million.

Dexter Environmental Assurance, Ltd. (DEAL), a wholly owned Bermuda company was
established in 1993. In December 1993, a portfolio of environmental reserves
totaling $5.9 million was transferred into DEAL to insure all wholly owned
domestic operations of Dexter, other than exposures at Windsor Locks,
Connecticut, against environmental liabilities arising from occurrences prior to
January 1, 1994. In November 1994, a second portfolio of environmental reserves
totaling $5 million was transferred into DEAL. With the second transfer, the
coverage period was expanded to include occurrences after December 31, 1993 and
prior to January 1, 1995 for all wholly owned domestic operations of Dexter. In
1995 this coverage period was expanded to extend through December 31, 1995.

MINORITY INTERESTS Minority interests increased by $13.9 million in 1995 to
$76.4 million. At year-end 1994, minority interests were $62.5 million, an
increase of $10.4 million from 1993. The increase in 1995 was due principally to
$10.2 million of net income attributable to the minority interest shareholders
of Life Technologies, Inc., Dexter's 54%-owned subsidiary, and a $2.7 million
increase due to the exercise of stock options at LTI. Minority interests
increased $1.9 million as a result of an additional investment in a Japanese
subsidiary made by LTI which increased their ownership by 1% to a 51%
controlling interest. Somewhat offsetting these increases were quarterly cash
dividends paid by LTI to minority interest shareholders of $1.4 million. The
increase in 1994 was principally due to $8.3 million of net income attributable
to the minority interest shareholders of LTI and currency translation effects of
$2.3 million. This increase in minority interests was somewhat offset by
quarterly cash dividends paid by LTI to minority interest shareholders of $1.4
million. Minority interest in LTI's equity represented $71.2 million and $59.2
million at December 31, 1995 and 1994, respectively. 

SHAREHOLDERS' EQUITY Shareholders' equity increased by $26 million in 1995 to
$369.6 million representing a book value of $15.26 per share. Net income of
$40.6 million and a currency translation impact of $9 million resulting from the
weakening of the U.S. dollar increased shareholders' equity in 1995. The
exercise of stock options along with the impact of restricted stock awards added
$1.2 million to shareholders' equity in 1995. Shareholders' equity also
increased due to the reduction of $1.3 million in unrealized losses from the
company's available-for-sale securities during the period ended December 31,
1995. Offsetting these increases was a reduction due to dividends declared of
$21.4 million. Included in shareholders' equity at December 31, 1995 is a $0.5
million reduction related to recognition of prior service cost for certain of
the company's nonqualified plans. 

In 1990, the Board of Directors authorized a repurchase of up to 1,000,000
shares of the company's outstanding common stock. In 1995, shareholders' equity
was reduced $4.2 million as the company purchased 170,900 shares of its
outstanding common stock at an average cost of $24.56 per share. There were no
purchases under the 1990 authorization during 1994 and 1993. At the end of 1995,
there were 763,782 shares held in treasury compared with 634,403 shares at the
end of 1994 and 643,578 shares at the end of 1993. 

CURRENCY EXCHANGE EFFECTS Assets and liabilities of those operations whose
functional currency is other than the U.S. dollar are translated at end of
period currency exchange rates and fluctuations due to changes in exchange rates
are accounted for as a separate component of shareholders' equity, "Currency
translation effects". Results of operations are translated at average currency
exchange rates during the period. 

Currency translation effects increased shareholders' equity by $9 million
including $9.3 million of translation effects less a $0.3 million related tax
effect. This net increase was the result of the U.S. dollar weakening against
currencies of countries in which the company operates. Currency translation
effects increased shareholders' equity by $14.8 million in 1994, of which $14.2
million was from translation effects and $0.6 million was from a related tax
effect. Currency translation effects decreased shareholders' equity by $5.8
million in 1993, of which $5.7 million was from translation effects and $0.1
million was from a related tax effect. 

The company utilizes forward exchange contracts to hedge nonlocal currency
transactions and commitments. Gains and losses on forward exchange contracts
that hedge specific commitments are deferred and recognized in income in the
same period as the hedged transaction. Such deferred unrealized gains and losses
at December 31, 1995, 1994 and 1993 were not significant. Gains and losses on
forward contracts that do not hedge an identifiable commitment are included in
income as the gain or loss arises. Forward exchange contracts outstanding at
year-end 1995 were short-term in nature and related to nonlocal currency
transactions of the company's European and Asian operations. The market risk
associated with forward exchange contracts is caused 


                                                                           41
<PAGE>   26
by fluctuations in exchange rates subsequent to entering into the forward
exchange contracts. At December 31, 1995, 1994 and 1993, the company, excluding
Life Technologies, Inc., had forward exchange contracts outstanding for the
purchase and sale of U.S. dollars, Japanese yen, French francs, pound sterling,
Italian lira, Deutsche marks and Spanish peseta. The equivalent U.S. dollar
purchase amount was $0.1 million as of December 31, 1993. There were no purchase
amounts outstanding as of December 31, 1995 and 1994. The equivalent U.S. dollar
sale amounts were $7.4 million, $4.6 million and $2.2 million as of December 31,
1995, 1994 and 1993, respectively. In addition, Life Technologies, Inc. had
forward exchange contracts outstanding for the purchase and sale of U.S.
dollars, Dutch guilders, Belgian francs, Swiss francs, Deutsche marks, pound
sterling, Japanese yen and French francs. The equivalent U.S. dollar purchase
amounts were $10.3 million and $2.1 million as of December 31, 1995 and 1994.
There were no purchase amounts outstanding as of December 31, 1993. The
equivalent U.S. dollar sale amounts were $12.9 million and $2.1 million as of
December 31, 1995 and 1993, respectively. There were no sale amounts outstanding
as of December 31, 1994. 

The company had short-term borrowings at December 31, 1995 in the amount of $4.8
million relating to nonlocal currency transaction exposure management. Currency
gains and losses realized on transactions were not significant in 1995, 1994 or
1993. 

In December 1993, the company issued Swiss franc 15-year long-term notes
for approximately Swiss franc 22 million and Japanese yen three-year notes in
the amount of Japanese yen 350 million, in each case reducing net asset
exposures in those currencies. At December 31, 1995, the company's net asset
positions exposed to currency fluctuations, as adjusted by long-term borrowings
and forward exchange contracts and expressed in local currencies and U.S. dollar
equivalents, are shown in the following table. At year-end 1995, the equivalent
of $196 million was exposed to currency fluctuations compared with $189 million
at the end of 1994.


<TABLE>
<CAPTION>
                                         Net Asset Positions
                                   ----------------------------
                                       Local              U.S.
Amounts in thousands                Currency           Dollars
---------------------------------------------------------------
<S>                                <C>               <C>      
Pound sterling                        39,220         $  60,909
French franc                         144,246            29,412
Swiss franc                           31,601            27,398
Swedish krona                        167,137            25,071
Deutsche mark                         15,080            10,496
Japanese yen                         849,796             8,217
Dutch guilder                         12,802             7,963
Singapore dollar                      10,809             7,653
New Zealand dollar                    10,011             6,537
Hong Kong dollar                      26,545             3,424
Belgian franc                         63,349             2,154
Italian lira                       3,013,701             1,899
Mexican peso                          11,438             1,487
Canadian dollar                        1,987             1,456
Danish krona                           3,797               685
Taiwanese dollar                      16,648               609
Venezuelan bolivar                   103,548               311
Austrian schilling                       375                37
                                                      --------
  Total                                               $195,718
                                                      ========
---------------------------------------------------------------
</TABLE>

PREFERRED STOCK The company has the following classes of preferred stock,
without par value, as of December 31, 1995:

<TABLE>
<CAPTION>
     CLASS                         AUTHORIZED AND UNISSUED
<S>                                    <C>           
 Preferred Stock                       150,000 shares
 Preferred Stock, Class I              500,000 shares
 Preferred Stock, Class II             500,000 shares
 Preferred Stock, Series A             250,000 shares
</TABLE>



PREFERRED STOCK, SERIES A - PURCHASE RIGHTS In October 1986, the company issued
one preferred stock purchase right for each share of common stock outstanding at
November 17, 1986. 

The preferred stock purchase right is designed to assure that
all shareholders receive fair and equal treatment and full value in the event of
a takeover attempt which is not approved by the Board of Directors. Each right
will entitle the holder to acquire one two-hundredth of a share of newly created
Series A Preferred Stock at an exercise price of $60 per purchase right. The
rights will trade with the common stock and will not be exercisable or
transferable apart from the common stock until 10 days after someone acquires or
makes a tender offer for 20% or more of the common stock. The rights plan also
provides that if anyone becomes the beneficial owner of 20% or more of Dexter's
outstanding common stock, every other holder of a right will then be entitled to
receive, upon exercise, shares of Dexter common stock having a value of two
times the exercise price. 

The rights, which do not have any voting privileges, expire on November 17, 1996
and are redeemable by the company at $.05 per right under certain circumstances.

The company has authorized 250,000 shares of Series A Preferred Stock for
issuance upon exercise of the rights.

STOCK PLAN

1994 LONG-TERM INCENTIVE PLAN In 1994, Dexter established a long-term incentive
plan for certain key management personnel of the company. The aggregate number
of shares of the company's common stock that may be awarded under the 1994
Long-term Incentive Plan is 1,200,000 shares. During 1995 and 1994 the company
awarded 76,500 shares and 64,250 shares of restricted stock, respectively.
During 1995, 1,863 awards were earned and distributed and 700 awards were
cancelled. At December 31, 1995, total restricted stock awards of 138,187 were
outstanding. Participants are granted restricted stock awards at no cost to the
employee. As of the grant date, participants have the rights of shareholders,
including the right to receive any cash dividends and the right to vote the
shares. These stock awards are subject to forfeiture provisions including the
lapse of time and achievement of certain performance targets and have
restrictions limiting the sale or transfer of shares during the restriction
periods defined in the plan. The expense relating to this plan is amortized over
the restriction period. This expense was $0.4 million in 1995 and 1994. 

SFAS No. 123, Accounting for Stock-Based Compensation, was issued in October
1995 and is effective for 1996. The company is currently evaluating the
provisions contained in SFAS No. 123 and will adopt the standard in 1996.

42

<PAGE>   27
STOCK OPTION PLANS

1979 STOCK OPTION PLAN AND DATA  The Dexter Corporation 1979 Stock Option Plan
permitted the granting of options to purchase a total of 999,999 shares
(adjusted for stock splits) of common stock at prices not less than the fair
market value of the shares on the date of grant. Such options may be
accompanied by stock appreciation rights, which are also issued at fair market
value, for up to half the number of shares under option. Options and stock
appreciation rights generally become exercisable at the rate of 20% of the
shares each year starting two years after the date of grant. The exercise price
may be satisfied by surrendering company stock with a like market value. The
plan, as amended, permits no future granting of options under the 1979 Stock
Option Plan.

<TABLE>
<CAPTION>

                                                                     December 31
                                          -------------------------------------------------------     
                                                     1995                1994                1993
                                          -------------------------------------------------------
                                                                  Number of Shares
                                          -------------------------------------------------------
<S>                                              <C>                <C>                 <C>
Outstanding at beginning of year                   81,150              88,266             108,412
Exercised                                         (20,975)             (7,116)            (20,146)
Expired or cancelled                                 (600)  
                                          ------------------------------------------------------- 
Outstanding at end of year                         59,575              81,150              88,266

Exercisable options                                59,575              81,150              88,266
<CAPTION>
                                          ------------------------------------------------------- 
                                                                  Dollars per Share
                                          ------------------------------------------------------- 
<S>                                       <C>                 <C>                 <C>
Option price ranges:
Beginning of year                         $14.25 - $23.75     $14.25 - $23.75     $14.25 - $23.75
Exercised                                 $14.25 - $23.75     $14.25 - $14.83     $14.83 - $20.83
Expired or cancelled                               $23.75
End of year                               $20.83 - $23.75     $14.25 - $23.75     $14.25 - $23.75
------------------------------------------------------------------------------------------------- 
</TABLE>

1987 INTERIM STOCK OPTION PLAN AND DATA  The 1987 Interim Stock Option Plan is
intended to be a continuation and extension of The Dexter Corporation 1979
Stock Option Plan with similar terms and conditions, and, as such, stock
appreciation rights may accompany the options as in the 1979 plan. The
aggregate number of shares of common stock permitted to be issued under the
plan was 75,000. The 1987 Stock Option Plan consists of one grant which was
issued in 1987 at a price of $23.75. The plan, as amended, permits no future
granting of options under the 1987 Interim Stock Option Plan.

<TABLE>
<CAPTION>

                                                                     December 31
                                          -------------------------------------------------------     
                                                     1995                1994                1993
                                          -------------------------------------------------------
                                                                  Number of Shares
                                          -------------------------------------------------------
<S>                                              <C>                  <C>                <C>
Outstanding at beginning of year                   16,000              16,000              17,010
Exercised                                          (1,450)                                   (280)
Expired or cancelled                               (1,200)                                   (730)
                                          ------------------------------------------------------- 
Outstanding at end of year                         13,350              16,000              16,000

Exercisable options                                13,350              16,000              16,000
------------------------------------------------------------------------------------------------- 
</TABLE>

1988 STOCK OPTION PLAN AND DATA  The 1988 Stock Option Plan provides for
granting of incentive and nonqualified stock options to purchase up to
1,000,000 shares of common stock. No stock appreciation rights may be granted.
The option price shall not be less than 100% of the fair market value on the
date of grant for incentive stock options and not less than 80% of the market
value on the date of grant for nonqualified options. Options generally become
exercisable at the rate of 33 1/3% of the shares each year starting one year
after the date of grant. There have been no nonqualified options issued under
the plan to date; therefore, no charges against income have been made.

<TABLE>
<CAPTION>

                                                                     December 31
                                          -------------------------------------------------------     
                                                     1995                1994                1993
                                          -------------------------------------------------------
                                                                  Number of Shares
                                          -------------------------------------------------------
<S>                                              <C>               <C>                  <C>
Outstanding at beginning of year                  738,500             630,144             514,846
Granted                                            31,500             157,095             146,500
Exercised                                         (19,566)             (1,718)            (12,165)
Expired or cancelled                              (59,912)            (47,021)            (19,037)
                                          ------------------------------------------------------- 
Outstanding at end of year                        690,522             738,500             630,144

Exercisable options                               535,584             466,820             359,932

Shares available for future grant                 214,774             186,362             296,436
<CAPTION>
                                          ------------------------------------------------------- 
                                                                  Dollars per Share
                                          ------------------------------------------------------- 
<S>                                       <C>                 <C>                 <C>
Option price ranges:
Beginning of year                         $20.88 - $29.06     $20.88 - $29.06     $20.88 - $29.06
Granted                                   $22.63 - $23.88     $24.13 - $25.50              $24.75
Exercised                                 $20.88 - $25.94     $20.88 - $21.63     $20.88 - $21.63
Expired or cancelled                      $20.88 - $29.06     $20.88 - $29.06     $20.88 - $29.06
End of year                               $20.88 - $29.06     $20.88 - $29.06     $20.88 - $29.06
------------------------------------------------------------------------------------------------- 
</TABLE>


                                                                              43
<PAGE>   28
DIVISION AND SUBSIDIARY HEADQUARTERS

DEXTER AEROSPACE MATERIALS
2850 Willow Pass Road
Pittsburg, CA  94565-3299
(510) 458-8000
Jeffrey W. McClelland
Division President

DEXTER ELECTRONIC MATERIALS
15051 East Don Julian Road
Industry, CA  91746-3398
(818) 968-6511
Ronald C. Benham
Senior Division President

DEXTER MAGNETIC MATERIALS
48460 Kato Road
Fremont, CA  94538-7337
(510) 656-5700
David Woodhead
Division President

DEXTER NONWOVENS
Two Elm Street
Windsor Locks, CT  06096-2335
(860) 654-8300
R. Barry Gettins, Ph.D.
Senior Division President

DEXTER PACKAGING PRODUCTS
East Water Street
Waukegan, IL  60085-5652
(847) 623-4200
T. Daniel Clark
Senior Division President

DEXTER S.A.
B.P. 51
14 rue Chanay
71700 Tournus, France
33-85-404545
Gerard R. Mazure
Directeur General

LIFE TECHNOLOGIES, INC.
(majority owned)
8717 Grovemont Circle
P.O. Box 6009
Gaithersburg, MD  20884-9980
(301) 840-8000
J. Stark Thompson, Ph.D.
President and Chief Executive Officer

D & S PLASTICS INTERNATIONAL
(equally owned joint venture with Solvay S.A.)
1200 Harmon Road
Auburn Hills, MI  48326-1550
(810) 391-9500
David G. Gordon
President

SHAREHOLDER/INVESTOR INFORMATION

THE DEXTER CORPORATION
One Elm Street
Windsor Locks, CT 06096-2334
(860) 292-7675
(860) 292-7673 Facsimile

STOCK EXCHANGE
Listing: New York Stock Exchange
Stock Symbol: DEX

REGISTRAR
Chemical Mellon Shareholder
   Services L.L.C.
Ridgefield Park, New Jersey

TRANSFER AGENT
Chemical Mellon Shareholder
   Services L.L.C.
Ridgefield Park, New Jersey and
New York, New York

INVESTOR RELATIONS
Kathleen Burdett
Vice President and
Chief Financial Officer
(860) 292-7620
(860) 292-7669 Facsimile

John D. Thompson
Senior Vice President,
Strategic and
Business Development
(860) 292-7640
(860) 292-7669 Facsimile

CORPORATE COMMUNICATIONS/
MEDIA CONTACT
Ellen C. Miles
Corporate Communications Manager
(860) 292-7686
(860) 292-7627 Facsimile

NOTICE OF ANNUAL MEETING
You are cordially invited to attend the annual meeting of shareholders beginning
at 10:00 a.m., Thursday, April 25, 1996, at the Old State House, 800 Main
Street, Hartford, Connecticut.

NOTICE OF FORM 10-K ANNUAL REPORT
The Form 10-K Annual Report of The Dexter Corporation filed with the Securities
and Exchange Commission, as well as the Form 10-K Annual Report of Life
Technologies, Inc., are available without charge after March 31 of each year to
shareholders and prospective investors. Please contact the Corporate
Communications Department in Windsor Locks, Connecticut at (860) 292-7615.

SHAREHOLDERS' STOCK SAVINGS PLAN/INQUIRIES
Dexter shareholders can reinvest their dividends automatically in additional
shares of Dexter common stock at the market price. Participants can also invest
up to an additional $3,000 in Dexter shares each quarter through this service.

Also, if you have any questions concerning your account as a shareholder, such
as name and address changes, inquiries regarding dividend checks, stock
certificates, or if you need tax information regarding your account, please
contact:

Chemical Mellon Shareholder Services L.L.C.
85 Challenger Road
Ridgefield Park, NJ 07660
(800) 288-9541

TDD SERVICE AVAILABLE
Dexter shareholders with hearing or speech disabilities can get information
about their accounts through TDD services offered by Chemical Mellon Shareholder
Services L.L.C. at (800) 231-5469.





             The entire annual report is printed on recycled paper.