<PAGE>
<PAGE>
===============================================================================
 
                                   FORM 10-Q
 
                      SECURITIES AND EXCHANGE COMMISSION
 
                            WASHINGTON, D. C. 20549
 
       (MARK ONE)
          [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934

               FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998
 
                                      OR
 
         [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934
 
COMMISSION FILE NUMBER 001-13255
                       ---------
 
                                 SOLUTIA INC.
                                 ------------ 
            (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
 

           DELAWARE                                   43-1781797
           --------                                   ----------
(STATE OR OTHER JURISDICTION OF          (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
 
10300 OLIVE BOULEVARD, P.O. BOX 66760, ST. LOUIS, MISSOURI       63166-6760
----------------------------------------------------------       ----------
       (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                  (ZIP CODE)
 
                                (314) 674-1000
                                --------------
             (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
 
    INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS TO
BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING TWELVE MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS
REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS. YES  X  NO 
                                       ---    ---

    INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES
OF COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE.
 

                                                     OUTSTANDING AT
                     CLASS                         SEPTEMBER 30, 1998
                     -----                         ------------------

         COMMON STOCK, $0.01 PAR VALUE             114,610,654 SHARES
         -----------------------------             ------------------
 
===============================================================================
 


                              <PAGE>
<PAGE>

                         PART I. FINANCIAL INFORMATION
 
ITEM 1. FINANCIAL STATEMENTS
 
<TABLE>
                                 SOLUTIA INC.
 
                       STATEMENT OF CONSOLIDATED INCOME
                    (DOLLARS IN MILLIONS, EXCEPT PER SHARE)
 

<CAPTION>
                                                                               THREE MONTHS           NINE MONTHS
                                                                                   ENDED                 ENDED
                                                                               SEPTEMBER 30,         SEPTEMBER 30,
                                                                             ----------------      -----------------
                                                                              1998      1997        1998       1997
                                                                             ------    ------      ------     ------
<S>                                                                           <C>       <C>        <C>        <C>
NET SALES................................................................     $ 703     $ 749      $2,168     $2,238
Cost of Goods Sold.......................................................       515       576       1,587      1,700
                                                                              -----     -----      ------     ------
GROSS PROFIT.............................................................       188       173         581        538
Marketing Expenses.......................................................        35        32         109        103
Administrative Expenses..................................................        36        30         101         93
Technological Expenses...................................................        22        23          62         62
                                                                              -----     -----      ------     ------
OPERATING INCOME.........................................................        95        88         309        280
Equity Earnings from Affiliates..........................................         5         8          17         25
Interest Expense.........................................................       (11)      (10)        (34)       (31)
Other Income (Expense)--Net..............................................        (1)        4           2          9
                                                                              -----     -----      ------     ------
INCOME BEFORE INCOME TAXES...............................................        88        90         294        283
Income Taxes.............................................................        30        34         100        100
                                                                              -----     -----      ------     ------
NET INCOME...............................................................     $  58     $  56      $  194     $  183
                                                                              =====     =====      ======     ======
BASIC EARNINGS PER SHARE.................................................     $0.50     $0.47      $ 1.67     $ 1.55
                                                                              =====     =====      ======     ======
DILUTED EARNINGS PER SHARE...............................................     $0.47     $0.46      $ 1.56     $ 1.49
                                                                              =====     =====      ======     ======
Weighted Average Equivalent Shares (in millions):
  Basic..................................................................     115.6     118.4       116.3      118.4
  Effect of Dilutive Securities:
    Common share equivalents--common stock issuable
      upon exercise of outstanding stock options.........................       7.4       4.6         7.7        4.3
                                                                              -----     -----       -----      -----
  Diluted................................................................     123.0     123.0       124.0      122.7
                                                                              =====     =====       =====      =====
 
See accompanying Notes to Consolidated Financial Statements.
</TABLE>

 
                                       1
 <PAGE>
<PAGE>

<TABLE>
                                 SOLUTIA INC.
 
                 STATEMENT OF CONSOLIDATED FINANCIAL POSITION
                             (DOLLARS IN MILLIONS)
 

<CAPTION>
                                                                                 SEPTEMBER 30,  DECEMBER 31,
                                                                                      1998          1997
                                                                                 -------------  ------------
<S>                                                                                  <C>        <C>
                                      ASSETS
CURRENT ASSETS:
Cash and cash equivalents..........................................................  $   63      $   24
Trade receivables, net of allowance of $6 in 1998 and 1997.........................     424         425
Miscellaneous receivables and prepaid expenses.....................................     126         136
Deferred income tax benefit........................................................      87          91
Inventories........................................................................     355         325
                                                                                     ------      ------
TOTAL CURRENT ASSETS...............................................................   1,055       1,001

PROPERTY, PLANT AND EQUIPMENT:
Land...............................................................................      17          17
Buildings..........................................................................     371         357
Machinery and equipment............................................................   2,763       2,707
Construction in progress...........................................................     116         107
                                                                                     ------      ------
Total property, plant and equipment................................................   3,267       3,188
Less accumulated depreciation......................................................   2,359       2,265
                                                                                     ------      ------
NET PROPERTY, PLANT AND EQUIPMENT..................................................     908         923

INVESTMENT IN AFFILIATES...........................................................     400         423
LONG-TERM DEFERRED INCOME TAX BENEFIT..............................................     292         300
OTHER ASSETS.......................................................................     137         121
                                                                                     ------      ------
TOTAL ASSETS.......................................................................  $2,792      $2,768
                                                                                     ======      ======
                       LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable...................................................................  $  281      $  221
Wages and benefits.................................................................      98         106
Restructuring reserves.............................................................      22          40
Miscellaneous accruals.............................................................     400         335
Short-term debt....................................................................     --          193
                                                                                     ------      ------
TOTAL CURRENT LIABILITIES..........................................................     801         895

LONG-TERM DEBT.....................................................................     597         597
POSTRETIREMENT LIABILITIES.........................................................     967         958
OTHER LIABILITIES..................................................................     442         449

STOCKHOLDERS' DEFICIT:
Common stock (authorized, 600,000,000 shares, par value $0.01)
  Issued: 118,400,635 shares in 1998 and 1997......................................       1           1
  Additional contributed capital...................................................    (128)       (119)
  Treasury stock, at cost (3,789,981 shares in 1998 and 992,828 shares in 1997)....    (102)        (22)
Unearned ESOP shares...............................................................     (27)        (31)
Accumulated other comprehensive income.............................................      23          12
Reinvested earnings................................................................     218          28
                                                                                     ------      ------
STOCKHOLDERS' DEFICIT..............................................................     (15)       (131)
                                                                                     ------      ------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT........................................  $2,792      $2,768
                                                                                     ======      ======
 
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
 
                                       2
 <PAGE>
<PAGE>

<TABLE>
                                 SOLUTIA INC.
 
                      STATEMENT OF CONSOLIDATED CASH FLOW
                             (DOLLARS IN MILLIONS)
 

<CAPTION>
                                                                                                      NINE MONTHS
                                                                                                         ENDED
                                                                                                     SEPTEMBER 30,
                                                                                                   ----------------
                                                                                                    1998      1997
                                                                                                   ------    ------
<S>                                                                                                 <C>       <C>
INCREASE IN CASH AND CASH EQUIVALENTS
 
OPERATING ACTIVITIES:
Net income........................................................................................  $ 194     $ 183
Adjustments to reconcile to Cash From Operations:
    Items that did not use (provide) cash:
        Deferred income taxes.....................................................................     11        36
        Depreciation and amortization.............................................................    103       105
        Other.....................................................................................     24       (30)
    Working capital changes that provided (used) cash:
        Accounts receivable.......................................................................      1       (56)
        Inventories...............................................................................    (30)      (24)
        Accounts payable and accrued liabilities..................................................     88      (111)
        Other.....................................................................................     19      (100)
    Other items...................................................................................    (11)      (19)
                                                                                                    -----     -----
CASH FROM OPERATIONS..............................................................................    399       (16)
                                                                                                    -----     -----
 
INVESTING ACTIVITIES:
Property, plant and equipment purchases...........................................................    (84)     (126)
Acquisition and investment payments...............................................................     (1)       (2)
Investment and property disposal proceeds.........................................................      8       --
                                                                                                    -----     -----
CASH FROM INVESTING ACTIVITIES....................................................................    (77)     (128)
                                                                                                    -----     -----
 
FINANCING ACTIVITIES:
Net transactions with Monsanto Company............................................................    --        292
Net repayment of debt obligations.................................................................   (190)      (56)
Treasury stock purchases..........................................................................   (113)      --
Dividend payments.................................................................................     (4)      --
Common stock issued under employee stock plans....................................................     24       --
                                                                                                    -----     -----
CASH FROM FINANCING ACTIVITIES....................................................................   (283)      236
                                                                                                    -----     -----
 
INCREASE IN CASH AND CASH EQUIVALENTS.............................................................     39        92
 
CASH AND CASH EQUIVALENTS:
BEGINNING OF YEAR.................................................................................     24       --
                                                                                                    -----     -----
END OF PERIOD.....................................................................................  $  63     $  92
                                                                                                    =====     =====
 
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
 
                                       3
 <PAGE>
<PAGE>

                                 SOLUTIA INC.
 
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             (DOLLARS IN MILLIONS)
 
1. BASIS OF PRESENTATION
 
    Solutia Inc. (the "company" or "Solutia") is an international producer
and marketer of a range of high performance chemical-based materials which are
used by its customers to make consumer, household, automotive and industrial
products. Prior to September 1, 1997, the businesses that form the company were
wholly owned by Monsanto Company ("Monsanto"). On September 1, 1997, Monsanto
distributed all of the outstanding shares of common stock of the company as a
dividend to Monsanto stockholders (the "Spinoff"). The distribution resulted
in the issuance of one share of the company's common stock for every five
shares of Monsanto common stock held of record as of August 20, 1997. As a
result of the Spinoff, Solutia became an independent publicly held company
listed on the New York Stock Exchange and its operations ceased to be owned by
Monsanto. Monsanto and Solutia entered into a number of agreements with respect
to the separation of the companies and to provide mechanisms for an orderly
transition following the Spinoff.
 
    Financial data included in the accompanying unaudited financial statements,
for periods prior to the Spinoff, were prepared on a basis which reflected an
estimate of what the historical assets, liabilities and operations would have
been if Solutia had been organized as a separate legal entity, owning certain
net assets of Monsanto. Financial data included in the accompanying unaudited
financial statements, for periods subsequent to the Spinoff, have been prepared
on a basis which reflects the historical assets, liabilities, and operations of
the businesses contributed to Solutia by Monsanto.
 
    These financial statements should be read in conjunction with the audited
financial statements and notes thereto set forth in Solutia's 1997 Annual
Report to stockholders and incorporated by reference in the company's annual
report on Form 10-K, filed with the Securities and Exchange Commission on March
13, 1998. As indicated in the notes to the audited financial statements
included in the company's 1997 Annual Report, Monsanto provided certain general
and administrative services to Solutia prior to the Spinoff. The cost for these
services was allocated to Solutia based upon the net capital employed in
Solutia's operations, as well as other methods which management believed to be
reasonable. In preparation for the Spinoff, Monsanto began a transition plan of
separation. As part of this plan, Monsanto discontinued its allocation of
corporate expenses for these general and administrative services on April 1,
1997 as these expenses were specifically identified and segregated as part of
Solutia's ongoing cost infrastructure.
 
    The accompanying unaudited consolidated financial statements reflect all
adjustments which in the opinion of management are necessary to present fairly
the financial position, results of operations and cash flows for the interim
periods reported. Such adjustments are of a normal, recurring nature. The
results of operations for the three-month and nine-month periods ended
September 30, 1998 are not necessarily indicative of the results to be expected
for the full year.
 
2. INVENTORIES
 
    The components of inventories as of September 30, 1998 and December 31,
1997 were as follows:
 
<TABLE>
<CAPTION>
                                                     SEPTEMBER 30,   DECEMBER 31,
                                                         1998            1997
                                                     -------------   ------------
<S>                                                     <C>            <C>
Finished goods.......................................   $ 275          $ 259
Goods in process.....................................      79             60
Raw materials and supplies...........................     127            148
                                                        -----          -----
Inventories, at FIFO cost............................     481            467
Excess of FIFO over LIFO cost........................    (126)          (142)
                                                        -----          -----
TOTAL................................................   $ 355          $ 325
                                                        =====          =====
</TABLE>
 
                                       4
 <PAGE>
<PAGE>

3. INTERCOMPANY TRANSACTIONS
 
    Included in the Statement of Consolidated Income for the three months and
nine months ended September 30, 1997 were sales to Monsanto of $9 million and
$42 million, respectively, and allocated interest expense of $5 million and $26
million, respectively. Sales were made at Monsanto's established transfer
prices. Interest expense charged to Solutia in 1997 represents an allocation
from Monsanto of its total interest expense. As discussed in Note 1, Monsanto
discontinued its allocation of the cost of general and administrative expenses
to Solutia, effective April 1, 1997, as part of its transition plan of
separation. Such expenses were specifically identified and segregated as part
of Solutia's on-going cost infrastructure. Allocated costs from Monsanto for
general and administrative services were $12 million for the nine months ended
September 30, 1997.
 
4. CONTINGENCIES
 
    Monsanto is a party to a number of lawsuits and claims relating to Solutia,
for which Solutia has assumed responsibility in the Spinoff. In addition,
Solutia is also a named party in a number of lawsuits and claims directly.
Solutia intends to defend all suits and claims vigorously. Such matters arise
out of the normal course of business and relate to product liability;
government regulation, including environmental issues; employee relations; and
other issues. Certain of the lawsuits and claims seek damages in very large
amounts. Although the results of litigation cannot be predicted with certainty,
management's belief is that the final outcome of such litigation will not have
a material adverse effect on Solutia's consolidated financial position,
profitability or liquidity in any one year, as applicable.
 
5. EARNINGS PER SHARE
 
    Effective December 31, 1997, Solutia adopted Statement of Financial
Accounting Standards ("SFAS") No. 128, "Earnings per Share." Under this new
standard, the presentation of primary and fully diluted earnings per share
required by the previous standards was replaced by basic and diluted earnings
per share. Basic earnings per share measures operating performance assuming no
dilution from securities or contracts to issue common stock. Diluted earnings
per share measures operating performance giving effect to the dilution that
would occur when securities or contracts to issue common stock are exercised or
converted.
 
    For periods ended prior to the Spinoff, the number of weighted average
shares outstanding and common share equivalents used in the earnings per share
calculation was based upon the weighted average number of Monsanto shares
outstanding and Monsanto common share equivalents for the applicable period,
adjusted for the distribution ratio in the Spinoff of one share of the
Company's common stock for every five shares of Monsanto common stock.
 
6. COMPREHENSIVE INCOME
 
    Effective January 1, 1998, Solutia adopted SFAS No. 130, "Reporting
Comprehensive Income." This statement establishes the standards for reporting
and displaying comprehensive income and its components in a full set of
general-purpose financial statements. Comprehensive income includes net income
and several other items that were recognized directly in reinvested earnings
under previous accounting standards.
 
    Comprehensive income for the three months and nine months ended September
30, 1998 and 1997 is detailed as follows:
 
<TABLE>
<CAPTION>
                                                             THREE MONTHS ENDED     NINE MONTHS ENDED
                                                                SEPTEMBER 30,         SEPTEMBER 30,
                                                             ------------------     -----------------
                                                             1998          1997     1998         1997
                                                             ----          ----     ----         ----
<S>                                                          <C>           <C>      <C>          <C>
NET INCOME.................................................. $58           $56      $194         $183
Foreign currency translation adjustment.....................  15            (9)       11           20
                                                             ---           ---      ----         ----
COMPREHENSIVE INCOME........................................ $73           $47      $205         $203
                                                             ===           ===      ====         ====
</TABLE>
 
                                       5
 <PAGE>
<PAGE>

    Accumulated Other Comprehensive Income as of September 30, 1998 and
December 31, 1997 is detailed as follows:
 
<TABLE>
<CAPTION>
                                                       SEPTEMBER 30, 1998      DECEMBER 31, 1997
                                                       ------------------      -----------------
<S>                                                            <C>                    <C>
Accumulated currency adjustment.....................           $30                    $19
Minimum pension liability adjustment................            (7)                    (7)
                                                               ---                    ---
ACCUMULATED OTHER COMPREHENSIVE INCOME..............           $23                    $12
                                                               ===                    ===
</TABLE>
 
7. OTHER EVENTS
 
    During the quarter, the company announced that it plans to sell its
phosphorus derivatives business and has retained an investment banking firm to
assist in the sale.
 
    In the 1998 second quarter, the company amended certain of its
postretirement health care plans primarily to adjust cost-sharing provisions.
The amendment results in a $161 million reduction in the company's accumulated
postretirement benefit obligation, which is being amortized over the average
remaining service life of plan participants of approximately 12 years.
 
8. SEGMENT DATA
 
    Segment data for the three months and nine months ended September 30, 1998
and 1997 were as follows:
 
<TABLE>
<CAPTION>
                                                                     THREE MONTHS ENDED SEPTEMBER 30,
                                              ------------------------------------------------------------------------------
                                                             1998                                       1997
                                              -----------------------------------        -----------------------------------
                                               NET       INTERSEGMENT                     NET       INTERSEGMENT
                                              SALES          SALES         PROFIT        SALES          SALES         PROFIT
                                              -----      ------------      ------        -----      ------------      ------
<S>                                           <C>           <C>             <C>          <C>           <C>             <C>
SEGMENT:
  Chemicals..............................     $228          $   1           $ 63         $246          $   6           $ 63
  Fibers.................................      241            --              56          253            --              48
  Polymers & Resins......................      235            --              64          255            --              60
                                              ----          -----           ----         ----          -----           ----
SEGMENT TOTALS...........................      704              1            183          754              6            171

RECONCILIATION TO CONSOLIDATED TOTALS:
  Sales eliminations.....................       (1)            (1)                         (6)            (6)
  Other revenues.........................      --                                           1
  Less unallocated service costs:
    Cost of goods sold...................                                    (25)                                       (28)
    Marketing, administrative and
      technological expenses.............                                    (63)                                       (55)
  Equity earnings from affiliates........                                      5                                          8
  Interest expense.......................                                    (11)                                       (10)
  Other income (expense)--net............                                     (1)                                         4
                                              ----          -----                        ----          -----
CONSOLIDATED TOTALS:
  NET SALES..............................     $703          $ --                         $749          $ --
                                              ====          =====           ----         ====          =====           ----
  INCOME BEFORE INCOME TAXES.............                                   $ 88                                       $ 90
                                                                            ====                                       ====
</TABLE>
 
                                       6
 <PAGE>
<PAGE>

<TABLE>
<CAPTION>
                                                                NINE MONTHS ENDED SEPTEMBER 30,
                                          ---------------------------------------------------------------------------
                                                         1998                                     1997
                                          ----------------------------------       ----------------------------------
                                           NET      INTERSEGMENT                    NET      INTERSEGMENT
                                          SALES         SALES         PROFIT       SALES         SALES         PROFIT
                                          -----     ------------      ------       -----     ------------      ------
<S>                                      <C>           <C>            <C>         <C>            <C>           <C>
SEGMENT:
  Chemicals...........................   $  675        $   5          $ 173       $  726         $  15         $ 172
  Fibers..............................      748          --             176          745           --            127
  Polymers & Resins...................      748          --             206          781             5           206
                                         ------        -----          -----       ------         -----         -----
SEGMENT TOTALS........................    2,171            5            555        2,252            20           505

RECONCILIATION TO CONSOLIDATED TOTALS:
  Sales eliminations..................       (5)          (5)                        (20)          (20)
  Other revenues......................        2                                        6
  Less unallocated service costs:
    Cost of goods sold................                                  (68)                                     (69)
    Marketing, administrative and
      technological expenses..........                                 (178)                                    (156)
  Equity earnings from affiliates.....                                   17                                       25
  Interest expense....................                                  (34)                                     (31)
  Other income (expense)--net.........                                    2                                        9
                                         ------        -----                      ------         -----
CONSOLIDATED TOTALS:
  NET SALES...........................   $2,168        $ --                       $2,238         $ --
                                         ======        =====          -----       ======         =====         -----
  INCOME BEFORE INCOME TAXES..........                                $ 294                                    $ 283
                                                                      =====                                    =====
</TABLE>
 
    Segment profit only includes operating expenses directly attributable to
the segment. Unallocated service costs are managed centrally and primarily
include costs of technology, engineering and manufacturing services that are
provided to the segments.
 
                                       7
 <PAGE>
<PAGE>

        UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
    The following unaudited pro forma condensed consolidated statement of
income for the three months and nine months ended September 30, 1997 give
effect to the Spinoff and Solutia's 1997 public debt offering as if the Spinoff
and the public debt offering had occurred at January 1, 1997. The pro forma
information is presented for illustrative purposes only and may not be
indicative of the results that would have been obtained had the transactions
actually occurred on the date assumed, nor is it necessarily indicative of
future consolidated results of operations.
 
    The unaudited pro forma condensed consolidated financial statements should
be read in conjunction with the historical financial statements and the related
notes thereto contained elsewhere in this report on Form 10-Q.
 
<TABLE>
                                 SOLUTIA INC.
 
        UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
                    (DOLLARS IN MILLIONS, EXCEPT PER SHARE)
 

<CAPTION>
                                                                                   THREE MONTHS ENDED SEPTEMBER 30, 1997
                                                                               --------------------------------------------
                                                                                                        PRO FORMA
                                                                               HISTORICAL      ----------------------------
                                                                                 SOLUTIA       ADJUSTMENTS          SOLUTIA
                                                                               ----------      -----------          -------
<S>                                                                               <C>          <C>                  <C>
NET SALES....................................................................     $ 749                             $  749
Cost of Goods Sold...........................................................       576                                576
                                                                                  -----                              -----
GROSS PROFIT.................................................................       173                                173
Marketing, Administrative and Technological Expenses.........................        85         $  3  <FB>              95
                                                                                                   7  <FE>
                                                                                  -----         ----                 -----
OPERATING INCOME.............................................................        88          (10)                   78
Equity Earnings from Affiliates..............................................         8                                  8
Interest Expense.............................................................       (10)          (6) <FF>             (16)
Other Income (Expense)--Net..................................................         4                                  4
                                                                                  -----         ----                 -----
INCOME BEFORE INCOME TAXES...................................................        90          (16)                   74
Income Taxes.................................................................        34           (6) <FG>              28
                                                                                  -----         ----                 -----
NET INCOME...................................................................     $  56         $(10)                $  46
                                                                                  =====         ====                 =====
DILUTED EARNINGS PER SHARE...................................................     $0.46                              $0.37
                                                                                  =====                              =====
Diluted Weighted Average Equivalent Shares...................................     123.0                              123.0
                                                                                  =====                              =====
 
See accompanying Notes to Unaudited Pro Forma Condensed Consolidated Financial
Statements.
</TABLE>
 
                                       8
 <PAGE>
<PAGE>

<TABLE>
                                 SOLUTIA INC.
 
        UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
                    (DOLLARS IN MILLIONS, EXCEPT PER SHARE)
 

<CAPTION>
                                                                                   NINE MONTHS ENDED SEPTEMBER 30, 1997
                                                                               -------------------------------------------
                                                                                                       PRO FORMA
                                                                               HISTORICAL      ---------------------------
                                                                                 SOLUTIA       ADJUSTMENTS         SOLUTIA
                                                                               ----------      -----------         -------
<S>                                                                              <C>           <C>                 <C>
NET SALES....................................................................    $2,238        $ (9) <FA>          $2,229
Cost of Goods Sold...........................................................     1,700          (1) <FB>           1,697
                                                                                                  1  <FC>
                                                                                                 (3) <FD>
                                                                                 ------        ----                ------
GROSS PROFIT.................................................................       538          (6)                  532
Marketing, Administrative and Technological Expenses.........................       258          14  <FB>             288
                                                                                                 (9) <FD>
                                                                                                 25  <FE>
                                                                                 ------        ----                ------
OPERATING INCOME.............................................................       280         (36)                  244
Equity Earnings from Affiliates..............................................        25                                25
Interest Expense.............................................................       (31)        (19) <FF>             (50)
Other Income (Expense)--Net..................................................         9                                 9
                                                                                 ------        ----                ------
INCOME BEFORE INCOME TAXES...................................................       283         (55)                  228
Income Taxes.................................................................       100         (20) <FG>              80
                                                                                 ------        ----                ------
NET INCOME...................................................................    $  183        $(35)               $  148
                                                                                 ======        ====                ======
DILUTED EARNINGS PER SHARE...................................................    $ 1.49                            $ 1.21
                                                                                 ======                            ======
Diluted Weighted Average Equivalent Shares...................................     122.7                             122.7
                                                                                 ======                            ======

See accompanying Notes to Unaudited Pro Forma Condensed Consolidated Financial
Statements.
</TABLE>
                                       9
   
<PAGE>
<PAGE>

                    NOTES TO UNAUDITED PRO FORMA CONDENSED
                       CONSOLIDATED FINANCIAL STATEMENTS
 
[FN]
 
<FA> To record the estimated effect of new selling prices and arrangements on
     former intercompany sales from Solutia to Monsanto.
 
<FB> To record the assumed increase in retiree medical and pension costs as a
     result of the Spinoff.
 
<FC> To record the estimated effect of transactions with the P4 joint venture
     formed by Monsanto in conjunction with the Spinoff.
 
<FD> To reverse the historical Monsanto corporate expense allocation to the
     Company because the company is no longer subject to the allocation of
     corporate expenses from Monsanto following the Spinoff.
 
<FE> Because the company is no longer subject to this corporate expense
     allocation, a pro forma adjustment was made to record estimated general
     corporate costs that the company believes it would have incurred had the
     company been a separate public company for the periods presented.
 
<FF> To record additional interest expense as a result of the company's
     assumption of debt from Monsanto and the borrowings of Solutia's 1997
     public debt offering.
 
<FG> To record the estimated provision for income tax as a result of the pro
     forma adjustments referred to in Notes (A) through (F) above at an
     estimated combined U.S. federal income and state income tax rate of 36
     percent.

 
                                       10
 <PAGE>
<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS
 
    This section includes forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. These forward-looking statements
include statements regarding expected future cash flows, financial resources,
effective changes in accounting due to recently issued accounting standards,
benefits from new technology, the cost of remediating the year 2000 issue and
the effect of any unremediated or undiscovered year 2000 issues on the
Company's operations. Although the Company believes its expectations reflected
in such forward-looking statements are based on reasonable assumptions, no
assurance can be given that such expectations will prove to have been correct.
Important factors that could cause actual results to differ materially from the
expectations reflected in the forward-looking statements herein include, among
others, those set forth below as well as general economic and business and
market conditions, efficacy of new technology, and increased competitive and/or
customer pressure.
 
RESULTS OF OPERATIONS--THIRD QUARTER 1998 COMPARED WITH THIRD QUARTER 1997
 
    Third quarter 1998 net sales decreased by 6 percent as compared with the
third quarter of 1997. The net sales decline affected all segments and resulted
primarily from lower average selling prices. This selling price erosion was 
driven by contract pricing tied to key raw material costs and the general
softening of selling prices.
 
  Chemicals Segment
 
    Net sales declines in the Chemicals segment occurred as a result of both
average selling price and volume declines. Average selling price and volume
reductions were caused, in part, by the worldwide excess supply of ammonia that
continued through the 1998 third quarter. Also, phosphorus derivatives products
experienced a net sales decrease that resulted entirely from volume slowdowns.
The volume reductions occurred primarily in phosphoric acid and wildfire
products, which offset strong food phosphates volumes. A portion of the net
sales decline was offset by improved sales volumes of ammonia and 
chlorobenzenes. 
 
    Segment profit for the 1998 third quarter was flat as compared to the 1997
third quarter. Raw material prices decreased slightly faster than average
selling prices, however any potential increase in segment profit was offset by
turnaround maintenance costs at several facilities.
 
  Fibers Segment
 
    The Fibers segment net sales for the 1998 third quarter were down
approximately 5 percent versus the same period of 1997. Carpet net sales
increased 5 percent on higher volumes that were offset partially by lower
average selling prices. Overall, the carpet market remained strong through the
quarter, particularly in the branded staple area. Net sales declines of
Acrilan(R) acrylic fiber, however, more than offset any segment sales gains
from carpet products. Export volumes and export average selling prices for
Acrilan(R) acrylic fibers have declined significantly as selling prices in Asia
have dropped to a level such that margins on sales to the region are not
attractive. The company continues to supply certain long-standing customers, at
prices with minimal margins. In addition, price declines that originated in
Asia are spreading to Latin America and, to a lesser extent, to North America
as competitors seek substitute markets to maintain product volumes.
 
    Profit in the Fibers segment increased approximately 17 percent in the
third quarter of 1998 from the comparable prior year's quarter. Lower raw
material costs and other cost reductions occurred in all Fibers segment
businesses. These cost reductions as well as the strong manufacturing
performance at the carpet facilities were the primary drivers of the segment
profit improvement.
 
  Polymers & Resins Segment
 
    Each of the businesses in the Polymers & Resins segment experienced net
sales decreases in the 1998 third quarter versus the 1997 third quarter. Sales
volumes of Saflex(R) plastic interlayer were affected by the General Motors
strike and lower sales to Asia and Latin America resulting from the financial
turmoil in those areas. Average selling prices for Saflex(R) plastic interlayer
also declined due to competitive pressures. Nylon Plastics & Polymer 

 
                                      11
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experienced both average selling price and volume decreases. Both decreases 
resulted from lower Asian demand which offset volume gains in Europe.
 
    Polymers & Resins segment profit for the 1998 third quarter increased 
7 percent from the third quarter of 1997 segment profit. Lower net sales were
more than offset by good manufacturing performance, lower raw material costs
and other cost reductions.
 
  Operating Income
 
    Operating income for the third quarter of 1998 increased approximately 8
percent over the comparable period of the prior year. The increase was driven
by increased gross margins offset by increased administrative costs.
Administrative costs were higher due primarily to employee benefit cost
increases.
 
  Equity Earnings from Affiliates
 
    Equity Earnings from Affiliates was lower in the 1998 third quarter as
compared to the 1997 third quarter due to a loss at the Quimica joint venture.
Quimica's loss occurred as a result of start-up costs for Saflex IIIG(TM)
plastic interlayer production and the devaluation of the Mexican peso.
 
RESULTS OF OPERATIONS--FIRST NINE MONTHS 1998 COMPARED WITH FIRST NINE MONTHS
1997
 
    For the nine-month period ended September 30, 1998, net sales declined
approximately 3 percent as compared to the same period of 1997. The decline was
caused by lower average selling prices in all segments offset partially by
improved product volumes.
 
  Chemicals Segment
 
    The Chemicals segment's net sales declined by approximately 7 percent as
compared to the previous year due to lower average selling prices for
intermediate products and lower phosphorus derivative product volumes. Formula
contracts, where raw material price decreases are passed on to customers in the
form of lower prices, caused the majority of the average selling price
decreases. The lower volume experienced in phosphorus and derivatives was due
to price reduction actions by competitors.
 
    Profit in the Chemicals segment was essentially flat with the same period
of the prior year due to lower average selling price offsetting the segment's
good manufacturing performance.
 
  Fibers Segment
 
    Significantly higher carpet staple volumes were almost fully offset by
average selling price decreases in all businesses of the Fibers segment. Carpet
volume increases were due to strong builder and commercial sales and new
introductions of Wear-Dated(R) brand products. Price reductions in the Fibers
segment were caused by competitive pressures on carpet staple despite a first
quarter 1998 price increase, and lower pricing of Acrilan(R) acrylic fibers due
to the financial crises in the company's export markets. For both the carpet
and Acrilan(R) acrylic fiber products, the majority of the average selling
price declines occurred during the third quarter. Year-over-year price declines
caused by lower priced imports also affected the Nylon Industrial products.
 
    Fibers segment profit increased significantly on carpet volume increases,
reduced raw material costs and other cost reductions in all businesses.
 
  Polymers & Resins Segment
 
    Polymers & Resins segment net sales declines were driven primarily by
softer pricing and, to lesser extents, by unfavorable currency exchange rate
movements and lower volumes. Lower average selling prices were felt most
significantly by the Company's Saflex(R) plastic interlayer unit and the resins
business where competitors sought to increase market share through price
reductions. Unfavorable currency exchange rate movements had an impact on
Saflex(R) plastic interlayer selling prices also. The effect of currency
exchange rates on the Company's operating income was minimal, however, due to
ex-U.S. sales sourcing from ex-U.S. operations. Lower volumes resulted from
greater internal consumption of nylon polymer.
 
                                      12
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    Polymers & Resins segment profit for the nine-month period was flat as
compared to the same period of the prior year. The lower sales discussed above
and higher manufacturing costs were offset by reduced raw material costs.
Increased manufacturing costs resulted from planned downtime for maintenance
projects and changeover costs at the Saflex(R) plastic interlayer production
sites as they expand production of the new Saflex IIIG(TM) plastic interlayer
product.
 
  Operating Income
 
    Operating income for the first nine months of 1998 was $309 million, an
increase of $29 million over the comparable period of 1997. The 1997 period
contains $12 million of pre-tax charges associated primarily with the adoption
of Statement of Position (SOP) 96-1, "Environmental Remediation Liabilities."
In addition, this year-over-year comparison was affected in 1998 by the
inclusion of stand-alone expenses for certain general and administrative
services that were provided by Monsanto during 1997. As discussed in note 1 of
the "Notes to the Consolidated Financial Statements," Monsanto provided these
services prior to the Spinoff under a cost allocation arrangement. If Solutia
had operated as a stand-alone entity for all of 1997, management estimates that
general and administrative services would have been higher by approximately $6
million in order to reflect the cost of replacing the services represented by
these allocations. After considering these events, the improvement in operating
income was due largely to lower raw material costs, other cost reductions and
good manufacturing performance.
 
  Equity Earnings from Affiliates
 
    Equity Earnings from Affiliates was lower for the nine-month period of 1998
as compared to 1997 primarily due to the lower earnings from the Company's
Flexsys L.P. joint venture. The lower earnings were attributed to start-up
costs associated with this joint venture's PPD2 facility and unfavorable
currency exchange fluctuations offset by improved sales volumes. The new unit
produces 4-amino-diphenylamine, a product that extends the life of rubber
products. In addition, the Quimica joint venture was affected by start-up costs
for Saflex IIIG(TM) plastic interlayer production and the devaluation of the
Mexican peso.
 
LIQUIDITY AND CAPITAL RESOURCES
 
    Solutia's working capital at September 30, 1998 increased to $254 million
from $106 million at December 31, 1997, primarily due to higher cash balances
and decreased short-term debt. This was the result of the company's strong cash
flow from operations.
 
    Solutia completed the repayment of its outstanding commercial paper during
the third quarter. Since the September 1, 1997 spin-off, the company repaid
approximately $429 million of debt.
 
    During the third quarter of 1998, the company completed the 5 million share
stock repurchase program announced in September 1997 by purchasing an
additional 1.7 million shares of common stock. The cost for shares repurchased
during the quarter was approximately $43 million.
 
    On October 1, 1998, the company announced a second 5 million share
repurchase program. Repurchases under this second program will begin in the
fourth quarter of 1998 and are currently anticipated to be completed by about
year-end 1999.
 
    The Company believes that its cash flow from operations, supplemented by
periodic additional borrowings, provides it with sufficient resources to
finance operations and planned capital needs.
 
RECENTLY ISSUED ACCOUNTING STANDARDS
 
    In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position ("SOP") 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use." SOP 98-1 establishes
the accounting guidance for the capitalization of certain internal-use software
costs once certain criteria are met. This accounting standard will be effective
for the Company beginning January 1, 1999. The adoption of SOP 98-1 is not
expected to have a material impact on the Company.

 
                                      13
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    In April 1998, the American Institute of Certified Public Accountants
issued SOP 98-5, "Reporting on the Costs of Start-Up Activities." SOP 98-5
provides guidance on the financial reporting of start-up costs and organization
costs. It requires costs of start-up activities and organization costs to be
expensed as incurred. This statement will be effective for the Company's 
financial statements for the year ended December 31, 1999. The adoption of  
SOP 98-5 is not expected to have a material impact on the Company.
 
    In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activity." SFAS No. 133
provides comprehensive and consistent standards for the recognition and
measurement of derivative and hedging activities. It requires that derivatives
be recorded on the Statement of Consolidated Financial Position at fair value
and establishes criteria for hedges of changes in the fair value of assets,
liabilities or firm commitments, hedges of variable cash flows of forecasted
transactions, and hedges of foreign currency exposures of net investments in
foreign operations. Changes in the fair value of derivatives that do not meet
the criteria for hedges would be recognized in the Statement of Consolidated
Income. This statement will be effective for the Company beginning January 1,
2000. The Company is evaluating SFAS No. 133 and has not determined its effect
on the consolidated financial statements.
 
THE YEAR 2000 ISSUE
 
  Overview
 
    The year 2000 ("Y2K") issue refers to the inability of a date-sensitive
computer program to recognize a two-digit date field designated "00" as the
year 2000. Mistaking "00" for 1900 could result in a system failure or
miscalculations causing disruptions to operations, including manufacturing, a
temporary inability to process transactions, send invoices, or engage in other
normal business activities. This is a significant issue for most, if not all
companies, with far reaching implications, some of which cannot be anticipated
or predicted with any degree of certainty.
 
    During 1996, Solutia began the process of addressing its Y2K issues. The
process includes six steps: 1) plan, 2) inventory, 3) assess, 4) remediate, 5)
test, 6) develop contingency plans. The planning phase was completed during
1997 and resulted in the Y2K issues being managed around five functional areas.
The functional areas that were identified are business applications, process
control (including embedded chip), supply chain, information technology ("IT")
technical infrastructure and customer issues.
 
  Y2K Issues
 
    Solutia inventoried and assessed its business applications during 1997. At
that time, the company determined that significant portions of its software
required modification or repair to properly function beyond December 31, 1999.
Solutia is addressing the majority of these Y2K issues through the previously
planned installation of software licensed from SAP AG which is Y2K compliant.
The implementation of SAP involves a series of transitions, the first of which
occurred in January 1997. Subsequent implementations have progressed in
accordance with the transition schedule. Through September 30, 1998, the SAP
project is on schedule with approximately 70 percent of the company now on SAP.
The final transition to SAP is scheduled to occur on March 31, 1999. Critical
issues that are not addressed by SAP are in the process of being remediated.
The company expects to complete remediation of all critical business
applications by the end of March 1999. Y2K integrated testing of SAP and
non-SAP systems will occur during mid-1999.
 
    The management of Y2K issues in the process control area is split between
primary process control systems and devices with embedded chips.
 
    Primary process control systems were inventoried and assessed during late
1997. Remediation and testing efforts are underway. Some slippage from
schedules has occurred as resources are temporarily redirected to other Y2K
areas. However, the company expects that critical issues in this area will be
completed on schedule by the end of the second quarter of 1999, with the
exception of a small portion of systems that will be repaired and tested during
planned plant shutdowns in the second half of 1999.
 
    The inventory of the company's devices with embedded chip systems is
complete. The assessment of those devices is in process and will be principally
complete by the end of November 1998. Critical systems in this area will
 
                                      14
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be renovated and tested by the end of the second quarter 1999, with the
exception of a small portion of systems that will be repaired during planned
plant shutdowns in the second half of 1999.

    Solutia has identified those companies in the supply chain which provide
materials, products or services that are critical to the company's operations.
Critical suppliers' Y2K issues are being assessed through the use of
questionnaires and other inquiries. Approximately half of the company's
critical suppliers have either completed their remediation efforts or have
plans to complete their remediation by mid-1999. Investigation of the remaining
Y2K issues with critical suppliers is continuing on schedule. Audits of
selected suppliers to verify the completion of their remediation are planned
for 1999.
 
    The IT technical infrastructure area is primarily comprised of desktop
computer workstations and software, computer networking infrastructure, host
server systems and voice systems. The inventory and assessment of known long
lead-time items has been completed. Major projects are identified and are
scheduled for completion during 1999. An exhaustive and comprehensive follow-up
investigation of this area is underway to assure no critical components have
been overlooked. Remediation and testing of any new items found will be
addressed by mid-1999.
 
    Solutia has been working with customers to address their Y2K concerns
regarding our ability to operate. Any plans to address the ability of our
significant customers to accept our products after December 31, 1999 will be
determined as contingency plans are developed.
 
    The company intends to perform integrated Y2K testing of critical systems
in all functional areas during the second quarter of 1999. Given the nature of
Solutia's manufacturing and other operations, full-scale integrated testing may
not be practical in some areas and, therefore, may be limited in scope to avoid 
significant disruption of the company's operations. Statements of compliance 
from vendors and other compliance evidence are expected to mitigate the risk 
of not performing integrated testing in those areas.

    The development of contingency arrangements for all functional areas is
early in the planning stage. Plans will include procedures that attempt to
minimize the impact of any unremediated and unresolved Y2K issues on Solutia's
operations and financial position. Initial plans are expected to be complete 
by mid-1999 and will continue to be refined as developments warrant.
 
    To date, the Company has incurred approximately $5 million in costs related
to Y2K work, excluding the cost of SAP implementation. Additional costs to
evaluate and remediate the remaining issues are currently estimated to be in
the range of $5 - $10 million and will be expensed as incurred during 1998 and
1999.
 
    Based on the status of the Company's work to address its Y2K issues,
including the implementation of SAP, management does not expect the Y2K issue
to pose significant operational problems for the Company. However, if the SAP
implementation is delayed or the remediation of other issues is not completed
timely, Y2K could have a material adverse effect on the Company, depending on
the nature and extent of any remaining non-compliance. Furthermore, if the
Company's customers and suppliers fail to rectify their Y2K issues in their own
systems the resultant effect on the Company may be material. Management 
anticipates that the most reasonably likely worst-case scenario would involve 
a temporary shutdown of certain units if, in management's judgment, the company 
cannot run certain processes safely from an environmental, safety and health 
standpoint because of the failure of the company or a supplier to resolve Y2K 
issues. Through the development of contingency plans, the company expects to 
mitigate the effect that any such temporary shutdowns would have on the company 
or third parties.
 
    The estimated costs and date of completion of Y2K remediation are based on
management's best estimates, which were derived from numerous assumptions about
future events. These assumptions include the availability of certain resources,
third-party modification plans and other factors. There can be no guarantee
that these estimates will be achieved and actual results could differ
materially. Specific factors that might cause material differences include, but
are not limited to, the availability and cost of personnel trained in this
area, the ability to identify and correct all relevant computer codes, and the
cost and availability of replacements for devices with embedded chips.
 
EUROPEAN MONETARY UNION
 
    On January 1, 1999, eleven member countries of the European Union are
expected to adopt the euro as their common legal currency. Effective that date,
conversion rates between the existing sovereign currency ("legacy currency")
of each of these participating countries and the euro will be irrevocably
fixed, and the euro will be
 
                                      15
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available for non-cash transactions. The legacy currencies of these countries 
will remain legal tender during a transition period from January 1, 1999 to 
January 1, 2002. During this transition period, parties may pay for goods and 
services using either the euro or the relevant legacy currency. Currency 
conversion will be performed using a triangulation method whereby one legacy 
currency is converted to the euro and then to the second legacy currency. 
The conversion to the euro will be completed in July 2002 when the legacy 
currencies of the participating member countries cease to be legal tender.
 
    While the conversion to the euro is expected to increase cross-border price
transparency, and therefore stimulate cross-border competition within the
single currency zone created by the participating countries, the effect on the
price of raw materials that Solutia purchases is expected to generally offset
the effect on the finished products it sells. In addition, the conversion to
the euro is expected to have the positive effect of eliminating currency risk
in cross-border sales.

    Since January 1998, Solutia has had a multifunctional team in place to
identify issues arising from the implementation of the euro, plan for the
changeover, and communicate with customers, suppliers, and employees. The
Company expects to be able to invoice and accept payments in euros on January
1, 1999. Information systems will be updated to allow the triangulation method
of currency conversion to the requisite number of decimal places in a timely
fashion. If the updates are not ready by January 1, 1999, triangulation will be
accomplished manually or through outsourcing until the updates are installed.
The cost of the technological updates or any interim measures is not expected
to be material. The software licensed from SAP AG that the Company is already
in the process of implementing is readily adaptable to this function.
 
    For the reasons stated above, management does not expect the introduction
of the euro to have a material effect on Solutia's business, financial
condition, or results of operations. If cross-border price transparency causes
the markets from which the Company purchases raw materials or to which it sells
finished products to behave differently than management expects, the
introduction of the euro could have a material effect on the Company.

                                      16
 
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                            PART II. OTHER INFORMATION
 
ITEM 6. EXHIBITS AND REPORTS ON FROM 8-K
 
    (a) Exhibits--See the Exhibit index at page 19 of this report.
 
    (b) The Company did not file any reports on Form 8-K during the quarter
ended September 30, 1998.
 


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                                   SIGNATURE
 
    Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


 
                                                      SOLUTIA INC.
                                          ------------------------------------
                                                      (Registrant)
 


                                                   /s/ ROGER S. HOARD
                                          ------------------------------------
                                             (Vice President and Controller)
                                           (On behalf of the Registrant and as
                                              Principal Accounting Officer)
 
Date: October 23, 1998



 
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                                 EXHIBIT INDEX
 
    These Exhibits are numbered in accordance with the Exhibit Table of Item
601 of Regulation S-K.
 
<TABLE>
<CAPTION>
 
 EXHIBIT
 NUMBER                              DESCRIPTION
 -------                             -----------
<S>        <C>
    2      Omitted--Inapplicable
 
    3      Omitted--Inapplicable
 
    4      Omitted--Inapplicable
 
   10      Solutia Inc. Deferred Compensation Plan
 
   11      Omitted--Inapplicable; see "Statement of Consolidated Income" on page 1.
 
   15      Omitted--Inapplicable
 
   18      Omitted--Inapplicable
 
   19      Omitted--Inapplicable
 
   22      Omitted--Inapplicable
 
   23      Omitted--Inapplicable
 
   24      Omitted--Inapplicable
 
   27      Financial Data Schedule
 
   99      Omitted--Inapplicable
</TABLE>
 




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