<PAGE>



                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K
(Mark One)

[X]  Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
     Act of 1934 For the fiscal year ended December 31, 2002
                                       or

[ ]  Transition report pursuant to Section 13 or 15(d) of the Securities
     Exchange Act of 1934 For the transition period from _______________ to
      ________________.

                        Commission file number 333-84486


                               LAND O'LAKES, INC.
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             (Exact Name of Registrant as Specified in Its Charter)


                 Minnesota                                41-0365145
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      (State or Other Jurisdiction of                  (I.R.S. Employer
       Incorporation or Organization)                  Identification No.)


       4001 Lexington Avenue North
          Arden Hills, Minnesota                             55112
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(Address of Principal Executive Offices)                   (Zip Code)

                                 (651) 481-2222
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              (Registrant's Telephone Number, Including Area Code)


         Securities registered pursuant to Section 12(b) of the Act:  None
         Securities registered pursuant to Section 12(g) of the Act:  None

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

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

         Land O'Lakes, Inc. is a cooperative.  Our voting and non-voting common
     equity can only be held by our members.  No public market for voting and
     non-voting common equity of Land O'Lakes, Inc. is established and it is
     unlikely, in the foreseeable future, that a public market for our voting
     and non-voting common equity will develop.

         Documents incorporated by reference:  None.

         Indicate by check mark whether the registrant is an accelerated filer
     (as defined in rule 12-b-2 of the Act).  Yes [ ]    No [X]

         The number of shares of the registrant's common stock outstanding as of
     December 31, 2002: 1,127 shares of Class A common stock, 5,207 shares of
     Class B common stock, 194 shares of Class C common stock, and 1,105 shares
     of Class D common stock.


<PAGE>

                                      INDEX

<Table>
<Caption>
<S>                                                                                          <C>
 PART I.

             Forward Looking Statement.................................................       3

 ITEM 1.     Business..................................................................       3

             Business Segments.........................................................       4

             Description of Cooperative................................................       13

 ITEM 2.     Properties................................................................       19

 ITEM 3.     Legal Proceedings.........................................................       19

 ITEM 4.     Submission of Matters to a Vote of Security Holders.......................       20

 PART II.

 ITEM 5.     Market for Registrant's Common Equity and Related Stockholder Matters.....       20

 ITEM 6.     Selected Financial Data...................................................       20

 ITEM 7.     Management's Discussion and Analysis of Financial Condition and
             Results of Operation......................................................       25

 ITEM 7(a).  Quantitative and Qualitative Disclosures about Market Risk................       58

 ITEM 8.     Financial Statements and Supplementary Data...............................       59

 ITEM 9.     Changes and Disagreements with Accountants on Accounting and
             Financial Disclosure......................................................       59

 PART III.

 ITEM 10.    Directors and Executive Officers of the Registrant........................       60

 ITEM 11.    Executive Compensation....................................................       63

 ITEM 12.    Security Ownership of Certain Beneficial Owners and Management and
               Related Stockholder Matters.............................................       68

 ITEM 13.    Certain Relationships and Related Transactions............................       68

 PART IV.

 ITEM 14.    Controls and Procedures...................................................       68

 ITEM 15.    Exhibits, Financial Statement Schedules, and Reports on Form 8-K..........       69

             Signatures................................................................       73

             Section 302 Certifications................................................       76
 </Table>



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                           FORWARD-LOOKING STATEMENTS

     The information presented in this Annual Report on Form 10-K under the
headings "Item 1. Business" and "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operation" contains forward-looking
statements. The forward-looking statements are based on the beliefs of our
management as well as on assumptions made by and information currently available
to us at the time the statements were made. When used in the Form 10-K, the
words "anticipate", "believe", "estimate", "expect", "may", "will", "could",
"should", "seeks", "pro forma" and "intend" and similar expressions, as they
relate to us are intended to identify the forward-looking statements. All
forward-looking statements attributable to persons acting on our behalf or us
are expressly qualified in their entirety by the cautionary statements set forth
here and in "Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operation--Risk Factors" on pages 48 to 58. We undertake no
obligation to publicly update or revise any forward-looking statements whether
as a result of new information, future events or for any other reason. Although
we believe that these statements are reasonable, you should be aware that actual
results could differ materially from those projected by the forward-looking
statements. For a discussion of factors that could cause actual results to
differ materially from the anticipated results or other expectations expressed
in our forward-looking statements, see the discussion of risk factors set forth
in "Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operation--Risk Factors" on pages 48 to 58. Because actual results
may differ, readers are cautioned not to place undue reliance on forward-looking
statements.

WEBSITE

     We maintain a website on the Internet through which additional information
about Land O'Lakes, Inc. is available. Our website address is
www.landolakesinc.com. Our annual reports on Form 10-K, quarterly reports on
Form 10-Q, current reports of Form 8-K, press releases and earnings releases are
available, free of charge, on our website as soon as practicable after they are
released publicly or filed with the SEC.

                                     PART I

ITEM 1.  BUSINESS.

     Unless context requires otherwise, when we refer to "Land O'Lakes," the
"Company," "we," "us", or "our," we mean Land O'Lakes, Inc. together with its
consolidated subsidiaries.

OVERVIEW

     We were formed as a Minnesota dairy cooperative corporation in 1921 and
entered the animal feed business in 1928. Since our formation, we have expanded
our business through acquisitions and joint ventures. In 1997, we merged with
Atlantic Dairy Cooperative, a Pennsylvania-based cooperative, which provided us
with increased butter production and access to raw milk near our largest butter
markets. In 1998, we merged with Dairyman's Cooperative Creamery Association of
Tulare, California, which increased our access to milk production in the western
United States. Also in 1998, we acquired many of the agricultural service assets
of Countrymark Cooperative, expanding our presence to the eastern Corn Belt in
feed, seed and agronomy. In 2000, we formed Agriliance, an unconsolidated joint
venture for the distribution of crop nutrient and crop protection products. We
have rationalized our business lines in order to concentrate on our core
businesses. In 2000, for example, we sold our fluid dairy business to Dean
Foods, and in 2001, we contributed our aseptic dairy products business to
Advanced Food Products, an unconsolidated joint venture. In October, 2000 we
formed Land O'Lakes Farmland Feed LLC ("Land O'Lakes Farmland Feed"), an animal
feed joint venture with Farmland Industries, Inc ("Farmland Industries"). Land
O'Lakes and Farmland Industries each contributed substantially all of the assets
of each of their North American animal feed businesses to form the joint
venture. On October 11, 2001, Land O'Lakes acquired Purina Mills, Inc. and
subsequently contributed Purina Mills, Inc. to Land O'Lakes Farmland Feed.

     We are a leading producer of dairy products, animal feed and crop seed in
the United States. We market our dairy products under the LAND O LAKES, Alpine
Lace and New Yorker brands and the Indian Maiden logo. We market our animal
feed, other than dog and cat food, under the Purina and Chow brands and the
"Checkerboard" Nine-Square logo. We also market our animal feed products under
the Land O'Lakes Feed label. Our crop seed



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products are sold under the CROPLAN GENETICS brand. In addition to these three
segments, we also have swine and agronomy segments and various unconsolidated
joint ventures and investments.

BUSINESS SEGMENTS

     See Notes to the Company's consolidated financial statements attached to
this annual report on Form 10-K for financial information on our business
segment.

DAIRY FOODS

     Overview. We produce, market and sell butter, spreads, cheese and other
related dairy products. We sell our products under our national brand names,
including LAND O LAKES, the Indian Maiden logo and Alpine Lace, as well as under
our regional brands such as New Yorker. Our network of 15 dairy manufacturing
facilities is geographically diverse and allows us to support our customers on a
national scale. Our customer base includes major national supermarket and
supercenter chains, industrial customers, including major food processors, and
foodservice customers including restaurants, schools, hotels and airlines.

     Products. We manufacture over 300 dairy-based food products. Our principal
dairy products and activities include:

        Butter. We produce and market branded butter under our proprietary LAND
     O LAKES brand name for retail and foodservice customers. In addition, we
     produce nonbranded butter for our private label and industrial customers.
     Our butter products include salted butter, unsalted butter, light butter,
     whipped butter, flavored butter and our newest product, ultra creamy
     butter.

        Spreads. We produce and market a variety of spreads, including
     margarine, nonbutter spreads and butter blends. These products are
     primarily marketed under the LAND O LAKES brand and are sold to our retail,
     foodservice and industrial customers.

        Cheese. We produce and sell cheese for retail sale in deli and dairy
     cases, to foodservice businesses and to industrial customers. Our deli
     cheese products are marketed under the LAND O LAKES, Alpine Lace and New
     Yorker brand names. Our dairy case cheese products are sold under the LAND
     O LAKES brand name. We also sell cheese products to private label
     customers. We offer a broad selection of cheese products, including cheddar
     monterey jack, mozzarella, American and other processed cheeses.

        Other. We manufacture nonfat dry milk and whey for sale to our
     industrial customers. We produce nonfat dry milk by drying the nonfat milk
     byproduct of our butter manufacturing process. It is used in processed
     foods, such as instant chocolate milk. Whey is a valued protein-rich
     byproduct of the cheesemaking process which is used in processed foods,
     sports drinks and other nutritional supplements.

        Raw Milk Wholesaling.  We purchase raw milk from our members and sell it
     directly to other dairy manufacturers, particularly fluid milk processors.
     We generate substantial revenues but negligible margins on these sales. See
     "Item 7: Management's Discussion and Analysis of Financial Condition and
     Results of Operations -- Wholesaling and Brokerage Activities."

     Sales, Marketing and Advertising. In order to meet the needs of our retail,
foodservice and industrial customers, we have sales efforts designed to service
each of these customer bases. Our retail customers are serviced through direct
sales employees and independent national food brokers. Our retail sales force
consists of 55 employees that service our larger retail customers, such as
supermarket and supercenter chains, and manage our national food broker
relationships. We have a relationship with a leading national food broker in the
United States, CROSSMARK, Inc. of Dallas, Texas.

     We market our products to our industrial customers through a combination of
six dedicated salespeople and the efforts of the managers at our manufacturing
facilities. Our industrial customers generally maintain a direct relationship
with our facility managers in order to coordinate delivery and ensure that our
products meet their specifications.

     Our foodservice products are primarily sold through independent regional
food brokers and food distributors. In addition, we employ 21 salespeople who
are responsible for maintaining these regional food broker relationships and
marketing to our large foodservice customers directly.



                                       4
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    Distribution. We contract with third-party trucking companies to distribute
our dairy products throughout the United States in refrigerated trucks. Our
dairy products are shipped to our customers either directly from the
manufacturing facilities or from one of our five regional distribution centers
located in New Jersey, Georgia, Illinois, California and Ohio. As most of our
dairy products are perishable, our distribution facilities are designed to
provide necessary temperature controls in order to ensure quality and freshness
of our products. The combination of our strategically located manufacturing and
distribution facilities and our logistics capabilities enables us to provide our
customers with a highly efficient distribution system.

    Production. We produce our dairy products at 15 manufacturing facilities
strategically located throughout the United States. We also have contractual
arrangements whereby we engage other dairy processors to produce some of our
products. We believe the geographic distribution of our plants allows us to
service our customers in a timely and efficient manner. In 2002, we processed
approximately 7.9 billion pounds of milk, primarily into butter and cheese.
Butter is produced by separating the cream from milk, pasteurizing it and
churning the cream until it hardens into butter. Butter production levels
fluctuate due to the seasonal availability of milk and butterfat. The cheese
manufacturing process involves adding a culture and a coagulant to milk. Over a
period of hours, the milk mixture hardens to form cheese. At that point, whey is
removed and separately processed. Finally, the cheese is salted, shaped and
aged.

    Supply and Raw Materials. Our principal raw material for production of dairy
products is milk. During 2002, we sourced approximately 93% of our raw milk from
our members. We enter into milk supply agreements with all of our dairy members
to ensure our milk supply. These contracts typically provide that we will pay
the producer for milk in the month following its delivery, at a price determined
by us, which typically includes a premium over Federal market order prices.
These contracts provide that we will purchase all of the milk produced by our
members for a fixed period of time, generally one year. As a result, we often
purchase more milk from our members than we require for our production
operations. There are three principal reasons for doing this: first, we need to
sell a certain percentage (which is not less than 10% of the amount procured and
depends on which Federal market order the milk is subject to) of our raw milk to
fluid dairy processors in order to participate in the Federal market order
system, which enables us to have lower input cost of milk; second, it decreases
our need to purchase additional supply during periods of low milk production in
the United States (typically August, September and October); and third, it
ensures that our members have a market for the milk they produce during periods
of high milk production. We enter into fixed-price forward sales contracts with
some of our large industrial cheese customers representing 10-15% of our
processed milk volume. We simultaneously enter into milk supply agreements with
a fixed price in order to ensure our margins on these contracts. We also
purchase cream, bulk cheese and bulk butter as raw materials for production of
our dairy products. We typically purchase cream pursuant to annual agreements
with fluid processors to purchase all of their cream production. We typically
purchase bulk cheese and butter pursuant to annual contracts. These cheese and
butter contracts provide for annual targets and delivery schedules and are based
on market prices. In isolated instances, we purchase these commodities on the
open market at current market prices. We refer to this type of transaction as a
spot market purchase.

    Customers. We sell our dairy products directly and indirectly to over 500
customers. Our products are sold in over 5,000 retail locations, including
supermarkets and supercenters, convenience stores, warehouse club stores and
military commissaries. Our retail customers include supermarket and supercenter
chains. In addition, we sell our products through food brokers and distributors
to foodservice providers such as restaurant chains, schools, hotels and
airlines.

    Research and Development. We seek to offer our customers product innovations
designed to meet their needs. In addition, we work on product and packaging
innovations to increase overall demand for our products and improve product
convenience. In 2002, we spent $11.5 million on dairy research and development,
and we employed approximately 66 individuals in research capacities at our
dedicated dairy foods research facility.

    Competition. The bulk of the dairy industry consists of national and
regional competitors. Our branded cheese products compete with products from
national competitors such as Kraft, Borden and Sargento as well as several
regional competitors. For butter, our competition comes primarily from regional
brands, such as Challenge, Borden and Breakstone. Because our retail customers
are consolidating, we face increased competitive pressures. We rely on our
brands to differentiate our products from our competition. We believe our
branded products compete on the basis of brand name recognition, product quality
and reputation, and customer support. Products in the private label



                                       5
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and industrial markets compete primarily based on price. We believe our product
quality and consistency of supply distinguishes our products in these markets.

ANIMAL FEED

    Overview. Through Land O'Lakes Farmland Feed, we are the leading producer of
animal feed for both the commercial and lifestyle sectors of the animal feed
market in the United States. Our commercial feed products are used by farmers
and specialized livestock producers who derive income from the sale of milk,
eggs, poultry and livestock. Our lifestyle feed products are used by customers
who own animals principally for non-commercial purposes. Margins on our
lifestyle feed products are significantly higher than those on our commercial
feed products. We market our animal feed, other than dog and cat food, under the
leading brands in the industry, Purina, Chow and the "Checkerboard" Nine Square
logo. We also market our animal feed products under the Land O'Lakes Feed label.
As of December 31, 2002, we operated a geographically diverse network of 100
feed mills, which permits us to distribute our animal feed nationally through
approximately 1,300 of our local member cooperatives, through approximately
3,550 independent dealers operating under the Purina brand name and directly to
customers. We believe we are a leader among feed companies in animal feed
research and development with a focus on enhancing animal performance and
longevity. For example, we developed and introduced milk replacer for young
animals, and our patented product formulations make us the only supplier of
certain unique milk replacer products. These products allow dairy cows to return
to production sooner after birthing and increase the annual production capacity
of cows. We expect the addition of Purina Mills to our feed operations to
generate significant cost savings as we eliminate redundant facilities, reduce
overhead costs, increase capacity utilization, increase our purchasing economies
and improve our logistics and transportation system. We operate our feed
business entirely through our Land O'Lakes Farmland Feed joint venture,
including certain insignificant foreign investments and subsidiaries.

    Products. We sell proprietary formulas of commercial and lifestyle animal
feed. We also produce commercial animal feed to meet our customers'
specifications. We sell feed for a wide variety of animals, such as dairy
cattle, beef cattle, swine, poultry, horses and other specialty animals such as
laboratory and zoo animals. Our principal feed products and activities include:

        Complete Feed. These products provide a balanced mixture of grains,
    proteins, nutrients and vitamins which meet the entire nutritional
    requirement of an animal. They are sold as ground meal, in pellets or in
    extruded pieces. Sales of complete feeds typically represent the majority of
    net sales. We generally sell our lifestyle animal feed as complete feed. We
    market our lifestyle animal feed to these customers through the use of our
    strong trademarks, namely, Purina, Chow and the "Checkerboard" Nine Square
    logo.

        Supplements. These products provide a substantial part of a complete
    ration for an animal, and typically are distinguished from complete feed
    products by their lack of the bulk grain portion of the feed. Commercial
    livestock producers typically mix our supplements with their own grain to
    provide complete animal nutrition.

        Premixes. These products are concentrated additives for use in
    combination with bulk grain and a protein source, such as soybean meal.
    Premixes consist of a combination of vitamins and minerals that are sold to
    commercial animal producers and to other feed mill operators for mixing with
    bulk grains and proteins.

        Milk Replacers. Milk replacers, a product we invented, are sold to
    commercial livestock producers to meet the nutritional requirements of their
    young animals while increasing their overall production capability by
    returning the parent animal to production faster. We market these products
    primarily under our Maxi Care, Cow's Match and Amplifier Maxbrand names. We
    have patents that cover certain aspects of our milk replacer products and
    processes. Our two principal milk replacer patents expire in April 2015 and
    April 2020.

        Ingredient Merchandising. In addition to selling our own products, we
    buy and sell or broker for a fee soybean meal and other feed ingredients. We
    market these ingredients to our local member cooperatives and to other feed
    manufacturers which use them to produce their own feed. Although this
    activity generates substantial revenues, it is a very low-margin business.
    We are generally able to obtain feed inputs at a lower cost as a result of
    our ingredient merchandising business because of lower per unit shipping
    costs associated with larger purchases and volume discounts.



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    Sales, Marketing and Advertising. We employ approximately 450 direct
salespeople in regional territories. In our commercial feed business, we also
provide our customers with information and technical assistance through trained
animal nutritionists. We also provide information resources and technical
assistance to these nutritionists. Our advertising and promotional expenditures
are focused on higher margin products, specifically our lifestyle animal feed
and milk replacers. We advertise in recreational magazines to promote our
lifestyle animal feed products. To promote our horse feed products, we have
dedicated promoters who travel to rodeos and other horse related events. We
promote our milk replacers with print advertising in trade magazines. We spent
$17.9 million on advertising and promotion for the year ended December 31, 2002.

    Distribution. We distribute our animal feed nationally primarily through our
network of approximately 1,300 local member cooperatives and approximately 3,550
Purina-branded dealers or directly to customers. We deliver our products
primarily by truck using our own fleet and independent carriers. Deliveries are
made directly from our feed mills to delivery locations within each feed mill's
geographic area.

    Production. The basic feed manufacturing process consists of grinding
various grains and protein sources into meal and then mixing these materials
with certain nutritional additives, such as vitamins and minerals. The resulting
products are sold in a variety of forms, including meal, pellets, blocks and
liquids. Our products are formulated based upon proprietary research pertaining
to nutrient content. As of December 31, 2002, we operated 100 feed mills across
the United States. We have reduced the number of feed mills we operate by taking
advantage of the overlap between our existing facilities and those of Purina
Mills in certain local markets. Consistent with current industry capacity
utilization, our facilities operate below their capacity. With the reduction of
redundant facilities and conversion of certain facilities to a single product,
we expect to increase our capacity utilization. Our animal feed segment
operates, or has investments in, insignificant foreign operations in, Canada,
Mexico, United Kingdom and Taiwan.

    Supply and Raw Materials. We purchase the bulk components of our products
from various suppliers and in the open ingredient markets. These bulk components
include corn, soybean meal and grain byproducts. In order to reduce
transportation costs, we arrange for delivery of these products to occur at our
feed mill operations throughout the United States. We purchase vitamins and
minerals from multiple vendors, including vitamin, pharmaceutical and chemical
companies.

    Customers. Our customers range from large commercial corporations to
individuals. We also sell our animal feed products to local cooperatives. These
local cooperatives either use these products in their own feed manufacturing
operations or resell them to their customers. Our customers purchase our animal
feed products for a variety of reasons, including our ability to provide
products that fulfill some or all of their animals' nutritional needs, our
knowledge of animal nutrition, our ability to maintain quality control and our
available capacity.

    Research and Development. Our animal feed research and development focuses
on enhancing animal performance and longevity. We also dedicate significant
resources to developing proprietary formulas that allow us to offer our
commercial customers alternative feed formulations using lower cost ingredients.
We employ 97 people in various animal feed research and development functions at
our research and development facilities. In 2002 we spent $9.8 million on
research and development.

    Competition. The animal feed industry is highly fragmented. Our competitors
consist of many small local manufacturers, several regional manufacturers and a
limited number of national manufacturers. The available market for commercial
feed may become smaller and competition may increase as meat processors become
larger and integrate their business by acquiring their own feed production
facilities. In addition, purchasers of commercial feed tend to select products
based on price rather than manufacturer and some of our feed products are
purchased from third parties with minimal further processing by us. As a result
of these factors, the barriers to entry in the feed industry are low. The market
for lifestyle feed is also consolidating. We believe we distinguish ourselves
from our competitors through our high-performance, value-added products, which
we research, develop and distribute on a national basis. We believe our brands,
Purina, Chow and the "Checkerboard" Nine Square logo, provide us with a
competitive advantage as they are well-recognized, national brands for lifestyle
animal feed. We also compete on the basis of service by providing training
programs using animal nutritionists with advanced technical qualifications to
consult with local member cooperatives, independent dealers and livestock
producers, and by developing and manufacturing customized products to meet
customer needs.



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    Governance. We operate our domestic feed business through our Land O'Lakes
Farmland Feed joint venture. Prior to the Purina Mills acquisition, we owned
73.7% of the joint venture. After the Purina Mills acquisition, we contributed
all of the equity interest in Purina Mills to Land O'Lakes Farmland Feed. As a
result, our ownership of Land O'Lakes Farmland Feed increased to 92.0%. We
manage Land O'Lakes Farmland Feed's day-to-day operations, and it is governed by
a five member board of managers. We have the right to appoint three members to
the board and Farmland Industries has the right to appoint two members to the
board. According to the terms of the Land O'Lakes Farmland Feed operating
agreement, actions of the board of managers require a majority vote. Certain
items require unanimous approval of the board of managers, including (1)
materially changing the scope of the business of the joint venture; (2) electing
to dissolve the joint venture; (3) selling all or substantially all of its
assets or significant assets; (4) requiring additional capital contributions;
(5) authorizing cash distributions of earnings; (6) changing income tax
elections or changing accounting practices to the extent they have a material
impact on Farmland Industries; (7) reducing the number of meetings of the
members committee to less than four per calendar year; (8) amending the
management services agreement with Land O'Lakes; and (9) adopting annual budgets
and business plans or any material amendments thereto.

    Pursuant to the Land O'Lakes Farmland Feed operating agreement, we have a
one-time option to purchase Farmland Industries' interest in the joint venture
at a price to be determined by negotiation or appraisal. The option period runs
from September 1, 2003, to September 1, 2005. Farmland Industries may reject our
request to exercise our option; however, if Farmland Industries rejects our
request, the voting rights on the board will be allocated based upon Land
O'Lakes' and Farmland Industries' financial interests in Land O'Lakes Farmland
Feed, and the number of actions requiring unanimous consent of the board will be
limited to items (2), (4), (5), (6) and (8) above as well as any action that
affects one member or the other or any distribution which is not proportionate
to a member's ownership interest.

CROP SEED

    Overview. We sell seed for a variety of crops, including alfalfa, soybeans,
corn and forage and turf grasses, under our CROPLAN GENETICS brand. We also
distribute certain crop seed products under third-party brands and under private
labels. Alfalfa is commonly grown for use in dairy and beef cattle nutrition. We
distribute our seed products through our network of local member cooperatives,
to other seed companies and to retail distribution outlets. We have strategic
relationships with Syngenta and Monsanto, two leading crop seed producers in the
United States, to which we provide distribution and research and development
services.

    Products. We develop, produce and distribute seed products including seed
for alfalfa, soybeans, corn and forage and turf grasses. We also market and
distribute seed products produced by other crop seed companies, including seed
for corn, soybeans, sunflowers, canola, sorghum and sugar beets. Seed products
are often genetically engineered through selective breeding or gene splicing to
produce crops with specific traits. These traits include resistance to
herbicides and pesticides and enhanced tolerance to adverse environmental
conditions. As a result of our relationships with certain life science
companies, we believe we have access to one of the most diverse genetic
databases of any seed company in the industry. We also license some of our
proprietary alfalfa seed traits to other seed companies for use in their seed
products.

    Sales, Marketing and Advertising. We have a sales force of approximately 128
employees who promote the sale of our seed products throughout the country,
particularly in the Midwest. Our sales and marketing strategy is built upon the
relationships we have established with our local member cooperatives and our
ability to purchase and distribute quality seed products at a low cost due to
our size and scale. We market our crop seed products under our brand name
CROPLAN GENETICS. We also distribute certain crop seed products under
third-party brands and under private label. We engage in a limited amount of
advertising, primarily utilizing marketing brochures and field signs. We are a
leader in online customer communications and order processing. We also
participate in the Total Farm Solutions program with our affiliate Agriliance.
Through this program, trained agronomists are placed at local cooperatives to
provide advisory services regarding crop seed and agronomy products.

    Distribution. We distribute our seed products through our network of local
member cooperatives, to other seed companies and to retail distribution outlets.
We have relationships with Syngenta and Monsanto, two leading crop seed
producers in the United States, to which we provide distribution and research
and development services. We also sell our proprietary products under private
labels to other seed companies for sale through their distribution channels.
Additionally, several of our product lines (particularly turf grasses) are sold
to farm supply retailers and



                                       8
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home and garden centers. We use third-party trucking companies for the
nationwide distribution of our seed products.

    Supply and Production. Our alfalfa, soybeans, corn and forage and turf grass
seed are produced to our specifications and under our supervision on farms by
geographically diverse third-party producers. We maintain a significant
inventory of corn and alfalfa seed products in order to mitigate negative
effects caused by weather or pests. Our alfalfa and corn seed products can be
stored for up to four years after harvesting. Our crop seed segment has foreign
operations in Argentina and Canada.

    Customers. We sell our seed products to over 6,500 customers, none of which
represented more than 3% of our crop seed net sales in 2002. Our customers
consist primarily of our local member cooperatives and other seed companies
across the United States and internationally. Our customer base also includes
retail distribution outlets.

    Research and Development. We focus our research efforts on crop seed
products for which we have a significant market position, particularly alfalfa
seed. We also work with other seed companies to jointly develop beneficial crop
seed traits. In 2002, we spent $6.2 million on crop seed research and
development. As of December 31, 2002, we employed 20 individuals in research and
development capacities and had four research and development facilities.

    Competition. Our competitors include Pioneer Hi-Bred International,
Monsanto, Syngenta and The Dow Chemical Company as well as many small niche seed
companies. We differentiate our seed business by supplying a branded,
technologically advanced, high quality product and by providing farmers with
access to agronomists through our joint Total Farm Solutions program with
Agriliance. These services are increasingly important as the seed industry
becomes more dependent upon biotechnology and crop production becomes more
sophisticated. Due to the added cost involved, our competitors, with the
exception of Pioneer, generally do not provide such services. We can provide
these services at a relatively low cost because we often share the costs of an
agronomist with Agriliance or with a local cooperative.

SWINE

    We market both young weanling and feeder pigs (approximately 11 and 45
pounds respectively) and mature market hogs (approximately 260 pounds) under
three primary programs: swine aligned, farrow-to-finish, and cost-plus. Under
the swine aligned program, we own sows and raise feeder pigs for sale to our
local member cooperatives. We raise market hogs for sale to pork processors
under our farrow-to-finish program. The cost-plus operation provides minimum
price floors to producers for market hogs. The price floor fluctuates based on
the cost of corn and soybean meal. The majority of our cost-plus contracts will
expire in late 2003 and early 2004 and all contracts will have expired no later
than 2005. We are not entering into new cost-plus contracts.

    We own approximately 65,000 sows producing approximately 623,000 feeder pigs
and 584,000 market hogs annually at facilities we own or lease and at facilities
owned by approximately 154 contract producers. The dramatic volatility in the
live hog market in 2002, 1999 and 1998, where selling prices were well below
cost, resulted in our swine operations generating losses primarily in connection
with our cost-plus and our farrow-to-finish programs. In 2002 the average price
per hundred weight was $36 compared to $47 in 2001.

    Historically, Purina Mills reported results of its swine business together
with its feed business. Accordingly, the portion of our swine business which we
acquired from Purina Mills in October 2001 is reported within our feed segment.
Purina Mills operates its swine business under the pass-through program and the
market risk sharing program. Under the pass-through program, we enter into
commitments to purchase weanling and feeder pigs from producers and generally
have commitments to immediately resell the animals to swine producers. The
market risk sharing program provides minimum price floors to producers for
market hogs. The price floor in our market risk sharing program floats with the
market price of hogs and the cost of swine feed. For a discussion of our swine
accounting and results see "Item 7: Management's Discussion and Analysis of
Financial Condition and Results of Operation."



                                       9
<PAGE>



AGRONOMY

    Our agronomy segment consists primarily of joint ventures and investments
that are not consolidated in our financial results. The two most significant of
these are Agriliance and CF Industries. As a result, our agronomy segment has no
net sales, but we allocate overhead to selling and administration and may
recognize patronage as a reduction in cost of sales. See "Joint Ventures and
Investments" for a discussion of the business of Agriliance and CF Industries.
For a discussion of our agronomy accounting and results see "Item 7:
Management's Discussion and Analysis of Financial Condition and Results of
Operation."

OTHER

    We also operate various other wholly-owned businesses such as LOL Finance
Co., which provides financing to farmers and livestock producers.

JOINT VENTURES AND INVESTMENTS

    Other than Cheese & Protein International LLC ("Cheese & Protein
International"), which is a consolidated unrestricted subsidiary, the joint
ventures and investments described below are unconsolidated.

    AGRILIANCE LLC. Agriliance, a 50/50 joint venture with United Country Brands
(jointly owned by CHS Cooperatives and Farmland Industries) was formed for the
purpose of distributing and manufacturing agronomy products. Prior to the
contribution of our agronomy assets to Agriliance, the financial results of
these assets were consolidated for financial reporting purposes.

    Products. Agriliance markets and sells two primary product lines: crop
nutrients (including fertilizers and micronutrients) and crop protection
products (including herbicides, pesticides, fungicides and adjuvants). For
Agriliance's fiscal year ended August 31, 2002, approximately 87% of these
products were manufactured by third-party suppliers and marketed under the
suppliers' brand names. The remaining 13% was either manufactured by Agriliance
or by a third-party supplier and marketed under the brand names Agrisolutions
(for herbicides, pesticides and related products) and Origin (for
micronutrients).

    Sales and Marketing. Agriliance has an internal sales force of approximately
100 employees. Agriliance's sales and marketing efforts serve the entire United
States, with its primary focus on the area from the Midwest to the eastern Corn
Belt. Agriliance's strategy is built upon strong relationships with local
cooperatives and Agriliance's ability to purchase and distribute quality
agronomy products at a low cost due to its size and scale. Agriliance engages in
a limited amount of advertising in trade journals and produces marketing
brochures and advertisements utilized by local cooperatives. In addition,
Agriliance assists local member cooperatives and independent farmers by
identifying, recruiting and training agronomists who provide advice relating to
agronomy products. In the Midwest, Agriliance has implemented the Total Farm
Solutions program, an effort to utilize the expertise of the agronomists to
bundle Agriliance products with our seed products.

    Production, Source of Supply and Raw Materials. Agriliance operates
primarily as a wholesale distributor of products purchased from other
manufacturers. Agriliance's primary suppliers of crop protection products are
Syngenta, Monsanto, BASF, Dow Chemical, DuPont and Aventis. Agriliance enters
into annual distribution agreements with these manufacturers. However,
Agriliance manufactures approximately 10% of its proprietary crop protection
products. Agriliance's production facilities are located in Iowa, Arkansas,
Missouri and Minnesota. Agriliance procures approximately 65% of its fertilizer
needs from CF Industries, of which we are a member, and Farmland Industries.
Farmland Industries initiated Chapter 11 bankruptcy proceedings on May 31, 2002.
Agriliance has other sources of supply that it could use to fill its anticipated
fertilizer needs in the event Farmland Industries fails to meet its delivery
obligations to Agriliance. Agriliance currently sources their remaining
fertilizer supply needs from a variety of suppliers including PCS, IMC, Terra
Nitrogen, Mississippi Chemical and Agrium. Agriliance also produces
micronutrient products. In 2002, approximately 58% of Agriliance's agronomy
products were sourced from three suppliers.

    Customers and Distribution. Agriliance's customer base consists primarily of
farmers, many of whom are members of our local cooperatives. Agriliance
distributes its products through our local member cooperatives and also through
retail agronomy centers owned by Agriliance. Agriliance stores inventory at a
number of strategically


                                       10
<PAGE>


positioned locations, including leased warehouses and storage space at local
cooperatives. Agriliance serves most of the key agricultural areas of the United
States, with its customers and distribution concentrated in the Midwest.

    Competition. Agriliance's primary competitors are national crop nutrient
distributors, such as Cargill, IMC, PCS, Agrium and Royster Clark, national crop
protection product distributors, such as UAP, Helena and Wilbur-Ellis, as well
as smaller regional brokers and distributors. This wholesale agronomy industry
is consolidating as distributors attempt to expand their distribution
capabilities and efficiencies. Wholesale agronomy customers tend to purchase
products based upon a distributor's ability to provide ready access to product
at critical times prior to and during the growing season. In addition, certain
customers purchase on the basis of price. We believe Agriliance distinguishes
itself from its competitors as a result of its distribution network, which
enables it to efficiently distribute product to customers. In addition,
Agriliance provides access to trained agronomists who give advice to farmers on
both agronomy and crop seed products to optimize their crop production.

    Governance. Agriliance is managed by a four member board of managers. We and
United Country Brands each have the right to appoint two of the managers.
Certain actions require the unanimous approval of the board, including (1)
adopting or amending the annual business plan; (2) distributing products
produced by Agriliance to anyone other than the members or patrons of
Agriliance's members; (3) approving capital expenditures related to the
expansion of Agriliance's production capabilities, purchasing additional
inventory or changing the types of products produced by Agriliance; (4)
incurring indebtedness other than in the ordinary course of business; (5)
appointing, replacing, or discharging an executive officer; (6) making
distributions to members; and (7) changing income tax or special accounting
elections. Pursuant to the terms of Agriliance's operating agreement, Land
O'Lakes, CHS Cooperatives and Farmland Industries have all agreed to refrain
from directly or indirectly engaging in the wholesale marketing of fertilizer
and agricultural chemicals in North America, except through Agriliance, for so
long as they, or an entity in which they are a material owner, remain a member
of Agriliance, and for a period of four years following termination of their
membership.

    MOARK LLC. In January 2000, we formed MoArk LLC, a joint venture of which we
currently own 57.5% with Osborne Investments, LLC, to produce and market eggs
and egg products. We increased our ownership percentage from 50% to 57.5% in
February 2003 for $7.8 million. We have the right to purchase from Osborne (and
Osborne has the right to cause us to buy from them) their interest in MoArk for
a minimum purchase price of $42.2 million (adjusted for tax benefits received by
Osborne and purchase price already paid) or a greater amount based upon MoArk's
performance over time. These rights are exercisable in January 2007. Although
Osborne has a 42.5% interest in MoArk, we are allocated 100% of the income or
loss of MoArk (other than on capital transactions involving realized gain or
loss on intangible assets, which are allocated 50/50). In addition to the $7.8
million payment made by Land O'Lakes in February, MoArk is obligated to make
four guaranteed payments to Osborne in 2004, 2005, 2006 and 2007, each in the
amount of $1,445,000.

    Products. MoArk produces and markets shell eggs and egg products that are
sold at retail and wholesale for consumer and industrial use throughout the
United States. As of December 31, 2002, MoArk marketed and processed eggs from
approximately 37 million layers (hens) which produced approximately 740 million
dozen eggs annually. Approximately 41% of the eggs and egg products marketed are
produced by layers owned by MoArk. The remaining 59% are purchased on the spot
market or from third-party producers. Shell eggs represent approximately 78% of
eggs MoArk sells annually, and the balance are broken for use in egg products
such as refrigerated liquid, frozen, dried and extended shelf life liquid. MoArk
recently launched a high quality, all natural shell egg product marketed under
the LAND O LAKES brand name in a Northeast market. Through MoArk's acquisition
of Cutler Egg Products in April 2001, MoArk acquired a patented process that
extends the shelf life of a refrigerated liquid egg product utilizing an
ultra-pasteurization process.

    Customers and Distribution. MoArk has approximately 950 retail grocery,
industrial, foodservice and institutional customers. While supply contracts
exist with a number of the larger retail organizations, the terms are typically
market based, annual contracts and allow early cancellation by either party.
MoArk primarily delivers directly to its customer (store to door delivery).
Alternatively, some customers pick up product at one of MoArk's facilities.

    Sales and Marketing. MoArk's internal sales force maintains direct
relationships with customers. MoArk also uses food brokers to maintain select
accounts and for niche and "spot" activity in situations where MoArk cannot
effectively support the customer or needs to locate a customer or customers for
excess products. With the exception



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<PAGE>



of the advertising activity associated with the launch of the LAND O LAKES brand
eggs, amounts spent for advertising are insignificant.

    Competition. MoArk competes with other egg processors, including Cal-Maine
Foods, Rose Acre Farms, Inc. and Michael Foods. MoArk competes with these
companies based upon its low cost production system, its high margin regional
markets and its diversified product line.

    Governance. We are entitled to appoint three managers to the board of
managers of MoArk, and Osborne has the right to appoint the remaining three
managers until its governance interest has been transferred to us. According to
the terms of MoArk's operating agreement, two managers elected by us and two
managers elected by Osborne constitute a quorum. Actions of the board of
managers require a unanimous vote of a quorum of the board of managers. MoArk is
required to maintain at all times a net worth in excess of $40.0 million. If
MoArk's net worth were to decline below $40.0 million, we would be required to
contribute the necessary funds in order to maintain the $40.0 million net worth.
As of December 31, 2002, MoArk's net worth was approximately $93 million. In the
event we decide to sell or transfer any or part of our economic and governance
interest in MoArk, including our right to cause the transfer of the governance
interest owned by Osborne, we must first offer to sell or transfer to Osborne
all of the rights and interests to be sold or transferred at a similar price and
under similar material terms and conditions.

CHEESE & PROTEIN INTERNATIONAL LLC. Cheese & Protein International, a 95% owned
consolidated joint venture with a subsidiary of Mitsui & Co. (USA), has
constructed and is operating a mozzarella cheese and whey plant in Tulare,
California. Commercial production commenced in May 2002. In connection with the
formation of the venture, we entered into a marketing agreement with Mitsui and
Cheese & Protein International which gives us the right to distribute the
products produced by the venture in the United States and gives Mitsui the right
to distribute the same products outside the United States. Once the start-up
phase is complete, the purchase price for all products will be based upon the
market prices for such product. We have also contracted with Cheese & Protein
International to provide no less than 70% of their milk requirements at prices
based upon market prices for milk. In addition, we have agreed to purchase no
less than 70% of Cheese & Protein International's estimated production of
mozzarella cheese, based upon market prices. This venture is governed by a 10
member committee. We have the right to appoint seven members to the committee.
The remaining three members are appointed by our joint venture partner.
Notwithstanding the foregoing, on November 25, 2002, Mitsui provided notice of
its intent to exercise a put option which, if exercised, would have required us
to purchase its thirty percent equity interest in CPI. Before the exercise date,
however, Mitsui elected to maintain a five percent ownership stake and agreed to
continue to negotiate with us regarding, among other things, its ownership
percent, its role in governance and its marketing rights. We are close to
reaching an agreement and we expect that Mitsui will continue to be a partner in
the joint venture going forward. If we are unable to reach agreement on or
before June 1, 2003, however, we have agreed to purchase Mitsui's remaining five
percent interest. If we acquire Mitsui's remaining equity interest after June
30, 2003, and if we do not replace Mitsui with another partner, CPI would become
a restricted subsidiary at that time. As a restricted subsidiary, CPI's
on-balance sheet debt and earnings would be included in the covenant
calculations for our credit facilities. Further, as a Restricted Subsidiary, CPI
would be required to guarantee our credit facilities and our senior unsecured
indebtedness. However, for as long as CPI remains non-wholly owned, it will
continue to be unrestricted for purposes of the credit facilities, and will not
be required to guarantee the credit facilities or the senior unsecured
indebtedness.


    ADVANCED FOOD PRODUCTS, LLC. We own a 35% interest in Advanced Food
Products, a joint venture which manufactures and markets a variety of custom and
noncustom aseptic products. Aseptic products are manufactured to have extended
shelf life through specialized production and packaging processes, enabling food
to be stored without refrigeration until opened. We formed Advanced Food
Products in 2001, with a subsidiary of Bongrain, S.A., a French food company,
for the purpose of manufacturing and marketing aseptically packaged cheese
sauces, snack dips, snack puddings, and ready to drink dietary beverages. The
venture is governed by a six member board of managers, and we have the right to
appoint two members. Bongrain manages the day-to-day operations of the venture.

    CF INDUSTRIES, INC. CF Industries is one of North America's largest
interregional cooperatives, and is owned by ten cooperatives. CF Industries
manufactures fertilizer products, which are distributed by its members or their
affiliates. CF Industries has manufacturing facilities in Louisiana, Alberta,
Canada and Florida. As of December 31, 2002, our percentage of ownership of
allocated equity of CF Industries was 38%. Each of the members, including



                                       12
<PAGE>



Land O'Lakes, has the right to elect one director to the board of directors. The
day-to-day operations of the cooperative are managed by the officers of CF
Industries who are elected by its board of directors.

    COBANK. CoBank is a cooperative lender of which we are a member. Our equity
interest in CoBank and the amount of patronage we receive is dependent upon our
outstanding borrowings from CoBank.

    AG PROCESSING. Ag Processing is a cooperative that produces soybean meal and
soybean oil. As a member of Ag Processing, we are entitled to patronage based
upon our purchases of these products. We use soybean meal as an ingredient in
our feed products. Soybean oil is an ingredient used to produce our dairy spread
products.

DESCRIPTION OF THE COOPERATIVE

    Land O'Lakes is incorporated in Minnesota as a cooperative corporation.
Cooperatives resemble traditional corporations in most respects, but with two
primary distinctions. First, a cooperative's common shareholders, its "members",
either supply the cooperative with raw materials or purchase its goods and
services. Second, to the extent a cooperative allocates its earnings from member
business to its members and meets certain other requirements, it is allowed to
deduct this "patronage income," known as "qualified" patronage income, from its
taxable income. Patronage income is allocated in accordance with the amount of
business each member conducts with the cooperative.

    Cooperatives typically derive a majority of their business from members,
although they are allowed by the Internal Revenue Code to conduct non-member
business. Earnings are designated as "pool" earnings or "non-pool" earnings
according to the Internal Revenue Code and decisions made by each cooperative.
Pool earnings are then segregated into earnings generated from member and
non-member business. Pool earnings may be treated as patronage income if they
are generated from business conducted with or for a member of the cooperative.
Non-pool earnings and earnings from non-member business are taxed as corporate
income in the same manner as a typical corporation. The after-tax amount is
retained as permanent equity by the cooperative. Pool earnings from member
business are either allocated to patronage income or retained as permanent
equity (in which case it is taxed as corporate income) or some combination
thereof.

    In order to obtain favorable tax treatment on allocated patronage income,
the Internal Revenue Code requires that at least 20% of each member's annual
allocated patronage income be distributed in cash. The portion of patronage
income that is not distributed in cash is retained by the cooperative, allocated
to member equities and distributed to the member at a later time as a
"revolvement" of equity. The cooperative's members must recognize the amount of
allocated patronage income (whether distributed to members or retained by the
cooperative) in the computation of their individual taxable income.

    At their discretion, cooperatives are also allowed to designate patronage
income as "nonqualified" patronage income and allocate it to member equities.
Unlike qualified patronage income, the cooperative pays taxes on this
nonqualified patronage income as if it was derived from non-member business. The
cooperative's members do not include undistributed nonqualified patronage income
in their current taxable income. However, the cooperative may revolve the equity
representing the nonqualified patronage income to members at some later date,
and is allowed to deduct those amounts from its taxable income at that time.
When nonqualified patronage income is revolved to the cooperative's members, the
revolvement must be included in the members' taxable income.

OUR STRUCTURE AND MEMBERSHIP

    We have both voting and nonvoting members, with differing membership
requirements for cooperative and individual members. We also separate our
members into two categories: "dairy members" supply our dairy foods segment with
dairy products, primarily milk, cream, cheese and butter, and "ag members"
purchase agricultural products, primarily agronomy products, feed and seed from
our other operations or joint ventures. We further divide our dairy and ag
members by region. There are eight dairy regions and five ag regions.

    All of our members must purchase stock and comply with uniform conditions
prescribed by our board of directors and by-laws. The board of directors may
terminate a membership if it determines that the member has failed to adequately
patronize us or has become our competitor.



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<PAGE>



    A cooperative voting member (a "Class A" member) must be an association of
producers of agricultural products operating on a cooperative basis engaged in
either the processing, handling, or marketing of its members' products or the
purchasing, producing, or distributing of farm supplies or services. Class A
members are entitled to a number of votes based on the amount of business done
with the Company. Class A members tend to be ag members, although a Class A
member may be both an ag and dairy member if they both supply us with dairy
products and purchase agricultural products from us or our joint ventures.

    An individual voting member (a "Class B" member) is an individual,
partnership, corporation or other entity other than a cooperative engaged in the
production of agricultural commodities. Class B members are entitled to one
vote. Class B members tend to be dairy members. Class B members may be both an
ag and dairy member if they both provide us with dairy products and purchase
agricultural products from us or our joint ventures.

    Our nonvoting cooperative members ("Class C" members) are associations
operating on a cooperative basis but whose members are not necessarily engaged
in the production or marketing of agricultural products. Such members are not
given the right to vote, because doing so may jeopardize our antitrust exemption
under the Capper-Volstead Act (the exemption requires all our voting members be
engaged in the production or marketing of agricultural products). Class C
members also include cooperatives which are in direct competition with us.
Nonvoting individual members ("Class D" members) generally do a low volume of
business with us and are not interested in our governance.

GOVERNANCE

    Our board is made up of 24 directors. Our dairy members nominate 12
directors from among the dairy members and our ag members nominate 12 directors
from among the ag members. The nomination of directors is conducted within each
group by region. The number of directors nominated from each region is based on
the total amount of business conducted with the cooperative by that region's
members. Directors are elected to four year terms at our annual meeting by
voting members in a manner similar to a typical corporation. Our by-laws require
that, at least every five years, we evaluate both the boundaries of our regions
and the number of directors from each region, so that the number of directors
reflects the proportion of patronage income from each region.

    The board may also choose to elect up to three non-voting advisory members.
Currently, we have one such member. The board governs our affairs in the same
manner as the boards of typical corporations that are not organized as
cooperatives.

EARNINGS

    As described above, we divide our earnings between pool and non-pool and
member and non-member business. We then allocate member earnings to dairy foods
operations or agricultural operations (which is comprised of our feed, crop
seed, agronomy and swine segments). Pool earnings from each of our segments are
currently maintained in separate pools. We have also established a second pool
for our dairy foods segment for farmers who sell milk to us for resale as
commodity fluid milk. For our dairy foods operations, the amount of member
business is based on the amount of dairy products supplied to us by our dairy
members. In calendar year 2002, 69.1% of our dairy input requirements came from
our dairy members. For our agricultural operations, the amount of member
business is based on the dollar-amount of products sold to our agricultural
members. In calendar year 2002, 83% of our agricultural products net sales, and
86% of our operating income, was derived from sales to agricultural members.

PATRONAGE INCOME AND EQUITY

    To acquire and maintain adequate capital to finance our business, our
by-laws allow us to retain up to 15% of our earnings from member business as
additions to permanent equity. We currently retain 10% and allocate the
remainder of our earnings from member business to patronage income.

    We have two plans through which we revolve patronage income to our members:
the Equity Target Program for our dairy foods operations and the Revolvement
Program for our agriculture businesses.

    The Equity Target Program provides a mechanism for determining the capital
requirements of our dairy foods operations and each dairy member's share of
those requirements. The board of directors has established an equity



                                       14
<PAGE>



target investment of $2.75 per hundred pounds of milk (or milk equivalent)
delivered per year by that member to us. We distribute 20% of allocated
patronage income to a dairy member annually until the investment target is
reached by that member. The remaining 80% of allocated patronage income is
retained and allocated to member equities and revolved in the twelve years after
the member becomes inactive. When the member's equity investment reaches the
target, and for as long as the member's equity target investment is maintained,
we distribute 100% of the member's future allocated patronage income. The equity
target as well as the revolvement period may be changed at the discretion of the
board.

    For calendar year 2001, we allocated $33.5 million of our member earnings as
patronage income to our dairy members. Of that amount, 94% or $31.6 million was
allocated to dairy members who have yet to reach their equity target investment,
and we distributed $6.1 million (20%) to those members and retained and
allocated $25.5 million (80%) to member equities. Also, 6% or $1.9 million was
distributed to dairy members who have met their equity investment requirement.
We did not allocate any of our member earnings as nonqualified patronage
refunds. We plan to revolve $16.8 million of dairy members' equity for 2002 to
be paid in 2003. For 2002, we allocated $0 as patronage income to dairy members.

    In the Revolvement Program for our agricultural businesses, we currently
distribute 30% of allocated patronage income in cash and retain and allocate the
remaining 70% to member equity. This equity is revolved 9 1/2 years later. Both
the amount distributed in cash and the revolvement period are subject to change
by the board. For calendar year 2001, we allocated $40.2 million of our member
earnings to our agricultural members. Of that amount, we paid patronage income
of $12.1 million to our members in cash and retained and allocated $28.1 million
to member equities. Our board suspended revolvement of ag member equities for
the 2001 and 2002 fiscal years.

    In 2002, we allocated $96.9 million of our member earnings to our
agricultural members. Of these net earnings, $83.2 million was designated as
nonqualified patronage in connection with legal settlement proceeds. We paid
income tax on this nonqualified patronage, however, we will be able to deduct
these earnings from our taxable income if we choose to revolve the earnings to
our members in the future. Revolvement of the equity representing this
nonqualified patronage income is subject to board approval.

    Our Estate Redemption Plan provides that we will redeem equity holdings of
deceased natural persons upon the demise of the owner. The Company's Age
Retirement Program provides that we will redeem in full equity holdings of dairy
members who are natural persons when the member reaches age 75 or older and
becomes inactive. Subject to various requirements, we may redeem the equity
holdings of members in bankruptcy or liquidation. All equity redemptions must be
presented to, and receive the approval of, our board of directors before
payment. We plan to revolve $3.3 million of member equities in connection with
these programs in 2002 and expect to revolve approximately $3.5 million in 2003.

EMPLOYEES

    At March 1, 2003, we had approximately 8,000 employees, approximately 20% of
whom were represented by unions having national affiliations. Our contracts with
these unions expire at various times throughout the next several years, with the
last contract expiring on January 1, 2005. We consider our relationship with
employees to be generally satisfactory. We have had no labor strikes or work
stoppages within the last five years.

PATENTS, TRADEMARKS AND INTELLECTUAL PROPERTY

    We rely on patents, copyrights, trademarks, trade secrets, confidentiality
provisions and licensing arrangements to establish and protect our intellectual
property. We believe that in addition to certain patented processes, the
formulas and production methods of our dairy foods products are trade secrets.
We also have patented formulations and processes for our milk replacer products
and deem our feed product formulations to be proprietary.

    We own a number of registered and unregistered trademarks used in connection
with the marketing and sale of our food products as well as our feed and seed
products including LAND O LAKES, and the Indian Maiden logo, Alpine Lace, New
Yorker, Extra Melt, GRIP 'N GO, CROPLAN GENETICS, Maxi Care, Amplifier Max and
Omolene. Land O'Lakes Farmland Feed licenses certain trademarks from Land
O'Lakes, including LAND O LAKES, the Indian Maiden logo, Maxi Care, and
Amplifier Max, for use in connection with its animal feed and milk replacer
products. Purina Mills, a wholly-owned subsidiary of Land O'Lakes Farmland Feed,
licenses the



                                       15
<PAGE>



trademarks Purina, Chow and the "Checkerboard" Nine Square logo from Nestle
Purina PetCare Company under a perpetual, royalty-free license. This license
only gives Purina Mills the right to use these trademarks to market the
particular products that Purina Mills currently markets with these trademarks.
Purina Mills does not have the right to use these trademarks outside of the
United States, or in conjunction with any products designed primarily for use
with cats, dogs or humans. We do not have the right to assign any of these
trademarks without the written consent of Nestle Purina PetCare Company. These
trademarks are important to Land O'Lakes Farmland Feed because brand name
recognition is a key factor to its success in marketing and selling its
products. The registrations of these trademarks in the United States and foreign
countries are effective for varying periods of time, and may be renewed
periodically, provided that we, as the registered owner, or our licensees, where
applicable, comply with all applicable renewal requirements including, where
necessary, the continued use of the trademarks in connection with similar goods.

    In 2002, we expanded our licensing agreement with Dean Foods. Under the
expanded agreement, Dean Foods is granted exclusive rights to use the Land
O'Lakes brand and the Indian Maiden logo in connection with the manufacturing,
marketing, promotion, distribution and sale of certain products, including, but
not limited to, basic dairy products (milk, yogurt, cottage cheese, ice cream,
eggnog, juices and dips), creams, small bottle milk, infant formula products and
soy beverage products. Dean Foods is also granted the right to use the Company's
patented Grip 'n Go bottle and the Company's formula to fat-free half & half.
With respect to the basic dairy products and the small bottle milk, the license
is granted on a royalty-free basis. With respect to the remaining products
covered by the license agreement, Dean Foods will pay a sales-based royalty,
subject to a guaranteed minimum annual royalty payment. In addition, the license
agreement is terminable by either party in the event that certain minimum
thresholds are not met on an annual basis.

    We have also entered into other license agreements with other affiliated and
unaffiliated companies, such as MoArk, which permit these companies to utilize
our trademarks in connection with the marketing and sale of certain products.

ENVIRONMENTAL MATTERS

    We are subject to various Federal, state, local, and foreign environmental
laws and regulations, including those governing the use, storage, discharge and
disposal of hazardous materials. Violations of these laws and regulations may
lead to civil and criminal fines and penalties or other sanctions. These laws
and regulations may also impose liability for the cleanup of environmental
contamination. We generate large volumes of waste water. Changes in
environmental regulations governing disposal of these materials could have a
material adverse effect on our business, financial condition or results of
operations.

    We use regulated substances in operating our manufacturing equipment and we
use and store other chemicals on site (including acids, caustics and
refrigeration chemicals). Agriliance stores petroleum products and other
chemicals on-site (including fertilizers, pesticides and herbicides). Discovery
of significant contamination or changes in environmental regulations governing
the handling of these materials could have a material adverse effect on our
business, financial condition or results of operations.

    Many of our current and former facilities have been in operation for many
years, and over that time, we and other operators of those facilities have
generated, used, stored, or disposed of substances or wastes that are or might
be considered hazardous under applicable environmental laws, including chemicals
and fuel stored in underground and above-ground tanks, animal wastes and large
volumes of wastewater discharges. As a result, the soil and groundwater at or
under certain of our current and former facilities (and/or in the vicinity of
such facilities) may have been contaminated, and we may be required to make
material expenditures to investigate, control and remediate such contamination.

    We are also potentially responsible for environmental conditions at a number
of former facilities and at waste disposal facilities operated by third parties.
We have been identified as a Potentially Responsible Party ("PRP") under the
federal Comprehensive Environmental Response, Compensation, and Liability Act
("CERCLA" or "Superfund") at various National Priorities List ("NPL") sites and
have unresolved liability with respect to the past disposal of hazardous
substances at several such sites. CERCLA may impose joint and several liability
on certain statutory classes of persons for the costs of investigation and
remediation of contaminated properties, regardless of fault or the legality of
the original disposal. These persons include the present and former owners or
operators of a



                                       16
<PAGE>



contaminated property, and companies that generated, disposed of, or arranged
for the disposal of hazardous substances found at the property. We have
contested our liability at one Superfund site, as to which we have declined to
pay past response costs associated with ongoing site study, and we have received
a notice of potential liability regarding three other waste disposal sites under
investigation by the EPA, as to which we are disputing our responsibility.

    We have, on average, paid less than $500,000 in each of the last five years
for investigation and remediation of environmental matters, including Superfund
and related matters, but there can be no assurance that expenditures for such
activities will not rise materially if substantial contamination is discovered
at one of our current or former facilities or if other PRPs fail or refuse to
participate in cost sharing at any Superfund site, or similar disposal site, at
which we are implicated.

    In addition, Federal and state environmental authorities have proposed new
regulations and have attempted to apply certain existing regulations for the
first time to agricultural operations. These regulations could result in
significant restraints on some of our operations, particularly our swine
operations, and could require us to spend significant amounts to bring these
operations into compliance. In addition, any failure to comply could result in
the imposition of fines and penalties. We cannot predict whether future changes
in environmental laws or regulations will materially increase the cost of
operating our facilities and conducting our business. Any such changes could
adversely affect our business, financial condition and results of operations.

REGULATORY MATTERS

    We are subject to Federal, state and local laws and regulations relating to
the manufacturing, labeling, packaging, health and safety, sanitation, quality
control, fair trade practices, and other aspects of our business. In addition,
zoning, construction and operating permits are required from governmental
agencies which focus on issues such as land use, environmental protection, waste
management, and the movement of animals across state lines. These laws and
regulations may, in certain instances, affect our ability to develop and market
new products and to utilize technological innovations in our business. In
addition, changes in these rules might increase the cost of operating our
facilities or conducting our business which would adversely affect our finances.

    Our dairy business is affected by Federal price support programs and federal
and state pooling and pricing programs. Since 1949, the Federal government has
maintained price supports for cheese, butter and nonfat dry milk. The government
stands as a ready purchaser of these products at their price support levels.
Historically, when the product price reached 110% of its price support level,
the government would sell its inventory into the market, effectively limiting
the price of these products. Because prices for these products have generally
been higher than their support level for a number of years, the government
currently has minimal inventories of cheese and butter. As a result, these
commodity prices have been able to be greater than 110% of their price support
levels for several years. According to data from the USDA, over the past five
years, butter has sold at an average of 176% of the support price without
reaching support levels, and cheese has sold at an average of 121% of the
support price. However, cheese sold at or near support levels at points between
October 2000 and January 2001. The Farm Security and Rural Investment Act of
2002 extends the dairy price support program through December 31, 2007.

    Federal and certain similar state regulations attempt to ensure that the
supply of raw milk flows in priority to fluid milk and soft cream producers
before producers of hard products such as cheese and butter. This is
accomplished in two ways. First, the Federal market order system sets minimum
prices for raw milk. The minimum price of raw milk for use in fluid milk and
soft cream production is set as a premium to the minimum price of raw milk used
to produce hard products. The minimum price of raw milk used to produce hard
products is, in turn, set based on the market prices of cheese and butter.
Second, the Federal market order system establishes a pooling program under
which participants are required to send at least some of their raw milk to fluid
milk producers. The specific amount varies based on region, but is at least 10%
of the raw milk a participant handles. Certain areas in the country, such as
California, have adopted systems which supersede the Federal market order system
but are similar to it. In addition, because the Federal market order system is
not intended as an exclusive regulation of the price of raw milk, certain states
have, and others could, adopt regulations which could increase the price we pay
for raw milk, which could have an adverse effect on our financial results. We
also pay a premium above the market order price based on competitive conditions
in different regions.



                                       17
<PAGE>



    Producers of dairy products which are participants in the Federal market
order system pay into regional "pools" for the milk they use based on the amount
of each class of dairy product produced and the price of those products. As
described above, only producers of dairy products who send the required minimum
amount of raw milk to fluid milk producers may participate in the pool. The
amounts paid into the pool for raw milk used to make fluid milk and soft creams
are set at a premium to the amounts paid into the pool for raw milk used to make
cheese or butter. The pool then returns to each dairy product producer for raw
milk it handled the weighted average price for all raw milk (including that used
for fluid milk and soft creams, whose producers must pay into the pool) sold in
that region. The dairy product producer pays at least this pool price to the
dairy farmer for milk received. This pooling system provides an incentive for
hard product producers to participate in the pool (and therefore supply the
required minimum for fluid milk production), because the average price for raw
milk received by these producers from the pool is more than the average price
they pay into the pool.

    As a cooperative, we are exempt from the requirement that we pay pool prices
to our members for raw milk supplied to us. However, as a practical matter, we
must pay a competitive price to our members in order to ensure adequate supply
of raw milk for our production needs, and therefore our operations are affected
by these regulations.

    If we did not participate in the pool, we would not receive the advantage of
the average pool payment and we would not be able to pay our milk producers as
much as participating processors without incurring higher costs for our raw
milk. To maintain our participation in the federal market order program and
avoid this competitive disadvantage, we must procure at least 110% of our raw
milk requirements to meet our production needs. If we are unable to procure at
least 110% of our requirements, we would have lower production which could have
a material adverse affect on our results of operations. In addition, if the pool
was eliminated we would be subject to additional market forces when procuring
raw milk, which could result in increased milk costs and decreased supply, which
could materially affect our business.

    As a manufacturer and distributor of food and animal feed products, we are
subject to the Federal Food, Drug and Cosmetic Act and regulations issued
thereunder by the Food and Drug Administration ("FDA"). This regulatory scheme
governs the manufacture (including composition and ingredients), labeling,
packaging, and safety of food. The FDA regulates manufacturing practices for
foods through its good manufacturing practices regulations, specifies the
standards of identity for certain foods and animal feed and prescribes the
format and content of certain information required to appear on food and animal
feed product labels. In addition, the FDA enforces the Public Health Service Act
and regulations issued thereunder, which authorize regulatory activity necessary
to prevent the introduction, transmission or spread of communicable diseases. We
and our products are also subject to state and local regulation through
mechanisms such as the licensing of dairy manufacturing facilities, enforcement
by state and local health agencies of state standards for food products,
inspection of facilities and regulation of trade practices. Modification of
these Federal, state and local laws and regulations could increase our costs of
sales or prevent us from marketing foods in the way we currently do and could
have a material adverse effect on our business prospects, results of operations
and financial condition.

    Pasteurization of milk and milk products is also subject to inspection by
the United States Department of Agriculture. We and our products are also
subject to state and local regulation through mechanisms such as the licensing
of dairy manufacturing facilities, enforcement by state and local health
agencies of state standards for food products, inspection of facilities, and
regulation of trade practices in connection with the sale of food products.
Modification of these Federal, state and local laws and regulations could
increase our costs of sales or prevent us from marketing foods in the way we
currently do and could have a material adverse effect on our business prospects,
results of operations and financial condition.

    Land O'Lakes Farmland Feed distributes animal feed products through a
network of independent dealers. Various states in which these dealers are
located have enacted dealer protection laws which could have the effect of
limiting our rights to terminate dealers. In addition, failure to comply with
such laws could result in awards of damages or statutory sanctions. As a result,
it may be difficult to modify the way we distribute our feed products, which may
put us at a competitive disadvantage.

    Several states have enacted "corporate farming laws" that restrict the
ability of corporations to engage in farming activities. Minnesota, North
Dakota, South Dakota, Nebraska, Kansas, Oklahoma, Missouri, Iowa and Wisconsin,
states in which we conduct business, have corporate farming laws. We believe
that our operations currently comply with the corporate farming laws in these
states and their exemptions, but these laws could change in the future and



                                       18
<PAGE>



additional states could enact corporate farming laws that regulate our
businesses. Even with the exemptions, these corporate farming laws restrict our
ability to expand or alter our operations in these states.

ITEM 2.  PROPERTIES.

         We own the land underlying our corporate headquarters in Arden Hills,
Minnesota and lease the buildings. Our corporate headquarters, consisting of a
main office building and a research and development facility, has an aggregate
of approximately 275,000 gross square feet. In addition, we own offices,
manufacturing plants, storage warehouses and facilities for use in our various
business segments. Thirty-three of our owned properties are mortgaged to secure
our indebtedness. The following table provides summary information about our
principal facilities:

<Table>
<Caption>
                                          TOTAL NUMBER    TOTAL NUMBER
                                         OF FACILITIES    OF FACILITIES    REGIONAL LOCATION
                   BUSINESS SEGMENT          OWNED            LEASED         OF FACILITIES
                   ------------------    -------------    -------------    -----------------
<S>                                         <C>                <C>        <C>
                   Dairy Foods.......        15(1)              16         Midwest(2) - 16
                                                                           West(3) - 6
                                                                           East(4) - 6
                                                                           South(5) - 3
                   Animal Feed.......       101(6)              50         Midwest - 85
                                                                           West - 35
                                                                           East - 7
                                                                           South - 24
                   Crop Seed.........        23                  9         Midwest - 19
                                                                           West - 11
                                                                           East- 1
                                                                           South- 1
                   Swine.............        21(7)               2         Midwest - 23
                   Agronomy..........         5                  0         Midwest - 5
</Table>

(1) Includes a closed facility and a facility utilized for feed manufacturing
    which is accounted for in the dairy foods segment.

(2) The Midwest region includes the states of Ohio, Michigan, Indiana, Illinois,
    Wisconsin, Minnesota, Iowa, Missouri, Oklahoma, Kansas, Nebraska, South
    Dakota and North Dakota and Ontario, Canada.

(3) The West region includes the states of Montana, Wyoming, Colorado, Texas,
    New Mexico, Arizona, Utah, Idaho, Washington, Oregon, Nevada, California,
    Alaska and Hawaii.

(4) The East region includes the states of Maine, New Hampshire, Vermont, New
    York, Massachusetts, Rhode Island, Connecticut, Pennsylvania, New Jersey,
    Delaware and Maryland.

(5) The South region includes the states of West Virginia, Virginia, North
    Carolina, Kentucky, Tennessee, South Carolina, Georgia, Florida, Alabama,
    Mississippi, Louisiana and Arkansas.

(6) Includes 12 closed facilities and 2 research and development facilities.

(7) Includes 4 facilities which will be sold upon completion of construction.

    We do not believe that we will have difficulty in renewing the leases we
currently have or in finding alternative space in the event those leases are not
renewed. We consider our properties suitable and adequate for the conduct of our
business.

ITEM 3.           LEGAL PROCEEDINGS.

    We are currently and from time to time involved in litigation incidental to
the conduct of our business. The damages claimed against us in some of these
cases are substantial. Although the amount of liability that may result from
these matters cannot be ascertained, we do not currently believe that, in the
aggregate, they will result in liabilities material to our consolidated
financial condition, future results of operations or cash flow.

    In December 2002, we reached settlements with additional defendants against
whom we claimed had illegally fixed the prices of various vitamin products we
purchased. As a result of these settlements, we received net proceeds of
approximately $87 million in January 2003. When combined with the settlement
proceeds received from similar claims settled since the commencement of these
actions, we have received cumulatively approximately $140 million from the
settling defendants. We continue to pursue similar claims against several other
defendants. With respect to the remaining claims, which represent significantly
less than half of the disputed vitamin purchases, we anticipate a Minnesota
trial during the fall of 2003.

                                       19
<PAGE>



    In a letter dated January 18, 2001, we were identified by the United States
Environmental Protection Agency ("EPA") as a potentially responsible party for
the hazardous waste located at the Hudson Refinery Superfund Site in Cushing,
Oklahoma. The letter invited us to enter into negotiations with the EPA for the
performance of a remedial investigation and feasibility study in connection with
the site and also demanded that we reimburse the EPA approximately $8.9 million
for remediation expenses already incurred at the site. We have responded to the
EPA denying any responsibility. No further communication has been received from
the EPA.

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

         None.




                                     PART II

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

         There is no established public market for the common equity of Land
O'Lakes. In view of the following, it is unlikely in the foreseeable future that
a public market for these securities will develop:

         (1)  the common stock interests are nondividend bearing;

         (2)  the right of any holder of common stock to receive patronage
income depends on the quantity and value of the business the member conducts
with us (See "Item 1. Business - Description of the Cooperative - Patronage
Income and Equity");

         (3)  the class of common stock issued to a member depends on whether
the member is a cooperative or individual member and whether the member is a
"dairy member" or "ag member" (See "Item 1. Business - Description of the
Cooperative - Our Structure and Membership");

         (4)  we may redeem holdings of members under certain circumstances upon
the approval of our board of directors (See "Item 1. Business - Description of
the Cooperative - Patronage Income and Equity"); and

         (5)  our board of directors may terminate a membership if it determines
that the member has failed to adequately patronize us or has become our
competitor (See "Item 1. Business - Description of the Cooperative - Our
Structure and Membership").

         As of December 31, 2002, there are approximately 1,127 holders of Class
A common stock, 5,207 holders of Class B common stock, 194 holders of Class C
common stock and 1,105 holders of Class D common stock.

ITEM 6.  SELECTED FINANCIAL DATA.

          SELECTED LAND O'LAKES CONSOLIDATED HISTORICAL FINANCIAL DATA

    The historical consolidated financial information presented below has been
derived from the Land O'Lakes consolidated financial statements for the periods
indicated. They should be read together with the audited consolidated financial
statements of Land O'Lakes and the related notes included elsewhere in the
Annual Report on Form 10-K. You should read the selected consolidated historical
financial information along with "Item 7. Management's Discussion and Analysis
of Financial Condition and Results of Operations" and our financial statements
included in this Annual Report on Form 10-K.



                                       20
<PAGE>



<Table>
<Caption>
                                                                    YEARS ENDED DECEMBER 31,
                                                  2002          2001          2000          1999          1998
                                               ----------    ----------    ----------    ----------    ----------
                                                                        ($ IN MILLIONS)
<S>                                            <C>           <C>           <C>           <C>           <C>
STATEMENT OF OPERATIONS DATA:
Net sales ..................................   $  5,846.9    $  5,864.9    $  5,672.8    $  5,615.8    $  5,174.2
Cost of sales ..............................      5,350.4       5,378.6       5,146.1       5,100.4       4,680.0
                                               ----------    ----------    ----------    ----------    ----------
Gross profit ...............................        496.5         486.3         526.7         515.4         494.2
Selling, general administration ............        481.5         382.0         389.3         506.9         396.0
Restructuring and impairment charges(1) ....         31.4           3.7          54.2           3.9            --
                                               ----------    ----------    ----------    ----------    ----------
     (Loss) earnings from operations .......        (16.4)        100.6          83.2           4.6          98.2
Interest expense, net ......................         68.8          55.7          52.4          44.7          27.2
Gain on legal settlements(2) ...............       (155.5)         (3.0)           --            --            --
Gain on sale of intangible(3) ..............         (4.2)           --            --            --            --
Gain from divestiture of businesses(4) .....         (5.0)           --         (89.0)        (54.2)           --
Loss (gain) on extinguishment of debt ......           --          23.5          (4.4)           --            --
Equity in (earnings) loss of
  companies ................................        (22.7)        (48.6)         35.6          (7.3)          0.8
Minority interest in earnings (loss) of
  subsidiaries .............................          5.5           6.9          (1.4)         (0.1)          0.1
                                               ----------    ----------    ----------    ----------    ----------
     Earnings before income taxes ..........         96.7          66.1          90.0          21.5          70.1
Income tax (benefit) expense ...............         (2.2)         (5.4)        (12.9)          0.1           1.5
                                               ----------    ----------    ----------    ----------    ----------
     Net earnings ..........................   $     98.9    $     71.5    $    102.9    $     21.4    $     68.6
                                               ==========    ==========    ==========    ==========    ==========

OTHER FINANCIAL DATA:
EBITDA(5) ..................................   $    314.5    $    215.8    $    214.1    $     87.9(6) $    157.9
Depreciation and amortization ..............        106.8          97.3          83.6          81.7          61.4
Capital expenditures .......................         87.4          83.9         104.3         109.3         103.1
Cash patronage paid to members(7) ..........         20.2          30.7          10.6          20.0          25.9
Equity revolvement paid to members(8) ......         17.7          16.2          43.6          28.7          14.4
Ratio of earnings to fixed charges(9) ......          2.2x          2.0x          2.4x          1.4x          2.9x

BALANCE SHEET DATA (AT END OF
  PERIOD):
Cash and short-term investments ............   $     64.3    $    130.2    $      4.0    $    197.8    $      4.5
Working capital(10) ........................        286.7         328.6         476.9         464.8         407.3
Property, plant and equipment, net .........        685.6         675.3         467.8         461.8         450.1
Total assets ...............................      3,246.3       3,091.4       2,473.3       2,700.1       2,291.8
Total debt(11) .............................        959.0       1,010.3         628.8         783.9         453.2
Capital Securities of Trust Subsidiary .....        190.7         190.7         190.7         200.0         200.0
Minority interests .........................         53.7          59.8          55.1          14.9          10.0
Total member equities and retained
  earnings .................................        911.5         836.5         805.0         768.8         781.1
</Table>

   See accompanying Notes to Selected Land O'Lakes Historical Financial Data.



                                       21
<PAGE>



<Table>
<Caption>
                                                             YEARS ENDED DECEMBER 31,
                                          2002          2001          2000        1999            1998
                                       ---------     ---------     ---------   ----------       ----------
                                                              (DOLLARS IN MILLIONS)
SELECTED SEGMENT FINANCIAL
  INFORMATION
<S>                                    <C>           <C>           <C>         <C>              <C>
DAIRY FOODS .......................    $ 2,899.1     $ 3,463.9     $ 3,098.2   $  3,291.1       $  3,266.6
Net sales
EBITDA(5) .........................         66.2         109.9         115.4         36.8(6)          99.8
Depreciation and amortization .....         36.8          42.5          42.8         47.4             37.1
Capital expenditures ..............         32.3          37.7          60.3         63.3             55.5

ANIMAL FEED(12)(13)
Net sales .........................      2,444.7       1,864.0       1,182.2        931.2            824.3
EBITDA(5) .........................        243.5          83.7          41.8         33.9             34.4
Depreciation and amortization .....         46.6          31.7          18.6         14.7             10.8
Capital expenditures ..............         26.0          24.9          21.5         17.4             14.4

CROP SEED
Net sales .........................        406.9         413.6         365.5        190.8            145.3
EBITDA(5) .........................          7.7          17.6          18.6          8.4              9.9
Depreciation and amortization .....          3.0           5.0           5.6          2.7              0.9
Capital expenditures ..............          0.6           2.7           3.5          4.8              2.4

SWINE(13)
Net sales .........................         83.2         109.9         102.0         82.7             62.5
EBITDA(5) .........................        (11.3)         13.3           6.8        (12.6)           (17.7)
Depreciation and amortization .....          3.8           5.6           6.2          7.9              4.7
Capital expenditures ..............          3.1           7.3           9.6         14.0             22.6

AGRONOMY(14)
Net sales .........................           --            --         857.0      1,023.3            774.7
EBITDA(5) .........................          4.8          (9.9)         27.5         17.6             24.3
Depreciation and amortization .....          6.1           6.3           4.6          3.4              0.8
Capital expenditures ..............           --            --            --           --               --

OTHER
Net sales .........................         13.0          13.5          67.9         96.7            100.8
EBITDA(5) .........................          3.6           1.2           4.0          3.8              7.2
Depreciation and amortization .....         10.5           6.2           5.8          5.6              7.1
Capital expenditures ..............         25.4          11.3           9.4          9.8              8.2
</Table>


   See accompanying Notes to Selected Land O'Lakes Historical Financial Data.



                                       22
<PAGE>



            NOTES TO SELECTED LAND O'LAKES HISTORICAL FINANCIAL DATA

(1)   The following table summarizes restructuring and impairment charges
      (reversals):

<Table>
<Caption>
                                                                              YEARS ENDED DECEMBER 31,
                                                                              ------------------------
                                                                  2002       2001      2000      1999       1998
                                                                 ------     ------    ------    ------     ------
<S>                                                              <C>        <C>       <C>       <C>        <C>
Restructuring charges (reversals)..................              $ 13.2     $ (4.1)   $  9.7    $   --     $   --
Impairment of assets...............................                18.2        7.8      44.5       3.9         --
                                                                 ------     ------    ------    ------     ------
     Total.........................................              $ 31.4     $  3.7    $ 54.2    $  3.9     $   --
                                                                 ======     ======    ======    ======     ======
</Table>

      In 2002, we recorded restructuring and impairment charges of $31.4
      million. In our Dairy Foods segment, we recorded a $19.6 million
      restructuring and impairment charge in 2002, of which $15.2 million was
      related primarily to the write-down of impaired plant assets held for sale
      to their estimated fair value, and $4.4 million was related to employee
      severance and outplacement costs for 374 employees at various locations.
      In our Animal Feed segment, we recorded an $11.8 million restructuring and
      impairment charge, of which $3.1 million was primarily related to the
      write-down of impaired plant assets held for sale to their estimated fair
      value, and $8.7 million was related to employee severance and outplacement
      costs for 375 employees at various locations.

      In 2001, we recorded restructuring charges of ($4.1) million. Our dairy
      foods segment recorded a restructuring charge of $1.7 million, which had
      not been paid at December 31, 2001, for severance costs for 63 production
      employees resulting from the consolidation of production facilities. Our
      animal feed segment reversed $5.7 million of a prior year restructuring
      charge primarily due to the decision we made following the acquisition of
      Purina Mills to continue to operate plants that were held for sale at
      December 31, 2000. The impairment charge of $7.8 in 2001 included $6.0
      million related to our investment in a Mexican feed operation held for
      sale at December 31, 2001. We recorded this impairment charge in order to
      value the investment at its expected selling price less costs of disposal.
      In addition, our swine segment recorded an impairment charge of $1.8
      million to reduce undeveloped land with permit issues to its estimated
      fair value.

      In 2000, we recorded restructuring charges of $9.7 million resulting from
      the consolidation of facilities and reduced personnel at Land O'Lakes
      Farmland Feed. Of the $9.7 million, $7.2 million related to the closing
      and planned sale of 12 plants and consisted of $5.5 million to write down
      the book value of the plants and $1.7 million for demolition and
      environmental clean-up. The remaining $2.5 million represented severance
      and outplacement costs for 119 non-plant employees. The impairment charge
      of $44.5 million in 2000 resulted primarily from a write-down of goodwill
      related to a previous acquisition.

      In 1999, the impairment charge of $3.9 million was related to
      under-utilization of the Land O'Lakes cheese production assets in Poland.

(2)   In 2002, we recognized gain on legal settlements of $155.5 million. The
      gain resulted from net cash proceeds of $58.8 million and a legal
      settlement receivable of $96.7 million for which cash was received on
      January 17, 2003. The amounts were received from several vitamin product
      suppliers against whom we alleged certain price-fixing claims.

(3)   In 2002, we recorded a $4.2 million gain on the sale of a customer list
      pertaining to the feed phosphate distribution business.

(4)   In 2002, we divested our operations in Poland for $4.2 million in cash and
      $6.3 million in debt assumed, which resulted in a gain of $1.3 million.
      Net cash proceeds were $11.0 million from a divestiture of a seed coating
      business in Idaho and a seed inoculation business in Brazil, which
      resulted in a gain of $4.0 million. Other divestures in 2002 resulted in
      net cash proceeds of $0.9 million and a loss of $0.3 million. In April
      2000, we divested swine assets in North Carolina for net proceeds of $4.4
      million, resulting in a gain of $0.5 million. In July 2000, we sold our
      fluid dairy assets for $179.7 million, resulting in a gain of $88.5
      million. In November 1999, we sold our flavoring business for $75.9
      million in cash, resulting in a gain of $54.2 million.

(5)   EBITDA is defined as earnings before income taxes, gains or losses on
      extinguishment of debt, interest expense (net of interest income),
      depreciation and amortization (excluding amortization of credit facilities
      included in interest expense), equity in earnings or loss of affiliated
      companies, gain or loss from divestiture of



                                       23
<PAGE>



      businesses, minority interest, cash dividends from affiliated companies,
      and the other items described below. EBITDA is presented because it is a
      widely accepted financial indicator of a company's ability to incur and
      service indebtedness. EBITDA should not be considered an alternative to
      net sales in excess of expenses as a measure of our operating results or
      to cash flow as a measure of liquidity. In addition, although EBITDA is
      not recognized under generally accepted accounting principles, it is
      widely used as a general measure of a company's performance because it
      assists in comparing performance on a relatively consistent basis across
      companies without regard to depreciation and amortization, which can vary
      significantly depending on accounting methods (particularly where
      acquisitions are involved) or nonoperating factors such as historical cost
      basis. Because EBITDA is not calculated identically by all companies, the
      presentation herein may not be comparable to other similarly titled
      measures of other companies. The definition of EBITDA conforms to that
      which is included in the indenture for our 8-3/4% senior notes due 2011.

      Other items excluded from EBITDA are:

<Table>
<Caption>
                                                            YEARS ENDED DECEMBER 31,
                                              2002        2001        2000        1999        1998
                                             ------      ------      ------      ------      ------
                                                              (DOLLARS IN MILLIONS)
<S>                                          <C>         <C>         <C>         <C>          <C>
Unrealized hedging (gain) losses(a) ....     $ (1.1)     $  6.6      $   --      $   --       $  --
Gain on sale of assets(b) ..............       (4.1)       (1.8)         --          --          --
Non-cash impairment charges(c) .........       18.2         7.8        44.5         3.9          --
Severance related to Purina
  acquisition(c) .......................        8.7          --          --          --          --
Amortization of credit facility ........       (3.1)         --          --          --          --
Non cash patronage income ..............       (0.3)         --          --          --          --
Return of capital by affiliated
  company ..............................        1.0          --          --          --          --
EBITDA from unrestricted
  subsidiaries(d) ......................       18.6        (0.1)        2.8        (2.3)       (1.7)
                                             ------      ------      ------      ------      ------
     Total .............................     $ 37.9      $ 12.5      $ 47.3      $  1.6      $ (1.7)
                                             ======      ======      ======      ======      ======
</Table>

      (a)  Reflects non-cash expense for mark-to-market derivative contracts
           incurred as a result of adopting SFAS No. 133 in 2001. See "Item 7.
           Management's Discussion and Analysis of Financial Condition and
           Results of Operation."

      (b)  Reflects cash gain resulting from the sale of an intangible asset in
           2002 and the sale of certain swine assets in 2001.

      (c)  See Note 1.

      (d)  Reflects exclusion of earnings of unrestricted subsidiaries as
           required by the definition of EBITDA included in the indenture for
           our 8-3/4% senior notes due 2011.

(6)   Period results include an inventory write-down of $62.1 million for cheese
      and butter due to lower of cost or market adjustments.

(7)   Reflects the portion of earnings allocated to members for the prior fiscal
      year distributed in cash in the current fiscal year.

<Table>
<Caption>
                                          YEARS ENDED DECEMBER 31,
                                  2002     2001     2000     1999     1998
                                 ------   ------   ------   ------   ------
                                           (DOLLARS IN MILLIONS)
<S>                              <C>      <C>      <C>      <C>      <C>
20% required for tax deduction   $ 14.1   $ 28.5   $  7.0   $ 15.0   $ 18.6
Discretionary...............        6.1      2.2      3.6      5.0      7.3
                                 ------   ------   ------   ------   ------
     Total..................     $ 20.2   $ 30.7   $ 10.6   $ 20.0   $ 25.9
                                 ======   ======   ======   ======   ======
</Table>

(8)   Reflects the distribution of earnings previously allocated to members and
      not paid out as cash patronage. The years 2002, 2001, 2000 and 1999
      include the distribution of a portion of the equity issued in connection
      with the acquisition of Dairyman's Cooperative Creamery Association and
      acquisition of certain assets of Countrymark Cooperative.



                                       24
<PAGE>



<Table>
<Caption>
                                 YEARS ENDED DECEMBER 31,
                         2002     2001     2000     1999     1998
                        ------   ------   ------   ------   ------
                                  (DOLLARS IN MILLIONS)
<S>                     <C>      <C>      <C>      <C>      <C>
Revolvement
  Dairy Foods.....      $ 15.2   $ 14.0   $ 13.8   $ 15.6   $  4.1
  Ag Services.....         2.5      2.2     29.8     13.1     10.3
                        ------   ------   ------   ------   ------
     Total........      $ 17.7   $ 16.2   $ 43.6   $ 28.7   $ 14.4
                        ======   ======   ======   ======   ======
</Table>

(9)   For purposes of determining the ratio of earnings to fixed charges,
      earnings are defined as earnings before income taxes, plus fixed charges.
      Fixed charges include interest on all indebtedness and one-third of rental
      expense on operating leases representing that portion of rental expense
      deemed to be attributable to interest.

(10)  Working capital is defined as current assets (less cash and cash
      equivalents) minus current liabilities (less notes and short-term
      obligations, and current maturities of long-term debt).

(11)  Total debt excludes the 7.45% Capital Securities due on March 15, 2028, of
      our trust subsidiary.

(12)  On October 1, 2000, we combined our feed assets with those of Farmland
      Industries to form Land O'Lakes Farmland Feed. We consolidate the
      operating activities of Land O'Lakes Farmland Feed.

(13)  Historically, Purina Mills reported results of its swine business together
      with its feed business. Accordingly, the portion of our swine business
      which we acquired from Purina Mills is reported in our animal feed segment
      results for the years ended December 31, 2002 and 2001.

(14)  On July 28, 2000, we contributed all of our revenue generating agronomy
      assets (excluding our investment in CF Industries and assets held for
      sale) to Agriliance, a joint venture with United Country Brands, in
      exchange for a 50% interest in Agriliance. Beginning July 29, 2000, our
      share of earnings or losses in Agriliance was reported under the equity
      method of accounting.

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

    You should read the following discussions of financial condition and results
of operations together with the consolidated financial statements and the notes
to such statements included elsewhere in this Annual Report on Form 10-K. This
discussion contains forward-looking statements based on current expectations,
assumptions, estimates and projections of our management. These forward-looking
statements involve risks and uncertainties. Actual results could differ
materially from those anticipated in these forward-looking statements as a
result of certain factors, as more fully described in the "Risk Factors" section
and elsewhere in this Annual Report on Form 10-K. We undertake no obligation to
update publicly any forward-looking statements.

OVERVIEW

GENERAL

Segments

    We operate our business predominantly in the United States in five segments:
dairy foods, animal feed, crop seed, swine and agronomy. We have limited
international operations, certain of which have recently been sold or are in the
process of being sold. Our dairy foods segment produces, markets and sells
butter, spreads, cheese and other dairy products. We operate our animal feed
segment principally through Land O'Lakes Farmland Feed LLC, our 92% owned joint
venture with Farmland Industries, Inc. ("Farmland Industries"). Our animal feed
segment develops, produces, markets and distributes animal feed to both
commercial and lifestyle customers. The results of the animal feed business are
consolidated in our financial statements and the minority interest is
eliminated. As a result of the Purina Mills acquisition in October 2001, animal
feed results now include Purina Mills swine marketing activities since Purina
Mills historically reported results of its swine business together with its feed
business. Our crop seed segment sells seed for a variety of crops, including
alfalfa, corn, soybeans and forage and turf grasses. Our swine segment produces
and markets both young feeder pigs and mature market hogs. Our agronomy segment
distributes crop nutrient and crop protection products. Historically, our
agronomy segment consisted primarily of the assets we contributed to Agriliance,
LLC ("Agriliance"), our unconsolidated joint venture. Since the contribution of
those assets to Agriliance at the end of July 2000, our investment has been
accounted for on the equity method



                                       25
<PAGE>



through our agronomy segment, along with the agronomy assets we retained. Our
membership interest in CF Industries, Inc. ("CF Industries"), an inter-regional
plant food manufacturing cooperative, is accounted for through this segment on a
cost basis. We also derive a portion of revenues and income from other related
businesses, which are insignificant to our overall results. We allocate
corporate administration expense to all five of our business segments using two
methodologies; direct usage for services for which we are able to track this
usage, such as payroll and legal, and invested capital for all other expenses. A
majority of these costs is allocated based on direct usage. We allocate these
costs to segments whether or not they are solely composed of investments and
joint ventures.

Unconsolidated Businesses

    We have investments in certain entities that are not consolidated in our
financial statements. In 2002, income from our unconsolidated businesses
amounted to $22.7 million, compared to income of $48.6 million in 2001 and a
loss of $35.6 million in 2000. Our investment in unconsolidated businesses as of
December 31, 2002 was $545.6 million, compared to $568.1 million as of December
31, 2001 and $465.8 million as of December 31, 2000. Cash flow from our
investment in unconsolidated businesses in 2002 was $27.4 million, compared to
$5.4 million in 2001 and $25.4 million in 2000.

    Agriliance and CF Industries constitute the most significant of our
investments in unconsolidated businesses, both of which are reflected in our
agronomy results. Our investment in, and earnings from, Agriliance and CF
Industries were as follows as of and for the year ended:

<Table>
<Caption>
                                                     DECEMBER 31,     DECEMBER 31,     DECEMBER 31,
                                                        2002             2001             2000
                                                    -------------    -------------    -------------
                                                                     (IN MILLIONS)
<S>                                                    <C>              <C>              <C>
AGRILIANCE:
  Investment................................           $  91.6          $  84.0          $  44.2
  Equity in earnings (loss).................              25.1             34.2            (32.4)

CF INDUSTRIES:
  Investment................................           $ 249.5          $ 248.5          $ 248.5
  Patronage income..........................                --               --               --
</Table>


    In 2002, we received a cash distribution of $17.5 million from Agriliance,
compared to no cash distributions in 2001 or 2000. We did not receive any cash
distributions from CF Industries during these periods.

    Land O'Lakes, Cenex Harvest States Cooperatives ("CHS") and Farmland
Industries contributed substantially all of their agronomy marketing assets to
Agriliance in July 2000. The agronomy marketing operations of Land O'Lakes, CHS
and Farmland Industries were previously managed through various operating
entities. Land O'Lakes has a 50 percent equity ownership in Agriliance. The
other 50 percent ownership interest in Agriliance is owned by United Country
Brands (jointly owned by CHS and Farmland Industries). Land O'Lakes provides
certain support services to Agriliance at competitive market prices. Agriliance
was billed $8.3 million in 2002, $7.1 million in 2001 and $4.9 million in the
five months ended December 31, 2000 for the support services. In addition, Land
O'Lakes purchases insignificant amounts of product from Agriliance. The fiscal
year of Agriliance ends on August 31. Unless otherwise indicated, references in
this Annual Report on Form 10-K to the annual results of Agriliance are
presented on a calendar year basis to conform to Land O'Lakes' presentation.
Agriliance funds its operations from operating cash flows, an initial working
capital contribution on formation and borrowings from unaffiliated third
parties. Agriliance had entered into syndicated secured term and revolving
credit arrangements in an aggregate amount of $407 million as of August 31,
2001. Since then, credit arrangements were renegotiated and as of December 31,
2002 amounted to $285 million. In addition, Agriliance has entered into a $200
million receivables securitization with CoBank. Neither Land O'Lakes nor any of
the restricted subsidiaries guarantee these obligations. Land O'Lakes does not
have an obligation to contribute additional capital to finance Agriliance's
operations. Agriliance's performance reflects the seasonal nature of its
business. Most of its annual sales and earnings, which are principally derived
from the distribution of fertilizer and crop protection products manufactured by
others, including CF Industries, occur in the first and second quarter of each
year, with off-season losses in the third and fourth quarter. The equity in loss
of $32.4 million from Agriliance that we recorded in 2000 reflected its
operating results from July 29, 2000 through the end of the year, an off-season
period. In contrast, the equity in earnings that we recorded for 2001 and 2002
included a full year of operations.



                                       26
<PAGE>



    CF Industries is an inter-regional cooperative involved in the manufacture
of crop nutrients, in which we have a 38% ownership interest based on our
product purchases. As a member, we are allowed to elect one board member out of
a total of nine. Agriliance is one of CF Industries' most significant customers.
CF Industries operates in a highly cyclical industry. The oversupply of nitrogen
in the industry since 1998 has resulted in depressed prices and, consequently,
depressed earnings. Studies are currently under way to determine strategic steps
to address the negative earnings situation. Since CF Industries is a
cooperative, we only receive earnings from our investment when the cooperative
allocates and distributes patronage to us. No patronage was allocated and
distributed to us in the last three years because CF Industries realized losses
in those years. We anticipate that no patronage allocations will occur until
these losses have been recouped. Our $249.5 million investment in CF Industries
consists of approximately $150 million in noncash patronage income from prior
periods (not distributed to us) and approximately $100 million that was acquired
as part of our Countrymark acquisition in 1998 based on Countrymark's prior
business with CF Industries. Prior to the contribution of our agronomy assets to
Agriliance, our agronomy business earned patronage income on the business it
conducted with CF Industries. Since July 29, 2000, Land O'Lakes has been
entitled to receive patronage income for business that Agriliance transacts with
CF Industries on behalf of our members, primarily fertilizer purchases. We
believe that these sales are on terms comparable to those available to
unaffiliated third parties.

    We have an investment in CoBank, an agricultural cooperative bank, which
amounted to $22.1 million on December 31, 2002, $21.5 million on December 31,
2001 and $20.6 million on December 31, 2000. This investment constitutes less
than one percent of CoBank's total shareholder equity. We account for our
investment in CoBank under the cost basis method of accounting. The investment
consists of an initial nominal cash amount of $1,000 and equity additions based
on a percentage (currently 10.0%) of our five-year average loan volume. Since
CoBank operates as a cooperative, we receive patronage income from CoBank based
on our annual loan volume with CoBank. This patronage income reduces our
interest expense. We believe that these loan transactions are on terms
comparable to those available to unaffiliated third parties.

Critical Accounting Policies

    We utilize certain accounting measurements under applicable generally
accepted accounting principles, which involve the exercise of management's
judgment about subjective factors and estimates about the effect of matters
which are inherently uncertain. The following is a summary of those accounting
measurements which we believe are most critical to our reported results of
operations and financial condition.

    Inventory Valuation. Inventories are valued at the lower of cost or market.
Cost is determined on a first-in, first-out or average cost basis. Many of our
products, particularly in our dairy foods, animal feed and swine segments, use
dairy or agricultural commodities as inputs or constitute dairy or agricultural
commodity outputs. Consequently, our results are affected by the cost of
commodity inputs and the market price of outputs. Government regulation of the
dairy industry and industry practices in animal feed tend to stabilize margins
in those segments but do not protect against large movements in either input
costs or output prices. Such large movements in commodity prices could result in
significant write-downs to our inventories, which could have a significant
negative impact on our operating results.

    We use derivative commodity instruments, primarily futures contracts, in our
operations to lock in our ingredient input prices, primarily for our product
inputs such as milk, butter and soybean oil for dairy foods, soybean meal and
corn for animal feed, and soybeans for crop seed. The degree of our hedging
position varies from less than one percent for butter to nearly 100% for soybean
oil. In addition, purchase agreements with various vendors are used to varying
degrees to lock in input prices. This decreases our exposure to changes in
commodity prices. We do not use derivative commodity instruments for speculative
purposes. The futures contracts are not designated as hedges under Statement of
Financial Accounting Standards "(SFAS)" No. 133, "Accounting for Derivative
Instruments and Hedging Activities." The futures contracts are marked to market
(either Chicago Mercantile Exchange or Chicago Board of Trade) on the last day
of each month and gains and losses are recognized as an adjustment to cost of
sales. Prior to 2001, we did not mark our derivative commodity instruments to
market; instead, we recorded losses or gains only when realized.

    Allowance for Doubtful Accounts. We estimate our allowance for doubtful
accounts based on an analysis of specific accounts, an analysis of historical
trends, payment and write-off histories, current sales levels and the state of
the economy. In addition, we estimate losses and retain reserves for the credit
risk related to the repayment of the



                                       27
<PAGE>



notes receivable with the qualifying special purpose entity ("QSPE") (See
"Off-balance sheets arrangements"). Our credit risks are continually reviewed
and management believes that adequate provisions have been made for doubtful
accounts. However, unexpected changes in the financial strength of customers or
changes in the state of the economy could result in write-offs which exceed
estimates and negatively impact our financial results.

    Recoverability of Long-Lived Assets. Our test for goodwill impairment is a
two-step process and is performed on at least an annual basis. The first step is
a comparison of the fair value of the reporting unit with its carrying amount,
including goodwill. If this step reflects impairment, then the loss would be
measured as the excess of recorded goodwill over its implied fair value. Implied
fair value is the excess of fair value of the reporting unit over the fair value
of all identified assets and liabilities. We assess the recoverability of other
long-lived assets at least annually or whenever events or changes in
circumstances indicate that expected future undiscounted cash flows might not be
sufficient to support the carrying amount of an asset. We deem an asset to be
impaired if a forecast of undiscounted future operating cash flows is less than
an asset's carrying amount. If an asset is determined to be impaired, the loss
is measured as the amount by which the carrying value of the asset exceeds its
fair value. Changes in our business strategies and/or changes in the economic
environment in which we operate may result in future impairment charges.

Cooperative Structure

    Land O'Lakes is incorporated in Minnesota as a cooperative corporation.
Cooperatives resemble traditional corporations in most respects, but with two
primary distinctions. First, a cooperative's common shareholders, its "members,"
either supply the cooperative with raw materials or purchase its goods and
services. Second, to the extent a cooperative allocates its earnings from member
business to its members and meets certain other requirements, it is allowed to
deduct this "qualified patronage income" or "patronage income" from its taxable
income. Patronage income is allocated in accordance with the amount of business
each member conducts with the cooperative.

    Cooperatives typically derive a majority of their business from members,
although they are allowed by the Internal Revenue Code to conduct non-member
business. Earnings from non-member business are retained as permanent equity by
the cooperative and taxed as corporate income in the same manner as a typical
corporation. Earnings from member business are either allocated to patronage
income or retained as permanent equity (in which case it is taxed as corporate
income) or some combination thereof.

    In order to obtain favorable tax treatment on allocated patronage income,
the Internal Revenue Code requires that at least 20% of each member's annual
allocated patronage income be distributed in cash. The portion of patronage
income that is not distributed in cash is retained by the cooperative and
allocated to member equities. Member equities may be distributed to members at a
later time as a "revolvement" as determined by our board of directors. The
cooperative's members must recognize the amount of allocated patronage income
(whether distributed to members or retained by the cooperative) in the
computation of their individual taxable income.

    Cooperatives are also allowed to designate patronage income as
"nonqualified" patronage income and allocate it to member equities. Unlike
qualified patronage income, the cooperative pays taxes on this nonqualified
patronage income as if it was derived from non-member business. The cooperative
may revolve the nonqualified patronage equity to members at some later date and
is allowed to deduct those amounts from its taxable income at that time. When
nonqualified patronage income is revolved to the cooperative's members, the
revolvement must be included in the members' taxable income.

    For the year ended December 31, 2002, our net earnings from member business
were $86.6 million, excluding the portion (10% holdback) added to permanent
equity. Of this amount, $96.9 million was applied to allocated patronage refunds
and $(10.3) million was applied to deferred equities. The $96.9 million of
allocated patronage refunds consisted of an estimated $4.2 million to be paid in
cash in 2003 and $92.7 million to be retained as allocated member equities and
revolved at a later time, subject to approval by the board of directors. The
$(10.3) million of deferred equities represent losses from member businesses
that are held in an equity reserve account rather than being allocated to
members. For the year ended December 31, 2002 we had net earnings of $12.3
million applied to retained earnings, which represents permanent equity derived
from non-member business, the 10% holdback of member earnings and income taxes.



                                       28
<PAGE>



    In 2002, we made payments of $37.9 million for the redemption of member
equities. This included $20.2 million for the cash patronage portion of the 2001
earnings allocated to members. It also included $17.7 million for the
revolvement of member equities previously allocated to members, and not paid as
cash patronage, and the revolvement of a portion of equities issued in
connection with the 1998 acquisitions of Dairyman's Cooperative Creamery
Association and certain assets of Countrymark Cooperative.


Wholesaling and Brokerage Activities

    Our dairy foods segment operates a wholesale milk marketing program. We
purchase excess raw milk over our production needs from our members and sell it
directly to other dairy processors. We generate losses or insignificant earnings
on these transactions; however, there are three principal reasons for doing
this: first, we need to sell a certain percentage of our raw milk to fluid dairy
processors in order to participate in the Federal market order system, which
lowers our input cost of milk for the manufacture of dairy products; second, it
reduces our need to purchase raw milk from sources other than members during
periods of low milk production in the United States (typically August, September
and October) and third, it ensures that our members have a market for the milk
that they produce during periods of high milk production. In 2002, we sold
6,074.6 million pounds of milk, which resulted in $827.0 million of net sales or
28.5% of our dairy foods segment's net sales for that period, with cost of sales
exceeding net sales by $3.3 million.

    Our animal feed segment, in addition to selling its own products, buys and
sells or brokers for a fee soybean meal and other feed ingredients. We market
these ingredients to our local member cooperatives and to other feed
manufacturers, which use them to produce their own feed. Although this activity
generates substantial revenues, it is a very low-margin business. We are
generally able to obtain feed inputs at a lower cost as a result of our
ingredient merchandising business because of lower per unit shipping costs
associated with larger purchases and volume discounts. In 2002, ingredient
merchandising generated net sales of $489.7 million, or 20.0% of total animal
feed segment net sales, and a gross profit of $13.6 million, or 4.7% of total
animal feed segment gross profit.

Seasonality

    Certain segments of our business are subject to seasonal fluctuations in
demand. In our dairy foods segment, butter sales typically increase in the fall
and winter months due to increased demand during holiday periods. Animal feed
sales tend to increase in the fourth and first quarter of each year because
cattle are less able to graze during cooler months. Most crop seed sales used to
occur in the first and second quarter of each year. However, we have seen a
trend toward selling more crop seed in the fourth and first quarter of each year
as a result of lower sales of proprietary brands and increased sales of
partnered seed brands. Agronomy product sales tend to be much higher in the
first and second quarter of each year, as farmers buy crop nutrients and crop
protection products to meet their seasonal needs.

FACTORS AFFECTING COMPARABILITY

Dairy and Agricultural Commodity Inputs and Outputs

    Many of our products, particularly in our dairy foods, animal feed and
swine segments, use dairy or agricultural commodities as inputs or constitute
dairy or agricultural commodity outputs. Consequently, our results are affected
by the cost of commodity inputs and the market price of commodity outputs.
Government regulation of the dairy industry and industry practices in animal
feed tend to stabilize margins in those segments but do not protect against
large movements in either input costs or output prices.

    Dairy Foods. Raw milk is the major commodity input for our dairy foods
segment. In 2002, our raw milk input cost was $1,659.7 million, or 60.6% of the
cost of sales for our dairy foods segment. Cream, butter and bulk cheese are
also significant dairy foods commodity inputs. Cost of sales for these inputs
was $201.3 million for cream, $93.5 million for butter and $273.0 million for
bulk cheese in 2002. Our dairy foods outputs, namely butter, cheese and nonfat
dry milk, are also commodities.

    The minimum price of raw milk and cream is set monthly by Federal regulators
based on regional prices of dairy foods products produced. These prices provide
the basis for our raw milk and cream input costs. As a result, those



                                       29
<PAGE>



dairy foods products for which the sales price is fixed shortly after
production, such as most bulk cheese, are not usually subject to significant
commodity price risk as the price received for the output usually varies with
the cost of the significant inputs. In 2002, bulk cheese, which is generally
sold the day made, represented $251.7 million, or 8.7% of our dairy foods
segment's net sales. Other products, such as private label butter, which have
significant net sales, are also generally sold shortly after they are made.

    We also maintain significant inventories of butter and cheese for sale to
our retail and food service customers, which are subject to commodity price
risk. Because production of raw milk and demand for butter varies seasonally, we
inventory significant amounts of butter. Demand for butter is highest during the
fall and winter, when milk supply is lowest. As a result, we produce and store
excess quantities of butter during the spring when milk supply is highest. In
addition, we maintain some inventories of cheese for aging. In 2002, branded and
private label retail, deli and foodservice net sales of cheese and butter
represented $1,012.4 million, or 34.9% of our dairy foods segment's net sales.

    We maintain a sizable dairy manufacturing presence in the Upper Midwest.
This region has seen significant declines in cow numbers. Since 1990, cow
numbers declined 16% in Minnesota and 14% in Wisconsin. Over the same period,
the Minnesota/Wisconsin share of nationwide dairy manufacturing volume has
declined from 40% to 28%. This decline has put pressure on our Upper Midwest
milk input costs and has resulted in significant losses to our company in 2002.
We have closed our Perham plant in January 2003 and will continue to explore
additional initiatives to improve our Upper Midwest dairy infrastructure in an
effort to increase efficiencies and reduce costs. Based on the initiatives we
have started in 2002, we incurred $9.5 million in restructuring and impairment
charges related to the Upper Midwest in 2002.

    Reduced margins on our mozzarella and whey products also have had a negative
impact not only on our Upper Midwest operations but also on our Cheese & Protein
International LLC operations. Demand for mozzarella and whey has softened which,
together with anticipated increases in mozzarella capacity in the industry, has
placed downward pressure on the margins these products generate. We expect that
the reduced margins will continue at least through 2003. In addition, we
increased our ownership position in Cheese & Protein International LLC from 70%
to 95% in 2002.

    Animal Feed. The animal feed segment follows industry standards for feed
pricing. The feed industry generally prices products based on income over
ingredient cost ("IOIC") per ton of feed. This practice tends to mitigate the
impact of volatility in commodity ingredient markets on our animal feed profits.
As ingredient costs fluctuate, the changes are generally passed on to customers
through weekly or monthly changes in prices. Thus, the key indicator of business
performance in the animal feed segment is IOIC rather than net sales. Net sales
are considered to be a poor indicator of performance since large fluctuations
can occur from period-to-period due to volatility in the underlying commodity
ingredient prices.

    We also enter into forward contracts to supply feed, which currently
represent approximately 20% of our feed output. When we enter into these
contracts, we also generally enter into forward input supply contracts to "lock
in" our IOIC.

    Changes in commodity grain prices also have an impact on the mix of products
we sell. When grain prices are relatively high, the demand for complete feed
rises since many livestock producers are also grain growers and will sell their
grain in the market and purchase complete feed as needed. When grain prices are
relatively low, these producers will feed their grain to their livestock and
purchase premixes and supplements to provide complete nutrition to their
animals. These fluctuations in product mix generally have minimal effects on our
operating results. Complete feed has a far lower margin per ton than supplements
and premixes. Thus, during periods of relatively high grain prices, although our
margins per ton are lower, we sell substantially more tonnage because the grain
portion of complete feed makes up the majority of its weight.

    As dairy production shifted from the Upper Midwest to the western United
States, we have seen a change in our feed product mix, with lower sales of
complete feed and increased sales of simple blends. Complete feed is
manufactured feed which meets the complete nutritional requirements of animals,
whereas a simple blend is a blending of unprocessed commodities to which the
producer then adds vitamins to supply the animal's nutritional needs. This
change in product mix is a result of differences in industry practices. Dairy
producers in the western United States tend to purchase feed components and mix
them at the farm location rather than purchasing a



                                       30
<PAGE>



complete feed product delivered to the farm. Producers will purchase grain
blends and concentrated premixes from separate suppliers. This shift is
reflected in increased sales of simple blends in our Western feed region and
increases in our subsidiaries that manufacture premixes in the Western area. In
addition, the increase in vertical integration of swine and poultry producers
has impacted our feed product mix by increasing sales of lower-margin feed
products.

    Swine.  We produce and market both young feeder pigs (approximately 45
pounds) and mature market hogs (approximately 260 pounds) under three primary
programs: swine aligned, farrow-to-finish and cost-plus.

    Under the swine aligned program, we own sows and raise feeder pigs that we
sell to our local member cooperatives under ten-year contracts. For the first
five years, we receive a fixed base price for our feeder pigs and are reimbursed
for feed costs. In years six through ten, the price is based on the cost of
production, plus a margin designed to achieve a target return on invested
capital. Since the price for the duration of the contract is not tied to the
live hog market, we do not have market risk on feeder pig prices. In addition,
there is no risk on corn or soybean meal prices since we are reimbursed for
actual feed costs. We do incur production risk if we do not produce enough
feeder pigs or if we do not produce them at a competitive cost.

    Under the farrow-to-finish program, we produce and sell market hogs.
Historically, market hog price fluctuations have resulted in volatility in our
net sales and earnings. In order to mitigate this risk, we have committed to
sell substantially all of the market hogs we produce annually through 2005 to
IBP, inc. under a packer agreement. Under this packer agreement, we are paid
market prices for our hogs with a settlement based on the sales price of the
pork products produced from those hogs. This approach mitigates some of the
volatility under this program because market hog and pork product margins do not
tend to move together. We sell the balance of our market hogs on the open
market. We sell feeder pigs on the open market, as well, depending on sow farm
performance and finishing space limitations. In 2002, we sold approximately 20%
of our feeder pig volume on the open market.

    Under the cost-plus program, we provide minimum hog price guarantees to
producers in exchange for swine feed sales and profit participation. We are in
the process of phasing out our existing cost-plus contracts and will not be
entering into new ones under the current structure. The majority of the
cost-plus contracts will expire in late 2003 and early 2004, and the last
cost-plus contracts will expire in early 2005. The program incurred pretax
losses of $5.7 million in 2002, minimal earnings in 2001 and a pretax loss of
$2.0 million in 2000.

    Historically, Purina Mills reported results of its swine business together
with its feed business. Accordingly, the portion of our swine business which we
acquired from Purina Mills in October 2001 is reported within our feed segment.
Purina Mills operates its swine business under the pass-through program and the
market risk sharing program. Under the pass-through program, we enter into
commitments to purchase weanling and feeder pigs from producers and generally
have commitments to immediately resell the animals to swine producers. The
market risk sharing program provides minimum price floors to producers for
market hogs. The price floor in our market risk sharing program floats with the
market price of hogs and the cost of swine feed. In 2002, the Purina Mills swine
business generated a loss of $3.9 million compared to losses of $0.1 million in
2001 and $6.4 million in 2000, primarily due to a decline in hog market prices.

ACQUISITIONS/JOINT VENTURES/DIVESTITURES

    We have engaged in various significant acquisitions, joint ventures and
divestitures since January 1, 1999. Each of the acquisitions was accounted for
as a purchase transaction. The Land O'Lakes Farmland Feed and Agriliance joint
ventures, our most significant joint ventures, involved the combination of
existing Land O'Lakes business units with those of our joint venture partners to
create new entities. Since its formation on October 1, 2000, we have
consolidated Land O'Lakes Farmland Feed. However, because we do not control
Agriliance, it is accounted for under the equity method.



                                       31
<PAGE>



    The following table lists each acquisition, joint venture and divestiture in
excess of $50 million in asset value since 1999.

<Table>
<Caption>
           YEAR      NAME                                    TRANSACTION                            TOTAL ASSETS
           ----      ----                                    -----------                            ------------
<S>                 <C>                                     <C>                                    <C>
           2002      None

           2001      Purina Mills........................    Acquisition for cash of                $540.5 million
                                                             stock of commercial and
                                                             lifestyle feed company
                                                             (October 2001)

           2000      Madison Dairy Produce Co............    Acquisition for cash of                $59.3 million
                                                             private label butter company
                                                             (January 2000)

                     Fluid dairy assets..................    Divestiture for cash of                $112.2 million
                                                             fluid dairy assets (July
                                                             2000)

                     Land O'Lakes Farmland Feed..........    Joint venture with Farmland            $91.7 million
                                                             Industries involving                   (our contribution)
                                                             transfer of existing Land
                                                             O'Lakes animal feed business
                                                             (October 2000)

                     Agriliance..........................    Joint venture with United              $79.5 million
                                                             Country Brands involving               (our contribution)
                                                             transfer of certain Land
                                                             O'Lakes agronomy assets
                                                             (July 2000)

           1999      Terra Industries....................    Acquisition for cash of                $70.7 million
                                                             selected agronomy retail
                                                             distribution assets in the
                                                             eastern United States (June
                                                             1999)

                     Agro Distribution...................    Investment in joint venture            $50.0 million
                                                             with CHS Cooperatives (June
                                                             1999) formed to acquire
                                                             selected northern and
                                                             southern ag retail
                                                             distribution assets from
                                                             Terra Industries
</Table>


    In June 1999, certain of the northern and southern retail agronomy assets of
Terra Industries were acquired by Agro Distribution, our unconsolidated joint
venture with CHS Cooperatives, which was subsequently contributed to Agriliance.
The objective of this acquisition was to sell each retail agronomy location to
one or more of our local cooperative members. Nearly all of the northern
locations were sold. We were unable to sell most of the southern locations and
decided in the fall of 2001 to continue to operate these southern retail
agronomy assets. Operation of these locations resulted in significant losses
2001. These losses were recorded through our investment in Agriliance as equity
in earnings or loss from affiliated companies. Agro Distribution's losses on
operation of these locations aggregated $3.3 million and $36.8 million for the
twelve months ended December 31, 2002 and 2001, respectively, with Land O'Lakes
recording 50% of these losses in equity in loss of affiliated companies. New
initiatives implemented in late 2001 resulted in reduced losses in 2002.


    In October 2001, we acquired Purina Mills, Inc. The total purchase price of
the Purina Mills acquisition was $358.6 million. The acquisition added $86.9
million of goodwill and $98.9 million of other intangible assets to our balance
sheet. This acquisition resulted in a substantial increase in our leverage
(long-term debt, including Capital Securities, to capital) from 43.5% at
December 31, 2000 to 51.1% at December 31, 2002 and increased interest costs by
approximately $40 million in 2001 and approximately $38 million in 2002. Given
the nature of products sold by Purina Mills and its distribution network, the
Purina Mills business has a higher gross margin rate and a higher rate of
selling, general and administration expense as a percent of sales than the Land
O'Lakes Farmland Feed business. By the end of 2002, we implemented programs that
will enable us to generate recurring annual cost savings of approximately $47
million as a result of the acquisition, relative to costs that would have been
incurred separately.



                                       32
<PAGE>



In 2002, we generated $34.9 million in savings, which were partially offset by
plant closings, severance, employee relocation and information technology
integration costs of $27.1 million.


RESULTS OF OPERATIONS

<Table>
<Caption>
                                                                               YEARS ENDED DECEMBER 31,
                                                  ------------------------------------------------------------------------------
                                                            2002                        2001                        2000
                                                  ------------------------     ------------------------     --------------------
                                                                   % OF                         % OF                      % OF
                                                                    NET                          NET                       NET
                                                  $ AMOUNT         TOTAL       $ AMOUNT         TOTAL       $ AMOUNT      SALES
                                                  ----------    ----------     ----------      --------     ----------   -------
                                                                            (DOLLARS IN MILLIONS)

<S>                                               <C>                 <C>      <C>                 <C>      <C>             <C>
NET SALES
Dairy foods .................................     $  2,899.1          49.6     $  3,463.5          59.1     $  3,098.2      54.6
Animal feed .................................        2,444.7          41.8        1,864.0          31.8        1,182.2      20.8
Crop seed ...................................          406.9           7.0          413.6           7.1          365.5       6.4
Swine .......................................           83.2           1.4          109.9           1.9          102.0       1.8
Agronomy ....................................             --            --             --            --          857.0      15.1
Other .......................................           13.0           0.2           13.5           0.1           67.9       1.3
                                                  ----------    ----------     ----------      --------     ----------   -------
  Total net sales ...........................     $  5,846.9                   $  5,864.9                   $  5,672.8
                                                  ==========                   ==========                   ==========

<Caption>

                                                                   % OF                         % OF                      % OF
                                                                    NET                          NET                       NET
                                                  $ AMOUNT         SALES       $ AMOUNT         SALES       $ AMOUNT      SALES
                                                  ----------    ----------     ----------      --------     ----------   -------
COST OF SALES
<S>                                               <C>                 <C>      <C>                 <C>      <C>             <C>
Dairy foods .................................     $  2,739.8          94.5     $  3,228.4          93.2     $  2,823.0      91.1
Animal feed .................................        2,155.3          88.2        1,691.3          90.7        1,064.8      90.1
Crop seed ...................................          353.9          87.0          354.2          85.6          308.5      84.4
Swine .......................................           93.5         112.4           97.0          88.3           93.4      91.6
Agronomy ....................................             --            --             --            --          794.6      92.7
Other .......................................            7.9          60.8            7.7          57.0           61.8      91.0
                                                  ----------    ----------     ----------      --------     ----------   -------
  Total cost of sales .......................        5,350.4          91.5        5,378.6          91.7        5,146.1      90.7

SELLING, GENERAL AND ADMINISTRATION
Dairy foods .................................          155.5           5.4          168.9           4.9          203.3       6.6
Animal feed .................................          245.5          10.0          133.4           7.2           84.4       7.1
Crop seed ...................................           45.9          11.3           49.2          11.9           44.0      12.0
Swine .......................................            5.9           7.1            5.2           4.7            7.9       7.7
Agronomy ....................................           18.9            --           16.4            --           39.5       4.6
Other .......................................            9.8          74.6            8.9          65.9           10.2      15.0
                                                  ----------    ----------     ----------      --------     ----------   -------
  Total selling, general and
       administration .......................          481.5           8.2          382.0           6.5          389.3       6.9
Restructuring and impairment charges ........           31.4           0.5            3.7           0.1           54.2       1.0
                                                  ----------    ----------     ----------      --------     ----------   -------
(Loss) earnings from operations .............          (16.4)          0.3          100.6           1.7           83.2       1.5
Interest expense, net .......................           68.8           1.2           55.7           0.9           52.4       0.9
Gain on legal settlements ...................         (155.5)          2.7           (3.0)          0.1             --        --
Gain on sale of intangible ..................           (4.2)          0.1             --            --             --        --
Gain on divestiture of businesses ...........           (5.0)          0.1             --            --          (89.0)      1.6
Loss (gain) on extinguishment of debt .......           --              --           23.5           0.4           (4.4)      0.1
Equity in (earnings) loss of affiliated
  companies .................................          (22.7)          0.4          (48.6)          0.8           35.6       0.6
Minority interest in earnings (loss) of
  subsidiaries ..............................            5.5           0.1            6.9           0.1           (1.4)      0.0
                                                  ----------    ----------     ----------      --------     ----------   -------
Earnings before income taxes ................           96.7           1.7           66.1           1.1           90.0       1.6
Income tax benefit ..........................           (2.2)          0.0           (5.4)          0.1          (12.9)      0.2
                                                  ----------    ----------     ----------      --------     ----------   -------
Net earnings ................................     $     98.9           1.7     $     71.5           1.2     $    102.9       1.8
                                                  ==========    ==========     ==========      ========     ==========   =======
</Table>


YEAR ENDED DECEMBER 31, 2002 COMPARED TO YEAR ENDED DECEMBER 31, 2001

NET SALES

    Net sales in 2002 decreased $18.0 million, or 0.3%, to $5,846.9 million,
compared to net sales of $5,864.9 million in 2001. The decrease was primarily
attributed to declines in dairy foods, animal feed and swine sales, partially
offset by the acquisition of Purina Mills in October 2001, which contributed
$686.8 million in incremental sales in 2002.

    Dairy Foods. Net sales in 2002 decreased $564.8 million, or 16.3%, to
$2,899.1 million, compared to net sales of $3,463.9 million in 2001. In 2002,
average commodity prices for butter decreased $0.55 or 33.3% per pound,



                                       33
<PAGE>
while average commodity prices for cheese decreased $0.25 or 17.5% per pound
compared to the same period in 2001. The impact of these market price changes
decreased net sales of butter by $205.0 million and decreased net sales of
cheese by $52.5 million. However, the prices retailers set for branded butter
did not follow trends in the commodity butter markets. Retail prices for branded
butter remained high, which resulted in declines in sales volumes as consumers
shifted to substitute products or reduced consumption. Retail branded butter and
spreads volumes decreased 3.5 million pounds and 5.9 million pounds,
respectively, representing a decrease in net sales of $8.1 million and $4.5
million, respectively, from the same period last year. On the other hand,
private label butter volumes increased 15.1 million pounds and increased sales
$25.6 million over the prior year. Foodservice butter volumes decreased 3.8
million pounds over the prior year and decreased sales by $7.4 million. Bulk
cheese sales decreased $56.6 million for the period ended December 31, 2002
compared to the twelve months ended December 31, 2001. Deli cheese volumes
decreased 4.6 million pounds from the prior year, which resulted in a reduction
of sales of $8.8 million. Nonfat dry milk powder, private label butter and
cheese sales in the Western Region decreased $35.7 million, $33.6 million and
$23.2 million, respectively. The decline in powder sales was due to changes in
production schedules at our dairy plants, which resulted in reduced powder
byproduct availability, while the decline in butter and cheese sales was due to
a combination of decreased market prices and volume declines. Sales decreased
$14.5 million as a result of exiting our cheese manufacturing business in
Poland. Sales also decreased $13.7 million due to the formation of our Advanced
Food Products joint venture in 2001. Sales in 2002 under our wholesale milk
marketing program decreased $108.5 million, or 11.6%, to $827.0 million,
compared to $935.5 million in 2001. Volume changes in exports, foodservice
cheese and other product categories accounted for the remaining sales decrease
of $18.3 million.

    Animal Feed. Net sales in 2002 increased $580.7 million, or 31.2%, to
$2,444.7 million, compared to net sales of $1,864.0 million in 2001. The
acquisition of Purina Mills contributed $686.8 million in incremental sales.
This increase was partially offset by declines in Land O'Lakes Farmland Feed
branded sales. Sales of bulk phosphates decreased $19.2 million due to the sale
of this business to a third party in the first quarter of 2002. Sales in our
Land O'Lakes Farmland Feed animal health products decreased $17.5 million as a
result of a realigned marketing arrangement with a large vendor whereby the
vendor sells product directly to our customers in exchange for a margin-based
fee. Swine feed sales of our Land O'Lakes Farmland Feed branded products
decreased $16.3 million as a result of decreased volumes and depressed market
prices for hog producers caused, in part, by excess food proteins in the U.S.
market. Sales in our wholly and majority owned subsidiaries declined $15.7
million primarily as the result of exiting a joint venture operation
manufacturing catfish feeds early in 2002. Sales in our International division
decreased $12.4 million, primarily as a result of exiting our Poland operations.
Sales in our medicated feed additives business declined $5.1 million due to
lower volumes. Sales of Land O'Lakes Farmland Feed branded beef feeds decreased
$4.8 million, primarily due to the effect of warmer than average winter weather
in early 2002 and excess food proteins in the U.S. market. Sales in our
warehouse ingredient area declined by $3.1 million due to lower volumes. On the
other hand, sales in our animal milk products area increased $2.3 million as a
result of strong volumes. Sales in our dairy feeds area increased $1.5 million,
driven by strong sales of simple blends in our Western region. Changes in other
feed categories amounted to a decrease of $12.7 million. Finally, sales from
ingredient merchandising decreased $10.6 million, or 2.2%, from $500.2 million
in 2001 to $489.7 million in 2002.

    Crop Seed. Net sales in 2002 decreased $6.7 million, or 1.6%, to $406.9
million, compared to net sales of $413.6 million in 2001. Continued volume
growth in both proprietary and partnered categories resulted in increased sales
of corn of $21.9 million, or 21.4%. As in 2001, we shipped product early in the
fourth quarter of 2002 which resulted in incremental sales of $12.4 million,
primarily in partnered corn and soybean seed. A change in billing for technology
fees collected on behalf of one of our third-party suppliers added $10.8 million
to sales and cost of sales. However, these sales increases were more than offset
by volume declines in other seed categories, such as soybeans and turf seed.
Soybean sales declined $36.8 million in 2002, or 23.8%, mainly as the result of
less acres planted, the discontinuance of a partnered soybean brand and smaller
seed sizes. Turf sales declined $9.6 million, or 23.9%, primarily due to
decreased volumes as a result of weak turf markets. Volume declines in other
seed categories resulted in a sales decrease of $5.4 million.

    Swine. Net sales in 2002 decreased $26.7 million, or 24.3%, to $83.2
million, compared to $109.9 million in 2001. The number of market hogs sold
decreased by 91,807 and the average weight per market hog sold decreased 1.8
pounds, with a corresponding sales decrease of $11.7 million. Reduced consumer
demand, caused, in part, by a protein glut in the U.S. markets, decreased the
average market price in 2002 to $36.06 per hundredweight versus an average
market price of $46.52 in 2001. The decrease in average market hog prices of
$10.46 per hundredweight decreased sales by $14.5 million. We signed a packer
agreement with IBP, inc. effective September 25, 2000, which


                                       34
<PAGE>
ties the price we receive for market hogs to the price that the packer receives
for pork products. In 2002, this agreement increased our sales by $2.9 million
compared to 2001. The number of feeder pigs sold under contract increased by
9,216, with a corresponding sales increase of $0.5 million. The average price
per feeder pig sold under contract decreased $0.48 from $48.04 in 2001 to $47.56
in 2002, which decreased sales by $0.3 million. This decrease was due primarily
to the fact that some contracts are based on futures markets. The average price
per feeder pig sold on the open market decreased $14.84, from $49.17 in 2001 to
$34.33 in 2002, which decreased sales by $2.6 million.

COST OF SALES

    Cost of sales in 2002 decreased $28.2 million, or 0.5%, to $5,350.4 million,
compared to cost of sales of $5,378.6 million in 2001. Cost of sales as a
percent of net sales decreased 0.2 percentage points to 91.5% for 2002, compared
to 91.7% for the prior year. While the acquisition of Purina Mills contributed
to the decrease in our cost of sales as a percent of net sales due to a
higher-margin product mix, it added significantly to our cost of sales,
resulting in an increase of $570.3 million. This increase was partially offset
by lower cost of sales in dairy foods. In 2002, patronage income from other
cooperatives that was directly attributable to product purchases amounted to
$4.7 million, compared to $6.2 million in 2001. Our cost of sales was reduced by
these amounts.

    Dairy Foods. Cost of sales in 2002 decreased $488.6 million, or 15.1%, to
$2,739.8 million, compared to cost of sales of $3,228.4 million in 2001. In
2002, average butter market prices decreased $0.55 per pound, while average
cheese market prices decreased $0.25 per pound compared to the same period in
2001. The impact of these market price changes decreased cost of sales of butter
by $182.0 million and decreased cost of sales of cheese by $52.2 million.
Increased volumes of private label butter sales increased cost of sales $24.2
million over the prior year. Foodservice butter volume decreases resulted in
decreased cost of sales of $7.1 million. Reduced sales of bulk cheese and deli
cheese resulted in decreased cost of sales of $53.3 million and $7.4 million,
respectively. Cost of sales for nonfat dry milk powder, private label butter and
cheese in the Western region decreased $40.2 million, $25.6 million and $12.8
million, respectively. Higher milk input costs in the Upper Midwest driven, in
part, by lower federal order pool returns resulted in increased cost of sales of
$7.4 million. Cow numbers and milk production have declined in both Minnesota
and Wisconsin, resulting in competitive pressures for milk and higher milk
procurement costs. The decision to exit our cheese manufacturing operations in
Poland reduced cost of sales by $13.9 million. The formation of our Advanced
Food Products joint venture in 2001 decreased cost of sales by $12.6 million.
Cost of sales in 2002 under our wholesale milk marketing program decreased
$105.4 million, or 11.3%, to $830.3 million, compared to $935.7 million in 2001.
Reduced energy costs in 2002 decreased cost of sales by $9.8 million, as
compared to 2001. Cost of sales includes $25.1 million from the start-up of
Cheese & Protein International's cheese and whey plant in Tulare, California.
Finally, cost of sales for other products decreased $23.0 million over the
prior-year period. Cost of sales as a percent of net sales increased 1.3
percentage points from 93.2% in 2001 to 94.5% in 2002, primarily due to lower
sales volumes and decreased commodity prices for butter and cheese.

    Animal Feed. Cost of sales in 2002 increased $464.0 million, or 27.4%, to
$2,155.3 million compared to $1,691.3 million in 2001. The acquisition of Purina
Mills added $570.3 million in cost of sales in 2002. This increase was partially
offset by a decrease in Land O'Lakes Farmland Feed branded product lines. Cost
of sales in our wholly and majority owned subsidiaries declined $18.5 million,
primarily the result of exiting a joint venture manufacturing catfish feed in
early 2002. Cost of sales of bulk phosphates decreased $17.0 million as we sold
this business during the first quarter of 2002. Cost of sales for Land O'Lakes
Farmland Feed animal health products decreased $16.6 million as a result of a
realigned marketing arrangement with a large vendor whereby the vendor sells
product directly to our customers in exchange for a margin-based fee. Land
O'Lakes Farmland Feed branded swine cost of sales decreased $9.6 million. Cost
of sales in our International division decreased $10.5 million primarily due to
the exit of our Mexico and Poland operations in 2002. Land O'Lakes Farmland Feed
branded beef feeds cost of sales decreased $2.3 million, due to slower sales as
a result of warm winter weather early in 2002. Cost of sales in our warehouse
ingredients and medicated feed additives areas declined $1.9 million and $2.6
million, respectively, due to lower volumes. Cost reductions from the
integration efforts related to Purina Mills reduced our cost of sales by $7.8
million. Cost of sales in our dairy feed area increased $3.0 million, primarily
as a result of strong sales in our Western region. Patronage income, which is
recorded as a reduction of cost of sales, decreased $2.9 million. An unrealized
hedging gain in 2002 related to corn and soybean meal futures contracts
decreased cost of sales by $0.2 million, compared to an increase from an
unrealized hedging loss of $3.7 million in 2001, resulting in a cost of sales
decrease of $3.9 million. Cost of sales decreased $10.4 million as a result of
the decline in ingredient merchandising sales. Cost of sales as a percent of net
sales decreased 2.5 percentage points, from 90.7%




                                       35
<PAGE>



in 2001 to 88.2% in 2002. The decrease was due primarily to certain Purina Mills
products, which carry a comparatively higher margin than our traditional product
lines, stronger margins in our aquaculture area and strong sales in our milk
replacer areas. IOIC as a percent of cost of sales increased to 25.2% in 2002
from 19.3% in 2001 due to the change in product mix and the unrealized hedging
gains and losses noted above.

    Crop Seed. Cost of sales in 2002 decreased $0.3 million, or 0.1%, to $353.9
million, compared to cost of sales of $354.2 million in 2001. Continued volume
growth in both proprietary and partnered categories resulted in increased cost
of sales for corn of $16.1 million, or 17.6%. As in 2001, we shipped product
early in the fourth quarter of 2002 which resulted in incremental cost of sales
of $13.8 million, primarily in partnered corn and soybean seed. A change in
billing for technology fees collected on behalf of one of our third-party
suppliers added $10.8 million to cost of sales. This increase in cost of sales
was more than offset by cost of sales declines in other seed categories, such as
soybeans and turf seed. Cost of sales for soybeans declined $31.1 million in
2002, or 22.9%, mainly as the result of less acres planted, the discontinuance
of a partnered soybean brand and smaller seed sizes. Cost of sales for turf seed
declined $9.6 million, or 27.0%, primarily due to decreased volumes as a result
of weak turf markets. Changes in product mix, particularly in alfalfa, accounted
for an increase in cost of sales of $4.3 million. An unrealized hedging gain on
soybean futures contracts of $2.3 million in 2002, compared to an unrealized
hedging loss of $2.3 million in 2001, decreased cost of sales by $4.6 million.
Cost of sales as a percent of net sales increased 1.4 percentage points, from
85.6% in 2001 to 87.0% in 2002, primarily due to a change in product mix.

    Swine. Cost of sales in 2002 decreased $3.5 million, or 3.6%, to $93.5
million, compared to $97.0 million in 2001. Reduced unit sales decreased cost of
sales by $9.7 million. In our cost-plus program, the decreased market price fell
below the program's floor price to independent producers, which increased cost
of sales by $6.2 million. Improved productivity decreased the cost per unit,
which decreased cost of sales by $0.5 million. An unrealized hedging loss
increased cost of sales by $0.9 million in 2002, compared to an unrealized
hedging loss of $0.4 million in 2001, resulting in a net increase in cost of
sales of $0.5 million. Cost of sales as a percent of net sales increased 24.1
percentage points from 88.3% to 112.4% of sales, primarily due to the decrease
in hog market prices which lowered swine net sales.

SELLING, GENERAL AND ADMINISTRATION EXPENSE

    Selling, general and administration expense in 2002 increased $99.4 million,
or 26.0%, to $481.4 million, compared to selling, general and administration
expense of $382.0 million in 2001. Selling, general and administration expense
as a percent of net sales increased 1.7 percentage points from 6.5% in 2001 to
8.2% in 2002. The acquisition of Purina Mills in October 2001 contributed $83.0
million in incremental selling, general and administration expense and increased
our selling, general and administration expense as a percent of net sales by 1.4
percentage points.

    Dairy Foods. Selling, general and administration expense in 2002 decreased
$13.4 million, or 7.9%, to $155.5 million, compared to $168.9 million in 2001. A
reduction of advertising and promotion expense of $4.9 million, reduced
administrative expense of $3.5 million and the reversal of a $3.0 million legal
reserve originally expensed in 2001, due to a favorable judgment (net effect
$6.0 million) were the primary components of the decrease. Selling, general and
administration expense as a percent of net sales increased 0.5 percentage points
from 4.9% in 2001 to 5.4% in 2002 due to lower sales volumes.

    Animal Feed. Selling, general and administration expense in 2002 increased
$112.1 million, or 84.0%, to $245.5 million, compared to $133.4 million in 2001.
The majority of this increase was related to the acquisition of Purina Mills,
which contributed $83.0 million in increased selling, general and administration
expense. In addition, we incurred one-time integration costs of $14.6 million
related to the Purina Mills acquisition, including $6.8 million in information
systems integration costs and $3.1 million in relocation expense. We also
incurred an additional $2.1 million in bad debt expense in 2002. Gains on the
disposal of fixed assets decreased by $2.9 million. In 2001, we experienced a
gain of $1.0 million in producer loan reserves that did not occur in 2002.
Selling, general and administration expense as a percent of net sales increased
2.8 percentage points from 7.2% in 2001 to 10.0% in 2002. Other income and
expense increased $6.6 million from 2001 to 2002 as a result of charges from the
receivables securitization.

    Crop Seed. Selling, general and administration expense in 2002 decreased
$3.3 million, or 6.7%, to $45.9 million, compared to $49.2 million in 2001. Cost
reduction efforts, reduced research and development spending, and



                                       36
<PAGE>


decreased information systems spending are the primary reasons for the decrease.
Selling, general and administration expense as a percent of net sales decreased
0.6 percentage points, from 11.9% in 2001 to 11.3% in 2002.

    Swine. Selling, general and administration expense in 2002 increased $0.7
million, or 13.5%, to $5.9 million, compared to $5.2 million in 2001. Excluding
a $1.9 million gain from the sale of an investment in 2001, selling, general and
administration expense in 2002 decreased $1.2 million, or 16.9%, to $5.9
million, compared to $7.1 million in 2001, due mostly to reduced staffing.
Excluding the gain, selling, general and administration expense as a percent of
net sales increased 0.8 percentage points, from 6.3% in 2001 to 7.1% in 2002,
primarily due to the decrease in hog market prices which lowered swine net
sales.

    Agronomy. Selling, general and administration expense in 2002 increased $2.5
million, or 15.2%, to $18.9 million, compared to $16.4 million in 2001,
primarily as a result of environmental reserves for potential liabilities prior
to the formation of Agriliance.

RESTRUCTURING AND IMPAIRMENT CHARGES

    In 2002, Land O'Lakes recorded restructuring and impairment charges of $31.4
million, compared to $3.7 million in 2001. Dairy Foods recorded a $19.6 million
restructuring and impairment charge in 2002, of which $15.2 million was related
primarily to the write-down of certain impaired plant assets to their estimated
fair value in anticipation of plant closings, and $4.4 million was related to
employee severance and outplacement costs for 374 employees at various
locations. Animal feed recorded an $11.8 million restructuring and impairment
charge, of which $3.1 million primarily was related to the write-down of certain
impaired plant assets to their estimated fair value, and $8.7 million was
related to employee severance and outplacement costs for 375 employees at
various locations. Restructuring and impairment charges in 2001 included a $1.7
million restructuring charge by Dairy Foods for employee severance and
outplacement costs for 63 employees at a manufacturing facility, a $6.0 million
impairment charge related to a feed operation in Mexico, a $1.8 million
impairment charge related to the write-down of Swine assets to their estimated
fair value and a $5.7 million reversal of charges taken in 2000. The 2001
reversal was for the sale of certain animal feed assets that had been written
off in December 2000 and to reflect the decision to continue operating a plant
previously scheduled for shutdown.

INTEREST EXPENSE

    Interest expense in 2002 was $68.8 million, compared to $55.7 million in
2001. The $13.1 million, or 23.5%, increase primarily resulted from increased
borrowing to finance the Purina Mills acquisition in October 2001. Average debt
balances increased by $150.6 million over 2001. CoBank patronage reduced
interest expense by $0.9 million in 2002, compared to $1.3 million in 2001.
Combined interest rates for borrowings, excluding CoBank patronage, averaged
7.0% in 2002, compared to 6.5% in 2001.

GAIN ON LEGAL SETTLEMENTS

    In the fourth quarter of 1999, a class action lawsuit, alleging illegal
price fixing, was filed against various vitamin product suppliers. Initially, we
were a party to this action as a member of the class. In February 2000, however
we decided to pursue our claims against the defendants outside the class action.
During the period commencing January 2002 through December 2002, we recorded a
gain of $155.5 million on vitamin settlements. These settlements were with those
defendants who supplied the vast majority of the vitamin purchases under
dispute. In 2001, we recorded a gain on legal settlements of $3.0 million.

GAIN ON SALE OF INTANGIBLE

    In 2002, we recorded a gain of $4.2 million on the sale to Potash
Corporation of Saskatchewan of a customer list pertaining to the feed phosphate
distribution business.



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<PAGE>



GAIN ON DIVESTITURE OF BUSINESSES

    In 2002, we recorded a gain of $4.0 million on the divestiture of selected
seed businesses, a gain of $1.3 million on the divestiture of our dairy foods
Poland business and a loss of $0.3 million on the divestiture of other
businesses, resulting in a total gain of $5.0 million. In 2001, we recorded no
gain or loss on divestitures.

LOSS (GAIN) ON EXTINGUISHMENT OF DEBT

    In 2002, we did not record a loss or gain on extinguishment of debt. In
2001, we incurred a loss on extinguishment of debt of $23.5 million on the
refinancing of our debt in conjunction with the Purina Mills acquisition.

EQUITY IN LOSS OR EARNINGS OF AFFILIATED COMPANIES

    In 2002, equity in earnings of affiliated companies was $22.7 million,
compared to earnings of $48.6 million in 2001. Results in 2002 included earnings
from Agriliance of $25.1 million, a loss from our Melrose Dairy Proteins LLC
joint venture of $5.2 million and a loss from MoArk of $2.9 million, partially
offset by earnings from our Advanced Food Products joint venture of $4.0 million
and earnings from other affiliated companies. Results in 2001 included earnings
from Agriliance of $34.2 million, earnings from various dairy, feed and swine
joint ventures of $12.6 million and earnings from MoArk of $1.8 million.

MINORITY INTEREST IN LOSS OR EARNINGS OF SUBSIDIARIES

    In 2002, we recorded minority interest in earnings of subsidiaries of $5.5
million, compared to earnings of $6.9 million in 2001. Minority interest in
earnings was derived primarily from animal feed related subsidiaries, while in
2001 minority interest in earnings of animal feed related subsidiaries was
partially offset by minority interest in the loss of dairy foods and other
consolidated subsidiaries.

INCOME TAXES

    We recorded an income tax benefit of $2.2 million in 2002, compared with a
tax benefit of $5.4 million in 2001. The tax benefit resulted from losses in our
dairy foods industrial operations and Cheese & Protein International LLC joint
venture, as well as non-member losses in our swine business and in MoArk, an
affiliated company, which more than offset the tax expense related to the
unallocated gain on legal settlements. The effect of allocated patronage refunds
reduced our statutory tax rate from 35.0% to a tax credit of 0.1% for 2002,
compared to a tax credit of 2.4% in 2001. The effect of foreign operations and
other factors further reduced our tax rate, resulting in an effective tax rate
of (2.3) % for 2002, compared to an effective tax rate of (8.2) % in 2001.

NET EARNINGS

    Net earnings increased $27.4 million to $98.9 million in 2002, compared to
$71.5 million in 2001. Net earnings in 2002 include a gain on legal settlements
of $129.3 million, net of income tax expense of $26.3 million, while net
earnings in 2001 include a gain on legal settlements of $2.7 million, net of
income tax expense of $0.3 million.

ALLOCATION OF NET EARNINGS

    In 2002, net earnings of $86.6 million from member business were allocated
to member equities, and retained earnings increased by $12.3 million, reflecting
primarily the portion of the gain on legal settlements that pertains to
non-member business, partially offset by non-member losses in Swine and Dairy
Foods industrial operations. In 2001, net earnings of $73.3 million were
allocated to member equities, and retained earnings were reduced by $1.8
million, reflecting minor losses in non-member business.



                                       38
<PAGE>
YEAR ENDED DECEMBER 31, 2001 COMPARED TO YEAR ENDED DECEMBER 31, 2000

NET SALES

    Net sales in 2001 increased $192.1 million, or 3.4%, to $5,864.9 million,
compared to net sales of $5,672.8 million in 2000. Excluding the effects of the
contribution of certain of our agronomy assets to the Agriliance joint venture
on July 29, 2000, the formation of the Advanced Food Products joint venture in
March 2001 and the divestiture of our fluid dairy assets in July 2000, net sales
in 2001 increased $1,284.3 million, or 28.1%, from $4,567.0 million in 2000 to
$5,851.3 million in 2001. The increase was primarily attributed to the full-year
effect of the Land O'Lakes Farmland Feed joint venture, which began operations
in October 2000, increased average commodity dairy prices and the acquisition of
Purina Mills in October 2001.

    Dairy Foods. Net sales in 2001 increased $365.7 million, or 11.8%, to
$3,463.9 million, compared to net sales of $3,098.2 million in 2000. Excluding
the effect of the fluid dairy divestiture and the Advanced Food Products joint
venture, net sales increased $600.8 million, or 21.1%, from $2,849.4 million to
$3,450.2 million. Average butter and cheese prices increased $0.49 per pound and
$0.29 per pound, respectively, a significant increase compared to depressed
prices which existed throughout 2000. The increase was driven by decreased milk
supply as a result of the shrinking United States cow herds due to depressed
prices in prior years. In general, we are able to pass through these higher
prices. Consequently, favorable pricing increased net sales by $147.3 million
for butter and $67.3 million for cheese. However, higher sales prices resulted
in declines in dairy volumes as consumers shifted to substitute products or
reduced consumption. Cheese volumes decreased 12.1 million pounds, representing
a decrease in net sales of $22.0 million from the same period last year. Butter
volumes were down 5.3 million pounds, representing a decrease in net sales of
$8.8 million. In addition, the Gustine, CA cheese facility, acquired in July
2000, contributed $76.9 million in incremental sales to our dairy operations,
and the Melrose, MN cheese joint venture in March 2001 resulted in $69.2 million
of incremental sales. Sales of bulk cheese to co-packers and other manufacturers
added $78.8 million in incremental sales. A combination of pricing and volume
changes in other product categories accounted for the remaining increase of
$107.5 million. Finally, sales in 2001 under our wholesale milk marketing
program increased $84.6 million, or 11.8%, to $801.4 million, compared to $716.8
million in 2000. This increase was due to increases in the sale of milk to Dean
Foods under an agreement established in July 2000 subsequent to Dean Foods'
purchase of our fluid dairy assets.

    Animal Feed. Net sales in 2001 increased $681.8 million, or 57.7%, to
$1,864.0 million, compared to net sales of $1,182.2 million in 2000. Most of the
increase was a result of the full-year impact of the addition of Farmland
Industries' feed assets to form the Land O'Lakes Farmland Feed joint venture,
which accounted for $453.0 million of the growth in net sales from the prior
period. The growth in sales in ingredient merchandising of $207.0 million, or
65.3%, from $316.8 million in 2000 to $523.8 million in 2001 was also driven by
the consolidation of Farmland Industries' ingredient merchandising results (and
is included in the $453.0 million increase in net sales). The Purina Mills
acquisition in October 2001 contributed $202.9 million in incremental feed
sales. Additionally, in July 2000, we increased our ownership from 50% to 100%
in Nutra-Blend, L.L.C. (a Midwestern premix production company); and as a
result, we consolidated their financial results into ours. Prior to July 1,
2000, we recorded our share of income from Nutra-Blend as equity income. This
change in ownership and the subsequent consolidation of results added $37.9
million of net sales. Sales reductions with some of our large poultry integrator
customers amounted to $6.1 million and offset some of the above increases.

    Crop Seed. Net sales in 2001 increased $48.1 million, or 13.2%, to $413.6
million, compared to net sales of $365.5 million in 2000. Strong volume growth
resulted in increased sales of soybeans of $40.3 million, or 35.3%, increased
sales of corn of $9.7 million, or 10.5%, and increased sales of alfalfa of $7.6
million, or 24.0%. Other seed categories grew by $16.4 million, or 29.5%. We
shipped $42.0 million in sales in the fourth quarter of 2001 that historically
would have occurred in the first quarter of 2002. These $42.0 million shipments
reflected 87.3% of total sales growth and included $28.5 million for soybeans
and $11.0 million for corn. An early fall harvest and mild winter allowed us to
ship product early in the season, and third-party suppliers also provided
incentives to customers to take seed product early. In addition, prior-year seed
acquisitions, which were integrated into our existing seed business, contributed
incremental volume growth. Some offsetting volume decline occurred in other seed
categories, primarily cotton, resulting in a decline in sales of $26.0 million.
The decline in cotton sales reflects the decision to direct bill from our vendor
to our major cotton customer in 2001; consequently, we recorded only a sales
support fee on such shipments as an offset to our selling expense.



                                       39
<PAGE>



    Swine. Net sales in 2001 increased $7.9 million, or 7.8%, to $109.9 million,
compared to $102.0 million in 2000. The increase was due mainly to higher unit
sales and improvements in market prices for hogs. While the number of market
hogs sold increased by 36,537 with a corresponding sales increase of $4.2
million, the total number of feeder pigs sold decreased by 3,601 with a
corresponding sales decrease of $0.2 million, resulting in a net increase in
sales of $4.0 million. Strong consumer demand coupled with reduced hog
production in the United States as a result of depressed hog prices in prior
years increased the average market price in 2001 to about $46.52 per
hundredweight versus an average market price of approximately $45.35 in 2000.
The increase in average market hog prices of $1.17 per hundredweight increased
sales by $2.1 million. The average price per feeder pig increased $0.41 from
$47.63 in 2000 to $48.04 in 2001, which increased sales by $1.8 million. This
increase was due primarily to the fact that we added more swine aligned
contracts with a higher base price. In addition, we were reimbursed for higher
feed costs in 2001, which also contributed to the increase in our average feeder
pig sales price that year. We signed a packer agreement with IBP, inc. effective
September 25, 2000, which ties the price we receive for market hogs to the price
that the packer receives for pork products. In 2001, this agreement reduced our
sales by $0.7 million, since the agreement limits our upside as well as downside
potential from market price swings.

    Agronomy. No agronomy segment sales were reported by Land O'Lakes for 2001,
due to the contribution of our agronomy business to the Agriliance joint venture
in 2000. Net sales for the period of January through July of 2000 were $857.0
million.

COST OF SALES

    Cost of sales in 2001 increased $232.5 million, or 4.5%, to $5,378.6
million, compared to cost of sales of $5,146.1 million in 2000. Cost of sales as
a percent of net sales increased 1.0 percentage points to 91.7% for 2001,
compared to 90.7% for the prior year. The formation of the Agriliance and
Advanced Food Products joint ventures impacted our reported results because we
no longer consolidate their results in our financial statements. In addition, we
divested of our fluid dairy assets. Adjusting for the effects of these
transactions, cost of sales increased $1,231.8 million, or 29.8%, to $5,366.0
million, compared to cost of sales of $4,134.2 million in 2000. Cost of sales as
a percentage of net sales adjusted for the effects of these transactions
increased 1.2 percentage points from 90.5% in 2000 to 91.7% in 2001. At the same
time, the consolidation of our feed joint venture results in our financial
statements added significantly to our cost of sales, resulting in an increase of
$424.7 million. Higher average milk input costs and changes in our feed and seed
product mix also contributed to the increase. For 2001, patronage income from
other cooperatives that was directly attributable to product purchases amounted
to $6.2 million, compared to $3.9 million for 2000. Our cost of sales was
reduced by these amounts.

    Dairy Foods. Cost of sales in 2001 increased $405.4 million, or 14.4%, to
$3,228.4 million, compared to cost of sales of $2,823.0 million in 2000. Cost of
sales as a percent of sales increased 2.1 percentage points from 91.1% in 2000
to 93.2% in 2001. Excluding the effects of the divestiture of our fluid dairy
assets and the formation of the Advanced Food Products joint venture, cost of
sales increased $610.2 million to $3,215.8 million in 2001, compared to $2,605.6
million in 2000. Cost of sales as a percent of sales, excluding the effect of
the divestiture and the joint venture, increased 1.8 percentage points, from
91.4% in 2000 to 93.2% in 2001. The increase in cost of sales was largely due to
higher average milk costs and higher prices for bulk cheese and butter.
Specifically, costs increased $147.3 million for butter and $67.3 million for
cheese. These cost increases were partially offset by reduced sales volume,
which decreased cost of sales by $20.9 million in cheese and $13.4 million in
butter. The effect of the Melrose, MN joint venture and Gustine, CA cheese plant
acquisition permitted us to sell more products and resulted in incremental cost
of sales of $73.8 million and $71.6 million, respectively. Increased sales of
bulk cheese to co-packers and other manufacturers contributed $74.6 million in
incremental cost of sales growth. Finally, cost of sales for other products
increased $105.1 million over the prior year. Energy costs increased by $8.9
million over the prior year. Plant underutilization in the Upper Midwest due to
shrinking milk supplies also contributed to the increase in cost of sales. Cost
of sales in 2001 under our wholesale milk marketing program increased $95.9
million, or 13.5%, to $806.8 million, compared to $710.9 million in 2000.

    Animal Feed. Cost of sales in 2001 increased $626.6 million, or 58.8%, to
$1,691.3 million compared to $1,064.8 million in 2000. The majority of the
increase in cost of sales was due to the Land O'Lakes Farmland Feed joint
venture, which added $424.7 million in costs, including $252.5 million in
ingredient merchandising cost. As a result, our ingredient merchandising cost of
sales was $507.2 million for 2001, compared to $309.4 million in 2000, the
increase being driven primarily by the addition of the Farmland Industries
ingredient merchandising results. The



                                       40
<PAGE>
acquisition of Purina Mills added $171.1 million in cost of sales for 2001, and
the consolidation of Nutra-Blend added another $32.0 million in incremental cost
of sales. Cost of sales as a percent of sales increased 0.6 percentage points,
from 90.1% in 2000 to 90.7% in 2001. The increase was due primarily to lower
margins on Farmland Industries products. Partially offsetting these lower-margin
Farmland Industries products were certain Purina Mills product lines, which
carry a comparatively higher margin than our traditional product lines. An
unrealized hedging loss in 2001 related to corn and soybean meal futures
contracts increased cost of sales by $3.7 million. Additionally, costs increased
more than sales growth due to higher energy costs and plant employee costs,
which resulted in $4.0 million of additional cost. IOIC as a percent of cost of
sales decreased from 18.9% in 2000 to 18.5% in 2001 due to the change in product
mix mentioned above.

    Crop Seed. Cost of sales in 2001 increased $45.7 million, or 14.8%, to
$354.2 million, compared to cost of sales of $308.5 million in 2000. Cost of
sales as a percent of sales increased 1.2 percentage points, from 84.4% in 2000
to 85.6% in 2001. Cost of sales increased for soybeans ($38.6 million), corn
($9.6 million), alfalfa ($4.4 million) and other forages ($4.8 million),
primarily from volume growth due to early shipment of $42.0 million of product
that historically would have occurred in the first quarter of 2002. This early
shipment accounted for $36.1 million, or 79.0%, of the cost of sales increase
and included $24.5 million for soybeans and $9.5 million for corn. Reduction in
sales of lower margin products such as cotton partially offset the impact of
this additional volume and resulted in an overall improvement of our cost of
sales ratio. An unrealized hedging loss in 2001 related to soybean futures
contracts added $2.3 million to cost of sales.

    Swine. Cost of sales in 2001 increased $3.6 million, or 3.9%, to $97.0
million, compared to $93.4 million in 2000. Cost of sales as a percent of sales
decreased 3.4 percentage points from 91.6% to 88.2% of sales due to reduced
losses in our cost-plus program and the improvement in hog market prices.
Additional unit sales added $3.4 million in cost of sales, while lower
production cost per unit reduced cost of sales by $0.3 million. An unrealized
hedging loss increased cost of sales by $0.4 million.

    Agronomy.  No cost of sales was reported by Land O'Lakes in 2001, due to the
contribution of our agronomy business to the Agriliance joint venture in 2000.
Cost of sales for 2000 was $794.6 million.

SELLING, GENERAL AND ADMINISTRATION EXPENSE

    Selling, general and administration expense in 2001 decreased $7.3 million,
or 1.9%, to $382.0 million, compared to selling and administration expense of
$389.3 million in 2000. Selling and administration expense as a percent of sales
decreased 0.4 percentage points from 6.9% in 2000 to 6.5% in 2001. Excluding the
effects of the formation of our Agriliance and Advanced Food Products joint
ventures and the divestiture of our fluid dairy assets, selling and
administration expense increased $39.7 million, or 12.2%, to $365.0 million in
2001, compared to $325.3 million in 2000. The full-year effect of the formation
of the Land O'Lakes Farmland Feed joint venture contributed to the increase.
Selling, general and administration expense as a percent of sales excluding the
effect of the divestiture and the formation of the Agriliance and Advanced Food
Products joint ventures decreased 0.9 percentage points from 7.1% in 2000 to
6.2% in 2001.

    Dairy Foods. Selling, general and administration expense in 2001 decreased
$34.4 million, or 16.9%, to $168.9 million, compared to $203.3 million in 2000.
Selling and administration expense as a percent of sales decreased 1.7
percentage points from 6.6% in 2000 to 4.9% in 2001. Excluding the effects of
the divestiture of our fluid dairy assets and the formation of the Advanced Food
Products joint venture, selling and administration expense for 2001 was $168.4
million, down $10.5 million, or 5.9%, compared to $178.9 million in 2000. This
decrease was primarily due to reductions in administration expense, partially
offset by an increase in advertising and promotion expense of $4.9 million,
primarily to promote our foodservice and branded deli cheese. Excluding the
effects of the divestiture and the joint venture, selling, general and
administration expense as a percent of sales decreased 1.4 percentage points
from 6.3% in 2000 to 4.9% in 2001.

    Animal Feed. Selling, general and administration expense in 2001 increased
$49.0 million, or 58.1%, to $133.4 million, compared to $84.4 million in 2000.
Selling and administration expense as a percent of sales increased 0.1
percentage points from 7.1% in 2000 to 7.2% in 2001. The change in selling and
administration expense was partially due to the consolidation of Farmland
Industries' feed operations, which added $22.0 million in expense. Additionally,
the consolidation of Purina Mills' business resulted in increased selling and
administration expense of



                                       41
<PAGE>


$25.3 million. Selling, general and administration expense as a percent of IOIC
decreased from 42.4% in 2000 to 41.8% in 2001.

    Crop Seed. Selling, general and administration expense in 2001 increased
$5.2 million, or 11.8%, to $49.2 million, compared to $44.0 million in 2000.
Selling expense increased $2.0 million, while advertising and promotion spending
increased $1.0 million due to increased sales and promotional efforts. Income
for sales support to Agriliance, which is accounted for as an offset to selling
and administration expense, decreased $1.0 million. Administration expense
increased $0.2 million. Selling, general and administration expense as a percent
of sales decreased 0.1 percentage points, from 12.0% in 2000 to 11.9% in 2001.

    Swine. Selling, general and administration expense in 2001 decreased $2.7
million, or 34.2%, to $5.2 million, compared to $7.9 million in 2000. Selling,
general and administration expense as a percent of sales decreased from 7.7% in
2000 to 4.7% in 2001. A gain on the sale of swine facilities contributed $1.9
million to the decrease. Reductions in administrative staff and reduced
information systems spending resulted in savings of $1.1 million, partially
offset by an increase in corporate administration allocations of $0.3 million
compared to the prior year.

    Agronomy. Selling, general and administration expense in 2001 decreased
$23.1 million, or 58.5%, to $16.4 million, compared to $39.5 million in 2000,
due to the formation of the Agriliance joint venture. Results for 2000 included
seven months of consolidated selling and administration expense from our
agronomy businesses prior to the contribution of certain of our agronomy assets
to Agriliance on July 28, 2000 and parent administrative support charges for the
remaining five months of 2000. Subsequent to the formation of Agriliance, we
continued to record allocated parent expenses for interest on our investment in
Agriliance and corporate overhead. In addition, selling, general and
administration expense in 2001 included $3.6 million in losses recorded for
eastern agronomy assets held for sale, compared to losses of $11.9 million
recorded in 2000.

RESTRUCTURING AND IMPAIRMENT CHARGES

    In 2001, Land O'Lakes recorded restructuring and impairment charges of $3.7
million, compared to $54.2 million in 2000. Dairy foods recorded a restructuring
charge of $1.7 million, which had not been paid at December 31, 2001, for
severance costs for 63 production employees resulting from the consolidation of
production facilities. Animal feed reversed $5.7 million of a prior-year
restructuring charge primarily due to a change in business strategy following
the Purina Mills acquisition, which resulted in the decision to continue to
operate plants that were held for sale at December 31, 2000. An impairment
charge of $6.0 million related to our animal feed operation in Mexico and held
for sale at December 31, 2001, was recorded in order to value the business at
its expected selling price less costs of disposal. Swine recorded an impairment
charge of $1.8 million to reduce the book value of undeveloped land with permit
issues to its estimated fair value.

    In 2000, we recorded restructuring and impairment charges of $54.2 million.
A restructuring charge of $9.7 million resulted from initiatives within Land
O'Lakes Farmland Feed LLC to consolidate facilities and reduce personnel. Of the
$9.7 million, $7.2 million related to the closing and planned sale of 12 plants
and consisted of $5.5 million to write down the book value of the plants and
$1.7 million for demolition expense and incidental exit costs. The remaining
$2.5 million represented severance and outplacement costs for 119 non-plant
employees. An impairment charge of $44.5 million resulted from a reduction in
the carrying amounts of certain impaired assets to their estimated fair value,
determined on the basis of third-party appraisals or estimated cash flows. The
impairment was related to cheese marketing and production assets that were
significantly underutilized due to changes in consumer product preferences and
costs associated with sourcing raw materials.

INTEREST EXPENSE

    Interest expense in 2001 was $55.7 million compared to $52.4 million in
2000. The $3.3 million, or 6.3%, increase primarily resulted from increased
borrowing to finance the Purina Mills acquisition, offset by lower interest
rates for most of the year. Average debt balances increased by $111.5 million
over 2000. CoBank patronage reduced interest expense by $1.3 million in 2001,
compared to $1.1 million in 2000. Combined interest rates for borrowings,
excluding CoBank patronage, averaged 6.5% in 2001, compared to 7.2% in 2000.



                                       42
<PAGE>



GAIN ON LEGAL SETTLEMENTS

    In the fourth quarter of 1999, a class action lawsuit, alleging illegal
price fixing, was filed against various vitamin product suppliers. Initially, we
were a party to this action as a member of the class. In February 2000, however
we decided to pursue our claims against the defendants outside the class action.
In 2001, we recorded a gain on legal settlements of $3.0 million, compared to no
gain in 2000.


GAIN ON DIVESTITURES

    In 2001, we did not divest of any businesses. In 2000 we recorded a gain of
$88.5 million from the divestiture of our fluid dairy assets and a gain of $0.5
million from the divestiture of a swine subsidiary. We used funds from these
divestitures to reduce outstanding debt balances.

LOSS (GAIN) ON EXTINGUISHMENT OF DEBT

    In 2001, a loss on extinguishment of debt of $23.5 million was incurred on
the refinancing of our debt in conjunction with the Purina Mills acquisition. In
2000, a gain on extinguishment of debt of $4.5 million was realized on the
repurchase of $9.3 million of our Capital Securities.

EQUITY IN LOSS OR EARNINGS OF AFFILIATED COMPANIES

    In 2001, equity in earnings of affiliated companies was $48.6 million
compared to a loss of $35.6 million in 2000. Results in 2001 included earnings
from Agriliance of $34.2 million, various dairy, feed and swine joint ventures
of $12.6 million, and MoArk of $1.8 million. Results in 2000 primarily reflected
a loss from Agriliance of $32.4 million.

    The increase in equity in Agriliance earnings of $66.6 million over the
prior year was mainly attributable to the full-year effect of the joint venture.
In 2001, we recorded twelve months of our 50% share of Agriliance results. In
2000, we recorded only five months of our 50% share of Agriliance results
(August through December), subsequent to the contribution of certain of our
agronomy assets to Agriliance in July 2000. Due to the seasonal nature of the
agronomy business, most of the revenues and earnings tend to occur during the
spring planting and early summer growing seasons. In 2001, we recorded equity in
earnings from Agriliance of $35.1 million for the first seven months and equity
in losses of $13.5 million for the last five months, excluding a $12.6 million
reversal pertaining to the reserve related to assets held for sale established
in 2000. For the five-month period August through December 2000, we recorded
equity in loss of Agriliance of $12.4 million, excluding a one-time $20 million
reserve for assets held for sale. The $12.6 million reversal to earnings in 2001
of the $20 million reserve that Land O'Lakes recorded in 2000 resulted from the
decision to retain and operate Agriliance's southern retail distribution assets
that were previously held for sale as of December 31, 2000.

MINORITY INTEREST IN LOSS OR EARNINGS OF SUBSIDIARIES

    In 2001, we recorded minority interest in earnings of subsidiaries of $6.9
million compared to a loss of $1.4 million in 2000. Minority interest in
earnings of animal feed related subsidiaries was $8.0 million, partially offset
by minority interest in the loss of other consolidated subsidiaries.

INCOME TAXES

    Income tax benefit was $5.4 million in 2001, compared with a tax benefit of
$12.9 million in 2000. The decrease in tax benefit was attributed to a reduction
in non-member losses as compared to 2000. The 2000 tax benefit resulted from
non-member losses, primarily due to impairment charges and losses associated
with the repositioning of agronomy retail distribution assets acquired in 1999.
The effect of allocated patronage refunds reduced our statutory tax rate from
35.0% to a tax credit of 2.4% for 2001 compared to a tax credit of 20.4% in
2000. The disposal of investments, partially offset by the effect of foreign
operations and other factors further reduced our tax rate, resulting in an
effective tax rate of (8.2)% for 2001, compared to an effective tax rate of
(14.3)% in 2000.



                                       43
<PAGE>



NET EARNINGS

    Net earnings decreased $31.4 million to $71.5 million in 2001, compared to
$102.9 million in 2000.

ALLOCATION OF NET EARNINGS

    In 2001, net earnings of $73.3 million from member business were allocated
to member equities, and retained earnings were reduced by $1.8 million,
reflecting minor losses from non-member business. In 2000, net earnings of
$136.9 million were allocated to member equities, and retained earnings were
reduced by $34.0 million. The 2000 allocation to member equities reflected the
gain on the sale of the fluid dairy business, which was recorded as a gain from
member business. Conversely, in 2000 retained earnings decreased primarily
because the impairment charge of $44.5 million, which was related to the
write-down of cheese marketing and production assets, pertained to non-member
business.

LIQUIDITY AND CAPITAL RESOURCES

    We rely on cash from operations, borrowings under our bank facilities and
bank term debt and other institutionally placed funded debt as the main sources
for financing working capital requirements, additions to property, plant and
equipment and to complete acquisitions and joint ventures. Other sources of
funding consist of leasing arrangements, a receivables securitization and the
sale of non-strategic assets. Total long-term debt was $1,007.3 million,
including $190.7 million in Capital Securities, as of December 31, 2002, and
$1,147.5 million, including $190.7 million in Capital Securities, as of December
31, 2001.

    Net cash provided by operating activities was $22.0 million for the year
ended December 31, 2002, $274.3 million for the year ended December 31, 2001,
and $115.2 million for the year ended December 31, 2000. For the year ended
December 31, 2002, net cash provided by operating activities was $252.3 million
less than in 2001. The decrease was primarily a result of lower operating
earnings and changes in working capital. Cash provided by operating activities
in 2002 included $58.8 million of cash proceeds from legal settlements.

    Net cash flows used by investing activities was $4.2 million for the year
ended December 31, 2002, $461.2 million for the year ended December 31, 2001 and
$82.6 million for the year ended December 31, 2000. The change was primarily due
to a decrease in acquisition and investment spending subsequent to the Purina
Mills acquisition in October 2001 and to sales of selected assets.

    Net cash flows (used) provided by financing activities was ($83.6) million
for the year ended December 31, 2002, $313.1 million for the year ended December
31, 2001, and $(226.4) million for the year ended December 31, 2000. During the
year ended December 31, 2002, we made payments of $62.0 million on existing
long-term debt and payments of $37.9 million for redemption of member equities.
During the same period, we increased short-term debt by $10.1 million to cover
seasonal working capital needs. For the year ended December 31, 2001, proceeds
of $1,369.5 million resulted from new financing, offset by the payment of $935.1
million on existing long-term debt and the payment of $53.8 million on
short-term debt. For the year ended December 31, 2000, payments of $179.1
million were made to reduce long-term debt.

    Our principal liquidity requirements are to service our debt and meet our
working capital and capital expenditure needs. Following the Purina Mills
acquisition, we have significantly increased our leverage. As of December 31,
2002 we had $1,007.3 million outstanding in long-term debt, including $190.7
million of Capital Securities, and $142.4 million outstanding in short-term
debt. In addition, as of December 30, 2002, $219.8 million was available under a
$250 million revolving credit facility for working capital and general corporate
purposes, after giving effect to $30.2 million of outstanding letters of credit,
which reduce availability. There were no draws on the facility as of year end
2002. Total equity as of December 31, 2002 was $911.5 million.

    The principal term loans consist of a $325.0 million syndicated Term Loan A
Facility with a remaining balance of $288.3 million and a final maturity of five
years, (expiration October 10, 2006), and a syndicated Term Loan B Facility with
a remaining balance of $231.4 million and a final maturity of seven years,
(expiration October 10, 2008). Our $250.0 million revolving credit facility
terminates on June 28, 2004.



                                       44
<PAGE>



    Borrowings under the term loans and the revolving credit facility bear
interest at variable rates (either LIBOR or an Alternative Base Rate) plus
applicable margins. The margins are dependent upon Land O'Lakes credit ratings.

    In October 2002, Moody's Investors Service ("Moody's") and Standard & Poor's
("S&P") lowered their respective ratings of our secured and unsecured debt as
follows:


<Table>
<Caption>
   FACILITY (MATURITY)                                                 MOODY'S               S&P
<S>                                                                  <C>                 <C>
   $250 million senior secured (2004) (Revolving Credit Fac.)         Ba2 to B1           BBB- to BB
   $288 million senior secured (2006) (Term Loan A)                   Ba2 to B1           BBB- to BB
   $231 million senior secured (2008) (Term Loan B)                   Ba2 to B1           BBB- to BB
   $350 million 8.75% senior unsecured (2011)                         Ba3 to B2            BB to B+
   $191 million 7.45% Trust preferred                                 Ba3 to B3            B+ to B-
</Table>


    These rating downgrades increase, by one-quarter of one percent (.25%) the
interest that we pay on our $288 million senior secured facility and the amount
drawn on our $250 million revolving credit facility, which was unused as of
December 31, 2002. The increase in interest rates affecting these two facilities
would have increased our interest cost by approximately $0.7 million in 2002.
Finally, Moody's outlook for our company is stable while S&P currently has the
company on credit watch negative.

    The Term Loan A Facility is prepayable at any time without penalty. The Term
Loan B Facility is prepayable with a penalty of 2% from October 11, 2002 through
October 10, 2003, 1% from October 11, 2003 through October 10, 2004 and no
penalty thereafter. The term loans are subject to mandatory prepayments, subject
to certain limited exceptions, in an amount equal to (1) 50% of excess cash flow
of Land O'Lakes and the restricted subsidiaries, (2) 100% of the net cash
proceeds of asset sales and dispositions of property of Land O'Lakes and the
restricted subsidiaries, to the extent not reinvested, (3) 100% of any casualty
or condemnation receipts by Land O'Lakes and the restricted subsidiaries, to the
extent not used to repair or replace assets, (4) 100% of joint venture dividends
or distributions received by Land O'Lakes or the restricted subsidiaries, to the
extent that they relate to the sale of property, casualty or condemnation
receipts, or the issuance of any equity interest in the joint venture, (5) 100%
of net cash proceeds from the sale of inventory or accounts receivable in a
securitization transaction to the extent cumulative proceeds from such
transactions exceed $100.0 million and (6) 100% of net cash proceeds from the
issuance of unsecured senior or subordinated indebtedness issued by Land
O'Lakes. In November and December 2002, we made a $2.9 million mandatory
prepayment on Term Loan A Facility and a $2.4 million mandatory prepayment on
Term Loan B Facility as a result of asset sales. In January and February 2003,
we made a $33.3 million prepayment on Term Loan A Facility and a $24.8 million
prepayment on Term Loan B Facility, of which $8.1 million was mandatory and
$50.0 million was optional.

    The amortization schedules for the Term Loan A and Term Loan B Facilities
are provided below.

<Table>
<Caption>
                                                               TERM LOAN A     TERM LOAN B
                                                               ------------   -------------
<S>                                                            <C>            <C>
                        2002 (paid)...................         $ 36,729,853   $  18,583,371
                        2003 (paid January and
                        February 2003)                           33,319,272      24,824,971
                        2003 (remaining)..............           39,977,984              --
                        2004..........................           64,491,867       1,895,451
                        2005..........................           85,989,157       2,527,269
                        2006..........................           64,491,867       2,527,269
                        2007..........................                   --       2,527,269
                        2008..........................                   --     197,114,400
                                                               ------------   -------------
                             Total....................         $325,000,000   $ 250,000,000
                                                               ============   =============
</Table>

    In November 2001, we issued $350 million of senior notes. These notes bear
interest at a fixed rate of 8 3/4% and mature on November 15, 2011. The notes
are callable beginning in year six at a redemption price of 104.375%. In years
seven and eight, the redemption price is 102.917% and 101.458%, respectively.
The notes are callable at par beginning in year nine.

    In 1998, Capital Securities in an amount of $200 million were issued by our
trust subsidiary, and the net


                                       45
<PAGE>


proceeds were used to acquire a junior subordinated note of Land O'Lakes. The
holders of these securities are entitled to receive dividends at an annual rate
of 7.45% until the securities mature in 2028 and correspond to the payment terms
of the junior subordinated debentures which are the sole asset of the trust
subsidiary. Interest payments on the debentures can be deferred for up to five
years, and the obligations under the debentures are junior to all of our debt.
As of December 31, 2002, the outstanding balance of Capital Securities was
$190.7 million.

     The credit agreements relating to the term loans and revolving credit
facility and the indenture relating to the 8 3/4% senior notes impose certain
restrictions on us, including restrictions on our ability to incur indebtedness,
make payments to members, make investments, grant liens, sell our assets and
engage in certain other activities. In addition, the credit agreements relating
to the term loans and revolving credit facility require us to maintain an
interest coverage ratio of at least 2.50 to 1. Our ratio was 3.38 to 1 as of and
for the year ended December 31, 2002 and 3.85 to 1 as of and for the year ended
December 31, 2001. We are also required to maintain a leverage ratio of no
greater than 4.25 to 1. The actual leverage ratio as of December 31, 2002 was
3.88 to 1, and 3.77 to 1 as of December 31, 2001. The required leverage ratio
steps down to 3.75 to 1 as of October 11, 2003 and remains constant thereafter.
Given the prepayments made in the first quarter, we fully expect to be in
compliance with the above ratios as defined in the credit agreements, throughout
2003.

    Indebtedness under the term loans and revolving credit facility is secured
by substantially all of the material assets of Land O'Lakes and its wholly-owned
domestic subsidiaries (other than LOL Finance Co. and LOLFC, LLC) and Land
O'Lakes Farmland Feed and its wholly-owned domestic subsidiaries (other than LOL
Farmland Feed SPV, LLC), including real and personal property, inventory,
accounts receivable, intellectual property and other intangibles, other than
those receivables which have been sold in connection with our receivables
securitization. Indebtedness under the term loans and revolving credit facility
is also guaranteed by our wholly-owned domestic subsidiaries (other than LOL
Finance Co. and LOLFC, LLC) and Land O'Lakes Farmland Feed and its wholly-owned
domestic subsidiaries (other than LOL Farmland Feed SPV, LLC). The 8 3/4% senior
notes are unsecured but are guaranteed by the same entities that guaranty the
obligations under the term loans and revolving credit facility.

    We expect that funds from operations and available borrowings under our
revolving credit facility and receivables securitization facility will provide
sufficient working capital to operate our business, to make expected capital
expenditures and to meet liquidity requirements through at least 2003, including
debt service on the term debt, the revolving credit facilities and the 8 3/4%
senior notes.

OFF-BALANCE SHEET ARRANGEMENTS

    In order to reduce overall financing costs, Land O'Lakes entered into a
revolving receivables securitization program with CoBank in December 2001 for up
to $100 million in advances against eligible receivables. Under this program,
Land O'Lakes, Land O'Lakes Farmland Feed LLC and Purina Mills, LLC sell feed,
seed and certain swine receivables to LOL Farmland Feed SPV, LLC, a limited
purpose wholly-owned subsidiary of Land O'Lakes Farmland Feed LLC. This
subsidiary is a qualifying special purpose entity (QSPE) under applicable
accounting rules. The QSPE was established for the limited purpose of purchasing
and obtaining financing for these receivables. The transfers of the receivables
to the QSPE are structured as sales and, in accordance with applicable
accounting rules, these receivables are not reflected in the consolidated
balance sheets of Land O'Lakes Farmland Feed LLC or Land O'Lakes. The QSPE
purchases the receivables with a combination of cash initially received from
CoBank, equal to the present value of eligible receivables multiplied by the
agreed advance rate; and notes, equal to the unadvanced present value of the
receivables. Land O'Lakes and the other receivables sellers are subject to
credit risk related to the repayment of the QSPE notes, which in turn is
dependent upon the ultimate collection on the QSPE's receivables pool.
Accordingly, we have retained reserves for estimated losses. As of December 31,
2002, no amount was drawn under this securitization.

    In addition, we lease various equipment and real properties under long-term
operating leases. Total consolidated rental expense was $44.4 million for the
year ended December 31, 2002; $34.8 million for the year ended December 31, 2001
and $31.7 million for the year ended December 31, 2000. Most of the leases
require payment of operating expenses applicable to the leased assets. We expect
that in the normal course of business most leases that expire will be renewed or
replaced by other leases.

CPI CAPITAL LEASE



                                       46
<PAGE>



    Cheese and Protein International (CPI), a consolidated joint venture of Land
O'Lakes, leases the real property, certain equipment and the buildings relating
to its cheese manufacturing and whey processing plant in Tulare, California (the
"Lease"). The Lease is accounted as a capital lease on our financial statements
and includes $106 million in assets. The Lease base term commenced on April 30,
2002 and expires on the fifth anniversary, unless CPI requests, and the lessor
approves, one or more one-year base term extensions, which could extend the base
term to no more than ten years. We have entered into a Support Agreement in
connection with the Lease. Pursuant to this agreement, we can elect one of the
following options in the event CPI defaults on its obligations under the Lease:
(i) assume the obligations of CPI, (ii) purchase the leased assets, (iii) fully
cash collateralize the Lease, or (iv) nominate a replacement lessee to be
approved by the lessor. The lease agreement requires among other things, that
CPI maintain certain financial ratios including minimum tangible net worth and a
minimum fixed charge coverage ratio. In addition, CPI is restricted as to
borrowings and changes in ownership. At December 31, 2002, CPI was not in
compliance with the minimum fixed charge coverage ratio; however, CPI obtained a
waiver of such noncompliance at December 31, 2002.
    The Lease is recorded as a current liability, pending the signing of an
amendment to the lease agreement which will modify the fixed charge coverage
ratio going forward. We expect the amendment will pass before March 31, 2002,
the next scheduled measurement date for the fixed charge coverage ratio. We
expect the amendment to postpone the measurement of the fixed charge coverage
ratio until March 2005. In addition to paying an increased applicable lender
margin, we also expect to establish a $20 million cash account or letter of
credit to provide additional support to the lease participants. The cash account
or letter of credit would only be drawn upon in the event of a CPI default, and
would reduce amounts otherwise due under the lease. This support requirement
will be lifted when certain financial targets are achieved by CPI. Assuming an
amendment is obtained, the Lease would be recorded as a long-term liability. The
annual lease payments are disclosed below based on current lease rates, an
assumed interest rate of 6% and a five-year lease term. The actual lease
payments will vary with short-term interest rate fluctuations, as interest per
the lease agreement is based on LIBOR. At the conclusion of the lease term, CPI
is obligated to pay the remaining lease balance.

    The minimum lease payments for the periods set forth below are as follows:

<Table>
<Caption>
                                Fiscal year:
<S>                                 <C>                 <C>
                                    2003                $  15,099,130
                                    2004                   14,570,375
                                    2005                   14,041,619
                                    2006                   13,512,864
                                    2007                   91,810,066
                                    Thereafter                     --
                                                        -------------
                                                        $ 149,034,054
                                                        =============
</Table>

CONTRACTUAL OBLIGATIONS

    At December 31, 2002, we had certain contractual obligations, which require
us to make payments as follows:


                PAYMENTS DUE BY PERIOD (AS OF DECEMBER 31, 2002)
<Table>
<Caption>
                                                                LESS THAN                           MORE THAN
                    CONTRACTUAL OBLIGATIONS           TOTAL      1 YEAR     1-3 YEARS   3-5 YEARS    5 YEARS
                    -----------------------         ----------  ---------   ---------   ---------   ---------
                                                                          (IN THOUSANDS)
<S>                                                <C>          <C>         <C>          <C>        <C>
                    Revolving Credit
                      Facility(1)...............    $       --   $     --    $     --   $      --    $     --
                    Long-Term Debt(2)...........     1,111,871    104,563     162,463      77,794     767,051
                    Capital Lease(3)............       108,279    108,279          --          --          --
                    Operating Leases............        80,516     23,816      28,762      16,307      11,631
                                                    ----------   --------    --------   ---------    --------
                         Total Contractual
                           Obligations..........    $1,300,666   $236,658    $191,225   $  94,101    $778,682
                                                    ==========   ========    ========   =========    ========
</Table>


------------------
(1) Maximum $250 million facility, of which $219.8 million was available as of
    December 31, 2002. A total of $30.2 million of this commitment was
    unavailable due to outstanding letters of credit.

(2) Term Loan A and Term Loan B Facilities are subject to certain mandatory
    prepayment obligations in certain events as explained above. See
    "Off-balance Sheet Arrangements" for information concerning our receivables
    securitization program.

(3) Amount represents the present value of future minimum lease payments for
    the CPI capital lease for which we are contingently liable as of December
    31, 2002. Assuming passage of the CPI lease amendment, the $108,279
    currently recorded as due in less than one year, would be spread over the
    remaining lease term until the final payment is made in 2007.

    We expect our total capital expenditures to be approximately $90 million to
$100 million in 2003. Of such amounts, we currently estimate that a minimum
range of $35 million to $45 million of ongoing maintenance capital expenditures
is required each year. We had $87.4 million in capital expenditures for the year
ended December 31,



                                       47
<PAGE>


2002, compared to $83.9 million in capital expenditures for the year ended
December 31, 2001. We estimate that our total depreciation and amortization
expense will be approximately $100 million to $110 million in 2003. We had
$106.8 million in depreciation and amortization expense for the year ended
December 31, 2002, compared to $97.3 million for the year ended December 31,
2001.

    In 2003 we expect our total cash payments to members to be at least $24
million for revolvement, cash patronage and estates and age retirements.

RECENT ACCOUNTING PRONOUNCEMENTS

    The Company adopted the remaining provisions of SFAS No. 142, "Goodwill and
Other Intangible Assets," on January 1, 2002. Under SFAS No. 142, goodwill and
other intangible assets that have indefinite lives are no longer amortized
except for goodwill related to the acquisition of cooperatives and the formation
of joint ventures, but rather will be tested for impairment at least annually in
accordance with the provisions of the standard.
    The Company adopted Emerging Issues Task Force ("EITF") No. 00-25, "Vendor
Income Statement Characterization of Consideration to a Purchaser of the
Vendor's Products or Services," on January 1, 2002. EITF No. 00-25 deals with
the accounting for consideration paid from a vendor (typically a manufacturer or
distributor) to a retailer, including slotting fees, cooperative advertising
arrangements and buy-downs. The guidance in EITF 00-25 generally requires that
these incentives be classified as a reduction of sales. The impact of the
adoption decreased previously reported sales and selling, general and
administration expense for the years ended December 31, 2001 and 2000 by $108.6
and $96.0 million, respectively.
    In April 2002, FASB issued SFAS No. 145, "Rescission of FASB Statements No.
4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections." As
a result, gains and losses from the extinguishment of debt previously classified
as an extraordinary item must now be included in earnings from continuing
operations. The Company reclassified a $23.5 million extraordinary loss in 2001
to loss on extinguishment of debt and a $4.5 extraordinary gain in 2000 to gain
on extinguishment of debt.
    In June 2002, the FASB issued SFAS 146, "Accounting for Costs Associated
with Exit or Disposal Activities." The standard requires that a liability for a
cost associated with an exit or disposal activity be recognized and measured
initially at fair value when the liability is incurred. Under existing
accounting literature, certain costs for exit activities were recognized at the
date a company committed to an exit plan. The provisions of the standard are
effective for exit or disposal activities initiated after December 31, 2002. The
standard is generally expected to delay recognition of certain exit related
costs.

RISK FACTORS

SUBSTANTIAL LEVERAGE -- OUR SUBSTANTIAL LEVERAGE COULD ADVERSELY AFFECT OUR
ABILITY TO FULFILL OUR OBLIGATIONS UNDER OUR DEBT OBLIGATIONS AND OPERATE OUR
BUSINESS.

We are highly leveraged and have significant debt service obligations. As of
December 31, 2002, after eliminating intercompany activity, our aggregate
outstanding indebtedness was $1,007.3 million, excluding unused commitments, and
our total equity was $911.5 million. For the year ended December 31, 2002 our
interest expense was $68.8 million. We may incur additional debt from time to
time to finance strategic acquisitions, investments and alliances, capital
expenditures or for other purposes, subject to the restrictions contained in our
debt agreements.

Our substantial debt could have important consequences to persons holding our
outstanding indebtedness, including the following:

    o   we will be required to use a substantial portion of our cash flow
        from operations to pay principal and interest on our debt, thereby
        reducing the availability of our cash flow to fund working capital,
        capital expenditures, strategic acquisitions, investments and alliances
        and other general corporate requirements;

    o   our interest expense could increase if interest rates in general
        increase because a substantial portion of our debt bears interest at
        floating rates;

    o   our substantial leverage will increase our vulnerability to general
        economic downturns and adverse competitive and industry conditions and
        could place us at a competitive disadvantage compared to those of our
        competitors which are less leveraged;


                                       48
<PAGE>



    o   our debt service obligations could limit our flexibility to plan
        for, or react to, changes in our business and the dairy and
        agricultural industries;

    o   our level of debt may restrict us from raising additional financing on
        satisfactory terms to fund working capital, capital expenditures,
        strategic acquisitions, investments and joint ventures and other
        general corporate requirements;

    o   our level of debt may prevent us from raising the funds necessary to
        repurchase all of our 8 3/4% senior notes due 2011 tendered to us upon
        the occurrence of a change of control, which would constitute an event
        of default under the senior notes; and

our failure to comply with the financial and other restrictive covenants in our
debt instruments could result in an event of default that, if not cured or
waived, could cause our debt to become due immediately and permit our lenders to
enforce their remedies. See "Item 7A. Quantitative and Qualitative Disclosures
about Market Risk."

ABILITY TO SERVICE DEBT -- SERVICING OUR INDEBTEDNESS REQUIRES A SIGNIFICANT
AMOUNT OF CASH, AND OUR ABILITY TO GENERATE CASH DEPENDS ON MANY FACTORS BEYOND
OUR CONTROL.

We expect to obtain the cash to make payments on our debt and to fund working
capital, capital expenditures, strategic acquisitions, investments and joint
ventures and other general corporate requirements from our operations. Our
ability to generate cash is subject to general economic, financial, competitive,
legislative, regulatory and other factors that are beyond our control. We cannot
assure investors that our business will generate sufficient cash flow from
operations, that we will realize currently anticipated cost savings, net sales
growth and operating improvements on schedule, or at all, or that future
borrowings will be available to us under our credit facilities, in each case, in
amounts sufficient to enable us to service our indebtedness or to fund our other
liquidity needs. If we cannot service our indebtedness, we will have to take
actions such as reducing or delaying capital expenditures, strategic
acquisitions, investments and joint ventures, selling assets, restructuring or
refinancing our indebtedness or seeking additional equity capital, which may
adversely affect our membership and affect their willingness to remain members.
These remedies may not be effected on commercially reasonable terms, or at all.
In addition, the terms of existing or future indebtedness agreements, including
the credit agreements relating to our bank facilities and bank term debt and the
indenture for our 8 3/4% senior notes, may restrict us from adopting any of
these alternatives. See "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations."

ADDITIONAL BORROWING CAPACITY -- DESPITE OUR SUBSTANTIAL LEVERAGE, WE WILL BE
ABLE TO INCUR MORE DEBT, WHICH MAY INTENSIFY THE RISKS ASSOCIATED WITH OUR
SUBSTANTIAL LEVERAGE.

The agreements governing our debt will permit us, subject to certain conditions,
to incur a significant amount of additional indebtedness. In addition, we may
incur additional debt under our $250.0 million revolving credit facility, of
which approximately $219.8 million was available to us as of December 31, 2002.
If we incur additional debt, the risks associated with our substantial leverage,
including our ability to service our debt, could intensify.

RESTRICTIVE COVENANTS IN OUR DEBT INSTRUMENTS -- RESTRICTIONS IMPOSED BY OUR
DEBT AGREEMENTS LIMIT OUR ABILITY TO FINANCE FUTURE OPERATIONS OR CAPITAL NEEDS
OR ENGAGE IN OTHER BUSINESS ACTIVITIES THAT MAY BE IN OUR INTEREST.

The terms of our current debt agreements impose, and the terms of any future
debt may impose, operating and other restrictions on us and certain of our
subsidiaries. In addition, the agreements governing our outstanding credit
facilities also require us to achieve specified financial and operating results
and maintain compliance with specified financial ratios.

The restrictions contained in our debt agreements could:

    o   limit our ability to plan for or react to market conditions or meet
        capital needs or otherwise restrict our activities or business plans;
        and



                                       49
<PAGE>



    o   adversely affect our ability to finance our operations, strategic
        acquisitions, investments or alliances or other capital needs or to
        engage in other business activities that would be in our interest.

A breach of any of these restrictive covenants or our inability to comply with
the required financial ratios could trigger cross default provisions in the
agreements governing our other debt. If a default occurs, certain of our debt
agreements allow the lenders to declare all borrowings outstanding, together
with accrued interest and other fees, to be immediately due and payable which
would result in an event of default under the indenture governing our senior
notes and a termination event under the agreements governing our receivables
securitization. Lenders will also have the right in these circumstances to
terminate any commitments they have to provide further borrowings. If we are
unable to repay outstanding borrowings when due, those lenders will also have
the right to proceed against the collateral, including our available cash,
granted to them to secure the indebtedness. If this debt was to be accelerated,
our assets may not be sufficient to repay in full that indebtedness and our
other indebtedness. If not cured or waived, such default could give our lenders
the right to enforce other remedies that would interrupt the operation of our
business.

IF CHEESE & PROTEIN INTERNATIONAL, LLC DEFAULTS ON ITS LEASE, THE COMPANY MAY BE
REQUIRED TO ASSUME CPI'S OBLIGATION UNDER THE LEASE.

Upon the occurrence of an uncured event of default under CPI's lease, and a
failure by CPI to either obtain a waiver of the event of default, to obtain an
amendment to the participation agreement, or to obtain alternative financing to
replace the lease, the Company would be required to do one of the following: 1)
assume the obligations of CPI, 2) buy out the lease by purchasing the leased
property at the remaining lease balance amount, 3) fully cash collateralize the
lease, or 4) nominate a replacement Lessee, which replacement Lessee would be
subject to the credit approval of 100% of the participants to the lease.

If such an event was to occur, and the Company is unable to nominate a
replacement Lessee, the Company may be required to expend a substantial amount
of capital in order to fulfill its obligations to the lease participants. In
addition to the capital outlay, if the Company is required to assume CPI's
obligations, buy out the lease or cash collateralize the lease, such actions
would likely count against the Company's financial covenants.

CHANGES IN CONSUMER PREFERENCES AND DISTRIBUTION CHANNELS COULD DECREASE OUR
REVENUES AND CASH FLOW.

We are subject to the risks of:

    o   evolving consumer preferences and nutritional and health-related
        concerns; and

    o   changes in food distribution channels, such as consolidation of the
        supermarket industry and other retail outlets that result in a smaller
        customer base and intensify the competition for fewer customers.

To the extent that consumer preference evolves away from products that we
produce for health or other reasons, and we are unable to create new products
that satisfy new consumer preferences, there will be a decreased demand for our
products. There has been a recent trend toward consolidation among food
retailers which we expect to continue. As a result, these food retailers are
selecting product suppliers who can meet their needs nationwide. If our
products, including those licensed to Dean Foods, are not selected by these food
retailers for one or more of our products, our sales volumes could be
significantly reduced. In addition, national distributors or regional food
brokers could choose not to carry our products. Because of the high degree of
consolidation of national food distributors, the decision of a single such
distributor not to carry our products could have a serious impact on our
revenues. Any shift in consumer preferences away from our products could
decrease our revenues and cash flow and impair our ability to fulfill our
obligations under our debt obligations and operate our business.

In the first quarter of 2002, we launched our brand repositioning campaign in
our dairy foods business to further strengthen the LAND O LAKES brand. The
success of our brand repositioning campaign in increased demand for, and sales
of, our products depends on consumer preferences and consumer reaction to our
emphasis on "Simple Goodness Living."



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Our animal feed business relies on the sale of animal feed products to consumers
who own animals for recreational purposes or hobbies. The impact of an extended
economic downturn in the U.S. economy could cause some of these owners to sell
their animals or to seek alternative, less expensive products.

COMPETITION IN THE INDUSTRY MAY REDUCE OUR SALES AND MARGINS.

Our business segments operate in highly competitive industries. In addition,
some of our business segments compete with companies that have greater capital
resources, research and development staffs, facilities, diversity of product
lines and brand recognition than ours. Increased competition as to any of our
products could result in reduced prices which would reduce our sales and
margins.

Our competitors may succeed in developing new or enhanced products which are
better than ours. These companies may also prove to be more successful in
marketing and selling their products than we are with ours.

OUR OPERATING RESULTS FLUCTUATE BY SEASON AND ARE AFFECTED BY EXTREME WEATHER
CONDITIONS.

Our operating results within many of our segments are affected by seasonal
fluctuations of our sales and operating profits. There is significantly
increased demand for butter in the months prior to Thanksgiving and Christmas.
Because our supply of milk is lowest at this time, we produce and store surplus
quantities of butter in the months preceding the increase in demand for butter.
As a result, we are subject both to the risk that butter prices may decrease and
that increased demand for butter may never materialize, resulting in decreased
net sales.

Our animal feed sales are seasonal, with a higher percentage of sales generated
during the fourth and first quarters of the year. This seasonality is driven
largely by weather conditions affecting sales of our beef cattle products. If
the weather is particularly warm during the winter, then sales of feed for beef
cattle may decrease because the cattle may be better able to graze under warmer
conditions.

The sales of crop seed and crop nutrient and crop protection products are
dependent upon the planting and growing season, which varies from year to year,
resulting in both highly seasonal patterns and substantial fluctuations in our
quarterly sales and operating profits. Most sales of our seed products and of
Agriliance's agronomy products are in the first half of the year during the
spring planting season in the United States. If the spring is particularly wet,
farmers will not apply crop nutrient and crop protection products because they
will be washed away and may be ineffective if applied. Recently, we have
experienced a shift in crop seed volume to the fourth quarter of the current
year from the first quarter of the following year, compared to historical
results. This crop seed volume shift is because of third-party seed suppliers'
incentives to customers to take seed product early.

Live hog and wholesale pork prices are also affected by seasonal factors.
Because of production times for hogs, there are generally fewer hogs available
in the second quarter, causing live hog and wholesale pork prices to be higher
at these times. Conversely, there are generally more hogs available in the
fourth quarter, which generally causes live hog and wholesale pork prices to be
lower on average during these months.

In addition, severe weather conditions and natural disasters, such as floods,
droughts, frosts or earthquakes, or adverse growing conditions, diseases and
insect-infestation problems may reduce the quantity and quality of commodities
available for processing by us. For example, dairy cows produce less milk when
subjected to extreme weather conditions, including hot and cold temperatures. A
significant reduction in the quantity or quality of commodities harvested or
produced due to adverse weather conditions, disease, insect problems or other
factors could result in increased processing costs and decreased production,
with adverse financial consequences to us.

INCREASED ENERGY AND GAS COSTS COULD INCREASE OUR EXPENSES AND REDUCE OUR
PROFITABILITY.

We require a substantial amount of electricity, natural gas and gasoline to
manufacture, store and transport our products. The prices of electricity,
natural gas and gasoline fluctuate significantly over time. Many of our products
compete based on price and we may not be able to pass on increased costs of
production, storage or transportation to our customers. As a result, increases
in the cost of electricity, natural gas or gasoline could substantially harm our
business and results of operations. Depending upon the type of fertilizer
produced, a one dollar increase in the price



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of gas can result in increased fertilizer costs ranging from $11.70 to $33.50
per ton. Agriliance was not able to pass on the entire increase in fertilizer
costs to customers, therefore Agriliance's margins on fertilizer products were
lower than they would have been had natural gas and fertilizer costs remained
constant. The higher sales price of fertilizer resulted in a reduction of
expected sales volume. Increases in natural gas prices may not occur to the same
degree in countries where natural gas does not have as many other uses, such as
countries with temperate climates where natural gas in not used as a heating
fuel. As a result of these demand differences, fertilizer producers in the
United States may be at a competitive disadvantage to some international
competitors during natural gas price increases.

Our dairy business requires a continuous supply of energy to refrigerate raw
materials and finished products. Our largest dairy processing facility is
located in California, which experienced an energy crisis that disrupted our
dairy processing operations and increased our expenses in 2001. As a result of
blackouts at our Tulare, California plant, we have added electrical generating
capacity. Future blackouts at this or other plants, however, may result in the
interruption of our processing operations and the loss of perishable ingredients
and products which could result in substantial financial losses.

AN OVERSUPPLY OF FOOD PROTEIN IN THE U.S. MARKET COULD CONTINUE TO REDUCE OUR
NET SALES AND CASH FLOWS.

Our animal feed segment supplies feed to farmers and specialized livestock
producers for use in their commercial production of livestock. When the price
that these producers receive for their livestock declines as a result of an
oversupply of food proteins (such as beef cattle, swine and chicken) in the
market, such producers may decide to lower their production levels or to seek
alternative, lower margin products, resulting in lower net sales and cash flows
for us.

OUTBREAKS OF DISEASE CAN REDUCE OUR NET SALES AND OPERATING MARGINS.

The productivity and profitability of our businesses depend on animal and crop
health and on disease control.

We face the risk of outbreaks of mad cow disease, which could lead to the
destruction of beef cattle and dairy cows and decreased demand for dairy and
beef products. If this occurs, we would also face reduced milk supply and
increased cost to produce our dairy products, which could reduce our sales and
operating margins. In addition, we could have decreased demand for our feed
products as dairy and beef producers decrease their herd sizes due to decreased
demand for dairy and beef products.

We face the risk of outbreaks of foot-and-mouth disease, which could lead to a
massive destruction of cloven-hoofed animals such as dairy cattle, beef cattle,
swine, sheep and goats and significantly reduce the demand for meat products.
Because foot-and-mouth disease is highly contagious and destructive to
susceptible livestock, any outbreak of foot-and-mouth disease could result in
the widespread destruction of all potentially infected livestock. Our feed
operations could suffer as a result of decreased demand for feed products. If
this happens, we could also have difficulty procuring the milk we need for our
dairy operations and incur increased cost to produce our dairy products, which
could reduce our sales and operating margins. In addition, we may be prevented
from selling or transporting hogs.

We face the risk of outbreaks of Newcastle disease, which could lead to the
destruction of poultry flocks. Because Newcastle disease is highly contagious
and destructive, any outbreak of Newcastle disease could result in the
widespread destruction of infected flocks. If this happens, we could experience
a decreased demand for our poultry feed which could reduce our sales and
operating margins. In addition, if Newcastle disease spreads to flocks owned by
MoArk, MoArk could experience a decreased supply of layers and eggs which could
reduce MoArk's sales and operating margins.

Outbreaks of plant diseases and pests could destroy entire crops of plants for
which we sell crop seed. If this occurs, the crops grown to produce seed could
also be destroyed, resulting in a shortage of crop seed available for us to sell
for the next planting season. In addition, there may be decreased demand for our
crop seed from farmers who choose not to plant those species of crops affected
by these diseases or pests. These shortages and decreased demand could reduce
our sales.



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THE SHIFT IN SEED SALES VOLUME FROM THE FIRST QUARTER INTO THE FOURTH QUARTER
MAY NOT RECUR.

In the fourth quarter of 2001 and 2002, we offered incentive programs to our
customers which encouraged them to purchase seed in the fourth quarter rather
than waiting until the first quarter of the following year. Although similar
fourth quarter incentive programs will likely be offered going forward, if our
customers do not find the incentive programs as appealing as the ones offered in
the past, our customers may wait until the first quarter of the following year
to make their seed purchases.

CHANGES IN THE MARKET PRICES OF THE DAIRY AND AGRICULTURAL COMMODITIES THAT WE
USE AS INPUTS AS WELL AS THE PRODUCTS WE MARKET MAY CAUSE OUR OPERATING PROFIT
AND THE LIKELIHOOD OF RECEIVING DIVIDENDS FROM OUR JOINT VENTURES TO DECREASE.

Many of our products, particularly in our dairy foods, animal feed and swine
segments, use dairy or agricultural commodities as inputs or constitute dairy or
agricultural commodity outputs. Consequently, increased cost of commodity inputs
and decreased market price of commodity outputs may reduce our operating profit.

We are major purchasers of commodities used as inputs in our dairy foods
segment, namely milk, cream, butter and bulk cheese. Our dairy food outputs,
namely butter, cheese and nonfat dry milk, are also commodities. We inventory a
significant amount of the cheese and butter products we produce for sale to our
customers at a later date and at the market price on that date. For example, we
build significant butter inventories in the spring when milk supply is highest
for sale to our retail customers in the fall when butter demand is highest. If
the market price we receive at the time we sell our products is less than the
market price on the day we made the products, we will have lower (or negative)
margins which may have a material adverse impact on our results of operations.
In addition, we maintain significant inventories of cheese for aging and face
the same risk with respect to these products.

In 1999, our earnings were significantly impacted by the dramatic declines in
the price of cheese and butter, which caused significant devaluations of our
inventory of cheese products and, to a lesser extent, butter. Based on data from
the Chicago Mercantile Exchange, commodity block cheese prices began the year at
$1.90 per pound and finished at $1.20 per pound, and decreased commodity prices
occurred throughout the year as we were building our inventory necessary during
the peak sales periods of fall and winter. The resulting $62.1 million inventory
write-down partially accounted for the decrease in earnings of the dairy foods
segment, as compared with 1998.

The animal feed segment follows industry standards for feed pricing. The feed
industry generally prices products on the basis of income over ingredient cost
("IOIC") per ton of feed. This practice mitigates the impact of volatility in
commodity ingredient markets on our animal feed margins. However, if our
commodity input prices were to increase dramatically, we may be unable to pass
these prices on to our customers, who may find alternative feed sources at lower
prices or may exit the market entirely. This increased expense could reduce our
profitability.

We have ownership interests in swine. In recent years, the market for hogs and
wholesale pork has been the subject of extreme market fluctuations as a result
of a number of factors, including industry expansion, processor capacity and
consumer demand oversupply of proteins. In December 1998, the price of hogs hit
its lowest point in nearly forty years, resulting in the price we received for a
finished hog being substantially less than the cost to produce the hog. The
prices for weanling and feeder pigs also decreased dramatically. As a result, in
the fiscal years ended December 31, 2000 and 1999, on a pro forma basis, we
experienced operating losses in the swine production business of approximately
$8.3 million and $42.0 million, respectively. The Purina Mills portion of these
losses was largely responsible for Purina Mills filing for bankruptcy.

During the fiscal years ended December 31, 1999 through 2002, a large portion of
these losses were attributable to our cost-plus contracts (or comparable
contracts of Purina Mills), which guarantee swine producers certain minimum
prices for feeder pigs and market hogs. Although we do not intend to renew or
extend these contracts, we may continue to incur losses under these contracts
until the last ones expire in 2005.

Our MoArk joint venture produces and markets eggs. Recently, the price of eggs
has been negatively impacted by an oversupply of eggs in the market. An expected
decrease in chick hatch and other changes expected to occur as a result of the
new animal welfare guidelines may not materialize. If these changes do not
occur, the supply of eggs may not materially decrease, and the price of eggs may
not significantly increase. To the extent the price of eggs remains low, MoArk's
ability to make a dividend distribution to the Company will be diminished.



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DECREASE IN MILK SUPPLY COULD DECREASE OUR SALES AND INCREASE OUR COST OF
PRODUCTION.

We operate 15 dairy facilities which are located in different regions of the
United States. Milk production in certain regions, including the Midwest and
Northeast is decreasing as smaller producers in these regions have ceased milk
production and larger producers in the West have increased milk production.
Since 1990, cow numbers have declined 16% in Minnesota and 14% in Wisconsin and
the Minnesota/Wisconsin share of nationwide dairy manufacturing volume has
declined from 40% to 28%. In addition, a producer, whether a member or a
non-member, may decide not to supply milk to us or may decide to stop supplying
milk to us when the term of its contractual obligation expires. Where milk
production is not sufficient to fully support our operations, or where producers
decide not to supply us with milk, we may not be able to operate our plants at a
capacity that is profitable, may be forced to transport milk from a distance or
may be forced to pay higher prices for our milk supply. This could decrease our
operating margins and could decrease our net sales as a result of our inability
to meet customer demand.

In response to decreased milk production in the Upper Midwest, we are
restructuring our dairy facility infrastructure to increase production
efficiencies and reduce costs. The success and cost of this restructuring will
be negatively affected if the demand for cheese and dairy products decreases,
our competitors increase the volume of dairy products they produce or the milk
supply in the Upper Midwest continues to decrease.

WE OPERATE THROUGH JOINT VENTURES IN WHICH OUR RIGHTS TO EARNINGS AND TO CONTROL
THE JOINT VENTURE ARE LIMITED.

We produce, market and sell products through numerous joint ventures with
unaffiliated third parties. Our feed and agronomy businesses are primarily
operated through joint ventures.

The terms of each joint venture are different, but our joint venture agreements
generally contain:

    o   restrictions on our ability to transfer our ownership interest in the
        joint venture;

    o   no right to receive distributions without the unanimous consent of the
        members of the joint venture; and

    o   noncompetition arrangements restricting our ability to engage
        independently in the same line of business as the joint venture.

In addition to these restrictions, in connection with the formation of some of
our joint ventures, we have entered into purchase or supply agreements which
require us to purchase a minimum amount of the products produced by the joint
venture or supply a minimum amount of the raw materials used by the joint
venture. The day-to-day operations of some of our joint ventures are managed by
us through a management contract and others are managed by other joint venture
members. As a result, we do not have day-to-day control over certain of these
companies. See "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations" for a discussion of our material joint
ventures.

AGRILIANCE'S BUSINESS MAY BE ADVERSELY AFFECTED BY AGRILIANCE'S DEPENDENCE UPON
ITS SUPPLIERS.

Agriliance relies on a limited number of suppliers for the agronomy products it
sells. In 2002, approximately 58% of Agriliance's crop protection products were
sourced from three suppliers. In the event Agriliance is unable to purchase its
agronomy products on favorable terms from these suppliers, Agriliance may be
unable to find suitable alternatives to meet its product needs. In addition,
Agriliance procures approximately 65% of its fertilizer needs from CF Industries
and Farmland Industries. Farmland Industries initiated Chapter 11 bankruptcy
proceeding on May 31, 2002. On February 17, 2003, Farmland Industries entered
into an Asset Sale and Purchase Agreement, pursuant to which Koch Nitrogen
Company agreed to purchase certain of Farmland Industries' fertilizer
operations. Accordingly, as of March 27, 2003, Farmland Industries is no longer
meeting its delivery obligation to Agriliance. Agriliance may be unable to meet
its fertilizer supply needs on suitable terms for future planting seasons if it
is unable to purchase its fertilizer needs on favorable terms from both CF
Industries and Farmland.



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A LOSS OF OUR COOPERATIVE TAX STATUS COULD INCREASE OUR TAX LIABILITY.

Subchapter T of the Internal Revenue Code sets forth rules for the tax treatment
of cooperatives. As a cooperative, we are not taxed on earnings from member
business that we deem to be patronage income allocated to our members. However,
we are taxed as a typical corporation on the remainder of our earnings from our
member business (those earnings which we have not deemed to be patronage income)
and on earnings from nonmember business. If we were not entitled to be taxed as
a cooperative, our tax liability would be significantly increased.

OUR LIMITED ACCESS TO EQUITY MARKETS COULD ADVERSELY AFFECT OUR ABILITY TO
OBTAIN ADDITIONAL EQUITY CAPITAL.

As a cooperative, we may not sell our common stock in the traditional equity
markets. In addition, our articles of incorporation and by-laws contain
limitations on dividends and liquidation preferences of any preferred stock we
issue. These limitations restrict our ability to raise equity capital and may
adversely affect our ability to compete with entities that do not face similar
restrictions.

WE MAY NOT SUCCESSFULLY IMPLEMENT THE STRATEGIES RELATING TO OUR RECENT
ACQUISITIONS OR ACHIEVE THE ANTICIPATED BENEFITS FROM THESE ACQUISITIONS.

In addition to the acquisition of Purina Mills, we have added more than 20 joint
ventures and acquisitions over the past five years. However, Purina Mills
represents our largest acquisition to date. The integration and consolidation of
Purina Mills as well as the other acquisitions into our business require
substantial management, financial and other resources. Such integration involves
a number of significant risks, including:

    o   unforeseen liabilities;

    o   unanticipated problems with the quality of the assets of the acquired
        businesses;

    o   loss of customers;

    o   personnel turnover;

    o   loss of relationships with suppliers or service providers; and

    o   diversion of management's attention from other aspects of our business.

The effects of these risks and our inability to integrate and manage Purina
Mills and the other acquired businesses successfully or to achieve a substantial
portion of the anticipated cost savings from these acquisitions in the timeframe
we anticipate, could have a material adverse effect on our business, financial
condition or results of operations. See "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations."

OUR OPERATIONS ARE SUBJECT TO NUMEROUS LAWS AND REGULATIONS, EXPOSING US TO
POTENTIAL CLAIMS AND COMPLIANCE COSTS THAT COULD ADVERSELY AFFECT OUR BUSINESS.

We are subject to Federal, state and local laws and regulations relating to the
manufacturing, labeling, packaging, health and safety, sanitation, quality
control, fair trade practices, and other aspects of our business. In addition,
zoning, construction and operating permits are required from governmental
agencies which focus on issues such as land use, environmental protection, waste
management, and the movement of animals across state lines. These laws and
regulations may, in certain instances, affect our ability to develop and market
new products and to utilize technological innovations in our business. In
addition, changes in these rules might increase the cost of operating our
facilities or conducting our business which would adversely affect our finances.

Our dairy business is affected by Federal price support programs and federal and
state pooling and pricing programs to support the prices of certain products we
sell. Federal and certain state regulations help ensure that the supply of raw
milk flows in priority to fluid milk and soft cream producers before producers
of hard products such as cheese and butter. In addition, as a producer of dairy
products, we participate in the Federal market order system and pay into
regional "pools" for the milk we use based on the amount of each class of dairy
product we produce and the


                                       55
<PAGE>


price of those products. If any of these programs was no longer available to us,
the prices we pay for milk could increase and reduce our profitability.

In addition, as a manufacturer of food and animal feed products, we are subject
to the Federal Food, Drug and Cosmetic Act and regulations issued thereunder by
the Food and Drug Administration ("FDA"). The pasteurization of our milk and
milk products is also subject to inspection by the United States Department of
Agriculture. Several states also have laws that protect feed distributors or
restrict the ability of corporations to engage in farming activities. These
regulations may require us to alter or restrict our operations or cause us to
incur additional costs in order to comply with the regulations.

INABILITY TO PROTECT OUR TRADEMARKS AND OTHER PROPRIETARY RIGHTS COULD DAMAGE
OUR COMPETITIVE POSITION.

We rely on patents, copyrights, trademarks, trade secrets, confidentiality
provisions and licensing arrangements to establish and protect our intellectual
property. Any infringement or misappropriation of our intellectual property
could damage its value and could limit our ability to compete. We may have to
engage in litigation to protect our rights to our intellectual property, which
could result in significant litigation costs and require a significant amount of
management's time.

We license our LAND O LAKES and the Indian Maiden logo trademarks to certain of
our joint ventures and other third parties for use in marketing certain of their
products. We have invested substantially in the promotion and development of our
trademarked brands and establishing their reputation as high-quality products.
Actions taken by these parties may damage our reputation and our trademarks'
value.

We believe that the recipes and production methods for our dairy and spread
products and formulas for our feed products are trade secrets. In addition, we
have amassed a large body of knowledge regarding animal nutrition and feed
formulation which we believe to be proprietary. Because most of this proprietary
information is not patented, it may be more difficult to protect. We rely on
security procedures and confidentiality agreements to protect this proprietary
information, however such agreements and security procedures may be insufficient
to keep others from acquiring this information. Any such dissemination or
misappropriation of this information could deprive us of the value of our
proprietary information.

Purina Mills, LLC, a wholly-owned subsidiary of Land O'Lakes Farmland Feed LLC
licenses the trademarks Purina, Chow and the "Checkerboard" Nine Square Logo
under a perpetual, royalty-free license from Nestle Purina PetCare Company.
Under the terms of the license agreement, Nestle Purina PetCare Company retains
primary responsibility for protecting the licensed trademarks from infringement.
If Nestle Purina PetCare Company fails to assert its rights to the licensed
trademarks, Purina Mills may be unable to stop such infringement or cause them
to do so. Any such infringement of the licensed trademarks, or of similar
trademarks of Nestle Purina PetCare Company, could result in a dilution in the
value of the licensed trademarks.

OUR BRAND NAMES COULD BE CONFUSED WITH NAMES OF OTHER COMPANIES WHO, BY THEIR
ACT OR OMISSION, COULD ADVERSELY AFFECT THE VALUE OF OUR BRAND NAMES.

Purina Mills' products are generally marketed under the trademarks Purina, Chow
and the "Checkerboard" Nine Square logo under a perpetual, royalty-free license
from Nestle Purina PetCare Company. Nestle Purina PetCare Company markets widely
recognized products under the same trademarks and has given other unaffiliated
companies the right to market products under these trademarks. A competitor of
ours, Cargill, licenses from Nestle Purina PetCare Company the right to market
the same types of products which Purina Mills sells under these trademarks in
countries other than the United States. Acts or omissions by Nestle Purina
PetCare Company or other unaffiliated companies may adversely affect the value
of the Purina, Chow and the "Checkerboard" Nine Square Logo trademarks and the
demand for Purina Mills' products. Third-party announcements or rumors about
these unaffiliated companies could also have these negative effects.

PRODUCT LIABILITY CLAIMS OR PRODUCT RECALLS COULD ADVERSELY AFFECT OUR BUSINESS
REPUTATION AND EXPOSE US TO INCREASED SCRUTINY BY FEDERAL AND STATE REGULATORS.


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The sale of food products for human consumption involves the risk of injury to
consumers and the sale of animal feed products involves the risk of injury to
those animals as well as human consumers of those animals. Such hazards could
result from:

    o   tampering by unauthorized third parties;

    o   product contamination (such as listeria, E. coli. and salmonella) or
        spoilage;

    o   the presence of foreign objects, substances, chemicals, and other
        agents;

    o   residues introduced during the growing, storage, handling or
        transportation phases; or

    o   improperly formulated products which either do not contain the proper
        mixture of ingredients or which otherwise do not have the proper
        attributes.

Some of the products we sell are produced for us by third parties, or contain
inputs manufactured by third parties, and such third parties may not have
adequate quality control standards to assure that such products are not
adulterated, misbranded, contaminated or otherwise defective. In addition, we
license our LAND O LAKES brand for use on products produced and marketed by
third parties, for which we receive royalties. We may be subject to claims made
by consumers as a result of products manufactured by these third parties which
are marketed under our brand names.

Consumption of our products may cause serious health-related illnesses and we
may be subject to claims or lawsuits relating to such matters. Even an
inadvertent shipment of adulterated products is a violation of law and may lead
to an increased risk of exposure to product liability claims, product recalls
and increased scrutiny by federal and state regulatory agencies. Such claims or
liabilities may not be covered by our insurance or by any rights of indemnity or
contribution which we may have against others in the case of products which are
produced by third parties. In addition, even if a product liability claim is not
successful or is not fully pursued, the negative publicity surrounding any
assertion that our products caused illness or injury could have a material
adverse effect on our reputation with existing and potential customers and on
our brand image. In the past, we have voluntarily recalled certain of our
products in response to reported or suspected contamination. If we determine to
recall any of our products, we may face material consumer claims.

OUR BUSINESS IS SUBJECT TO THE RISK OF ENVIRONMENTAL LIABILITY AND WE COULD BE
NAMED AS A RESPONSIBLE OR POTENTIALLY RESPONSIBLE PARTY.

Many of our current and former facilities have been in operation for many years
and, over that time, we and other operators of those facilities have generated,
used, stored, or disposed of substances or wastes that are or might be
considered hazardous under applicable environmental laws, including chemicals
and fuel stored in underground and above-ground tanks, animal wastes and large
volumes of wastewater discharges. As a result, the soil and groundwater at or
under certain of our current and former facilities may have been contaminated,
and we may be required to make material expenditures to investigate, control and
remediate such contamination.

We have been identified as a potentially responsible party under the federal
Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA")
at several national priority list sites and currently have unresolved liability
with respect to the past disposal of hazardous substances at several of our
current and former facilities and waste disposal facilities operated by third
parties. CERCLA may impose joint and several liability on owners, operators and
users of a facility for the costs of investigation and remediation of
contaminated properties, regardless of fault or the legality of the original
disposal.

In addition, federal and state environmental authorities have proposed new
regulations and attempted to apply certain existing regulations for the first
time to agricultural operations. These regulations could result in significant
restraints on some of our operations, particularly our swine operations, and
could require us to spend significant amounts of money to bring these operations
into compliance.

STRIKES OR WORK STOPPAGES BY OUR UNIONIZED WORKERS COULD DISRUPT OUR BUSINESS.


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As of March 1, 2003, approximately 20% of our employees were covered by
collective bargaining agreements, some of which are due to expire within the
year. Our inability to negotiate acceptable contracts with the unions upon
expiration of these contracts could result in strikes or work stoppages and
increased operating costs as a result of higher wages or benefits paid to union
members or replacement workers. If the unionized workers were to engage in a
strike or work stoppage, or other non-unionized operations were to become
unionized, we could experience a significant disruption of our operations or
higher ongoing labor costs.

THERE IS NO ASSURANCE THAT OUR SENIOR MANAGEMENT TEAM OR OTHER KEY EMPLOYEES
WILL REMAIN WITH US.

We believe that our ability to successfully implement our business strategy and
to operate profitably depends on the continued employment of our senior
management team and other key employees. If members of the management team or
other key employees become unable or unwilling to continue in their present
positions, the operation of our business would be disrupted and we may not be
able to replace their skills and leadership in a timely manner to continue our
operations as currently anticipated. We operate generally without employment
agreements with, or key person life insurance on the lives of, our key
personnel.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

COMMODITY RISK

    In the ordinary course of business, we are subject to market risk resulting
from changes in commodity prices associated with dairy and other agricultural
markets. See "Item 7: Management Discussion and Analysis of Financial Condition
and Results of Operation." To manage the potential negative impact of price
fluctuations, we engage in various hedging and other risk management activities.

    As part of our trading activity, we utilize futures and option contracts
offered through regulated commodity exchanges to reduce risk on the market value
of our inventories and our fixed or partially fixed purchase and sale contracts.
We do not utilize hedging instruments for speculative purposes.

    Certain commodities cannot be hedged with futures or option contracts
because such contracts are not offered for these commodities by regulated
commodity exchanges. Inventories and purchase contracts for those commodities
are hedged with forward sales contracts to the extent practical so as to arrive
at a net commodity position within the formal position limits set by us and
deemed prudent for each of those commodities. Commodities for which future
contracts and options are available are also typically hedged first in this
manner, with futures and options used to hedge within position limits that
portion not covered by forward contracts.

    The notional or contractual amount of futures contracts provides an
indication of the extent of our involvement in such instruments for the dates
and the periods provided below, but does not represent exposure to market risk
or future cash requirements under certain of these instruments. A summary of our
futures contracts follows:

<Table>
<Caption>
                                                AT DECEMBER 31,
                                  ------------------------------------------
                                          2002                 2001
                                  --------------------  --------------------
                                   NOTIONAL     FAIR     NOTIONAL     FAIR
                                    AMOUNT      VALUE     AMOUNT      VALUE
                                  ----------  --------  ----------  --------
                                                 (IN THOUSANDS)
<S>                               <C>         <C>       <C>         <C>
Commodity futures contracts
  Commitments to purchase.....    $ 108,359   $(4,543)  $  76,639   $(6,475)
  Commitments to sell.........      (56,969)     (615)     (6,111)      (86)
                                  ---------   -------   ---------   -------
    Total outstanding
      Derivatives.............    $  51,390   $(5,158)  $  70,528   $(6,561)
                                  =========   =======   =========   =======
</Table>



                                       58
<PAGE>



<Table>
<Caption>
                                           YEAR ENDED DECEMBER 31,
                                  ------------------------------------------
                                          2002                 2001
                                  --------------------  --------------------
                                              REALIZED              REALIZED
                                  NOTIONAL     GAINS     NOTIONAL    GAINS
                                   AMOUNT     (LOSSES)    AMOUNT    (LOSSES)
                                  ----------  --------  ----------  --------
                                                 (IN THOUSANDS)
<S>                               <C>         <C>       <C>         <C>
Commodity futures contracts
  Total volume of exchange
    traded contracts:
  Commitments to purchase....     $ 185,564   $(3,874)  $ 296,609   $  1,842
  Commitments to sell........     $(167,410)  $ 1,093   $(295,808)  $  5,557
</Table>



INTEREST RATE RISK

    We are exposed to changes in interest rates. As of December 31, 2002, we had
$520 million in debt outstanding under the credit agreements relating to the
term loans and revolving credit facility, all of which is variable rate debt.
Also at December 31, 2002 we had $108.3 million for an obligation under capital
lease which has lease payments that fluctuate with short-term interest rates.
Interest rate changes generally do not affect the market value of this debt but
do impact the amount of our interest payments and, therefore, our future
earnings and cash flows, assuming other factors are held constant. Holding other
variables constant, including levels of indebtedness, a one-percentage point
increase in interest rates would have an estimated negative impact on pretax
earnings and cash flows for the next year of approximately $6.2 million.

INFLATION RISK

    Inflation is not expected to have a significant impact on our business,
financial condition or results of operations. We generally have been able to
offset the impact of inflation through a combination of productivity
improvements and price increases.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

    The financial statements and notes thereto required pursuant to this Item 8
begin immediately after the certification pages of this annual report on Form
10-K.

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

         None.



                                       59
<PAGE>



                                    PART III


ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

    The following table sets forth certain information with respect to our
directors and executive officers:

<Table>
<Caption>
                NAME                     AGE                         TITLE
---------------------------------        ---     --------------------------------------------
<S>                                             <C>
John E. Gherty...................        59      President and Chief Executive Officer
Daniel Knutson...................        46      Senior Vice President and Chief Financial
                                                 Officer
Robert DeGregorio................        46      President, Land O'Lakes Farmland Feed
Duane Halverson..................        57      Executive Vice President and Chief Operating
                                                 Officer, Ag Services
Chris Policinski.................        44      Executive Vice President and Chief Operating
                                                 Officer, Dairy Foods
John Prince......................        60      Senior Vice President, Western Region Dairy
                                                 Foods Group
Peter Simonse....................        44      Vice President, Treasurer
Don Berg.........................        56      Vice President, Public Affairs
John Rebane......................        56      Vice President, General Counsel
James Wahrenbrock................        61      Vice President, Planning and Business
                                                 Development
Dr. David Hettinga...............        62      Vice President, Research, Technology and
                                                 Engineering
Karen Grabow.....................        53      Vice President, Human Resources
Harley Buys......................        50      Director
Lynn Boadwine....................        39      Director
Ben Curti........................        52      Director
Kelly Davidson...................        51      Director
Richard Epard....................        63      Director
James Fife.......................        53      Director, Chairman of the Board
Gordon Hoover....................        45      Director,
Peter Kappelman..................        40      Director, First Vice Chairman of the Board
Cornell Kasbergen................        45      Director
Paul Kent, Jr....................        52      Director
Kevin Kepler.....................        48      Director
Larry Kulp.......................        60      Director
Charles Lindner..................        51      Director
John Long........................        53      Director
Manuel Maciel, Jr................        58      Director, Secretary
Robert Marley....................        51      Director
Jim Miller.......................        61      Director
Ronnie Mohr......................        54      Director
Douglas Reimer...................        52      Director
Dave Reinders....................        47      Director
Kenneth Schoenberg...............        55      Director
Robert Winner....................        54      Director
Larry Wojchik....................        51      Director, Second Vice Chairman of the Board
John Zonneveld, Jr...............        49      Director
Bobby Moser......................        60      Nonvoting Advisory Member
</Table>

    Unless otherwise indicated, each officer is elected by and serves at the
pleasure of the Board of Directors and each director and officer of Land O'Lakes
has been in his current profession for at least the past five years.

    John E. Gherty, President and Chief Executive Officer since 1989. Mr. Gherty
began his career at Land O'Lakes in 1970 after completing graduate degrees in
law and industrial relations at the University of Wisconsin. In the 1980s, he
served as group vice president and chief administrative officer. He was
appointed to his present position in 1989.

    Daniel Knutson, Senior Vice President and Chief Financial Officer of Land
O'Lakes and Chief Financial Officer of Land O'Lakes Farmland Feed since 2000.
Mr. Knutson began his career at the Company in 1978. He received his BS Degree
in Accounting in 1977 and MBA with emphasis in Finance in 1991, both from
Mankato State University, and has earned his CPA and CMA certifications.


                                       60
<PAGE>


    Robert DeGregorio, President of Land O'Lakes Farmland Feed LLC since 2000
and Manager of Land O'Lakes Farmland Feed since 2002. Mr. DeGregorio began his
career at Land O'Lakes in 1982 in the Agriculture Research Department and became
Vice President of Land O'Lakes Feed Division in 1997. He became President of
Land O'Lakes Farmland Feed LLC at the formation of the joint venture in 2000.

    Duane Halverson, Executive Vice President and Chief Operating Officer of Ag
Services since 1993 and Manager of Land O'Lakes Farmland Feed since 2000. Mr.
Halverson began his career at Land O'Lakes in 1970 in corporate planning. He has
served in a variety of executive positions at the Company, and now heads up Land
O'Lakes Ag Services businesses, which include animal feed, crop seed and swine
operations.

    Chris Policinski, Executive Vice President and Chief Operating Officer of
the Dairy Foods division, was appointed to this office in March, 2002. From 1999
to 2002, Mr. Policinski served as our Executive Vice President of the Dairy
Foods division's Value Added Group. Mr. Policinski joined Land O'Lakes in 1997
with more than 21 years of management experience in the food industry. Prior to
his current position, he was Vice President of Strategy, Business Development
and International Development. Before joining Land O'Lakes, Chris spent four
years with The Pillsbury Company in leadership roles in Marketing/General
Management as Vice President of their Pizza and Mexican Food Groups.

    John Prince, Senior Vice President, Western Region Dairy Foods Group, was
appointed to this office in March of 2002. From 1999 to 2002, Mr. Prince served
as our Executive Vice President and Chief Operating Officer of the Dairy Foods
division's Industrial Group. From 1998 until 1999 Mr. Prince served as Senior
Vice President of Dairy Foods, Western Region. Prior to this, Mr. Prince was the
Chief Executive Officer of Dairyman's Cooperative Creamery Association. He held
this position from March, 1994 until May, 1998 when Dairyman's Cooperative
Creamery merged with our company. Jack Prince is party to an Employment
Agreement dated August 19, 1998, which was amended as of February 4, 2002

    Peter Simonse, Vice President and Treasurer since December 2002. Prior to
his appointment to this position Mr. Simonse served as Treasurer since 2000,
when he joined the company. Before joining Land O'Lakes, Peter spent 14 years
with Amoco Corporation in various finance roles, his last being Vice President
of Finance, Exploration Business Group.

    Don Berg, Vice President of Public Affairs since December, 2000. Prior to
his appointment to this position Mr. Berg served as Vice President of Milk
Procurement for 15 years. Don has been employed with our company for 30 years.

    John Rebane, Vice President and General Counsel since 1984. Mr. Rebane
joined our company in 1973. He holds a Juris Doctor degree from the University
of Minnesota.

    James Wahrenbrock, Vice President, Planning and Business Development since
April, 2000 and Manager of Land O'Lakes Farmland Feed since October, 2000. Prior
to his appointment to this position, Mr. Wahrenbrock served as Vice President
Swine & New Ventures. He joined our company in 1976.

    Dr. David Hettinga, Vice President of Research, Technology and Engineering
since 1989. Dr. Hettinga joined our company in 1983. He obtained a M.S. in Food
Science from Purdue University, and a Ph.D. in Food Microbiology from Iowa State
University.

    Karen Grabow, Vice President of Human Resources since September, 2001. Prior
to joining our company, Karen was employed as the Vice President, Human
Resources of Target Corporation. She held this position since 1993.

    Harley Buys has held his position as director since February 27, 2003 and
his present term of office as a director will end in February, 2004. Mr. Buys
farms corn, soybeans and alfalfa and operates a dairy farm in partnership with
his son in Edgerton, Minnesota.

    Lynn Boadwine has held his position as director since 1999 and his present
term of office as a director will end in February, 2004. Mr. Boadwine operates
Boadwine Farms, Inc., a farm in South Dakota.


                                       61
<PAGE>


    Ben Curti has held his position as director since February 27, 2003 and his
present term of office as a director will end in February, 2007. Mr. Curti
maintains a dairy operation and farms field crops and pistachios in Tulare,
California.

    Kelly Davidson has held his position as director since February 27, 2003 and
his present term of office as a director will end in February, 2005. Mr.
Davidson is the general manager of Andale Co-op, Andale, Kansas, and the chief
operating officer of Field Solutions, LLC, of Halstead, Kansas.

    Richard Epard has held his position as director since February 27, 2003 and
his present term of office as a director will end in February, 2007. Mr. Epard
farms wheat, corn, soybeans and sunflowers in Colby, Kansas.

    James Fife has held his position as a director since 1991 and his present
term of office as a director will end in February, 2004. Mr. Fife is general
manager of Ag Supply Company in Wenatchee, Washington.

    Gordon Hoover has held his position as director since 1997 and his present
term of office as a director will end in 2006. Mr. Hoover operates a dairy farm
in Pennsylvania.

    Peter Kappelman has held his position as director since 1996 and his present
term of office as a director will end in 2007. Mr. Kappelman is co-owner of
Meadow Brook Dairy Farms, LLC, a dairy farm in Wisconsin.

    Cornell Kasbergen has held his position as director since 1998 and his
present term of office as a director will end in 2006. Mr. Kasbergen operates a
dairy in California.

    Paul Kent, Jr. has held his position as director since 1990 and his present
term of office as a director will end in 2006. Mr. Kent operates a dairy farm in
Minnesota.

    Kevin Kepler has held his position as director since February 27, 2003 and
his present term of office as a director will end in February, 2005. Mr. Kepler
is the president of his family farm corporation, Junlyn Farms, Inc., located in
Hillsboro, Wisconsin. Mr. Kepler operates a dairy farm and farms alfalfa, corn
and soybeans.

    Larry Kulp has held his position as director since February 27, 2003 and his
present term of office as a director will end in February, 2007. Mr. Kulp is a
partner in his family dairy farm, Kulp Family Dairy, LLC, located in
Martinsburg, Pennsylvania.

    Charles Lindner has held his position as director since 1996 and his present
term of office as a director will end in 2005. Mr. Lindner operates a dairy farm
in Wisconsin.

    John Long has held his position as director since 1991 and his present term
of office as a director will end in 2006. Mr. Long operates a ranch in North
Dakota.

    Manuel Maciel, Jr. has held his position as director since 1998 and his
present term of office as a director will end in 2004. Mr. Maciel operates
Macy-L Holsteins, a dairy farm in California.

    Robert Marley has held his position as director since 2000 and his present
term of office as a director will end in 2007. Mr. Marley is Chief Executive
Officer of Jackson Jennings Farm Bureau Co-operative Association, a local
cooperative located in Seymour, Indiana.

    Jim Miller has held his position as director since February 27, 2003 and his
present term of office as a director will end in February, 2006. Mr. Miller
farms grain and raises beef cattle in Hardy, Nebraska.

    Ronnie Mohr has held his position as director since 1998 and his present
term of office as a director will end in 2005. Mr. Mohr operates a farm, hog
finishing operation and grain bin and equipment sales business in Indiana. Mr.
Mohr has served as a director of Holiday Gulf Homes Inc. since 1996.

    Douglas Reimer has held his position as director since 2001 and his present
term of office as a director will end in 2007. Mr. Reimer is the managing
partner of Deer Ridge S.E.W. Feeder Pig LLC, located in Iowa.


                                       62
<PAGE>
    Dave Reinders has held his position as director since February 27, 2003 and
his present term of office as a director will end in February, 2004. Mr.
Reinders is the general manager of United Farmers Co-op in George, Iowa.

    Kenneth Schoenberg has held his position as director since 1997 and his
present term of office as a director will end in 2005. Mr. Schoenberg operates a
dairy farm in Pennsylvania.

    Robert Winner has held his position as director since 1997 and his present
term of office as a director will end in 2004. Mr. Winner operates Pleasant
Acres Dairy Farms, Inc. a dairy farm in New Jersey. Mr. Winner chairs the Land
O'Lakes Foundation board.

    Larry Wojchik has held his position as director since 1986 and his present
term of office as a director will end in 2006. Mr. Wojchik has served as general
manager of Goldstar Cooperative since 2000. From 1978-2000, he served as general
manager of Equity Cooperative.

    John Zonneveld, Jr. has held his position as director since 2000 and his
present term of office as a director will end in 2005. Mr. Zonneveld operates a
dairy farm in California.

    Bobby Moser is a nonvoting advisory member of the board. He is appointed by
the Board of Directors annually and has held his position since 2002. Mr. Moser
is Vice President for Agricultural Administration at The Ohio State University
in Columbus, Ohio.

    We transact business in the ordinary course with our directors and with our
local cooperative members with which the directors are associated. Such
transactions are on terms no more favorable than those available to our other
members.

    The Land O'Lakes board is made up of 24 directors. Twelve directors are
chosen by our dairy members and 12 by our Ag members. Each board member must
also be a member of the group of members, dairy or Ag, which elects him or her.
The board may also choose to elect up to 3 nonvoting advisory members.
Currently, there is one such advisory board member. Our board of directors
governs our affairs in virtually the same manner as any other corporation. See
"Business -- Description of the Cooperative -- Governance" for more information
regarding the election of our directors.

    We have seven committees of our board of directors: the Executive Committee,
the Advisory Committee, the Audit Committee, the Governance Committee, the
Expense Committee, the PAC Committee and the Board Performance/Operations
Committee.





ITEM 11. EXECUTIVE COMPENSATION.

    The following table shows, for the Chief Executive Officer of Land O'Lakes
and each of our four other most highly compensated executive officers,
information concerning compensation earned for services in all capacities during
the year ended December 31, 2002.


                           SUMMARY COMPENSATION TABLE
<Table>
<Caption>
                                                                                     LONG-TERM COMPENSATION
                                                                                 -----------------------------
                                                                                     AWARDS          PAYOUTS
                                                            ANNUAL               ---------------    ----------
                                                         COMPENSATION              SECURITIES
                                            ---------------------------------      UNDERLYING         LTIP           ALL OTHER
     NAME AND PRINCIPAL POSITION            YEAR     SALARY ($)     BONUS ($)    OPTIONS/SARS(#)    PAYOUTS($)    COMPENSATION($)(1)
-----------------------------------         ----     ----------    ----------    ---------------    ----------    ------------------
<S>                                         <C>       <C>          <C>               <C>            <C>           <C>
John E. Gherty, President and Chief
  Executive Officer....................     2002      $698,620     $      --         16,000         $       --          13,700
Duane Halverson, Executive Vice
  President and Chief Operating Officer,
    Ag Services........................     2002       446,923            --          9,500                 --          14,436
Chris Policinski, Executive Vice Officer,
  President and Chief Operating
   Dairy Foods Group...................     2002       431,115            --          7,000                 --           8,575
John Prince, Senior Vice President
  Western Region, Dairy Foods Group....     2002       365,644            --          7,000                 --          44,600
Robert DeGregorio, President, Land
  O'Lakes Farmland Feed LLC(2).........     2002       359,847        50,000         10,000                 --           9,500
</Table>


                                       63
<PAGE>


(1) The amounts shown in the table for 2002 reflect life insurance premiums paid
    by Land O'Lakes in the amount of $8,600 for Mr. Gherty, $8,400 for Mr.
    Halverson, $3,475 for Mr. Policinski, $ 39,500 for Mr. Prince, and $3,800
    for Mr. DeGregorio. The amounts also include contributions made by Land
    O'Lakes on behalf of the named individuals under the qualified and
    non-qualified defined contribution plans of Land O'Lakes as follows:

<Table>
<Caption>
                         COMPANY MATCHING
                          CONTRIBUTION      COMPANY CONTRIBUTION
       NAME              (QUALIFIED PLAN)   (NON-QUALIFIED PLAN)
-----------------       ------------------  ---------------------
<S>                         <C>                  <C>
Mr. Gherty.......           $ 5,100              $     --
Mr. Halverson....             5,100                   936
Mr. Policinski...             5,100                    --
Mr. Prince.......             5,100                    --
Mr. DeGregorio...             5,100                   600
</Table>

(2) Mr. DeGregorio is the President of Land O'Lakes Farmland Feed and also
    performs policy making functions for Land O'Lakes.




                      OPTION/SAR GRANTS IN LAST FISCAL YEAR

<Table>
<Caption>
                                     INDIVIDUAL GRANTS
                           -----------------------------------------

                                            PERCENT OF                               AT ASSUMED ANNUAL RATES
                              NUMBER OF       TOTAL                                      OF STOCK PRICE
                             SECURITIES    OPTIONS/SARS                              APPRECIATION FOR OPTION
                             UNDERLYING     GRANTED TO    EXERCISE                          TERM(2)
                            OPTIONS/SARS   EMPLOYEES IN   OF BASE      EXPIRATION    -----------------------
          NAME              GRANTED(#)(1)   FISCAL YEAR  PRICE($/SH)      DATE          5%($)        10%($)
-----------------------    --------------  ------------  -----------   ----------    ---------    ----------
<S>                        <C>             <C>           <C>           <C>           <C>          <C>
John E. Gherty.........        16,000           13.3%       $ 35.69     3-31-2012    $ 370,751    $  947,119
Duane Halverson(3).....         9,500            8.0          35.69     3-31-2012      191,168       488,358
Chris Policinski.......         7,000            5.8          35.69     3-31-2012      162,204       414,365
John Prince(4).........         7,000            5.8          35.69     3-31-2012      162,204       414,365
Robert DeGregorio(3)...        10,000            8.4          35.69     3-31-2012      173,790       443,962
</Table>


(1) Options granted are to purchase "Units" described below under the Land
    O'Lakes Long-Term Incentive Plan. The vesting schedule for all grants of
    Units is set forth below in the plan descriptions.

(2) The dollar amounts under these columns are the results of calculations at
    the 5% and 10% annual appreciation rates set by the Securities and Exchange
    Commission for illustrative purposes, and, therefore, are not intended to
    forecast future financial performance. Accordingly, these calculations
    assume 5% and 10% appreciation in the value of the Units.

(3) Mr. Halverson and Mr. DeGregorio were granted 1,250 and 2,500 options,
    respectively, contingent upon meeting certain performance measures related
    to the integration of Purina Mills into Land O'Lakes Farmland Feed. The
    table currently assumes that the performance measures will be met. In the
    event that the performance measures are not met, the entries for Mr.
    Halverson and Mr. DeGregorio would be adjusted accordingly.

(4) Grants of options to John Prince are made under the California Cooperative
    Value Incentive Plan, described below.


                                       64
<PAGE>


                 AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
                        AND FISCAL YEAR-END OPTION VALUES

    The purpose of the following table is to report exercises of options to
purchase Units by the named executive officers of Land O'Lakes during the fiscal
year ended December 31, 2002 and any value of their unexercised options as of
December 31, 2002. The named executive officers did not exercise options in
fiscal 2002. Land O'Lakes has not issued any stock appreciation rights to the
named executive officers.

<Table>
<Caption>
                                                                                   VALUE OF UNEXERCISED IN-
                                                        NUMBER OF UNEXERCISED       THE-MONEY OPTIONS/SARS
                                                         OPTIONS AT FY-END(#)           AT FY-END($)(1)
                        SHARES ACQUIRED    VALUE      --------------------------  --------------------------
         NAME           ON EXERCISE(#)   REALIZED($)  EXERCISABLE  UNEXERCISABLE  EXERCISABLE  UNEXERCISABLE
---------------------   ---------------  -----------  -----------  -------------  -----------  -------------
<S>                           <C>          <C>          <C>           <C>             <C>           <C>
John E. Gherty.......          --           --           12,000        20,000          --            --
Duane Halverson......          --           --            5,875        10,625          --            --
Chris Policinski.....          --           --            5,250         8,750          --            --
John Prince..........          --           --            5,250         8,750          --            --
Robert DeGregorio....          --           --            5,000        10,000          --            --
</Table>


(1) Value is based on a Unit value of $27.69, which was the value of the Units
    on December 31, 2002, minus the purchase price.

LAND O'LAKES EMPLOYEES SAVINGS AND SUPPLEMENTAL RETIREMENT PLAN

    The Land O'Lakes Employee Savings and Supplemental Retirement Plan is a
qualified defined contribution 401(k) plan which permits employees to make both
pre-tax and after-tax contributions. All full-time, non-union Land O'Lakes
employees are eligible to participate. Union employees may participate if their
participation is specified by their collective bargaining agreement. Subject in
all cases to maximum contribution limits established by law, the maximum total
contribution for non-highly compensated employees is 50% of compensation; the
maximum pre-tax contribution for such employees is also 50%. For highly
compensated employees, the maximum total contribution is 12% of compensation and
the maximum pre-tax contribution is 8%. The Company matches 50% of the first 6%
of pre-tax contributions made by employees. Employees are immediately 100%
vested in their full account balance, including the company match.

EXECUTIVE ANNUAL VARIABLE COMPENSATION PLAN

    The Executive Annual Variable Compensation Plan is a plan for executive
officers of Land O'Lakes. The maximum award opportunity varies by the
participant's position up to a maximum target award of 45% of base pay. Awards
from this plan are dependent on a combination of three elements of performance:
1) company overall results (30%); 2) targets for business performance (55%); and
3) individual performance commitments (15%). A minimum of 6% after-tax return on
equity is the threshold performance level required to trigger any payments from
the plan. Targets for company results, unit business performance and individual
performance commitments are established annually. Once maximum awards from each
of these components are achieved, excess awards may be granted. These awards
also vary based on the participant's position, between 79-102% of base salary.


LAND O'LAKES, INC. EXECUTIVE LONG-TERM VARIABLE COMPENSATION PLAN (1999-2001)

    The Land O'Lakes, Inc. Executive Long-Term Variable Compensation Plan was
effective only for the years 1999-2001. The President and all officers of Land
O'Lakes who were not otherwise participating in a long-term variable plan were
eligible. The maximum award under this plan to any individual was 60% of their
base salary at the end of the performance period. Awards made under the plan
were based on the return on equity and net earnings of Land O'Lakes for the
period between 1999 and 2001. One half of all awards was subject to mandatory
deferral, with the other half payable in cash or eligible to be deferred, at the
option of the award recipient.

LAND O'LAKES LONG-TERM INCENTIVE PLAN

    The Land O'Lakes Long-Term Incentive Plan, initiated in 2001, is a phantom
stock plan which allows certain employees to purchase "Units" under the plan.
Neither options granted nor Units may be transferred, assigned, pledged,
encumbered, or otherwise alienated from the grantee. Officers are eligible to
participate, as are selected


                                       65
<PAGE>


non-officers identified by the Chief Executive Officer. Participants are granted
an annual award of options. One quarter of the options vest on December 31 of
the year in which they are granted, with the rest vesting ratably on December 31
of the succeeding three years. These Units are not traditional stock, and do not
provide the purchaser with any voting rights or rights to receive assets of Land
O'Lakes.

    The purchase price of the option is established as of December 31 of the
year prior to the grant of the option, based on a formula reflecting the value
of the enterprise at the close of the fiscal year preceding the grant of the
option. Participants may elect to exercise vested options to purchase units only
during the period between January 1 and March 31 of any year. Units are valued
each year on December 31, and are valued by the same formula by which the
purchase price of the option is determined. Participants in the plan may
purchase Units using cash or amounts in their deferred compensation accounts. In
addition, the options have a net exercise provision which allows participants to
use the value of appreciated options to buy Units.

    Participants' ability to redeem owned Units while employed is limited to 50%
of the appreciated value of the cumulative total of Units previously purchased
by such participant, until the value of the owned Units reaches an established
ratio to the participant's annual base pay. These ratios are established based
on the level of the participant. Following death, inability to work due to
disability, retirement or other termination, the participant has a limited
period of time during which to exercise remaining vested options and/or redeem
purchased units, which varies according to the circumstances of the
participant's cessation of employment.

LAND O'LAKES NON-QUALIFIED DEFERRED COMPENSATION PLAN

    The Land O'Lakes Non-Qualified Deferred Compensation Plan provides a select
group of employees with base salaries in excess of $95,000 an opportunity to
elect to defer a portion of their compensation for later payment at the earlier
of their death, disability, retirement or other termination. Eligible employees
may elect to defer a minimum of $1,000 up to a maximum 30% of base compensation
and 100% of variable pay. The default distribution is monthly installments over
a five year period. Deferred compensation is not included as compensation for
purposes of the company's qualified plans. The Company adds an additional amount
equal to three percent (3%) of the participant's elective deferrals to this
plan. In addition, at the end of each calendar quarter, the Company credits the
participant's account balance with modest interest at a rate announced in
advance of each calendar year. Benefits of this plan are paid out of the general
assets of the corporation.

    Land O'Lakes maintains three non-qualified excess benefit plans for its
officers. Benefits for all three of these plans are paid out of the general
assets of the corporation.

NON-QUALIFIED EXECUTIVE EXCESS BENEFIT PLAN (IRS LIMITS)

    The Non-Qualified Executive Excess Benefit Plan (IRS Limits) provides for a
payment of a benefit to officers which is the equivalent of the difference
between the benefit that would have been payable to the executive if the Land
O'Lakes Employee Retirement Plan benefit formula were applied to the executive's
actual compensation, without regard for limitations on compensation or benefits
imposed by the Internal Revenue Code, and the benefit actually payable under the
Land O'Lakes Employee Retirement Plan.

NON-QUALIFIED EXECUTIVE EXCESS BENEFIT PLAN (1989 FORMULA)

    The Non-Qualified Executive Excess Benefit Plan (1989 Formula) provides a
non-qualified benefit to individuals who were officers as of January 1, 1989 at
the time the defined benefit formula was changed. This excess benefit plan
provides a benefit representing the difference between the accrued benefit under
the formula as of December 31, 1988 and the accrued benefit under the Land
O'Lakes Employee Retirement Plan at the time of the individual's retirement.

NON-QUALIFIED EXECUTIVE EXCESS BENEFIT SAVINGS PLAN

    The Non-Qualified Executive Excess Benefit Savings Plan provides a benefit
to officers who participate in this savings plan by crediting an amount to a
deferred compensation account which represents 3% of total compensation, net of
any deferred compensation, less the amount of the company match contributed to
the savings plan. Account balances are credited with a modest rate of interest
quarterly. Distributions are made under the same circumstances


                                       66
<PAGE>


and on the same terms as the individual has elected under the Land O'Lakes
Non-Qualified Deferred Compensation Plan, or according to the default provisions
of the Land O'Lakes Non-Qualified Deferred Compensation Plan in the absence of
an election.

CALIFORNIA COOPERATIVE VALUE INCENTIVE PLAN

    The California Cooperative Value Incentive Plan is similar to the Land
O'Lakes Long-Term Incentive Plan. The primary difference is that participants
may not actually purchase the phantom stock "Units" under this plan. Instead,
plan participants who "exercise" options granted to them receive a cash
distribution equal to the difference between the Unit value and the exercise
price.

LAND O'LAKES EMPLOYEE RETIREMENT PLAN

                               PENSION PLAN TABLE
<Table>
<Caption>
                 FINAL
              AVERAGE PAY                    YEARS OF SERVICE AT RETIREMENT
              -----------  ----------------------------------------------------------------
               (ANNUAL)        10       15         20         25          30          35
                           ---------  --------   --------   --------    --------   --------
<S>           <C>          <C>        <C>        <C>        <C>         <C>        <C>
TABLE A       $  200,000   $ 30,100   $ 45,100   $ 60,100   $ 75,200    $ 90,200   $ 90,200
                 400,000     62,100     93,100    124,100    155,200     186,200    186,200
                 600,000     94,100    141,100    188,100    235,200     282,200    282,200
                 800,000    126,100    189,100    252,100    315,200     378,200    378,200
               1,000,000    158,100    237,100    316,100    395,200     474,200    474,200
               1,200,000    190,100    285,100    380,100    475,200     570,200    570,200

TABLE B       $  200,000   $ 34,700   $ 52,000   $ 69,400   $ 86,700    $104,100   $104,100
                 400,000     76,000    114,000    152,100    190,100     228,100    228,100
                 600,000    117,400    176,000    234,700    293,400     352,100    352,100
                 800,000    158,700    238,000    317,400    396,700     476,100    476,100
               1,000,000    200,000    300,000    400,100    500,100     600,100    600,100
               1,200,000    241,400    362,000    482,700    603,400     724,100    724,100
</Table>

    The Land O'Lakes Employee Retirement Plan is a qualified defined benefit
pension plan. All full-time, non-union Land O'Lakes employees are eligible to
participate. Union employees may participate if their participation is specified
by their collective bargaining agreement. An employee is fully vested in the
plan after five years of vesting service. For most employees, the plan provides
for a monthly benefit for the employee's lifetime beginning at normal retirement
age (social security retirement age), calculated according to the following
formula: {[1.08% x Final Average Pay]+[.52% x (Final Average Pay-Covered
Compensation)]} x years of credited service (up to a maximum of 30 years). These
levels are illustrated by Table A above. Due to provisions of this plan
providing that certain benefits existing in a previous version of the plan will
not be reduced, certain employees, including Messrs. Gherty and Halverson, will
instead receive the compensation at levels previously in effect for the
retirement plan. These sums are described in Table B above.

    Final Average Pay is average monthly compensation for the highest paid 60
consecutive months of employment out of the last 132 months worked. Covered
Compensation is an amount used to coordinate pension benefits with Social
Security benefits. It is adjusted annually to reflect changes in the Social
Security Taxable Wage Base, and varies with the employee's year of birth and the
year in which employment ends. The normal form of benefit for a single employee
is a life-only annuity; for a married employee, the normal form is a 50% joint
and survivor annuity. There are other optional annuity forms available.
Terminated or retired employees who are at least 55 with 10 years of vesting
service may elect a reduced early retirement benefit.

    As of January 1, 2003, Mr. Gherty was credited with 32 years of service, Mr.
Halverson was credited with 32 years of service, Mr. DeGregorio was credited
with 21 years of service, Mr. Prince was credited with 7 years of service and
Mr. Policinski was credited with 6 years of service.

COMPENSATION OF DIRECTORS AND MANAGERS

    The Chairman of the Board of Land O'Lakes is paid $30,000 annually; all
other directors are paid $10,000 annually. In addition, all directors receive a
$300 per diem and are reimbursed for their reasonable expenses incurred in
attending board of directors meetings.


                                       67
<PAGE>


EMPLOYMENT CONTRACTS

    Jack Prince is party to an Employment Agreement dated August 19, 1998, which
was amended as of February 4, 2002. Pursuant to the terms of this employment
agreement, Mr. Prince may terminate his employment with Land O'Lakes upon 60
days notice. In the event that Mr. Prince terminates his employment, he will
receive one year of base pay. The terms of Mr. Prince's employment agreement
prevent him from competing in any industry which comprises a significant portion
of the business of Land O'Lakes prior to July 1, 2004.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
         RELATED STOCKHOLDER MATTERS.

    At December 31, 2002 no person, either individually or as a member of a
group, beneficially owned in excess of five percent of any class of our voting
securities, and our directors and executive officers did not, either
individually or as a member of a group, beneficially own in excess of one
percent of any class of our voting securities.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

    Land O'Lakes transacts business in the ordinary course with our directors
and with our local cooperative members with which the directors are associated
on terms no more favorable than those available to our other members.

    Pursuant to an agreement dated September 25, 2000, Land O'Lakes Farmland
Feed licenses certain trademarks from Land O'Lakes on a royalty free basis,
including LAND O LAKES, the Indian Maiden logo, Maxi Care, and Amplifier Max,
for use in connection with its animal feed and milk replacer products. Land
O'Lakes Farmland Feed also licenses certain trademarks of Farmland Industries,
including Farmland, for use with its feed products.

    Pursuant to a Management Services Agreement dated September 1, 2000 between
Land O'Lakes and Land O'Lakes Farmland Feed, Land O'Lakes provides certain
management, operational and ancillary services to Land O'Lakes Farmland Feed.
Land O'Lakes charges Land O'Lakes Farmland Feed for these services on an at-cost
basis using methodologies approved by Land O'Lakes and the board of managers of
Land O'Lakes Farmland Feed. For the year ended December 31, 2002, Land O'Lakes
Farmland Feed paid Land O'Lakes $100.9 million for payroll and benefit related
costs and $7.0 million for corporate services such as legal, insurance
administration, tax administration, human resources, payroll and benefit
administration, leasing, public relations, credit and collections, accounting
and IT support.

    Pursuant to a Feed Supply Agreement dated September 29, 2000 between Land
O'Lakes Farmland Feed and Farmland Industries, Farmland Industries agrees to
purchase all of its branded feed, specialty feeds, catfish, swine and cattle
feed, and ingredients, excluding grain, from Land O'Lakes Farmland Feed. Such
purchases are made on a patronage basis, subject to the Articles of
Incorporation and By-laws of Farmland Industries. Such sales are to be made at
prices competitive with those available from other suppliers. For the year ended
December 31, 2002, Land O'Lakes Farmland Feed sold $1.5 million in feed and
ingredients to Farmland Industries. This Feed Supply Agreement extends for the
duration of Land O'Lakes Farmland Feed, or, for five years following the
exercise by Land O'Lakes of its option to purchase Farmland Industries' interest
in Land O'Lakes Farmland Feed. Due to a disputed provision in the agreement,
Farmland Industries has not purchased as much feed as originally anticipated.

                                     PART IV

ITEM 14. CONTROLS AND PROCEDURES.

    (a)  Evaluation of disclosure controls and procedures.

    The Company's Chief Executive Officer and Chief Financial Officer evaluated
the effectiveness of the design and operation of our disclosure controls and
procedures (as defined in rule 13a-14(c) under the Exchange Act) as of a date
(the "Evaluation Date") within 90 days prior to the filing date of this annual
report on Form 10-K. Based upon their evaluation, the Chief Executive Officer
and Chief Financial Officer concluded that, as of the Evaluation


                                       68
<PAGE>


Date, our disclosure controls and procedures were effective in timely alerting
them to the material information relating to us (or our consolidated
subsidiaries) required to be included in our periodic SEC filings.


    (b)  Changes in internal controls.

    There were no significant changes made in our internal controls during the
period covered by this report or in other factors that could significantly
affect these controls subsequent to the date of their evaluation and there were
no corrective actions with regard to significant deficiencies and material
weaknesses.


ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

(a)            DOCUMENTS FILED AS PART OF THIS ANNUAL REPORT ON FORM 10-K:

         1.    Consolidated Financial Statements:

<Table>
<Caption>
<S>                                                                                         <C>
LAND O'LAKES, INC.
Financial Statements for the years ended December 31, 2002, 2001 and 2000
Independent Auditors' Report of KPMG LLP.................................................    F-2
Consolidated Balance Sheets as of December 31, 2002 and 2001.............................    F-3
Consolidated Statements of Operations for the years ended December 31, 2002, 2001 and
2000.....................................................................................    F-4
Consolidated Statements of Cash Flows for the years ended December 31, 2002, 2001 and
2000.....................................................................................    F-5
Consolidated Statements of Equities for the years ended December 31, 2002, 2001 and
2000.....................................................................................    F-6
Notes to Consolidated Financial Statements...............................................    F-7

LAND O'LAKES FARMLAND FEED LLC
Financial Statements for the years ended December 31, 2002 and 2001
and for the three months ended December 31, 2000
Independent Auditors' Report of KPMG LLP.................................................    F-30
Consolidated Balance Sheets as of December 31, 2002 and 2001.............................    F-31
Consolidated Statements of Operations for the years ended
  December 31, 2002 and 2001 and the three months ended December 31, 2000................    F-32
Consolidated Statements of Cash Flows for the years ended
  December 31, 2002 and 2001 and the three months ended December 31, 2000................    F-33
Consolidated Statements of Equities for the years ended
  December 31, 2002 and 2001 and the three months ended December 31, 2000................    F-34
Notes to Consolidated Financial Statements...............................................    F-35

LAND O'LAKES FEED DIVISION
Financial Statements for the nine months ended September 30, 2000
Independent Auditors' Report of KPMG LLP.................................................    F-54
Consolidated Balance Sheet as of September 30, 2000 .....................................    F-55
Consolidated Statement of Operations for the nine months ended September 30, 2000........    F-56
Consolidated Statement of Cash Flows for the nine months
  ended September 30, 2000...............................................................    F-57
Notes to Consolidated Financial Statements...............................................    F-58

PURINA MILLS, LLC
Independent Auditors' Report of KPMG LLP.................................................    F-68
Financial Statements for the years ended December 31, 2002 and 2001
Consolidated Balance Sheets as of December 31, 2002 and 2001.............................    F-69
Consolidated Statements of Operations for the year ended
  December 31, 2002, for the period October 12, 2001 though December 31, 2001, for
 the period January 1, 2001 through October 11, 2001, for the six months ended
 December 31, 2000 and the six months ended June 30, 2000................................    F-70
Consolidated Statements of Cash Flows for the year ended
  December 31, 2002, for the period October 12, 2001 though December 31, 2001, for
 the period January 1, 2001 through October 11, 2001, for the six months ended
 December 31, 2000 and the six months ended June 30, 2000................................    F-71
</Table>


                                       69
<PAGE>



<Table>
<S>                                                                                         <C>
Consolidated Statements of Equities for the year ended
  December 31, 2002, for the period October 12, 2001 though December 31, 2001, for
 the period January 1, 2001 through October 11, 2001,  for the six months ended
 December  31, 2000 and the six months ended June 30, 2000...............................    F-72
Notes to Consolidated Financial Statements...............................................    F-73

AGRILIANCE, LLC
Financial Statements(unaudited) for the three months ended November 30, 2002 and
2001
Consolidated Balance Sheets as of November 30, 2002 and August 31, 2002..................    F-82
Consolidated Statements of Operations for the three months ended November 30, 2002
  and 2001...............................................................................    F-83
Consolidated Statements of Cash Flows for the three months ended November 30, 2002
  and 2001...............................................................................    F-84
Notes to Consolidated Financial Statements...............................................    F-85

Financial Statements for the years ended August 31, 2002, 2001 and the eight months
ended August 31, 2000
Independent Auditors' Report of KPMG LLP.................................................    F-86
Consolidated Balance Sheets as of August 31, 2002 and 2001...............................    F-87
Consolidated Statements of Operations for the years ended August 31, 2002, August
31, 2001 and for the eight months ended August 31, 2000..................................    F-88
Consolidated Statements of Cash Flows for the years ended August 31, 2002, August
31, 2001 and for the eight months ended August 31, 2000..................................    F-89
Consolidated Statements of Members' Equity for the years ended August 31, 2002,
August 31, 2001 and for the eight months ended August 31, 2000...........................    F-90
Notes to Consolidated Financial Statements...............................................    F-91
</Table>


(b)      REPORTS ON FORM 8-K

         Form 8-K filed on November 27, 2002 Notice received from MMDI, Inc. of
         its intent to exercise its put option in Cheese and Protein
         International.

         Form 8-K filed on December 13, 2002 MMDI, Inc. elects to retain reduced
         membership interest in Cheese and Protein International.

(c)      EXHIBITS:
                                  EXHIBIT INDEX

<Table>
<Caption>
EXHIBIT                     DESCRIPTION
<S>                        <C>
  3.1                       Restated Articles of Incorporation of Land O'Lakes, Inc., as
                            amended, August 1998. (1)
  3.2                       By-Laws of Land O'Lakes Inc., as amended, December 2000. (1)
  4.1                       Credit Agreement among Land O'Lakes, Inc., the Lenders party
                            thereto and The Chase Manhattan Bank, dated as of October
                            11, 2001. (1)
  4.2                       First Amendment dated November 6, 2001 to the Credit
                            Agreement dated October 11, 2001. (1)
  4.3                       Second Amendment dated February 15, 2002 to the Credit
                            Agreement dated October 11, 2001. (1)
  4.4                       Guarantee and Collateral Agreement among Land O'Lakes, Inc.
                            and certain of its subsidiaries and The Chase Manhattan
                            Bank, dated as of October 11, 2001. (1)
  4.5                       Indenture dated as of November 14, 2001, among Land O'Lakes,
                            Inc. and certain of its subsidiaries, and U.S. Bank,
                            including Form of 8  3/4% Senior Notes due 2011 and Form of
                            8 3/4% Senior Notes due 2011. (1)
  4.6                       Registration Rights Agreement dated November 14, 2001 by and
                            among Land O'Lakes, Inc. and certain of its subsidiaries,
                            J.P. Morgan Securities Inc., SPP Capital Partners, LLC,
                            SunTrust Robinson Capital Markets, Inc., Tokyo-Mitsubishi
                            International plc and U.S. Bancorp Piper Jaffray, Inc. (1)
  4.7                       Purchase Agreement by and between Land O'Lakes, Inc., and
                            certain of its subsidiaries, J.P. Morgan Securities Inc.,
                            SPP Capital Partners, LLC, SunTrust Robinson Capital
                            Markets, Inc., Tokyo-Mitsubishi International plc and U.S.
                            Bancorp Piper Jaffray, Inc., dated as of November 8, 2001. (1)
  4.8                       Form of Old Note (included in Exhibit 4.5). (1)
  4.9                       Form of New Note (included in Exhibit 4.5). (1)
 10.1                       Amended and Restated Five Year Credit Agreement dated as of
                            October 11, 2001 among Land O'Lakes, Inc., The Chase
                            Manhattan Bank, CoBank, ACB, and the Lenders party thereto. (1)
</Table>



                                       70
<PAGE>



<Table>
<S>                        <C>
 10.2                       First Amendment dated November 6, 2001 to the Amended and
                            Restated Five-Year Credit Agreement dated October 11, 2001. (1)
 10.3                       Second Amendment dated February 15, 2002 to the Amended and
                            Restated Five-Year Credit Agreement dated October 11, 2001. (1)
 10.4                       Joint Venture Agreement by and between Farmland Industries,
                            Inc. and Land O'Lakes, Inc. dated as of July 18, 2000. (1)
 10.5                       Operating Agreement of Agriliance LLC among United Country
                            Brands, LLC, Cenex Harvest States Cooperatives, Farmland
                            Industries, Inc. and Land O'Lakes, Inc. dated as of January
                            4, 2000. (1)
 10.6                       Joint Venture Agreement among Cenex Harvest States
                            Cooperatives, Farmland Industries, Inc. and Land O'Lakes
                            Inc. dated as of January 1, 2000. (1)
 10.7                       Operating Lease between Arden Hills Associates and Land
                            O'Lakes, Inc. dated as of May 31, 1980. (1)
 10.8                       Ground Lease between Land O'Lakes, Inc. and Arden Hills
                            Associates dated as of May 31, 1980. (1)
 10.9                       License Agreement among Ralston Purina Company, Purina
                            Mills, Inc. and BP Nutrition Limited dated as of October 1,
                            1986. (1)
 10.10                      License Agreement between Land O'Lakes, Inc. and Land
                            O'Lakes Farmland Feed LLC dated September 25, 2000. (1)
 10.11                      Trademark License Agreement by and between Land O'Lakes,
                            Inc. and Dean Foods dated as of July 10, 2000. (1)
 10.12                      Asset Purchase Agreement between Land O'Lakes, Inc. and Dean
                            Foods dated as of May 30, 2000. (1)
 10.13                      Agreement and Plan of Merger, dated as of June 17, 2001, by
                            and among Purina Mills, Inc., Land O'Lakes, Inc., LOL
                            Holdings II, Inc. and LOL Holdings III, Inc. (1)
 10.14                      Management Services Agreement, dated September 1, 2000, by
                            and between Land O'Lakes and Land O'Lakes Farmland Feed LLC. (1)
 10.15                      Employment Agreement between John Prince and Land O'Lakes,
                            Inc. dated August 19, 1998. (1) #
 10.16                      Amendment dated February 4, 2002 to Employment Agreement
                            between John Prince and Land O'Lakes, Inc. (1) #
 10.17                      Purchase and Sale Agreement dated as of December 18, 2001,
                            among Land O'Lakes, Inc., Land O'Lakes Farmland Feed LLC,
                            Purina Mills, LLC and LOL Farmland Feed SPV, LLC. (1)
 10.18                      Receivables Purchase Agreement dated as of December 18,
                            2001, among Land O'Lakes Farmland Feed LLC, LOL Farmland
                            Feed SPV, LLC, and CoBank, ACB. (1)
 10.19                      Executive Annual Variable Compensation Plan of Land O'Lakes. (1) #
 10.20                      Land O'Lakes Long Term Incentive Plan. (1) #
 10.21                      Land O'Lakes Non-Qualified Deferred Compensation Plan. (1) #
 10.22                      Land O'Lakes Non-Qualified Executive Excess Benefit Plan
                            (IRS Limits). (1) #
 10.23                      Land O'Lakes Non-Qualified Executive Excess Benefit Plan
                            (1989 Formula). (1) #
 10.24                      Land O'Lakes Non-Qualified Executive Excess Benefit Savings
                            Plan. (1) #
 10.25                      California Cooperative Value Incentive Plan of Land O'Lakes. (2) #
 10.26                      License Agreement, by and between Land O'Lakes, Inc., Dean Foods
                            Company, Morningstar Foods, Inc. and Dairy Marketing Alliance, LLC,
                            dated July 24, 2002. (3)
 10.27                      Amended Land O'Lakes Long Term Incentive Plan. * #
 10.28                      Amended California Cooperative Value Incentive Plan of Land O'Lakes. * #
 12                         Statement regarding the computation of ratios*
 21                         Subsidiaries of the Registrant*
 99.1                       Certification  Pursuant to 18 U.S.C. Section 1350, As Adopted
                            Pursuant to Section 906
                            of the Sarbanes-Oxley Act of 2002*
 99.2                       Certification  Pursuant to 18 U.S.C. Section 1350, As Adopted
                            Pursuant to Section 906
                            of the Sarbanes-Oxley Act of 2002*
</Table>


(1)      Incorporated by reference to the identical exhibit to the Registrant's
         Registration Statement on Form S-4 filed March 18, 2002.

(2)      Incorporated by reference to the identical exhibit to the Registrant's
         Registration Statement on Form S-4 filed May 9, 2002

(3)      Incorporated by reference to exhibit 10.1 to the Company's Form 10-Q
         for the quarterly period ended September 30, 2002, filed on November
         14, 2002

#        Management contract, compensatory plan or arrangement required to be
         filed as an exhibit to this



                                       71
<PAGE>




Form 10-K.

*        Filed electronically herewith




                                       72
<PAGE>



                                   SIGNATURES


Pursuant to the requirements of Section 13 or 15(d) 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, on March 27, 2003.


                                            LAND O'LAKES, INC.


                                            By  /s/ Daniel Knutson
                                              ---------------------------------
                                              Daniel Knutson
                                              Senior Vice President and Chief
                                              Financial Officer


Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities indicated on March 27, 2003.


<Table>
<S>                                   <C>
  /s/ John E. Gherty                   President and Chief Executive Officer
------------------------
    John E. Gherty                     (Principal Executive Officer)


  /s/ Daniel Knutson                   Senior Vice President and Chief Financial Officer
------------------------
    Daniel Knutson                     (Principal Financial and Accounting Officer)


  /s/ Harley Buys                      Director
------------------------
    Harley Buys


  /s/ Lynn Broadwine                   Director
------------------------
    Lynn Broadwine


  /s/ Ben Curti                        Director
------------------------
    Ben Curti


  /s/ Kelly Davidson                   Director
------------------------
    Kelly Davidson


  /s/ Richard Epard                    Director
------------------------
    Richard Epard


  /s/ James Fife                       Director
------------------------
    James Fife


  /s/ Gordon Hoover                    Director
------------------------
    Gordon Hoover


  /s/ Peter Kappelman                  Director
------------------------
    Peter Kappelman
</Table>



                                       73
<PAGE>



<Table>
<S>                                   <C>
  /s/ Cornell Kasbergen                Director
------------------------
    Cornell Kasbergen


  /s/ Paul Kent, Jr.                   Director
------------------------
    Paul Kent, Jr.


  /s/ Kevin Kepler                     Director
------------------------
    Kevin Kepler


  /s/ Larry Kulp                       Director
------------------------
    Larry Kulp


  /s/ Charles Lindner                  Director
------------------------
    Charles Lindner


  /s/ John Long                        Director
------------------------
    John Long


  /s/ Manuel Marciel, Jr.              Director
------------------------
    Manuel Marciel, Jr.


  /s/ Robert Marley                    Director
------------------------
    Robert Marley


  /s/ Jim Miller                       Director
------------------------
    Jim Miller


  /s/ Ronnie Mohr                      Director
------------------------
    Ronnie Mohr


  /s/ Douglas Reimer                   Director
------------------------
    Douglas Reimer


  /s/ Dave Reinders                    Director
------------------------
    Dave Reinders


  /s/ Kenneth Schoenberg               Director
------------------------
    Kenneth Schoenberg


  /s/ Robert Winner                    Director
------------------------
    Robert Winner
</Table>



                                       74
<PAGE>



<Table>
<S>                                   <C>
  /s/ Larry Wojchik                    Director
------------------------
    Larry Wojchik


  /s/ John Zonneveld, Jr.              Director
------------------------
    John Zonneveld, Jr.
</Table>




                                       75
<PAGE>



                                 CERTIFICATIONS

I, John E. Gherty, certify that:

I have reviewed this annual report on Form 10-K of Land O'Lakes Inc.;

Based on my knowledge, this annual report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this annual report;

Based on my knowledge, the financial statements, and other financial information
included in this annual report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in the annual report;

The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this annual report is being prepared;

evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and

presented in this annual report our conclusions about the effectiveness of the
disclosure controls and procedures based on our evaluation as of the Evaluation
Date;

The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):

all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and

any fraud, whether or not material, that involves management or other employees
who have a significant role in the registrant's internal controls; and

The registrant's other certifying officers and I have indicated in this annual
report whether or not there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.


Date: March 27, 2003

                                      By  /s/ John E. Gherty
                                          -------------------------------------
                                          John E. Gherty
                                          President and Chief Executive Officer



                                       76
<PAGE>



I, Daniel Knutson, certify that:

I have reviewed this annual report on Form 10-K of Land O'Lakes Inc.;

Based on my knowledge, this annual report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this annual report;

Based on my knowledge, the financial statements, and other financial information
included in this annual report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in the annual report;

The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this annual report is being prepared;

evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and

presented in this annual report our conclusions about the effectiveness of the
disclosure controls and procedures based on our evaluation as of the Evaluation
Date;

The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):

all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and

any fraud, whether or not material, that involves management or other employees
who have a significant role in the registrant's internal controls; and

The registrant's other certifying officers and I have indicated in this annual
report whether or not there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.


Date: March 27, 2003

                                            By  /s/ Daniel Knutson
                                                --------------------------------
                                                Daniel Knutson
                                                Senior Vice President
                                                and Chief Financial Officer



                                       77
<PAGE>
    SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO
  SECTION 15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES
                       PURSUANT TO SECTION 12 OF THE ACT

No proxy statement, form of proxy or other proxy soliciting material with
respect to any annual or other meeting of security holders has been or will be
sent to security holders.

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<Table>
<Caption>
<S>                                                                                                 <C>
LAND O'LAKES, INC.
Financial Statements for the years ended December 31, 2002, 2001 and 2000
Independent Auditors' Report of KPMG LLP........................................................     F-2
Consolidated Balance Sheets as of December 31, 2002 and 2001....................................     F-3
Consolidated Statements of Operations for the years ended December 31, 2002, 2001 and
2000............................................................................................     F-4
Consolidated Statements of Cash Flows for the years ended December 31, 2002, 2001 and
2000............................................................................................     F-5
Consolidated Statements of Equities for the years ended December 31, 2002, 2001 and
2000............................................................................................     F-6
Notes to Consolidated Financial Statements......................................................     F-7

LAND O'LAKES FARMLAND FEED LLC
Financial Statements for the years ended December 31, 2002 and 2001 and for the
  three months ended December 31, 2000
Independent Auditors' Report of KPMG LLP........................................................     F-30
Consolidated Balance Sheets as of December 31, 2002 and 2001....................................     F-31
Consolidated Statements of Operations for the years ended
  December 31, 2002 and 2001 and the three months ended December 31, 2000.......................     F-32
Consolidated Statements of Cash Flows for the years ended
  December 31, 2002 and 2001 and the three months ended December 31, 2000.......................     F-33
Consolidated Statements of Equities for the years ended
  December 31, 2002 and 2001 and the three months ended December 31, 2000.......................     F-34
Notes to Consolidated Financial Statements......................................................     F-35

LAND O'LAKES FEED DIVISION
Financial Statements for the nine months ended September 30, 2000
Independent Auditors' Report of KPMG LLP........................................................     F-54
Consolidated Balance Sheet as of September 30, 2000 ............................................     F-55
Consolidated Statement of Operations for the nine months ended September 30, 2000...............     F-56
Consolidated Statement of Cash Flows for the nine months ended September 30, 2000...............     F-57
Notes to Consolidated Financial Statements......................................................     F-58

PURINA MILLS, LLC
Independent Auditors' Report of KPMG LLP........................................................     F-68
Financial Statements for the years ended December 31, 2002 and 2001
Consolidated Balance Sheets as of December 31, 2002 and 2001....................................     F-69
Consolidated Statements of Operations for the year ended
  December 31, 2002, for the period October 12, 2001 though December 31, 2001, for
 the period January 1, 2001 through October 11, 2001, for the six months ended
 December 31, 2000 and the six months ended June 30, 2000.......................................     F-70
Consolidated Statements of Cash Flows for the year ended
  December 31, 2002, for the period October 12, 2001 though December 31, 2001, for
 the period January 1, 2001 through October 11, 2001, for the six months ended
 December 31, 2000 and the six months ended June 30, 2000.......................................     F-71
Consolidated Statements of Equities for the year ended
  December 31, 2002, for the period October 12, 2001 though December 31, 2001, for
 the period January 1, 2001 through October 11, 2001,  for the six months ended
 December  31, 2000 and the six months ended June 30, 2000......................................     F-72
Notes to Consolidated Financial Statements......................................................     F-73

AGRILIANCE, LLC
Financial Statements(unaudited) for the three months ended November 30, 2002 and 2001
Consolidated Balance Sheets as of November 30, 2002 and August 31, 2002.........................     F-82
Consolidated Statements of Operations for the three months ended November 30, 2002
  and 2001......................................................................................     F-83
Consolidated Statements of Cash Flows for the three months ended November 30, 2002
  and 2001......................................................................................     F-84
Notes to Consolidated Financial Statements......................................................     F-85

Financial Statements for the years ended August 31, 2002, 2001 and the
eight months ended August 31, 2000
Independent Auditors' Report of KPMG LLP........................................................     F-86
Consolidated Balance Sheets as of August 31, 2002 and 2001......................................     F-87
Consolidated Statements of Operations for the years ended August 31, 2002, August 31,
2001 and for the eight months ended August 31, 2000.............................................     F-88
Consolidated Statements of Cash Flows for the years ended August 31, 2002, August 31,
 2001 and for the eight months ended August 31, 2000............................................     F-89
Consolidated Statements of Members' Equity for the years ended August 31, 2002,
August 31, 2001 and for the eight months ended August 31, 2000..................................     F-90
Notes to Consolidated Financial Statements......................................................     F-91
</Table>



                                      F-1
<PAGE>



                          INDEPENDENT AUDITORS' REPORT

The Board of Directors
Land O'Lakes, Inc:

    We have audited the accompanying consolidated balance sheets of Land
O'Lakes, Inc. and subsidiaries as of December 31, 2002 and 2001, and the related
consolidated statements of operations, cash flows and equities for each of the
years in the three-year period ended December 31, 2002. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

    We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Land
O'Lakes, Inc. and subsidiaries as of December 31, 2002 and 2001, and the results
of their operations and their cash flows for each of the years in the three-year
period ended December 31, 2002 in conformity with accounting principles
generally accepted in the United States of America.

    As discussed in Note 1 to the consolidated financial statements, in 2002,
the Company adopted the provisions of the Financial Accounting Standards Board's
Statement of Financial Accounting Standards No. 142, "Goodwill and Other
Intangible Assets." In 2001, the Company adopted the provisions of the Financial
Accounting Standards Board's Statement of Financial Accounting Standards No.
133, "Accounting for Derivative Instruments and Hedging Activities," as amended
by Statement No. 138, "Accounting for Certain Derivative Instruments and Certain
Hedging Activities"; Statement No. 141, "Business Combinations"; certain
provisions of Statement No. 142, "Goodwill and Other Intangible Assets," as
required for goodwill and intangible assets resulting from business combinations
consummated after June 30, 2001; and Statement No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets."


                                                       /s/ KPMG LLP

Minneapolis, Minnesota
January 30, 2003




                                      F-2
<PAGE>



                               LAND O'LAKES, INC.

                           CONSOLIDATED BALANCE SHEETS

<Table>
<Caption>
                                                                             DECEMBER 31
                                                                      -------------------------
                                                                         2002           2001
                                                                      ----------     ----------
                                                                           ($ IN THOUSANDS)
ASSETS
<S>                                                                  <C>            <C>
Current assets:
  Cash and short-term investments ...............................     $   64,327     $  130,169
  Receivables, net ..............................................        567,584        574,011
  Receivable from legal settlement ..............................         96,707             --
  Inventories ...................................................        446,386        450,774
  Prepaid expenses ..............................................        189,246        144,261
  Other current assets ..........................................         13,878         28,551
                                                                      ----------     ----------
     Total current assets .......................................      1,378,128      1,327,766
Investments .....................................................        545,592        568,130
Property, plant and equipment, net ..............................        579,860        675,277
Property under capital lease ....................................        105,736             --
Goodwill, net ...................................................        323,413        255,027
Other intangibles ...............................................        101,770        111,660
Other assets ....................................................        211,823        153,518
                                                                      ----------     ----------
     Total assets ...............................................     $3,246,322     $3,091,378
                                                                      ==========     ==========

LIABILITIES AND EQUITIES

Current liabilities:
  Notes and short-term obligations ..............................     $   37,829     $   33,971
  Current portion of long-term debt .............................        104,563         19,546
  Obligation under capital lease ................................        108,279             --
  Accounts payable ..............................................        701,786        652,309
  Accrued expenses ..............................................        204,629        187,569
  Patronage refunds payable and other member equities payable ...         12,388         28,900
                                                                      ----------     ----------
     Total current liabilities ..................................      1,169,474        922,295
Long-term debt ..................................................      1,007,308      1,147,465
Employee benefits and other liabilities .........................        104,340         82,801
Deferred tax liabilities ........................................             --         42,495
Minority interests ..............................................         53,687         59,806
Equities:
  Capital stock .................................................          2,190          2,305
  Member equities ...............................................        873,659        805,860
  Retained earnings .............................................         35,664         28,351
                                                                      ----------     ----------
     Total equities .............................................        911,513        836,516
                                                                      ----------     ----------
Commitments and contingencies
Total liabilities and equities ..................................     $3,246,322     $3,091,378
                                                                      ==========     ==========
</Table>


          See accompanying notes to consolidated financial statements.



                                      F-3
<PAGE>



                               LAND O'LAKES, INC.

                      CONSOLIDATED STATEMENTS OF OPERATIONS

<Table>
<Caption>
                                                                              YEARS ENDED DECEMBER 31
                                                                 ------------------------------------------------
                                                                     2002             2001              2000
                                                                 ------------      ------------      ------------
                                                                                 ($ IN THOUSANDS)

<S>                                                              <C>               <C>               <C>
Net sales ..................................................     $  5,846,864      $  5,864,858      $  5,672,774
Cost of sales ..............................................        5,350,423         5,378,605         5,146,110
                                                                 ------------      ------------      ------------
Gross profit ...............................................          496,441           486,253           526,664
Selling, general and administration ........................          481,406           381,993           389,290
Restructuring and impairment charges .......................           31,412             3,733            54,226
                                                                 ------------      ------------      ------------
(Loss) earnings from operations ............................          (16,377)          100,527            83,148
Interest expense, net ......................................           68,846            55,684            52,439
Gain on legal settlements ..................................         (155,544)           (2,996)               --
Gain on sale of intangible .................................           (4,184)               --                --
Gain from divestiture of businesses ........................           (4,992)               --           (89,034)
Loss (gain) on extinguishment of debt ......................               --            23,453            (4,450)
Equity in (earnings) loss of affiliated companies ..........          (22,675)          (48,583)           35,566
Minority interest in earnings (loss) of subsidiaries .......            5,487             6,882            (1,405)
                                                                 ------------      ------------      ------------

Earnings before income taxes ...............................           96,685            66,087            90,032
Income tax benefit .........................................           (2,202)           (5,401)          (12,900)
                                                                 ------------      ------------      ------------
Net earnings ...............................................     $     98,887      $     71,488      $    102,932
                                                                 ============      ============      ============

Applied to:
  Member equities
     Allocated patronage refunds ...........................     $     96,900      $     70,552      $    142,271
     Deferred equities .....................................          (10,336)            2,708            (5,347)
                                                                 ------------      ------------      ------------
                                                                       86,564            73,260           136,924
  Retained earnings ........................................           12,323            (1,772)          (33,992)
                                                                 ------------      ------------      ------------
                                                                 $     98,887      $     71,488      $    102,932
                                                                 ============      ============      ============
</Table>


          See accompanying notes to consolidated financial statements.



                                      F-4
<PAGE>



                               LAND O'LAKES, INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<Table>
<Caption>
                                                                            YEARS ENDED DECEMBER 31
                                                              ---------------------------------------------------
                                                                   2002              2001               2000
                                                              -------------      -------------      -------------
                                                                                ($ IN THOUSANDS)
<S>                                                           <C>                <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net earnings ..........................................     $      98,887      $      71,488      $     102,932
  Adjustments to reconcile net earnings to net cash
     provided by operating activities:
     Depreciation and amortization ......................           106,762             97,288             83,621
     Bad debt expense ...................................             5,094              1,871              4,550
     Proceeds from patronage revolvement received .......             2,061              2,895             16,350
     Non-cash patronage income ..........................            (1,921)            (4,999)            (9,914)
     Receivable from legal settlement ...................           (96,707)                --                 --
     Deferred income tax (benefit) expense ..............            (5,050)            20,096            (31,844)
     Increase in other assets ...........................           (85,843)           (12,543)            (1,178)
     (Decrease) increase in other liabilities ...........            (2,301)            (4,527)               673
     Restructuring and impairment charges ...............            31,412              3,733             54,226
     Gain from divestiture of businesses ................            (4,992)                --            (89,034)
     Equity in (earnings) losses of affiliated
        companies .......................................           (22,675)           (48,583)            35,566
     Minority interests .................................             5,487              6,882             (1,405)
     Other ..............................................               (74)            (6,153)             1,184
  Changes in current assets and liabilities, net of
     acquisitions and divestitures:
     Receivables ........................................           (26,087)            37,298            (25,568)
     Inventories ........................................            (4,167)            21,139            103,641
     Other current assets ...............................           (22,216)              (200)            83,601
     Accounts payable ...................................            62,654            124,402           (283,313)
     Accrued expenses ...................................           (18,316)           (35,783)            71,073
                                                              -------------      -------------      -------------
  Net cash provided by operating activities .............            22,008            274,304            115,161
CASH FLOWS FROM INVESTING ACTIVITIES:
  Additions to property, plant and equipment ............           (87,437)           (83,936)          (104,343)
  Acquisitions, net of cash acquired ....................                --           (371,858)          (101,076)
  Payments for investments ..............................           (16,226)           (46,189)           (86,611)
  Net proceeds from divestiture of businesses ...........            16,070                 --            184,106
  Proceeds from sale of investments .....................            27,371              5,264              3,248
  Proceeds from sale of property, plant and equipment ...            24,313             30,224             25,189
  Dividends from investments in affiliated companies ....            26,558              3,548                 --
  Other .................................................             5,116              1,745             (3,088)
                                                              -------------      -------------      -------------
  Net cash used by investing activities .................            (4,235)          (461,202)           (82,575)
CASH FLOWS FROM FINANCING ACTIVITIES:
  Increase (decrease) in short-term debt ................            10,118            (53,812)           (42,762)
  Proceeds from issuance of long-term debt ..............             6,057          1,369,528             58,955
  Payments on principal of long-term debt ...............           (62,040)          (935,104)          (179,133)
  Payments for debt issuance costs ......................                --            (20,265)                --
  Payments for purchase of capital securities ...........                --                 --             (9,300)
  Payments for redemption of member equities ............           (37,878)           (46,896)           (54,260)
  Other .................................................               128               (378)               109
                                                              -------------      -------------      -------------
  Net cash (used) provided by financing activities ......           (83,615)           313,073           (226,391)
                                                              -------------      -------------      -------------
  Net (decrease) increase in cash .......................           (65,842)           126,175           (193,805)
Cash and short-term investments at beginning of year ....           130,169              3,994            197,799
                                                              -------------      -------------      -------------
Cash and short-term investments at end of year ..........     $      64,327      $     130,169      $       3,994
                                                              =============      =============      =============
</Table>

          See accompanying notes to consolidated financial statements.





                                      F-5
<PAGE>
                               LAND O'LAKES, INC.

                       CONSOLIDATED STATEMENTS OF EQUITIES

<Table>
<Caption>
                                                           YEARS ENDED DECEMBER 31, 2002, 2001, AND 2000
                                                          -----------------------------------------------
                                                                                 MEMBER EQUITIES
                                                          CAPITAL     -----------------------------------   RETAINED      TOTAL
                                                           STOCK      ALLOCATED   DEFERRED        NET       EARNINGS     EQUITIES
                                                         ----------   ----------  ----------   ----------  ----------   ----------
                                                                                     ($ IN THOUSANDS)

<S>                                                     <C>          <C>         <C>          <C>          <C>          <C>
BALANCE, DECEMBER 31, 1999 ...........................   $    2,073   $  702,674  $   (7,694)  $  694,980  $   71,782   $  768,835
Capital stock issued .................................          411           --          --           --          --          411
Capital stock redeemed ...............................         (139)          --          --           --          --         (139)
2000 earnings, as applied ............................           --      142,271      (5,347)     136,924     (33,992)     102,932
  Less portion stated as current liability ...........           --      (28,593)         --      (28,593)         --      (28,593)
Portion of member equities stated as
  current liability ..................................           --       (8,900)         --       (8,900)         --       (8,900)
Equities issued for mergers and  acquisitions ........           --        2,250          --        2,250          --        2,250
Cash patronage and redemption of member
  equities ...........................................           --      (54,260)         --      (54,260)         --      (54,260)
 Redemption included in prior year's liabilities .....           --       19,350          --       19,350          --       19,350
Deferred equities transfer ...........................           --           --       8,290        8,290      (8,290)          --
Other, net ...........................................           --          129      (1,229)      (1,100)      4,168        3,068
                                                         ----------   ----------  ----------   ----------  ----------   ----------
BALANCE, DECEMBER 31, 2000 ...........................        2,345      774,921      (5,980)     768,941      33,668      804,954

Capital stock issued .................................           65           --          --           --          --           65
Capital stock redeemed ...............................         (105)          --          --           --          --         (105)
2001 earnings, as applied ............................           --       70,552       2,708       73,260      (1,772)      71,488
  Less portion stated as current  liability ..........           --      (19,900)         --      (19,900)         --      (19,900)
Portion of member equities stated as
  current liability ..................................           --       (9,000)         --       (9,000)         --       (9,000)
Cash patronage and redemption of member
  equities ...........................................           --      (46,896)         --      (46,896)         --      (46,896)
Redemption included in prior year's  liabilities .....           --       37,493          --       37,493          --       37,493
Other, net ...........................................           --         (608)      2,570        1,962      (3,545)      (1,583)
                                                         ----------   ----------  ----------   ----------  ----------   ----------
BALANCE, DECEMBER 31, 2001 ...........................        2,305      806,562        (702)     805,860      28,351      836,516

Capital stock issued .................................            5           --          --           --          --            5
Capital stock redeemed ...............................         (120)          --          --           --          --         (120)
2002 earnings, as applied ............................           --       96,900     (10,336)      86,564      12,323       98,887
  Less portion stated as current liability ...........           --       (4,178)         --       (4,178)         --       (4,178)
Portion of member equities stated as
  current liability ..................................           --       (8,210)         --       (8,210)         --       (8,210)
Cash patronage and redemption of member
  equities ...........................................           --      (37,878)         --      (37,878)         --      (37,878)
Redemption included in prior year's liabilities ......           --       28,900          --       28,900          --       28,900
Other, net ...........................................           --        2,601          --        2,601      (5,010)      (2,409)
                                                         ----------   ----------  ----------   ----------  ----------   ----------
BALANCE, DECEMBER 31, 2002 ...........................   $    2,190   $  884,697  $  (11,038)  $  873,659  $   35,664   $  911,513
                                                         ==========   ==========  ==========   ==========  ==========   ==========

</Table>


          See accompanying notes to consolidated financial statements.



                                      F-6
<PAGE>



                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           ($ IN THOUSANDS IN TABLES)

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF OPERATIONS

    Land O'Lakes, Inc. is a diversified food and agricultural cooperative
serving family farmers throughout the United States. The Company procures 12
billion pounds of member milk annually, markets more than 300 dairy products and
provides over 1,300 member cooperatives with agronomic production materials
including feed, seed, crop nutrients and crop protection products.

REVENUE RECOGNITION

    Sales are primarily recognized upon shipment of product to the customer.

STATEMENT PRESENTATION

    The consolidated financial statements include the accounts of Land O'Lakes,
Inc. and wholly owned and majority-owned subsidiaries and limited liability
companies ("Land O'Lakes" or the "Company"). Intercompany transactions and
balances have been eliminated. Certain reclassifications have been made to the
2001 and 2000 consolidated financial statements to conform to the 2002
presentation.

CASH AND SHORT-TERM INVESTMENTS

    Cash and short-term investments include short-term, highly liquid
investments with original maturities of three months or less.

INVENTORIES

    Inventories are valued at the lower of cost or market. Cost is determined on
a first-in, first-out or average cost basis.

DERIVATIVE COMMODITY INSTRUMENTS

    The Company uses derivative commodity instruments, primarily futures
contracts, to reduce the exposure to changes in commodity prices. These
contracts are not designated as hedges under Statement of Financial Accounting
Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging
Activities". The futures contracts are marked to market each month and gains and
losses are recognized in earnings.

INVESTMENTS

    Investments in other cooperatives are stated at cost plus unredeemable
patronage refunds received, or estimated to be received, in the form of capital
stock and other equities. Estimated patronage refunds are not recognized for tax
purposes until notices of allocation are received. The Company believes it is
not practical to estimate the fair value of investments in other cooperatives
due to the excessive cost involved as there is no established market for these
investments. The equity method of accounting is used for investments in other
companies in which Land O'Lakes voting interest is 20 to 50 percent. Investments
in less than 20 percent-owned companies are stated at cost.

PROPERTY, PLANT AND EQUIPMENT

    Property, plant and equipment are stated at cost. Depreciation is calculated
using the straight-line method over the estimated useful life (15 to 30 years
for land improvements and buildings, 5 to 10 years for machinery and equipment
and 3 to 5 years for software) of the respective assets in accordance with the
straight-line method. Accelerated methods of depreciation are used for income
tax purposes.



                                      F-7
<PAGE>



GOODWILL AND OTHER INTANGIBLE ASSETS

    Goodwill represents the excess of the purchase price of an acquired entity
over the amounts assigned to assets acquired and liabilities assumed. Upon
adoption of the remaining provisions of SFAS No. 142, "Goodwill and Other
Intangible Assets," on January 1, 2002, the Company no longer amortizes goodwill
except for goodwill related to the acquisition of cooperatives and the formation
of joint ventures. See Note 7 for pro forma effects of adopting this standard.
    Other intangible assets consist primarily of trademarks, patents, and
agreements not to compete. Certain trademarks are no longer amortized because
they have indefinite lives. The remaining other intangible assets are amortized
using the straight-line method over the estimated useful lives, ranging from 2
to 15 years.

RECOVERABILITY OF LONG-LIVED ASSETS

    The test for goodwill impairment is a two-step process and is performed on
at least an annual basis. The first step is a comparison of the fair value of
the reporting unit (as defined) with its carrying amount, including goodwill. If
this step reflects impairment, then the loss would be measured as the excess of
recorded goodwill over its implied fair value. Implied fair value is the excess
of fair value of the reporting unit over the fair value of all identified assets
and liabilities. The Company assesses the recoverability of other long-lived
assets annually or whenever events or changes in circumstance indicate that
expected future undiscounted cash flows might not be sufficient to support the
carrying amount of an asset. The Company deems an asset to be impaired if a
forecast of undiscounted future operating cash flows is less than its carrying
amount. If an asset is determined to be impaired, the loss is measured as the
amount by which the carrying value of the asset exceeds its fair value.

INCOME TAXES

    Land O'Lakes is a non-exempt agricultural cooperative and is taxed on all
non-member earnings and any member earnings not paid or allocated to members by
qualified written notices of allocation as that term is used in section 1388(c)
of the Internal Revenue Code. The Company files a consolidated tax return with
its fully taxable subsidiaries.

    The Company establishes deferred income tax assets and liabilities based on
the difference between the financial and income tax carrying values of assets
and liabilities using existing tax rates.

ADVERTISING AND PROMOTION

    Advertising and promotion costs are expensed as incurred. Advertising and
promotion costs were $53.9 million, $48.8 million and $59.0 million in 2002,
2001 and 2000, respectively.

RESEARCH AND DEVELOPMENT

    Expenditures for research and development are charged to administration
expense in the year incurred. Total research and development expenses were $33.3
million, $23.8 million and $20.2 million in 2002, 2001 and 2000, respectively.

RECENT ACCOUNTING PRONOUNCEMENTS

    The Company adopted the remaining provisions of SFAS No. 142, "Goodwill and
Other Intangible Assets," on January 1, 2002. Under SFAS No. 142, goodwill and
other intangible assets that have indefinite lives are no longer amortized
except for goodwill related to the acquisition of cooperatives and the formation
of joint ventures, but rather will be tested for impairment at least annually in
accordance with the provisions of the standard. See Note 7 for additional
information on the adoption of SFAS No. 142.
    The Company adopted Emerging Issues Task Force ("EITF") No. 00-25, "Vendor
Income Statement Characterization of Consideration to a Purchaser of the
Vendor's Products or Services," on January 1, 2002. EITF No. 00-25 deals with
the accounting for consideration paid from a vendor (typically a manufacturer or
distributor) to a retailer, including slotting fees, cooperative advertising
arrangements and buy-downs. The guidance in EITF 00-25


                                      F-8
<PAGE>


generally requires that these incentives be classified as a reduction of sales.
The impact of the adoption decreased previously reported sales and selling,
general and administration expense for the years ended December 31, 2001 and
2000 by $108.6 and $96.0 million, respectively.

In April 2002, FASB issued SFAS No. 145, "Rescission of FASB Statements No. 4,
44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections." As a
result, gains and losses from the extinguishment of debt previously classified
as an extraordinary item must now be included in earnings from continuing
operations. The Company reclassified a $23.5 million extraordinary loss in 2001
to loss on extinguishment of debt and a $4.5 million extraordinary gain in 2000
to gain on extinguishment of debt.

In June 2002, the FASB issued SFAS 146, "Accounting for Costs Associated with
Exit or Disposal Activities." The standard requires that a liability for a cost
associated with an exit or disposal activity be recognized and measured
initially at fair value when the liability is incurred. Under existing
accounting literature, certain costs for exit activities were recognized at the
date a company committed to an exit plan. The provisions of the standard are
effective for exit or disposal activities initiated after December 31, 2002. The
standard is generally expected to delay recognition of certain exit related
costs.

ACCOUNTING ESTIMATES

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

2.  RECEIVABLES

    A summary of receivables at December 31 is as follows:

<Table>
<Caption>
                                                                           2002       2001
                                                                        ---------  --------
<S>                                                                     <C>       <C>
          Trade accounts..........................................      $ 237,106  $287,229
          Notes and contracts.....................................         44,565    50,626
          Notes from sale of trade receivables (see Note 3).......        225,144   192,403
          Other...................................................         79,024    66,707
                                                                        ---------  --------
                                                                          585,839   596,965
          Less allowance for doubtful accounts....................         18,255    22,954
                                                                        ---------  --------
          Total receivables, net..................................      $ 567,584  $574,011
                                                                        =========  ========
</Table>

    A substantial portion of Land O'Lakes receivables is concentrated in the
agricultural industry. Collections of these receivables may be dependent upon
economic returns from farm crop and livestock production. The Company's credit
risks are continually reviewed, and management believes that adequate provisions
have been made for doubtful accounts.

3.  RECEIVABLES PURCHASE FACILITY

    In December 2001, the Company established a $100.0 million receivables
purchase facility with CoBank, ACB (CoBank). A wholly-owned, unconsolidated
special purpose entity (SPE) was established to purchase certain receivables
from the Company. CoBank has been granted an interest in the pool of receivables
owned by the SPE. The transfers of the receivables from the Company to the SPE
are structured as sales and, accordingly, the receivables transferred to the SPE
are not reflected in the consolidated balance sheet. However, the Company
retains credit risk related to the repayment of the notes receivable with the
SPE, which, in turn, is dependent upon the credit risk of the SPE's receivables
pool. Accordingly, the Company has retained reserves for estimated losses. The
Company expects no significant gains or losses from the facility. At December
31, 2002, no amounts were outstanding under this facility and $100.0 million
remained available. The total accounts receivable sold during 2002 and 2001 were
$2,653.0 million and $383.2 million, respectively.



                                      F-9
<PAGE>



4.  INVENTORIES

    A summary of inventories at December 31 is as follows:

<Table>
<Caption>
                                                2002       2001
                                              ---------  ---------
<S>                                           <C>        <C>
                 Raw materials...........     $ 141,849  $ 127,569
                 Work in process.........        33,707     37,423
                 Finished goods..........       270,830    285,782
                                              ---------  ---------
                 Total inventories.......     $ 446,386  $ 450,774
                                              =========  =========
</Table>

5.  INVESTMENTS

    A summary of investments at December 31 is as follows:
<Table>
<Caption>
                                                                          2002       2001
                                                                        ---------  --------
<S>                                                                      <C>       <C>
        CF Industries, Inc..........................................    $ 249,502  $248,502
        Agriliance LLC..............................................       91,629    84,030
        MoArk LLC...................................................       44,678    47,593
        Ag Processing Inc...........................................       37,854    38,977
        Advanced Food Products LLC..................................       27,418    27,487
        CoBank, ACB.................................................       22,061    21,549
        Melrose Dairy Proteins, LLC.................................        6,579     8,253
        Universal Cooperatives......................................        6,473     6,196
        Prairie Farms Dairy, Inc....................................        5,092     4,754
        PEC Mark II (Malta Cleyton).................................           --     7,681
        Other -- principally cooperatives and joint ventures........       54,306    73,108
                                                                        ---------  --------
        Total investments...........................................    $ 545,592  $568,130
                                                                        =========  ========
</Table>

    During 2002, the Company sold its interest in PEC Mark II (Malta Cleyton), a
Mexican feed joint venture, for $5.6 million in cash and a $2.0 million note
receivable.

    During 2001, the Company made an additional cash investment of $27.7 million
in MoArk LLC, an egg production and marketing company, of which $13.1 million
was recorded as goodwill. In a non-cash transaction, the Company contributed its
aseptic processing assets of $24.5 million in exchange for a 35% equity
investment in Advanced Food Products LLC.

    Summarized financial information for the Company's four largest equity
investments, which comprise most of the equity investments, is as follows:

<Table>
<Caption>
                                                         2002         2001
                                                     -----------  -----------
<S>                                                      <C>          <C>
                  Net sales.......................   $ 4,322,237  $ 4,850,747
                  Gross profit....................       435,321      463,220
                  Net earnings....................        45,839       34,194
                  Current assets..................     1,511,267    1,584,028
                  Non-current assets..............       362,352      379,327
                  Current liabilities.............     1,307,862    1,376,515
                  Non-current liabilities.........       201,321      234,088
                  Total equity....................       364,437      352,752
</Table>





                                      F-10
<PAGE>



6.  PROPERTY, PLANT AND EQUIPMENT

    A summary of property, plant and equipment at December 31 is as follows:

         Owned property, plant and equipment:

<Table>
<Caption>
                                                                  2002        2001
                                                              -----------  ----------
<S>                                                           <C>          <C>
         Land and land improvements.......................    $    59,396  $   51,818
         Buildings and building equipment.................        294,032     311,499
         Machinery and equipment..........................        554,926     560,244
         Software.........................................         38,689      38,438
         Construction in progress.........................         40,771      56,769
                                                              -----------  ----------
                                                                  987,814   1,018,768
         Less accumulated depreciation....................        407,954     343,491
                                                              -----------  ----------
         Total property, plant and equipment, net.........    $   579,860  $  675,277
                                                              ===========  ==========
</Table>

         Property under capital lease:
<Table>
<Caption>
                                                                   2002        2001
                                                              -----------  ----------
<S>                                                          <C>           <C>
         Buildings and building equipment.................    $    26,868  $       --
         Machinery and equipment..........................         78,868          --
                                                              -----------  ----------
                                                                  105,736          --
         Less accumulated depreciation....................             --          --
                                                              -----------  ----------
         Total property under capital lease, net..........    $   105,736  $       --
                                                              ===========  ==========
</Table>

7.  GOODWILL AND OTHER INTANGIBLE ASSETS

GOODWILL  The Company adopted the remaining provisions of SFAS No. 142 on
January 1, 2002. Had SFAS No. 142 been effective January 1, 2000, net earnings
for 2001 and 2000 would have been reported as follows:

<Table>
<Caption>
                                                               2002       2001        2000
                                                            ---------  ---------   ---------
<S>                                                        <C>         <C>        <C>
         Net earnings....................................   $  98,887  $  71,488   $ 102,932
         Add back: Goodwill amortization, net of tax.....          --      4,940       6,887
                                                            ---------  ---------   ---------
         Adjusted net earnings...........................   $  98,887  $  76,428   $ 109,819
                                                            =========  =========   =========
</Table>

The carrying amount of goodwill at December 31 is as follows:

<Table>
<Caption>
                                                       2002       2001
                                                    ---------  ---------
<S>                                                <C>        <C>
             Dairy Foods..........................  $  66,718  $  40,285
             Feed.................................    156,839    109,463
             Seed.................................     16,948     15,704
             Swine................................        647        701
             Agronomy.............................     69,823     74,904
             Other................................     12,438     13,970
                                                    ---------  ---------
             Total goodwill.......................  $ 323,413  $ 255,027
                                                    =========  =========
</Table>

    The Dairy Foods segment goodwill increased by $26.4 million, principally due
to the additional purchase price for an acquisition in 2001. The Feed segment
goodwill increased $47.4 million, mostly due to the $50.7 million reallocation
of the Purina Mills, Inc. purchase price. The Seed segment goodwill increased
$1.2 million, mainly due to the additional purchase price for an acquisition.
The decrease in goodwill in the Agronomy segment was primarily due to
amortization related to an investment in a joint venture.

OTHER INTANGIBLE ASSETS A summary of other intangible assets at December 31 is
as follows:

<Table>
<Caption>
                                                                               2002      2001
                                                                            ---------  --------
<S>                                                                        <C>        <C>
             Amortized other intangible assets:
             Trademarks, less accumulated amortization
                of $1,615 and $235, respectively.........................   $   2,725  $  4,107
             Patents, less accumulated amortization of
                $1,394 and $241, respectively............................      14,979    16,132
             Agreements not to compete, less accumulated
                amortization of $2,324 and $1,415,
                respectively.............................................       1,976     3,608
             Other intangible assets, less accumulated
                 amortization of $7,343 and $4,416, respectively.........       5,127    10,850
                                                                            ---------  --------
             Total amortized other intangible assets.....................      24,807    34,697
             Total non-amortized other intangible assets - trademarks....      76,963    76,963
                                                                            ---------  --------
             Total other intangible assets...............................   $ 101,770  $111,660
                                                                            =========  ========
</Table>



                                      F-11
<PAGE>



    Amortization expense for the years ended December 31, 2002 and 2001 was $6.6
million and $4.6 million, respectively. The estimated amortization expense
related to other intangible assets subject to amortization for the next five
years will approximate $4.0 million annually. The weighted-average life of the
intangible assets subject to amortization is approximately 14 years.

8.  DEBT OBLIGATIONS

    The Company had notes and short-term obligations at December 31, 2002 and
2001 of $37.8 million and $34.0 million, respectively. The Company also has a
$250.0 million 5-year revolving credit facility with a variable interest rate
based on LIBOR. There were no borrowings on this facility as of December 31,
2002.

    A summary of long-term debt at December 31 is as follows:

<Table>
<Caption>
                                                                                 2002         2001
                                                                             ----------   ----------
<S>                                                                          <C>          <C>
          Term A loan -- quarterly installments through 2006
            (variable rate based on LIBOR)...............................    $   288,270  $  325,000
          Term B loan -- quarterly installments through 2008
            (variable rate based on LIBOR)...............................        231,417     250,000
          Senior unsecured notes -- due 2011 (8.75%).....................        350,000     350,000
          Industrial development revenue bonds and other secured notes
            payable-due 2003 through 2016 (.90% to 6.00%)................         26,268      26,329
          Capital Securities of Trust Subsidiary -- due 2028
            (7.45%)......................................................        190,700     190,700
          Other debt.....................................................         25,216      24,982
                                                                             ----------   ----------
                                                                               1,111,871   1,167,011
          Less current portion...........................................        104,563      19,546
                                                                             -----------  ----------
          Total long-term debt...........................................    $ 1,007,308  $1,147,465
                                                                             ===========  ==========
</Table>

    During 2002, the Company made payments on Term A loan of $36.7 million and
on Term B loan of $18.6 million. Debt covenants include certain minimum
financial ratios that were all satisfied.

    During 2001, the Company obtained a Term A loan for $325.0 million and a
Term B loan for $250.0 million. In addition, a long-term bond offering for
$350.0 million, due 2011, was completed in November 2001.

    The early extinguishment of previous credit facilities in 2001 resulted in a
loss of $23.5 million.

    Land O'Lakes Capital Trust I (the "Trust") was created for the sole purpose
of issuing $200.0 million of Capital Securities and investing the proceeds
thereof in an equivalent amount of debentures of the Company.
The sole assets of the Trust, $206.2 million principal amount Junior
Subordinated Deferrable Interest Debentures (the "Debentures") of the Company,
bearing interest at 7.45% and maturing on March 15, 2028, are eliminated upon
consolidation. The Capital Securities are guaranteed to the extent set forth in
the Offering Memorandum of the Capital Securities by the Company and bear the
same interest rate and maturity date as the Debentures.

    Interest paid, including interest paid on capital securities and net of
amounts capitalized ($0.1 million, $0.1 million and $1.5 million in 2002, 2001
and 2000, respectively), was $80.0 million, $55.7 million and $59.8 million in
2002, 2001 and 2000, respectively.

    The weighted average interest rates on short-term borrowings and notes
outstanding at December 31, 2002 and 2001 were 6.99% and 6.52%, respectively.

    Borrowings under the revolving credit facility and the term loans bear
interest at variable rates (either LIBOR or an Alternative Base Rate) plus
applicable margins. The margins depend on Land O'Lakes credit ratings. Based
upon Land O'Lakes existing credit ratings, the current LIBOR margins are 225
basis points for the revolving credit facility, 275 basis points for the Term A
Loan and 350 basis points for the Term B Loan. Spreads for the Alternative Base
Rate are 100 basis points lower than the applicable LIBOR spreads. LIBOR may be
set for one, two, three or six month periods at the election of Land O'Lakes. As
of December 31, 2002, interest rates on the Term A Loan and Term B Loan were
4.17% and 4.92%, respectively.

    The maturity of long-term debt for the next five years and thereafter is
summarized in the table below. The amount for 2003 includes a $50 million
voluntary prepayment of Term A and B loans, which was paid on January 24, 2003.



                                      F-12
<PAGE>



<Table>
<Caption>
                                    YEAR             AMOUNT
                             ------------------    --------
<S>                          <C>                     <C>
                             2003..............    $104,563
                             2004..............      71,510
                             2005..............      90,953
                             2006..............      68,732
                             2007..............       9,062
                             2008 and thereafter    767,051
</Table>

9.  FAIR VALUE OF FINANCIAL INSTRUMENTS

    The following tables provide information of the carrying amount, notional
amount and fair value of financial instruments, including derivative financial
instruments. The Company believes it is not practical to estimate the fair value
of investments in other cooperatives due to the excessive cost involved as there
is no established market for these investments. The carrying value of financial
instruments classified as current assets and current liabilities, such as cash
and short-term investments, receivables, accounts payable, notes and short-term
obligations, approximate fair value due to the short-term maturity of the
instruments. The carrying value of LIBOR-based debt, including the revolving
credit facility, Term A loan and Term B loan, also approximates fair market
value since the interest rate automatically adjusts every one to three months
and credit spreads are not believed to have changed materially since the
facilities were established. The fair value of fixed rate long-term debt was
established through a present value calculation, based on available information
on prevailing market interest rates for similar securities on the respective
reporting dates, and is summarized at December 31 as follows:


<Table>
<Caption>
                                                                          2002                  2001
                                                                  --------------------  ---------------------
                                                                   CARRYING     FAIR     CARRYING     FAIR
                                                                    AMOUNT      VALUE     AMOUNT      VALUE
                                                                  ---------   --------   ---------   --------
<S>                                                              <C>         <C>        <C>         <C>
          Senior unsecured notes due 2011......................   $ 350,000   $275,170   $ 350,000   $343,490
          Capital Securities of Trust Subsidiary due 2028......     190,700    103,302     190,700    127,310
</Table>


    The Company enters into futures and options contract derivatives to reduce
risk on the market value of inventory and fixed or partially fixed purchase and
sale contracts.
    The notional or contractual amount of derivatives provides an indication of
the extent of the Company's involvement in such instruments at that time but
does not represent exposure to market risk or future cash requirements under
certain of these instruments. A summary of the notional or contractual amounts
of these instruments at December 31 is as follows:


<Table>
<Caption>
                                                                 2002                  2001
                                                         --------------------  -------------------
                                                         NOTIONAL      FAIR    NOTIONAL     FAIR
                                                          AMOUNT       VALUE    AMOUNT      VALUE
                                                         ---------    -------  ---------   -------
<S>                                                     <C>          <C>      <C>         <C>
Derivative financial instruments:
  Commodity futures contracts...................
          Commitments to purchase...............         $ 108,359    $(4,543) $  76,639   $(6,475)
          Commitments to sell...................           (56,969)      (615)    (6,111)      (86)
</Table>

10.  INCOME TAXES

    The components of the income tax provision are summarized as follows:

<Table>
<Caption>
                                                                     2002        2001         2000
                                                                 ----------   ----------   ---------
<S>                                                              <C>        <C>        <C>
                      Current expense(benefit)
                      Federal...........................         $    2,586   $  (22,298)  $  16,678
                      State.............................                262       (3,199)      2,266
                                                                 ----------   ----------   ---------
                                                                      2,848      (25,497)     18,944
                      Deferred (benefit) expense........             (5,050)      20,096     (31,844)
                                                                 ----------   ----------   ---------
                      Income tax benefit................         $   (2,202)  $   (5,401)  $ (12,900)
                                                                 ==========   ==========   =========
</Table>

    The effective tax rate differs from the statutory rate primarily as a result
of the following:



                                      F-13
<PAGE>



<Table>
<Caption>
                                                             2002     2001    2000
                                                            ------  -------  ------
<S>                                                         <C>     <C>      <C>
           Statutory rate...............................     35.0%   35.0%    35.0%
           Patronage refunds............................    (35.1)  (37.4)   (55.4)
           State income tax, net of federal benefit.....     (0.3)   (0.5)    (1.2)
           Amortization of goodwill.....................      0.5     0.4      5.2
           Effect of foreign operations.................     (4.2)    1.5      0.8
           Disposal of investment.......................       --    (5.1)      --
           Other, net...................................      1.8    (2.1)     1.3
                                                            -----   -----    -----
           Effective tax rate...........................     (2.3)%  (8.2)%  (14.3)%
                                                            =====   =====    =====
</Table>

    The significant components of the deferred tax assets and liabilities at
December 31 are as follows:

<Table>
<Caption>
                                            2002         2001         2000
                                          --------     --------     --------
<S>                                       <C>          <C>          <C>
Deferred tax assets related to:
Deferred patronage .....................  $  4,323     $ 12,443     $ 12,810
Accrued expenses .......................    25,160       33,145       21,017
Allowance for doubtful accounts ........     9,012       12,040        5,557
Inventories ............................     2,252        5,064        3,588
Asset impairments ......................    10,232        8,037       16,020
Joint ventures .........................        --        1,680       20,898
Net operating loss carryforward ........    48,312           --           --
Other, net .............................        --        3,829        3,710
                                          --------     --------     --------
Total deferred tax assets ..............    99,291       76,238       83,600
                                          --------     --------     --------
Deferred tax liabilities
related to:
Property, plant and equipment ..........    65,157       77,904       12,946
Intangibles ............................    17,800       16,944       10,085
Joint ventures .........................     1,292           --           --
Other, net .............................       347           --           --
                                          --------     --------     --------
Total deferred tax liabilities .........    84,596       94,848       23,031
                                          --------     --------     --------
Net deferred tax assets (liabilities)...  $ 14,695     $(18,610)    $ 60,569
                                          ========     ========     ========
</Table>

    SFAS No. 109 "Accounting for Income Taxes" requires consideration of a
valuation allowance if it is "more likely than not" that benefits of deferred
tax assets will not be realized. Management has determined, based on prior
earnings history and anticipated earnings, that no valuation allowance is
necessary.

    Income taxes (recovered) paid in 2002, 2001, and 2000 were $(21.7) million,
$22.3 million and $5.1 million, respectively.

11. PENSION AND OTHER POSTRETIREMENT PLANS

    The Company has a defined pension plan, which covers all eligible employees
not participating in a labor negotiated plan. Plan benefits are generally based
on years of service and employees' highest compensation during five consecutive
years of employment. Annual payments to the pension trust fund are determined in
compliance with the Employee Retirement Income Security Act (ERISA).

    The Company also sponsors plans that provide certain health care benefits
for retired employees. Employees become eligible for these benefits upon meeting
certain age and service requirements. The Company funds only the plans' annual
cash requirements.

    The measurement date for the pension and other postretirement benefit plans
is November 30.



                                      F-14
<PAGE>
         Reconciliation of the funded status of the plans and the amounts
included in the balance sheets are as follows:

<Table>
<Caption>
                                                                                          OTHER POSTRETIREMENT
                                                            PENSION BENEFITS                    BENEFITS
                                                       ---------------------------     ---------------------------
                                                           2002            2001           2002            2001
                                                       -----------     -----------     -----------     -----------
<S>                                                    <C>             <C>             <C>             <C>
Change in benefit obligation:
  Benefit obligation at beginning of year ..........   $   313,680     $   288,267     $    59,296     $    51,530
  Service cost .....................................        11,536           9,471             802             818
  Interest cost ....................................        23,588          21,091           4,048           3,918
  Plan amendments ..................................         3,377             750              --              --
  Transfer to other plans ..........................        (3,062)             --              --              --
  Business combinations ............................        26,390              --              --              --
  Actuarial (gain) loss ............................        (5,517)         10,922           2,827           8,112
  Benefits paid ....................................       (18,169)        (16,821)         (6,050)         (5,082)
                                                       -----------     -----------     -----------     -----------
  Benefit obligation at end of year ................   $   351,823     $   313,680     $    60,923     $    59,296
                                                       ===========     ===========     ===========     ===========
Change in plan assets:
  Fair value of plan assets at beginning of year ...   $   283,983     $   304,506     $        --     $        --
  Actual loss on plan assets .......................       (17,810)         (5,702)             --              --
  Company contributions ............................        67,936           2,000           6,050           5,082
  Transfer to other plans ..........................        (3,062)             --              --              --
  Business combinations ............................        21,259              --              --              --
  Benefits paid ....................................       (18,169)        (16,821)         (6,050)         (5,082)
                                                       -----------     -----------     -----------     -----------
  Fair value of plan assets at end of year .........   $   334,137     $   283,983     $        --     $        --
                                                       ===========     ===========     ===========     ===========
Reconciliation of prepaid (accrued) benefits:
  Funded status ....................................   $   (17,686)    $   (29,697)    $   (60,923)    $   (59,296)
  Unrecognized net actuarial loss ..................       107,545          65,591          28,946          28,190
  Unrecognized transition obligation ...............            --              --           6,429           7,072
  Unrecognized prior service cost ..................         5,927           3,823           2,926           3,192
                                                       -----------     -----------     -----------     -----------
  Prepaid (accrued) benefit cost ...................   $    95,786     $    39,717     $   (22,622)    $   (20,842)
                                                       ===========     ===========     ===========     ===========
Weighted-average assumptions:
  Discount rate ....................................          7.00%           7.25%           7.00%           7.25%
  Expected return on plan assets ...................          8.50%           9.50%            N/A             N/A
  Rate of compensation increase ....................          4.25%           4.75%            N/A             N/A
</Table>


         For measurement purposes, a 10.0% annual rate of increase in the per
capita cost of covered health care benefits was assumed for 2003 and an annual
rate of increase of 5.5% was assumed for all years thereafter. The health care
cost trend rate assumption affects the amounts reported. For example, a 1%
increase in the assumed trend rate for health care costs would have increased
the service cost and the interest cost components of 2002 postretirement health
care benefits expense by $0.2 million and the accumulated postretirement benefit
obligation by $3.3 million as of December 31, 2002. In contrast, a 1% decrease
in the assumed trend rate for health care costs would have decreased the service
cost and interest cost components of 2002 postretirement health care benefits
expense by $0.2 million and the accumulated postretirement benefit obligation by
$2.8 million as of December 31, 2002.

         Components of net periodic benefit cost are as follows:

<Table>
<Caption>
                                                 PENSION BENEFITS                       OTHER POSTRETIREMENT BENEFITS
                                     -----------------------------------------    ---------------------------------------
                                        2002           2001            2000          2002          2001           2000
                                     -----------    -----------    -----------    -----------   -----------   -----------
<S>                                  <C>            <C>            <C>            <C>           <C>           <C>
Service cost .....................   $    11,536    $     9,471    $     9,749    $       802   $       818   $       794
Interest cost ....................        23,588         21,091         19,931          4,048         3,918         3,649
Expected return on assets ........       (30,301)       (28,428)       (26,916)            --            --            --
Amortization of prior
  service cost ...................         1,273            814            814            266           266           266
Amortization of actuarial
  loss ...........................           419             --             --          1,615         1,326         1,346
Amortization of transition
  obligation .....................            --             --             --            643           643           643
                                     -----------    -----------    -----------    -----------   -----------   -----------
Net periodic benefit cost ........   $     6,515    $     2,948    $     3,578    $     7,374   $     6,971   $     6,698
                                     ===========    ===========    ===========    ===========   ===========   ===========
</Table>

         In addition to the defined benefit pension plan, the Company has a
noncontributory, supplemental executive retirement plan (SERP), which is an
unfunded, defined benefit plan. The projected benefit obligation of the unfunded
plan was $15.3 million and $14.4 million at December 31, 2002 and 2001,
respectively. The accumulated benefit obligation was $11.9 million and $13.2
million at December 31, 2002 and 2001, respectively. Net periodic pension cost
was $1.4 million, $1.2 million and $1.9 million for 2002, 2001 and 2000,
respectively.

         The Company also has a discretionary capital accumulation plan (CAP),
which is an unfunded, defined benefit plan. The projected benefit obligations
and the accumulated benefit obligation of the unfunded plan were $26.8 million
and $24.9 million at December 31, 2002 and 2001, respectively. The accrued
discretionary CAP liability



                                      F-15
<PAGE>



was $26.8 million and $24.9 million at December 31, 2002 and 2001, respectively.
The expense for this plan was $1.7 million for 2002 and $0.0 million for 2001
and 2000.

         Certain eligible employees are covered by defined contribution plans.
The expense for these plans was $4.9 million, $4.9 million and $5.8 million for
2002, 2001 and 2000, respectively.

12. EQUITIES

         The authorized capital stock at December 31, 2002 consists of 2,000
shares of Class A Common, $1,000 par value; 50,000 shares of Class B Common, $1
par value; 500 shares of nonvoting Class C Common, $1,000 par value; 10,000
shares of nonvoting Class D Common, $1 par value; and 1,000,000 shares of
nonvoting, 8% non-cumulative Preferred, $10 par value.

         The following details the activity in membership shares during the
three years ended December 31, 2002:

<Table>
<Caption>
                                                         NUMBER OF SHARES
                            -----------------------------------------------------------------------
                                                     COMMON
                            --------------------------------------------------------
                                 A              B              C              D          PREFERRED
                            -----------    -----------    -----------    -----------    -----------
<S>                         <C>            <C>            <C>            <C>            <C>
December 31, 1999 .......           878          7,754            117          3,099        106,723
  New Members ...........           327            295             84            671             --
  Redemptions ...........           (39)        (2,159)            (4)        (2,270)        (9,289)
                            -----------    -----------    -----------    -----------    -----------
December 31, 2000 .......         1,166          5,890            197          1,500         97,434
  New Members ...........            47            716             18            364             --
  Redemptions ...........           (41)          (739)           (15)          (426)        (4,865)
                            -----------    -----------    -----------    -----------    -----------
December 31, 2001 .......         1,172          5,867            200          1,438         92,569
  New Members ...........             3            321              2            137             --
  Redemptions ...........           (48)          (981)            (8)          (470)        (6,289)
                            -----------    -----------    -----------    -----------    -----------
December 31, 2002 .......         1,127          5,207            194          1,105         86,280
                            -----------    -----------    -----------    -----------    -----------
</Table>

         Patronage refunds to members of $96.9 million, $70.6 million and $142.3
million for the years ended December 31, 2002, 2001 and 2000, respectively, are
based on earnings in specific patronage or product categories and in proportion
to the business each member does within each category. For 2002, Land O'Lakes
will issue qualified patronage and non-qualified refunds in the amount of $13.7
million and $83.2 million, respectively. Qualified patronage refunds are tax
deductible by the Company when qualified written notices of allocation are
issued and non-qualified patronage refunds are tax deductible when redeemed with
cash.

         The allocation to retained earnings of $12.3 million in 2002, $(1.8)
million in 2001 and $(34.0) million in 2000 represents earnings or (losses)
generated by non-member businesses plus amounts under the retained earnings
program as provided in the by-laws of the Company.

13. ACQUISITIONS, MERGERS AND DIVESTITURES

         Proceeds from divestitures in 2002 totaled $22.4 million. The Company
divested its operations in Poland for $4.2 million in cash and $6.3 million in
debt assumed, which resulted in a gain of $1.3 million. Net cash proceeds were
$11.0 million from a divestiture of a seed coating business in Idaho and a seed
inoculation business in Brazil, which resulted in a gain of $4.0 million. Other
divestures in 2002 resulted in net cash proceeds of $0.9 million and a loss of
$0.3 million.

         On October 11, 2001, the Company acquired 100% of the outstanding stock
of Purina Mills, Inc. (Purina Mills). The Company contributed the stock to Land
O'Lakes Farmland Feed LLC in exchange for increasing its ownership in the LLC
from 73.7% to 92.0%. The results of operations of Purina Mills are included in
the consolidated financial statements since that date. Purina Mills is a
commercial and lifestyle feed company. This acquisition allowed the Company to
diversify into lifestyle feed products.

         The aggregate purchase price was approximately $359 million, net of
cash acquired, of which $247 million represented cash payments for stock and
acquisition costs and $112 million represented debt retirement. In connection
with the acquisition, the Company refinanced certain existing bank financing
arrangements and entered into new bank financing arrangements (see Note 8).

         The following table summarizes the estimated fair value of the assets
acquired and liabilities assumed at the date of acquisition. At December 31,
2001 the Company was in the process of obtaining final third party valuations of
certain assets; thus the allocation of the purchase price was subject to
refinement. During 2002, the allocation of the purchase price was completed. As
a result of final appraisals and resolutions of other contingencies outstanding
at the date of the acquisition goodwill was increased by $50.7 million, with the
most significant offset to property, plant and equipment.



                                      F-16
<PAGE>



<Table>
<Caption>
                                                   AT OCTOBER 11, 2001
                                                   -------------------
<S>                                                <C>
Current assets ...................................   $    92,486
Investments ......................................        10,430
Property, plant and equipment ....................       218,913
Goodwill .........................................        86,872
Other intangibles ................................        98,940
Other assets .....................................        32,892
                                                     -----------
  Total assets acquired ..........................       540,533
                                                     -----------
Current liabilities ..............................        64,338
Other liabilities ................................       117,638
                                                     -----------
  Total liabilities assumed ......................       181,976
                                                     -----------
  Net assets acquired ............................   $   358,557
                                                     ===========
</Table>

         Goodwill of $86.9 million was recognized and assigned to the Feed
segment. None of the goodwill is expected to be deductible for tax purposes. Of
the $98.9 million of acquired identifiable intangible assets, $77.0 million is
not subject to amortization, and relates primarily to trade names and
trademarks. The remaining intangible assets of $21.9 million, have a weighted
average useful life of approximately 12 years and consist of patents in the
amount of $16.4 million with a 14 year weighted average useful life and
contracts of $5.5 million with a 3 year weighted average useful life.

         The following table summarizes the unaudited pro forma results of
operations for the years ended December 31, 2001 and 2000 for the Company as if
the Purina Mills acquisition had occurred on January 1, 2001 and 2000,
respectively. The unaudited pro forma results of operations are for
informational purposes only and do not purport to represent what the Company's
results of operations would have been if the acquisition had actually occurred
on those dates.

<Table>
<Caption>
                                          PRO FORMA YEAR
                                         ENDED DECEMBER 31
                                 ---------------------------------
                                       2001              2000
                                 ---------------   ---------------
<S>                              <C>               <C>
Net sales ....................   $     6,530,168   $     6,512,579
Net earnings .................            71,152            90,735
</Table>


         During 2000, Land O'Lakes completed acquisitions that required cash
outlays of $101.1 million. The Company received $184.1 million of net cash
proceeds from divestitures.

         In January 2000, Land O'Lakes expanded its butter production capacity
with the acquisition of Madison Dairy Produce Co. in Madison, Wisconsin. The
Company broadened its seed operations during the year by acquiring the seed
assets of several companies, including WilFarm LLC, Agro Distribution, Advanta
Seeds, Inc. and AgriBioTech Inc. Other acquisitions in 2000 included the
purchase of a cheese plant in Gustine, California and a feed mill in Neosho,
Missouri.

         In April 2000, the Company divested of a swine business in North
Carolina for net cash proceeds of $4.4 million which resulted in a gain of $0.5
million. In July 2000, the Company sold its fluid dairy assets to Dean Foods
Company for net proceeds of $179.7 million which resulted in a gain of $88.5
million.

         In October 2000, the Company and Farmland entered into a new venture
that combined both of their feed businesses into a single entity -- Land O'Lakes
Farmland Feed LLC. Land O'Lakes owned 69% of the venture at the date of
combination; and as majority-owner, fully consolidates its operating activities.

         All of the above acquisitions have been accounted for as purchases and
accordingly the acquired assets and liabilities have been recorded at their
estimated fair value at the date of acquisition. The operating results are
included in the Statements of Operations from the date of acquisition.

14. RESTRUCTURING AND IMPAIRMENT CHARGES

         A summary of restructuring and impairment charges is as follows:

<Table>
<Caption>
                                                               2002             2001               2000
                                                          --------------   --------------    --------------
<S>                                                       <C>              <C>               <C>
Restructuring charges (reversals) .....................   $       13,173   $       (4,067)   $        9,700
Impairment charges ....................................           18,239            7,800            44,526
                                                          --------------   --------------    --------------
Total restructuring and impairment charges ............   $       31,412   $        3,733    $       54,226
                                                          ==============   ==============    ==============
</Table>

         In 2002, the Company recorded restructuring and impairment charges of
$31.4 million. In the Dairy Foods segment, the Company recorded a $19.6 million
restructuring and impairment charge in 2002, of which $15.2 million was related
primarily to the write-down of impaired plant assets held for sale to their
estimated fair value,



                                      F-17
<PAGE>




and $4.4 million was related to employee severance and outplacement costs for
374 employees at various locations. In the Animal Feed segment, the Company
recorded an $11.8 million restructuring and impairment charge, of which $3.1
million was primarily related to the write-down of impaired plant assets held
for sale to their estimated fair value, and $8.7 million was related to employee
severance and outplacement costs for 375 employees at various locations. The
balance remaining to be paid at December 31, 2002 for employee severance and
outplacement costs was $10.5 million.

         In 2001, the Company recorded restructuring and impairment charges of
$3.7 million. Dairy Foods recorded a restructuring charge of $1.7 million, which
had not been paid at December 31, 2001, for severance costs for 63 production
employees resulting from the consolidation of production facilities. Feed
reversed $5.7 million of a prior-year restructuring charge primarily due to a
change in business strategy following the Purina Mills acquisition, which
resulted in the decision to continue to operate plants that were held for sale
at December 31, 2000. An impairment charge of $6.0 million related to the
Company's feed operation in Mexico held for sale at December 31, 2001, was
recorded in order to value the business at its expected selling price less costs
of disposal. Swine recorded an impairment charge of $1.8 million to reduce
undeveloped land with permit issues to its estimated fair value.

         In 2000, the Company recorded restructuring and impairment charges of
$54.2 million. The restructuring charge of $9.7 million resulted from
initiatives within Land O'Lakes Farmland Feed LLC to consolidate facilities and
reduce personnel. Of the $9.7 million, $7.2 million related to the closing and
planned sale of 12 plants and consisted of $5.5 million to write down assets
held for sale to their estimated fair value and $1.7 million for demolition
expenses and incidental exit costs. The remaining $2.5 million represented
severance and outplacement costs for 119 non-plant employees. The impairment
charge of $44.5 million resulted from a reduction in the carrying amounts of
certain impaired assets to their estimated fair value, determined on the basis
of third-party appraisals or estimated cash flows. The impairment was related to
cheese marketing and production assets that were significantly underutilized due
to changes in consumer product preferences and costs associated with sourcing
raw materials.

15. GAIN ON LEGAL SETTLEMENTS

         During 2002, the Company recognized gain on legal settlements of $155.5
million. The gain resulted from net cash proceeds of $58.8 million and a legal
settlement receivable of $96.7 million for which cash was received on January
17, 2003. The amounts were received from several vitamin product suppliers
against whom the Company alleged certain price-fixing claims.

16. GAIN ON SALE OF INTANGIBLE

         In 2002, the Company recorded a $4.2 million gain on the sale of a
customer list pertaining to the feed phosphate distribution business.

17. LOSS (GAIN) ON EXTINGUISHMENT OF DEBT

         In 2001, the early extinguishment of previous credit facilities
resulted in a loss of $23.5 million. In 2000, the Company repurchased $9.3
million of Capital Securities, which resulted in a gain of $4.5 million.

18. COMMITMENTS AND CONTINGENCIES

         The Company leases various equipment and real properties under
long-term operating leases. Total rental expense was $44.4 million in 2002,
$34.8 million in 2001 and $31.7 million in 2000. Most of the leases require
payment of operating expenses applicable to the leased assets. Management
expects that in the normal course of business most leases that expire will be
renewed or replaced by other leases.

         Minimum lease commitments under operating noncancelable leases at
December 31, 2002, total $80.5 million composed of $23.8 million for 2003, $17.4
million for 2004, $11.4 million for 2005, $9.2 million for 2006, $7.1 million
for 2007 and $11.6 million for later years.

         At December 31, 2002 the $108.3 million obligation under capital lease
represents the present value of the future minimum lease payments for which the
Company is contingently liable. The lessee is Cheese and Protein International,
LLC (CPI), a 95%-owned subsidiary. The lease has been included in the Company's
consolidated balance sheet at December 31, 2002 because CPI did not meet its
fixed charge coverage ratio covenant as of December 31, 2002. CPI has received a
covenant waiver from the lender, but only through March 2003. CPI is currently
in discussions with its lenders on an amendment to the lease contract which will
cover future periods. The



                                      F-18
<PAGE>



lease has terms through 2007, but it is currently classified as a current
liability because the Company could be required to pay the full amount in 2003
if an amendment cannot be obtained from the participating lenders.

         The Company is currently and from time to time involved in litigation
and environmental claims incidental to the conduct of business. The damages
claimed in some of these cases are substantial. Although the amount of liability
that may result from these matters cannot be ascertained, the Company does not
currently believe that, in the aggregate, they will result in liabilities
material to the Company's consolidated financial condition, future results of
operations or cash flows.

         In a letter dated January 18, 2001, the Company was identified by the
United States Environmental Protection Agency ("EPA") as a potentially
responsible party for the hazardous waste located at the Hudson Refinery
Superfund Site in Cushing, Oklahoma. The letter invited the Company to enter
into negotiations with the EPA for the performance of a remedial investigation
and feasibility study in connection with the site, and also demanded that the
Company reimburse the EPA approximately $8.9 million for remediation expenses
already incurred at the site. The Company has responded to the EPA denying any
responsibility. No further communication has been received from the EPA.

19. SEGMENT INFORMATION

         The Company operates in five segments: dairy foods, animal feed, crop
seed, swine and agronomy.

         The dairy foods segment produces, markets and sells products such as
butter, spreads, cheese, and other dairy related products. Products are sold
under well-recognized national brand names including LAND O LAKES, the Indian
Maiden logo and Alpine Lace, as well as under regional brand names such as New
Yorker.

         The animal feed segment is made up of a 92% ownership position in Land
O'Lakes Farmland Feed LLC. Land O'Lakes Farmland Feed LLC develops, produces,
markets and distributes animal feeds such as ingredient feed, formula feed, milk
replacers, vitamins and additives.

         The crop seed segment is a supplier and distributor of crop seed
products in the United States. A variety of crop seed is sold, including
alfalfa, soybeans, corn and forage and turf grasses.

         The swine segment has three programs, farrow-to-finish, swine aligned
and cost-plus. The farrow-to-finish program produces and sells market hogs. The
swine aligned program raises feeder pigs which are sold to local member
cooperatives. The cost-plus program provides minimum hog price guarantees to
producers in exchange for swine feed sales and profit participation.

         The agronomy segment consists primarily of the Company's 50% ownership
in Agriliance LLC, which is accounted for under the equity method. Agriliance
LLC markets and sells two primary product lines: crop protection (including
herbicides and pesticides) and crop nutrients (including fertilizers and
micronutrients).

         The Company allocates corporate administration expense to all of its
business segments, both directly and indirectly. Corporate staff functions that
are able to determine actual services provided to each segment allocate expense
on a direct and predetermined basis. All other corporate staff functions
allocate expense indirectly based on each segment's percent of total invested
capital. A majority of corporate administration expense is allocated directly.



                                      F-19
<PAGE>



<Table>
<Caption>
                                             DAIRY FOODS            FEED              SEED               SWINE
                                           ---------------    ---------------    ---------------    ---------------
<S>                                        <C>                <C>                <C>                <C>
FOR THE YEAR ENDED DECEMBER 31,
  2002
  Net sales ............................   $     2,899,075    $     2,444,668    $       406,871    $        83,239
  Cost of sales ........................         2,739,813          2,155,342            353,852             93,482
  Selling, general and administration ..           155,501            245,523             45,852              5,879
  Restructuring and impairment charges .            19,647             11,765                 --                 --
  Interest expense, net ................            20,136             28,302              2,738              5,401
  Gain on legal settlements ............            (3,166)          (152,378)                --                 --
  Gain on sale on intangible ...........                --             (4,184)                --                 --
  (Gain) loss on divestiture of
    business ...........................            (1,281)               (21)            (3,956)               155
  Equity in loss (earnings) of
    affiliated companies ...............               580             (1,560)                75              1,491
  Minority interest in (loss)
    earnings of subsidiaries ...........               (21)             5,380                 19                 --
                                           ---------------    ---------------    ---------------    ---------------
  (Loss) earnings before income taxes ..   $       (32,134)   $       156,499    $         8,291    $       (23,169)
                                           ===============    ===============    ===============    ===============
FOR THE YEAR ENDED DECEMBER 31,
  2001
  Net sales ............................   $     3,463,853    $     1,864,021    $       413,567    $       109,895
  Cost of sales ........................         3,228,430          1,691,309            354,175             96,980
  Selling, general and administration ..           168,940            133,438             49,193              5,155
  Restructuring and impairment charges .             1,661                272                 --              1,800
  Interest expense, net ................            20,046             13,786              6,268              6,182
  Gain on legal settlements ............                --             (2,996)                --                 --
  Loss on extinguishment of debt .......                --                 --                 --                 --
  Equity in (earnings) loss of
    affiliated companies ...............            (4,940)            (4,437)               324             (3,325)
  Minority interest in (loss)
    earnings of subsidiaries ...........            (1,000)             7,992                  6                 --
                                           ---------------    ---------------    ---------------    ---------------
  Earnings (loss) before income taxes ..   $        50,716    $        24,657    $         3,601    $         3,103
                                           ===============    ===============    ===============    ===============
FOR THE YEAR ENDED DECEMBER 31,
  2000
  Net sales ............................   $     3,098,159    $     1,182,230    $       365,522    $       101,991
  Cost of sales ........................         2,822,973          1,064,772            308,498             93,449
  Selling, general and administration ..           203,312             84,384             44,007              7,888
  Restructuring and impairment charges .            44,526              9,700                 --                 --
  Interest expense (income), net .......            29,437              4,300              6,419              6,477
  Gain from divestiture of businesses ..           (88,530)                --                 --               (504)
  Gain on extinguishment of debt .......                --                 --                 --                 --
  Equity in (earnings) loss of
    affiliated companies ...............            (1,301)            (2,433)              (147)            (3,485)
  Minority interest in (loss)
    earnings of subsidiaries ...........              (171)            (1,786)                 1                 40
                                           ---------------    ---------------    ---------------    ---------------
  Earnings (loss) before income taxes ..   $        87,913    $        23,293    $         6,744    $        (1,874)
                                           ===============    ===============    ===============    ===============
2002
  Total assets .........................   $       815,186    $     1,301,268    $       446,470    $        69,804
  Depreciation and amortization ........            36,831             46,555              3,023              3,829
  Capital expenditures .................            32,347             26,047                573              3,126
2001
  Total assets .........................   $       730,365    $       981,229    $       379,912    $        77,911
  Depreciation and amortization ........            42,466             31,707              5,008              5,575
  Capital expenditures .................            37,749             24,872              2,685              7,310
2000
  Total assets .........................   $       715,267    $       446,249    $       335,260    $        95,999
  Depreciation and amortization ........            42,766             18,618              5,583              6,180
  Capital expenditures .................            60,291             21,507              3,521              9,572

<Caption>

                                                 AGRONOMY             OTHER           CONSOLIDATED
                                              ---------------    ---------------    ---------------
<S>                                           <C>                <C>                <C>
FOR THE YEAR ENDED DECEMBER 31,
  2002
  Net sales ............................      $            --    $        13,011    $     5,846,864
  Cost of sales ........................                   --              7,934          5,350,423
  Selling, general and administration ..               18,885              9,766            481,406
  Restructuring and impairment charges .                   --                 --             31,412
  Interest expense, net ................                9,469              2,800             68,846
  Gain on legal settlements ............                   --                 --           (155,544)
  Gain on sale on intangible ...........                   --                 --             (4,184)
  (Gain) loss on divestiture of
    business ...........................                   --                111             (4,992)
  Equity in loss (earnings) of
    affiliated companies ...............              (26,598)             3,337            (22,675)
  Minority interest in (loss)
    earnings of subsidiaries ...........                   --                109              5,487
                                              ---------------    ---------------    ---------------
  (Loss) earnings before income taxes ..      $        (1,756)   $       (11,046)   $        96,685
                                              ===============    ===============    ===============
FOR THE YEAR ENDED DECEMBER 31,
  2001
  Net sales ............................      $            --    $        13,522    $     5,864,858
  Cost of sales ........................                   --              7,711          5,378,605
  Selling, general and administration ..               16,394              8,873            381,993
  Restructuring and impairment charges .                   --                 --              3,733
  Interest expense, net ................                8,057              1,345             55,684
  Gain on legal settlements ............                   --                 --             (2,996)
  Loss on extinguishment of debt .......                   --             23,453             23,453
  Equity in (earnings) loss of
    affiliated companies ...............              (34,704)            (1,501)           (48,583)
  Minority interest in (loss)
    earnings of subsidiaries ...........                   --               (116)             6,882
                                              ---------------    ---------------    ---------------
  Earnings (loss) before income taxes ..      $        10,253    $       (26,243)   $        66,087
                                              ===============    ===============    ===============
FOR THE YEAR ENDED DECEMBER 31,
  2000
  Net sales ............................      $       857,004    $        67,868    $     5,672,774
  Cost of sales ........................              794,564             61,854          5,146,110
  Selling, general and administration ..               39,545             10,154            389,290
  Restructuring and impairment charges .                   --                 --             54,226
  Interest expense (income), net .......                6,109               (303)            52,439
  Gain from divestiture of businesses ..                   --                 --            (89,034)
  Gain on extinguishment of debt .......                   --             (4,450)            (4,450)
  Equity in (earnings) loss of
    affiliated companies ...............               46,033             (3,101)            35,566
  Minority interest in (loss)
    earnings of subsidiaries ...........                  211                300             (1,405)
                                              ---------------    ---------------    ---------------
  Earnings (loss) before income taxes ..      $       (29,458)   $         3,414    $        90,032
                                              ===============    ===============    ===============
2002
  Total assets .........................      $       416,014    $       197,580    $     3,246,322
  Depreciation and amortization ........                6,090             10,434            106,762
  Capital expenditures .................                   --             25,344             87,437
2001
  Total assets .........................      $       411,738    $       510,223    $     3,091,378
  Depreciation and amortization ........                6,321              6,211             97,288
  Capital expenditures .................                   --             11,320             83,936
2000
  Total assets .........................      $       417,602    $       462,966    $     2,473,343
  Depreciation and amortization ........                4,624              5,850             83,621
  Capital expenditures .................                   --              9,452            104,343
</Table>




                                      F-20
<PAGE>




20. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

<Table>
<Caption>
                                 FIRST             SECOND             THIRD             FOURTH
                                QUARTER            QUARTER           QUARTER            QUARTER          FULL YEAR
                            ---------------    ---------------   ---------------    ---------------   ---------------
<S>                         <C>                <C>               <C>                <C>               <C>
2002
Net sales ...............   $     1,524,196    $     1,412,057   $     1,363,292    $     1,547,319   $     5,846,864
Gross profit ............           147,879            123,774           112,634            112,154           496,441
Net (loss) earnings .....              (976)            48,296           (11,988)            63,555            98,887

<Caption>

                                 FIRST            SECOND             THIRD             FOURTH
                                QUARTER           QUARTER           QUARTER            QUARTER           FULL YEAR
                            ---------------   ---------------   ---------------    ---------------   ---------------
<S>                         <C>               <C>               <C>                <C>               <C>
2001
Net sales ...............   $     1,375,727   $     1,372,473   $     1,414,532    $     1,702,126   $     5,864,858
Gross profit ............           115,112           117,323            95,503            158,315           486,253
Net earnings (loss) .....            13,043            44,190            (4,415)            18,670            71,488
</Table>



21. RELATED PARTY TRANSACTIONS

         The Company has a 50% voting interest in Melrose Dairy Proteins, LLC, a
joint venture with Dairy Farmers of America formed in April 2001. For the years
ended December 31, 2002 and 2001, the Company purchased $18.6 million and $1.3
million, respectively, in product from the venture and sold $96.1 million and
$63.2 million, respectively, in product to the venture.

         The Company has a 50% voting interest in Agriliance LLC, a joint
venture with United Country Brands formed in July 2000. For the years ended
December 31, 2002 and 2001, the Company sold services to the venture of $8.3
million and $7.1 million, respectively.

22. ALLOWANCE FOR DOUBTFUL ACCOUNTS

         The activity in the allowance for doubtful accounts is as follows:

<Table>
<Caption>

                                                                    ADDITIONS
                                                                ------------------
                                               BALANCE AT          NET CHARGES
                                               BEGINNING             TO COSTS        (OTHER ADDITIONS)/           BALANCE AT
             DESCRIPTION                        OF YEAR            AND EXPENSES          DEDUCTIONS               END OF YEAR
----------------------------------------   ------------------   ------------------   ------------------       ------------------
<S>                                        <C>                  <C>                  <C>                      <C>
Year ended December 31, 2002 ...........   $           22,954   $            5,094   $            9,793       $           18,255
Year ended December 31, 2001 ...........               17,870                1,871               (3,213)(a)               22,954
Year ended December 31, 2000 ...........               15,355                4,550                2,035                   17,870

</Table>

----------
(a)  Includes ($6,206) from the acquisition of Purina Mills, Inc. and accounts
     charged off, net of recoveries.


23. CONSOLIDATING FINANCIAL INFORMATION

         The Company entered into financing arrangements which are guaranteed by
the Company and certain of its wholly and majority owned subsidiaries (the
"Guarantor Subsidiaries"). Such guarantees are full, unconditional and joint and
several.

         The following supplemental financial information sets forth, on an
unconsolidated basis, balance sheet, statement of operations and cash flow
information for the Company, Guarantor Subsidiaries and the Company's other
subsidiaries (the "Non-Guarantor Subsidiaries"). The supplemental financial
information reflects the investments of the Company in the Guarantor and
Non-Guarantor Subsidiaries using the equity method of accounting.



                                      F-21
<PAGE>



                               LAND O'LAKES, INC.

                    SUPPLEMENTAL CONSOLIDATING BALANCE SHEET
                                DECEMBER 31, 2002

<Table>
<Caption>
                                          LAND           WHOLLY         MAJORITY
                                      O'LAKES, INC.      OWNED           OWNED
                                         PARENT       CONSOLIDATED    CONSOLIDATED  NON-GUARANTOR
                                         COMPANY       GUARANTORS      GUARANTORS    SUBSIDIARIES     ELIMINATIONS   CONSOLIDATED
                                      -------------   -------------   -------------  -------------    -------------  -------------
<S>                                   <C>             <C>             <C>            <C>              <C>            <C>
                                                                ASSETS
Current assets:
  Cash and short-term
     investments ..................   $      58,334   $       2,584   $      (1,461) $       4,870    $          --  $      64,327
  Receivables, net ................         472,165          30,057         150,447         45,377         (130,462)       567,584
  Receivable from legal settlement           90,707              --           6,000             --               --         96,707
  Inventories .....................         254,517          74,397         108,493          8,979               --        446,386
  Prepaid expenses ................         176,541           4,840           7,625            240               --        189,246
  Other current assets ............          12,868             337              --            673               --         13,878
                                      -------------   -------------   -------------  -------------    -------------  -------------
       Total current assets .......       1,065,132         112,215         271,104         60,139         (130,462)     1,378,128
Investments .......................       1,102,835           1,102          20,777          2,496         (581,618)       545,592
Property, plant and equipment,
  net .............................         260,078          23,131         246,402         50,249               --        579,860
Property under capital lease ......         105,736              --              --             --               --        105,736
Goodwill, net .....................         187,755          13,172         121,673            813               --        323,413
Other intangibles .................           4,243             723          96,455            349               --        101,770
Other assets ......................         153,452           2,738          27,064         42,506          (13,937)       211,823
                                      -------------   -------------   -------------  -------------    -------------  -------------
       Total assets ...............   $   2,879,231   $     153,081   $     783,475  $     156,552    $    (726,017) $   3,246,322
                                      =============   =============   =============  =============    =============  =============

                                                    LIABILITIES AND EQUITIES

Current liabilities:
  Notes and short-term
     obligations ..................   $      27,040   $       2,818   $          59  $      66,174    $     (58,262) $      37,829
  Current portion of long-term
     debt .........................         104,347          64,963              --             47          (64,794)       104,563
  Obligation under capital lease ..         108,279              --              --             --               --        108,279
  Accounts payable ................         503,851          68,329         117,563         18,553           (6,510)       701,786
  Accrued expenses ................         158,323           1,644          45,361          4,526           (5,225)       204,629
  Patronage refunds and other
    member equities payable .......          12,388              --              --             --               --         12,388
                                      -------------   -------------   -------------  -------------    -------------  -------------
       Total current liabilities ..         914,228         137,754         162,983         89,300         (134,791)     1,169,474
Long-term debt ....................         988,696          10,197              --         18,023           (9,608)     1,007,308

Employee benefits and other
  liabilities .....................          75,588           1,333          26,071          1,348               --        104,340
Minority interests ................          49,402              --              --          4,285               --         53,687
Equities:
  Capital stock ...................           2,190           1,084         507,956         61,123         (570,163)         2,190
  Member equities .................         873,659              --              --             --               --        873,659
  Retained earnings ...............         (24,532)          2,713          86,465        (17,527)         (11,455)        35,664
                                      -------------   -------------   -------------  -------------    -------------  -------------
       Total equities .............         851,317           3,797         594,421         43,596         (581,618)       911,513
                                      -------------   -------------   -------------  -------------    -------------  -------------
Commitments and contingencies
Total liabilities and
  equities ........................   $   2,879,231   $     153,081   $     783,475  $     156,552    $    (726,017) $   3,246,322
                                      =============   =============   =============  =============    =============  =============
</Table>




                                      F-22
<PAGE>



                               LAND O'LAKES, INC.

               SUPPLEMENTAL CONSOLIDATING STATEMENT OF OPERATIONS
                      FOR THE YEAR ENDED DECEMBER 31, 2002

<Table>
<Caption>
                                               LAND            WHOLLY         MAJORITY
                                           O'LAKES, INC.       OWNED           OWNED
                                              PARENT        CONSOLIDATED     CONSOLIDATED     NON-GUARANTOR
                                              COMPANY        GUARANTORS       GUARANTORS       SUBSIDIARIES    CONSOLIDATED
                                           -------------    -------------    -------------    -------------    -------------
<S>                                        <C>              <C>              <C>              <C>              <C>
Net sales ..............................   $   3,122,327    $     225,407    $   2,376,716    $     122,414    $   5,846,864
Cost of sales ..........................       2,913,156          206,517        2,096,814          133,936        5,350,423
                                           -------------    -------------    -------------    -------------    -------------
Gross profit ...........................         209,171           18,890          279,902          (11,522)         496,441
Selling, general and administration ....         217,645           20,748          231,827           11,186          481,406
Restructuring and impairment charges ...          19,784              362           11,266               --           31,412
                                           -------------    -------------    -------------    -------------    -------------
(Loss) earnings from operations ........         (28,258)          (2,220)          36,809          (22,708)         (16,377)
Interest expense (income), net .........          70,256            3,939           (4,714)            (635)          68,846
Gain on legal settlements ..............        (147,902)              --           (7,642)              --         (155,544)
Gain on sale of intangible .............              --               --           (4,184)              --           (4,184)
(Gain) loss on divestiture of business .          (2,521)          (3,932)              --            1,461           (4,992)
Equity in (earnings) loss of affiliated
  companies ............................         (21,901)             247           (1,021)              --          (22,675)
Minority interest in earnings
  of subsidiaries ......................           4,454               --              231              802            5,487
                                           -------------    -------------    -------------    -------------    -------------
Earnings (loss) before income taxes ....          69,356           (2,474)          54,139          (24,336)          96,685
Income tax (benefit) expense ...........          (3,462)             911             (841)           1,190           (2,202)
                                           -------------    -------------    -------------    -------------    -------------
Net earnings (loss) ....................   $      72,818    $      (3,385)   $      54,980    $     (25,526)   $      98,887
                                           =============    =============    =============    =============    =============
</Table>



                                      F-23
<PAGE>


                               LAND O'LAKES, INC.

               SUPPLEMENTAL CONSOLIDATING STATEMENT OF CASH FLOWS
                      FOR THE YEAR ENDED DECEMBER 31, 2002

<Table>
<Caption>
                                                        LAND           WHOLLY         MAJORITY
                                                    O'LAKES, INC.      OWNED           OWNED
                                                       PARENT       CONSOLIDATED    CONSOLIDATED    NON-GUARANTOR
                                                       COMPANY       GUARANTORS      GUARANTORS      SUBSIDIARIES
                                                    -------------   -------------   -------------   -------------
<S>                                                 <C>             <C>             <C>             <C>
CASH FLOWS FROM OPERATING
  ACTIVITIES:
  Net earnings (loss) ............................  $      72,818   $      (3,385)  $      54,980   $     (25,526)
  Adjustments to reconcile net earnings
    (loss) to net cash provided (used) by
    operating activities:
    Depreciation and amortization ................         56,285           3,693          43,879           2,905
    Bad debt expense .............................          1,894              --           3,200              --
    Proceeds from patronage revolvement
      received ...................................          2,061              --              --              --
    Non-cash patronage income ....................         (1,921)             --              --              --
    Receivable from legal settlement .............        (90,707)             --          (6,000)             --
    Deferred income tax benefit ..................         (5,050)             --              --              --
    (Decrease) increase in other assets ..........        (87,897)         (2,204)         (3,801)          5,823
    Increase (decrease) in other liabilities .....          7,501            (601)         (9,377)            176
    Restructuring and impairment charges .........         19,784             362          11,266              --
    (Gain) loss on divestiture of business .......         (2,521)         (3,932)             --           1,461
    Equity in (earnings) loss of affiliated
      companies ..................................        (21,901)            247          (1,021)             --
    Minority interest ............................          4,454              --             231             802
    Other ........................................          9,496             488          (2,281)         (7,777)
  Changes in current assets and
    liabilities, net of acquisitions and
    divestitures:
    Receivables ..................................         20,884           4,575         (11,509)         (4,901)
    Inventories ..................................         18,205         (18,791)         (1,055)         (2,526)
    Other current assets .........................        (26,286)          4,683            (653)             40
    Accounts payable .............................         54,607           7,011           7,508             (38)
    Accrued expenses .............................          4,032          (4,978)        (13,323)          1,178
                                                    -------------   -------------   -------------   -------------
  Net cash provided (used) by operating
    activities ...................................         35,738         (12,832)         72,044         (28,383)
CASH FLOWS FROM INVESTING
  ACTIVITIES:
  Additions to property, plant and equipment .....        (54,164)         (1,176)        (25,995)         (6,102)
  Payments for investments .......................        (22,561)             (6)             --            (300)
  Net proceeds from divestiture of business ......         16,070              --              --              --
  Proceeds from sale of investments ..............         22,101           1,420           3,700             150
  Proceeds from sale of property, plant
    and equipment ................................         17,472             241           6,600              --
  Dividends from investments in affiliated
    companies ....................................         22,832              --           3,726              --
  Other ..........................................          4,366              --             750              --
                                                    -------------   -------------   -------------   -------------
  Net cash provided (used) by investing
    activities ...................................          6,116             479         (11,219)         (6,252)
CASH FLOWS FROM FINANCING
  ACTIVITIES:
  (Decrease) increase in short-term debt .........        (62,960)          5,574          (4,572)          4,175
  Proceeds from issuance of long-term debt .......          8,004             313               0              23
  Payments on principal of long-term debt ........         (3,112)            (40)        (55,441)         (3,447)
  Payments for redemption of member
    equities .....................................        (37,878)             --              --              --
  Other ..........................................          1,372              --          (1,246)         27,702
                                                    -------------   -------------   -------------   -------------
  Net cash (used) provided by financing
    activities ...................................        (94,574)          5,847         (61,259)         28,453
                                                    -------------   -------------   -------------   -------------
  Net decrease in cash ...........................        (52,720)         (6,506)           (434)         (6,182)
Cash and short-term investments at beginning
  of year ........................................        111,054           9,090          (1,027)         11,052
                                                    -------------   -------------   -------------   -------------
Cash and short-term investments at end of
  year ...........................................  $      58,334   $       2,584   $      (1,461)  $       4,870
                                                    =============   =============   =============   =============

<Caption>

                                                      ELIMINATIONS    CONSOLIDATED
                                                      -------------   -------------
<S>                                                   <C>             <C>
CASH FLOWS FROM OPERATING
  ACTIVITIES:
  Net earnings (loss) ............................    $          --   $      98,887
  Adjustments to reconcile net earnings
    (loss) to net cash provided (used) by
    operating activities:
    Depreciation and amortization ................               --         106,762
    Bad debt expense .............................               --           5,094
    Proceeds from patronage revolvement
      received ...................................               --           2,061
    Non-cash patronage income ....................               --          (1,921)
    Receivable from legal settlement .............               --         (96,707)
    Deferred income tax benefit ..................               --          (5,050)
    (Decrease) increase in other assets ..........            2,236         (85,843)
    Increase (decrease) in other liabilities .....               --          (2,301)
    Restructuring and impairment charges .........               --          31,412
    (Gain) loss on divestiture of business .......               --          (4,992)
    Equity in (earnings) loss of affiliated
      companies ..................................               --         (22,675)
    Minority interest ............................               --           5,487
    Other ........................................               --             (74)
  Changes in current assets and
    liabilities, net of acquisitions and
    divestitures:
    Receivables ..................................          (35,136)        (26,087)
    Inventories ..................................               --          (4,167)
    Other current assets .........................               --         (22,216)
    Accounts payable .............................           (6,434)         62,654
    Accrued expenses .............................           (5,225)        (18,316)
                                                      -------------   -------------
  Net cash provided (used) by operating
    activities ...................................          (44,559)         22,008
CASH FLOWS FROM INVESTING
  ACTIVITIES:
  Additions to property, plant and equipment .....               --         (87,437)
  Payments for investments .......................            6,641         (16,226)
  Net proceeds from divestiture of business ......               --          16,070
  Proceeds from sale of investments ..............               --          27,371
  Proceeds from sale of property, plant
    and equipment ................................               --          24,313
  Dividends from investments in affiliated
    companies ....................................               --          26,558
  Other ..........................................               --           5,116
                                                      -------------   -------------
  Net cash provided (used) by investing
    activities ...................................            6,641          (4,235)
CASH FLOWS FROM FINANCING
  ACTIVITIES:
  (Decrease) increase in short-term debt .........           67,901          10,118
  Proceeds from issuance of long-term debt .......           (2,283)          6,057
  Payments on principal of long-term debt ........               --         (62,040)
  Payments for redemption of member
    equities .....................................               --         (37,878)
  Other ..........................................          (27,700)            128
                                                      -------------   -------------
  Net cash (used) provided by financing
    activities ...................................           37,918         (83,615)
                                                      -------------   -------------
  Net decrease in cash ...........................               --         (65,842)
Cash and short-term investments at beginning
  of year ........................................               --         130,169
                                                      -------------   -------------
Cash and short-term investments at end of
  year ...........................................    $          --   $      64,327
                                                      =============   =============
</Table>



                                      F-24
<PAGE>



                               LAND O'LAKES, INC.

                    SUPPLEMENTAL CONSOLIDATING BALANCE SHEET
                                DECEMBER 31, 2001

<Table>
<Caption>
                                         LAND           WHOLLY       MAJORITY
                                     O'LAKES, INC.      OWNED         OWNED
                                        PARENT       CONSOLIDATED  CONSOLIDATED   NON-GUARANTOR
                                       COMPANY        GUARANTORS    GUARANTORS     SUBSIDIARIES    ELIMINATIONS    CONSOLIDATED
                                     -------------  -------------  -------------  --------------   -------------   -------------
                                                                ASSETS
<S>                                  <C>            <C>            <C>            <C>              <C>              <C>
Current assets:
  Cash and short-term
     investments ..................  $     111,054  $       9,090  $      (1,027)  $      11,052   $          --   $     130,169
  Receivables, net ................        552,951         23,659        136,949          47,109        (186,657)        574,011
  Inventories .....................        276,115         57,388        107,548           9,723              --         450,774
  Prepaid expenses ................        127,257          9,625          6,265           1,114              --         144,261
  Other current assets ............         28,551             --             --              --              --          28,551
                                     -------------  -------------  -------------   -------------   -------------   -------------
       Total current assets .......      1,095,928         99,762        249,735          68,998        (186,657)      1,327,766

Investments .......................      1,047,711          3,596         50,751           1,453        (535,381)        568,130
Property, plant and equipment,
  net .............................        272,328         29,146        319,164          54,639              --         675,277
Goodwill, net .....................        138,054         12,224        103,790             959              --         255,027
Other intangibles .................          6,157          2,669        102,503             331              --         111,660
Other assets ......................        110,446          2,111          4,521          48,141         (11,701)        153,518
                                     -------------  -------------  -------------   -------------   -------------   -------------
       Total assets ...............  $   2,670,624  $     149,508  $     830,464   $     174,521   $    (733,739)  $   3,091,378
                                     =============  =============  =============   =============   =============   =============

                                                        LIABILITIES AND EQUITIES

Current liabilities:
  Notes and short-term
     obligations ..................  $         270  $       2,701  $      88,902   $      68,261   $    (126,163)  $      33,971
  Current portion of long-term
     debt .........................         19,995         59,506             23              59         (60,037)         19,546
  Accounts payable ................        436,177         61,786        133,872          20,550             (76)        652,309
  Accrued expenses ................        142,820          6,959         33,769           4,021              --         187,569
  Patronage refunds and other
    member equities payable .......         28,900             --             --              --              --          28,900
                                     -------------  -------------  -------------   -------------   -------------   -------------
       Total current liabilities ..        628,162        130,952        256,566          92,891        (186,276)        922,295

Long-term debt ....................      1,125,437          9,924             65          24,121         (12,082)      1,147,465
Employee benefits and other
  liabilities .....................         45,459          1,434         35,626             282              --          82,801
Deferred tax liabilities ..........         42,495             --             --              --              --          42,495
Minority interests ................          5,494             --            972          13,744          39,596          59,806
Equities:
  Capital stock ...................          2,305          1,084        504,916          58,410        (564,410)          2,305
  Member equities .................        805,860             --             --              --              --         805,860
  Retained earnings ...............         15,412          6,114         32,319         (14,927)        (10,567)         28,351
                                     -------------  -------------  -------------   -------------   -------------   -------------
       Total equities .............        823,577          7,198        537,235          43,483        (574,977)        836,516
                                     -------------  -------------  -------------   -------------   -------------   -------------
Commitments and contingencies
Total liabilities and
  equities ........................  $   2,670,624  $     149,508  $     830,464   $     174,521   $    (733,739)  $   3,091,378
                                     =============  =============  =============   =============   =============   =============
</Table>




                                      F-25
<PAGE>



                               LAND O'LAKES, INC.

               SUPPLEMENTAL CONSOLIDATING STATEMENT OF OPERATIONS
                      FOR THE YEAR ENDED DECEMBER 31, 2001

<Table>
<Caption>
                                                    LAND            WHOLLY         MAJORITY
                                                O'LAKES, INC.       OWNED            OWNED
                                                   PARENT        CONSOLIDATED     CONSOLIDATED     NON-GUARANTOR
                                                   COMPANY         GUARANTORS      GUARANTORS      SUBSIDIARIES     CONSOLIDATED
                                                -------------    -------------    -------------    -------------    -------------
<S>                                             <C>              <C>              <C>              <C>              <C>
    Net sales ...............................   $   3,761,682    $     215,187    $   1,763,928    $     124,061    $   5,864,858
    Cost of sales ...........................       3,485,592          180,692        1,599,083          113,238        5,378,605
                                                -------------    -------------    -------------    -------------    -------------
    Gross profit ............................         276,090           34,495          164,845           10,823          486,253
    Selling, general and administration .....         210,471           31,625          125,188           14,709          381,993
    Restructuring and impairment charges
      (reversals) ...........................           9,461               --           (5,728)              --            3,733
                                                -------------    -------------    -------------    -------------    -------------
    Earnings (loss) from operations .........          56,158            2,870           45,385           (3,886)         100,527
    Interest expense (income), net ..........          45,973            4,677            5,616             (582)          55,684
    Gain on legal settlements ...............          (2,996)              --               --               --           (2,996)
    Loss on extinguishment of debt ..........          23,453               --               --               --           23,453
    Equity in earnings of affiliated
      companies .............................         (46,006)              --           (2,577)              --          (48,583)
    Minority interest in earnings
      (loss) of subsidiaries ................           7,275               --              359             (752)           6,882
                                                -------------    -------------    -------------    -------------    -------------
    Earnings (loss) before income taxes .....          28,459           (1,807)          41,987           (2,552)          66,087
    Income tax (benefit) expense ............          (6,647)             761               --              485           (5,401)
                                                -------------    -------------    -------------    -------------    -------------
    Net earnings (loss) .....................   $      35,106    $      (2,568)   $      41,987    $      (3,037)   $      71,488
                                                =============    =============    =============    =============    =============
</Table>



                                      F-26
<PAGE>



                               LAND O'LAKES, INC.

               SUPPLEMENTAL CONSOLIDATING STATEMENT OF CASH FLOWS
                      FOR THE YEAR ENDED DECEMBER 31, 2001

<Table>
<Caption>
                                                        LAND            WHOLLY         MAJORITY
                                                     O'LAKES, INC.      OWNED           OWNED
                                                       PARENT        CONSOLIDATED    CONSOLIDATED    NON-GUARANTOR
                                                       COMPANY        GUARANTORS      GUARANTORS      SUBSIDIARIES
                                                     ------------    ------------    ------------    -------------
<S>                                                  <C>             <C>             <C>             <C>
CASH FLOWS FROM OPERATING
  ACTIVITIES:
  Net earnings (loss) ............................   $     35,106    $     (2,568)   $     41,987    $     (3,037)
  Adjustments to reconcile net earnings
    (loss) to net cash provided (used) by
    operating activities:
    Depreciation and amortization ................         62,643           5,207          26,396           3,042
    Bad debt expense .............................          1,871              --              --              --
    Proceeds from patronage revolvement
      received ...................................          2,895              --              --              --
    Non-cash patronage income ....................         (4,999)             --              --              --
    Deferred income tax expense ..................         20,096              --              --              --
    (Decrease) increase in other assets ..........        (41,611)            (71)         26,147             291
    Increase (decrease) in other
      liabilities ................................         84,202            (533)       (137,049)             88
    Restructuring and impairment charges
      (reversals) ................................          9,461              --          (5,728)             --
    Equity in earnings of affiliated
      companies ..................................        (46,006)             --          (2,577)             --
    Minority interest ............................          7,275              --             359            (752)
    Other ........................................        (10,973)             --           5,198            (378)
  Changes in current assets and
    liabilities, net of acquisitions and
    divestitures:
    Receivables ..................................         57,537             464          (8,646)         (5,427)
    Inventories ..................................         12,449          (1,952)         11,057            (415)
    Other current assets .........................        (22,294)          2,263          19,967            (136)
    Accounts payable .............................        124,532         (59,137)         (2,701)          1,666
    Accrued expenses .............................        (10,815)         (1,217)        (24,480)            729
                                                     ------------    ------------    ------------    ------------
  Net cash provided (used) by operating
    activities ...................................        281,369         (57,544)        (50,070)         (4,329)
CASH FLOWS FROM INVESTING
  ACTIVITIES:
  Additions to property, plant and equipment .....        (46,240)         (1,475)        (19,353)        (16,868)
  Acquisitions, net of cash acquired .............             --              --        (371,858)             --
  Payments for investments .......................       (403,488)           (278)        (20,883)         (1,405)
  Proceeds from sale of investments ..............          5,264              --              --              --
  Proceeds from sale of property, plant
    and equipment ................................         29,940             145              --             139
  Dividends from investments in affiliated
    companies ....................................          3,548              --              --              --
  Other ..........................................         (3,156)             --           4,901              --
                                                     ------------    ------------    ------------    ------------
  Net cash (used) provided by investing
    activities ...................................       (414,132)         (1,608)       (407,193)        (18,134)
CASH FLOWS FROM FINANCING
  ACTIVITIES:
  (Decrease) increase in short-term debt .........        (80,726)         61,703          67,401           6,715
  Proceeds from issuance of long-term debt .......      1,347,917              --              --          17,584
  Payments on principal of long-term debt ........       (922,823)            (55)         (8,702)         (3,524)
  Payments for debt issuance costs ...............        (20,265)             --              --              --
  Payments for redemption of member
    equities .....................................        (46,896)             --              --              --
  Other ..........................................        (38,714)          7,140         409,212           1,849
                                                     ------------    ------------    ------------    ------------
  Net cash provided (used) by financing
    activities ...................................        238,493          68,788         467,911          22,624
                                                     ------------    ------------    ------------    ------------
  Net increase in cash ...........................        105,730           9,636          10,648             161
Cash and short-term investments at beginning
  of year ........................................          5,324            (546)        (11,675)         10,891
                                                     ------------    ------------    ------------    ------------
Cash and short-term investments at end of
  year ...........................................   $    111,054    $      9,090    $     (1,027)   $     11,052
                                                     ============    ============    ============    ============

<Caption>


                                                        ELIMINATIONS    CONSOLIDATED
                                                       -------------    ------------
<S>                                                     <C>             <C>
CASH FLOWS FROM OPERATING
  ACTIVITIES:
  Net earnings (loss) ............................      $         --    $     71,488
  Adjustments to reconcile net earnings
    (loss) to net cash provided (used) by
    operating activities:
    Depreciation and amortization ................                --          97,288
    Bad debt expense .............................                --           1,871
    Proceeds from patronage revolvement
      received ...................................                --           2,895
    Non-cash patronage income ....................                --          (4,999)
    Deferred income tax expense ..................                --          20,096
    (Decrease) increase in other assets ..........             2,701         (12,543)
    Increase (decrease) in other
      liabilities ................................            48,765          (4,527)
    Restructuring and impairment charges
      (reversals) ................................                --           3,733
    Equity in earnings of affiliated
      companies ..................................                --         (48,583)
    Minority interest ............................                --           6,882
    Other ........................................                --          (6,153)
  Changes in current assets and
    liabilities, net of acquisitions and
    divestitures:
    Receivables ..................................            (6,630)         37,298
    Inventories ..................................                --          21,139
    Other current assets .........................                --            (200)
    Accounts payable .............................            60,042         124,402
    Accrued expenses .............................                --         (35,783)
                                                        ------------    ------------
  Net cash provided (used) by operating
    activities ...................................           104,878         274,304
CASH FLOWS FROM INVESTING
  ACTIVITIES:
  Additions to property, plant and equipment .....                --         (83,936)
  Acquisitions, net of cash acquired .............                --        (371,858)
  Payments for investments .......................           379,865         (46,189)
  Proceeds from sale of investments ..............                --           5,264
  Proceeds from sale of property, plant
    and equipment ................................                --          30,224
  Dividends from investments in affiliated
    companies ....................................                --           3,548
  Other ..........................................                --           1,745
                                                        ------------    ------------
  Net cash (used) provided by investing
    activities ...................................           379,865        (461,202)
CASH FLOWS FROM FINANCING
  ACTIVITIES:
  (Decrease) increase in short-term debt .........          (108,905)        (53,812)
  Proceeds from issuance of long-term debt .......             4,027       1,369,528
  Payments on principal of long-term debt ........                --        (935,104)
  Payments for debt issuance costs ...............                --         (20,265)
  Payments for redemption of member
    equities .....................................                --         (46,896)
  Other ..........................................          (379,865)           (378)
                                                        ------------    ------------
  Net cash provided (used) by financing
    activities ...................................          (484,743)        313,073
                                                        ------------    ------------
  Net increase in cash ...........................                --         126,175
Cash and short-term investments at beginning
  of year ........................................                --           3,994
                                                        ------------    ------------
Cash and short-term investments at end of
  year ...........................................      $         --    $    130,169
                                                        ============    ============
</Table>



                                      F-27
<PAGE>




                               LAND O'LAKES, INC.

               SUPPLEMENTAL CONSOLIDATING STATEMENT OF OPERATIONS
                      FOR THE YEAR ENDED DECEMBER 31, 2000

<Table>
<Caption>
                                               LAND                            MAJORITY
                                           O'LAKES, INC.    WHOLLY OWNED        OWNED
                                              PARENT        CONSOLIDATED     CONSOLIDATED    NON-GUARANTOR
                                             COMPANY         GUARANTORS       GUARANTORS      SUBSIDIARIES     CONSOLIDATED
                                           -------------    -------------    -------------    -------------    -------------
<S>                                        <C>              <C>              <C>              <C>              <C>
Net sales ..............................   $   5,044,305    $     205,113    $     352,575    $      70,781    $   5,672,774
Cost of sales ..........................       4,605,870          161,079          323,412           55,749        5,146,110
                                           -------------    -------------    -------------    -------------    -------------
Gross profit ...........................         438,435           44,034           29,163           15,032          526,664
Selling, general and administration ....         305,900           39,638           24,731           19,021          389,290
Restructuring and impairment charges ...           7,100           37,426            9,700               --           54,226
                                           -------------    -------------    -------------    -------------    -------------
Earnings (loss) from operations ........         125,435          (33,030)          (5,268)          (3,989)          83,148
Interest expense (income), net .........          48,370            4,182            1,933           (2,046)          52,439
Gain from divestiture of businesses ....         (89,034)              --               --               --          (89,034)
Gain on extinguishment of debt .........          (4,450)              --               --               --           (4,450)
Equity in loss (earnings) of affiliated
  companies ............................          35,874               --             (308)              --           35,566
Minority interest in (loss) earnings of
  subsidiaries .........................          (1,470)             211               42             (188)          (1,405)
                                           -------------    -------------    -------------    -------------    -------------
Earnings (loss) before income taxes ....         136,145          (37,423)          (6,935)          (1,755)          90,032
Income tax (benefit) expense ...........         (14,054)             787             (244)             611          (12,900)
                                           -------------    -------------    -------------    -------------    -------------
Net earnings (loss) ....................   $     150,199    $     (38,210)   $      (6,691)   $      (2,366)   $     102,932
                                           =============    =============    =============    =============    =============
</Table>



                                      F-28
<PAGE>



                               LAND O'LAKES, INC.

               SUPPLEMENTAL CONSOLIDATING STATEMENT OF CASH FLOWS
                      FOR THE YEAR ENDED DECEMBER 31, 2000

<Table>
<Caption>
                                                         LAND            WHOLLY          MAJORITY
                                                     O'LAKES, INC.       OWNED            OWNED
                                                        PARENT        CONSOLIDATED     CONSOLIDATED     NON-GUARANTOR
                                                        COMPANY        GUARANTORS       GUARANTORS      SUBSIDIARIES
                                                     -------------    -------------    -------------    -------------
<S>                                                  <C>              <C>              <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net earnings (loss) ............................   $     150,199    $     (38,210)   $      (6,691)   $      (2,366)
  Adjustments to reconcile net earnings (loss)
    to net cash provided (used) by operating
    activities:
    Depreciation and amortization ................          73,248            3,558            4,860            1,955
    Bad debt expense .............................           4,550               --               --               --
    Proceeds from patronage revolvement
      received ...................................          16,350               --               --               --
    Non-cash patronage income ....................          (9,914)              --               --               --
    Deferred income tax benefit ..................         (31,844)              --               --               --
    Increase (decrease) in other assets ..........          79,607            6,165          (29,726)          (4,107)
    (Decrease) increase in other
      liabilities ................................          (5,700)             390           54,269                7
    Restructuring and impairment charges .........           7,100           37,426            9,700               --
    Gain from divestiture of businesses ..........         (89,034)              --               --               --
    Equity in loss (earnings) of affiliated
      companies ..................................          35,874               --             (308)              --
    Minority interest ............................          (1,470)             211               42             (188)
    Other ........................................           1,084             (211)          (6,103)           6,414
  Changes in current assets and
    liabilities, net of acquisitions and
    divestitures:
    Receivables ..................................         (62,607)           2,867          (97,256)          (5,004)
    Inventories ..................................         192,446          (11,838)         (75,528)          (1,439)
    Other current assets .........................          98,464           (4,394)         (10,333)            (136)
    Accounts payable .............................        (306,366)          28,317           81,759            1,597
    Accrued expenses .............................          40,819           (3,321)          33,296              279
                                                     -------------    -------------    -------------    -------------
  Net cash provided (used) by operating
    activities ...................................         192,806           20,960          (42,019)          (2,988)
CASH FLOWS FROM INVESTING ACTIVITIES:
  Additions to property, plant and
    equipment ....................................          (2,286)          (2,579)         (81,358)         (18,120)
  Acquisitions, net of cash acquired .............         (80,269)         (20,807)              --               --
  Payments for investments .......................         (72,447)            (816)         (54,714)          (1,156)
  Net proceeds from divestiture of businesses ....         184,106               --               --               --
  Proceeds from sale of investments ..............           3,248               --               --               --
  Proceeds from sale of property, plant and
    equipment ....................................          25,169                7               --               13
  Other ..........................................          (7,010)           3,755               22              145
                                                     -------------    -------------    -------------    -------------
  Net cash provided (used) by investing
    activities ...................................          50,511          (20,440)        (136,050)         (19,118)
CASH FLOWS FROM FINANCING ACTIVITIES:
  (Decrease) increase in short-term debt .........         (77,012)              (3)          21,624           12,629
  Proceeds from issuance of long-term debt .......           5,329               --               --               28
  Payments on principal of long-term debt ........        (165,707)          (3,190)          (6,603)          (3,633)
  Payments for purchase of capital securities ....          (9,300)              --               --               --
  Payments for redemption of member equities .....         (54,260)              --               --               --
  Other ..........................................        (109,273)          (1,689)         142,160           11,433
                                                     -------------    -------------    -------------    -------------
  Net cash (used) provided by financing
    activities ...................................        (410,223)          (4,882)         157,181           20,457
                                                     -------------    -------------    -------------    -------------
  Net decrease in cash ...........................        (166,906)          (4,362)         (20,888)          (1,649)
Cash and short-term investments at beginning of
  year ...........................................         172,230            3,816            9,213           12,540
                                                     -------------    -------------    -------------    -------------
Cash and short-term investments at end of year ...   $       5,324    $        (546)   $     (11,675)   $      10,891
                                                     =============    =============    =============    =============

<Caption>

                                                         ELIMINATIONS    CONSOLIDATED
                                                        -------------    -------------
<S>                                                     <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net earnings (loss) ............................      $          --    $     102,932
  Adjustments to reconcile net earnings (loss)
    to net cash provided (used) by operating
    activities:
    Depreciation and amortization ................                 --           83,621
    Bad debt expense .............................                 --            4,550
    Proceeds from patronage revolvement
      received ...................................                 --           16,350
    Non-cash patronage income ....................                 --           (9,914)
    Deferred income tax benefit ..................                 --          (31,844)
    Increase (decrease) in other assets ..........            (53,117)          (1,178)
    (Decrease) increase in other
      liabilities ................................            (48,293)             673
    Restructuring and impairment charges .........                 --           54,226
    Gain from divestiture of businesses ..........                 --          (89,034)
    Equity in loss (earnings) of affiliated
      companies ..................................                 --           35,566
    Minority interest ............................                 --           (1,405)
    Other ........................................                 --            1,184
  Changes in current assets and
    liabilities, net of acquisitions and
    divestitures:
    Receivables ..................................            136,432          (25,568)
    Inventories ..................................                 --          103,641
    Other current assets .........................                 --           83,601
    Accounts payable .............................            (88,620)        (283,313)
    Accrued expenses .............................                 --           71,073
                                                        -------------    -------------
  Net cash provided (used) by operating
    activities ...................................            (53,598)         115,161
CASH FLOWS FROM INVESTING ACTIVITIES:
  Additions to property, plant and
    equipment ....................................                 --         (104,343)
  Acquisitions, net of cash acquired .............                 --         (101,076)
  Payments for investments .......................             42,522          (86,611)
  Net proceeds from divestiture of businesses ....                 --          184,106
  Proceeds from sale of investments ..............                 --            3,248
  Proceeds from sale of property, plant and
    equipment ....................................                 --           25,189
  Other ..........................................                 --           (3,088)
                                                        -------------    -------------
  Net cash provided (used) by investing
    activities ...................................             42,522          (82,575)
CASH FLOWS FROM FINANCING ACTIVITIES:
  (Decrease) increase in short-term debt .........                 --          (42,762)
  Proceeds from issuance of long-term debt .......             53,598           58,955
  Payments on principal of long-term debt ........                 --         (179,133)
  Payments for purchase of capital securities ....                 --           (9,300)
  Payments for redemption of member equities .....                 --          (54,260)
  Other ..........................................            (42,522)             109
                                                        -------------    -------------
  Net cash (used) provided by financing
    activities ...................................             11,076         (226,391)
                                                        -------------    -------------
  Net decrease in cash ...........................                 --         (193,805)
Cash and short-term investments at beginning of
  year ...........................................                 --         (197,799)
                                                        -------------    -------------
Cash and short-term investments at end of year ...      $          --    $       3,994
                                                        =============    =============
</Table>



                                      F-29
<PAGE>



                          INDEPENDENT AUDITORS' REPORT


The Board of Managers
Land O'Lakes Farmland Feed LLC:

         We have audited the accompanying consolidated balance sheets of Land
O'Lakes Farmland Feed LLC and subsidiaries as of December 31, 2002 and 2001, and
the related consolidated statements of operations, cash flows and equities for
the years ended December 31, 2002 and 2001 and the three months ended December
31, 2000. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

         We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Land O'Lakes
Farmland Feed LLC and subsidiaries as of December 31, 2002 and 2001, and the
results of their operations and their cash flows for the years ended December
31, 2002 and 2001 and the three months ended December 31, 2000 in conformity
with accounting principles generally accepted in the United States of America.

         As discussed in Note 1 to the consolidated financial statements, in
2002, the Company adopted the provisions of the Financial Accounting Standards
Board's Statement of Financial Accounting Standards No. 142, "Goodwill and Other
Intangible Assets." In 2001, the Company adopted the provisions of the Financial
Accounting Standards Board's Statement of Financial Accounting Standards No.
133, "Accounting for Derivative Instruments and Hedging Activities," as amended
by Statement No. 138, "Accounting for Certain Derivative Instruments and Certain
Hedging Activities"; Statement No. 141, "Business Combinations"; certain
provisions of Statement No. 142, "Goodwill and Other Intangible Assets," as
required for goodwill and intangible assets resulting from business combinations
consummated after June 30, 2001; and Statement No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets."



                                                  /s/ KPMG LLP

Minneapolis, Minnesota
January 30, 2003



                                      F-30
<PAGE>



                         LAND O'LAKES FARMLAND FEED LLC

                           CONSOLIDATED BALANCE SHEETS

<Table>
<Caption>
                                                                        DECEMBER 31,
                                                               -------------------------------
                                                                    2002             2001
                                                               --------------   --------------
                                                                        ($ IN THOUSANDS)
<S>                                                            <C>              <C>
 ASSETS

 Current assets:
   Cash and short-term investments .........................   $          356   $        3,019
   Receivables, net ........................................          127,382          119,063
   Receivable from legal settlement ........................            6,000               --
   Inventories .............................................          113,078          113,559
   Prepaid expenses and other current assets ...............            7,835            6,472
   Note receivable - Land O'Lakes, Inc. ....................           29,493               --
                                                               --------------   --------------
           Total current assets ............................          284,144          242,113
 Investments ...............................................           22,973           31,496
 Property, plant and equipment, net ........................          251,739          326,956
 Goodwill, net .............................................          122,486          104,749
 Other intangibles .........................................           96,804          104,396
 Other assets ..............................................           28,762           23,875
                                                               --------------   --------------
           Total assets ....................................   $      806,908   $      833,585
                                                               ==============   ==============

 LIABILITIES AND EQUITIES

 Current liabilities:
   Notes and short-term obligations ........................   $        2,400   $        5,000
   Notes payable -- Land O'Lakes, Inc. -- current ..........               --           29,210
   Accounts payable ........................................          121,219          117,042
   Accrued expenses ........................................           48,134           35,132
                                                               --------------   --------------
           Total current liabilities .......................          171,753          186,384
 Notes payable -- Land O'Lakes, Inc. -- noncurrent .........               --           59,664
 Employee benefits and other liabilities ...................           29,447           36,656
 Minority interests ........................................            2,960            2,919
 Equities:
   Contributed capital .....................................          515,376          515,044
   Retained earnings .......................................           87,372           32,918
                                                               --------------   --------------
           Total equities ..................................          602,748          547,962
                                                               --------------   --------------
 Commitments and contingencies
 Total liabilities and equities ............................   $      806,908   $      833,585
                                                               ==============   ==============
 </Table>

          See accompanying notes to consolidated financial statements.



                                      F-31
<PAGE>



                         LAND O'LAKES FARMLAND FEED LLC

                      CONSOLIDATED STATEMENTS OF OPERATIONS

<Table>
<Caption>
                                                                                                  THREE MONTHS
                                                            YEAR ENDED        YEAR ENDED            ENDED
                                                            DECEMBER 31,      DECEMBER 31,        DECEMBER 31,
                                                               2002               2001               2000
                                                          ---------------    ---------------    ---------------
                                                                  ($ IN THOUSANDS)
<S>                                                       <C>                <C>                <C>
Net sales .............................................   $     2,430,385    $     1,837,377    $       389,908
Cost of sales .........................................         2,144,014          1,672,385            354,243
                                                          ---------------    ---------------    ---------------
Gross profit ..........................................           286,371            164,992             35,665
Selling, general and administration ...................           236,004            127,185             30,495
Restructuring and impairment charges (reversals) ......            11,266             (5,728)             9,700
                                                          ---------------    ---------------    ---------------
Earnings (loss) from operations .......................            39,101             43,535             (4,530)
Interest (income) expense, net ........................            (4,558)             6,088              2,052
Gain on legal settlements .............................            (7,642)                --                 --
Gain on sale of intangible ............................            (4,184)                --                 --
Equity in earnings of affiliated companies ............            (1,021)            (2,577)              (308)
Minority interest in earnings (loss) of
subsidiaries ..........................................               900                878                (46)
                                                          ---------------    ---------------    ---------------
Earnings (loss) before income taxes ...................            55,606             39,146             (6,228)
Income tax expense ....................................             1,152                 --                 --
                                                          ---------------    ---------------    ---------------
Net earnings (loss) ...................................   $        54,454    $        39,146    $        (6,228)
                                                          ===============    ===============    ===============
</Table>


          See accompanying notes to consolidated financial statements.



                                      F-32
<PAGE>



                         LAND O'LAKES FARMLAND FEED LLC

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<Table>
<Caption>
                                                                                                           THREE MONTHS
                                                                          YEAR ENDED       YEAR ENDED         ENDED
                                                                          DECEMBER 31,     DECEMBER 31,    DECEMBER 31,
                                                                             2002             2001             2000
                                                                         -------------    -------------    -------------
                                                                                         ($ IN THOUSANDS)
<S>                                                                      <C>              <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net earnings (loss) ................................................   $      54,454    $      39,146    $      (6,228)
  Adjustments to reconcile net earnings (loss) to net cash
     provided by (used in) operating activities:
     Depreciation and amortization ...................................          44,398           29,631            3,597
     Bad debt expense (recovery) .....................................           3,200             (783)           1,260
     Receivable from legal settlement ................................          (6,000)              --               --
     Increase in other assets ........................................          (4,079)          (4,759)         (13,771)
     (Decrease) increase in other liabilities ........................          (9,200)          (6,017)          11,572
     Restructuring and impairment charges (reversals) ................          11,266           (5,728)           9,700
     Equity in earnings of affiliated companies ......................          (1,021)          (2,577)            (308)
     Minority interest ...............................................             900              878              (46)
     Gain on sale of intangible ......................................          (4,184)              --               --
     Other ...........................................................           1,294               --               --
  Changes in current assets and liabilities, net of acquisitions and
     divestitures:
     Receivables .....................................................         (13,327)          37,989         (120,137)
     Inventories .....................................................             372           10,436          (69,958)
     Other current assets ............................................            (584)           6,272          (10,213)
     Accounts payable ................................................           4,177          (11,319)          92,886
     Accrued expenses ................................................         (12,080)         (17,864)          23,068
                                                                         -------------    -------------    -------------
  Net cash provided by (used in) operating activities ................          69,586           75,305          (78,578)

CASH FLOWS FROM INVESTING ACTIVITIES:
  Additions to property, plant and equipment .........................         (26,054)         (21,931)         (21,352)
  Proceeds from sale of investments ..................................           3,700               --               --
  Proceeds from sale of property, plant and equipment ................           6,600            5,211            1,816
  Dividends from affiliated companies ................................           3,726               --               --
  Other ..............................................................             750               --               --
                                                                         -------------    -------------    -------------
    Net cash used by investing activities ............................         (11,278)         (16,720)         (19,536)

CASH FLOWS FROM FINANCING ACTIVITIES:
  (Decrease) increase in short-term debt .............................          (2,600)           1,029            3,971
  Proceeds from note payable to Land O'Lakes, Inc. ...................         449,997          358,030          185,243
  Payments on note payable to Land O'Lakes, Inc. .....................        (508,700)        (422,965)         (91,100)
  Capital contributions by members ...................................             332            8,340               --
                                                                         -------------    -------------    -------------
  Net cash (used) provided by financing activities ...................         (60,971)         (55,566)          98,114
  Net (decrease) increase in cash and short-term investments .........          (2,663)           3,019               --

Cash and short-term investments at beginning of period ...............           3,019               --               --
                                                                         -------------    -------------    -------------
Cash and short-term investments at end of period .....................   $         356    $       3,019    $          --
                                                                         =============    =============    =============
Supplemental schedules of noncash investing and financing
  activities:
  Capital contributions by members ...................................   $          --    $     371,907    $     134,797
</Table>

          See accompanying notes to consolidated financial statements.



                                      F-33
<PAGE>
                         LAND O'LAKES FARMLAND FEED LLC

                       CONSOLIDATED STATEMENTS OF EQUITIES
  FOR THE YEARS ENDED DECEMBER 31, 2002 AND DECEMBER 2001 AND THE THREE MONTHS
                             ENDED DECEMBER 31, 2000

<Table>
<Caption>
                                                              RETAINED
                                                              EARNINGS
                                             CONTRIBUTED    (ACCUMULATED        TOTAL
                                              CAPITAL         DEFICIT)         EQUITIES
                                           -------------    -------------    -------------
                                                           ($ IN THOUSANDS)
<S>                                        <C>              <C>              <C>
Initial capital contributions ..........   $     134,797    $          --    $     134,797
Net loss ...............................                           (6,228)          (6,228)
                                           -------------    -------------    -------------
Balance, December 31, 2000 .............         134,797           (6,228)         128,569
Capital contributions:
  Purina Mills stock ...................         366,897                           366,897
  Other ................................          13,350                            13,350
Net earnings ...........................                           39,146           39,146
                                           -------------    -------------    -------------
Balance, December 31, 2001 .............   $     515,044    $      32,918    $     547,962
Capital contributions:
  Purina Mills stock ...................             332                               332
Net earnings ...........................                           54,454           54,454
                                           -------------    -------------    -------------
Balance, December 31, 2002 .............   $     515,376    $      87,372    $     602,748
                                           =============    =============    =============
</Table>


          See accompanying notes to consolidated financial statements.



                                      F-34
<PAGE>



                         LAND O'LAKES FARMLAND FEED LLC

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2002 AND 2001
                           ($ IN THOUSANDS IN TABLES)

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

         Land O'Lakes Farmland Feed LLC (the "Company") produces both commercial
and lifestyle feed for a variety of animals, including dairy cattle, beef
cattle, swine, poultry, horses, and other specialty animals.

         The Company was established in October 2000 through the combination of
the feed operations of Land O'Lakes, Inc. and Farmland Industries, Inc. Through
their relative contributions Land O'Lakes, Inc. and Farmland Industries, Inc.
had ownership interests of 73.7% and 26.3%, respectively. The initial capital
contributions made by each of the members to the Company consisted primarily of
property, plant, and equipment and other long-lived assets. In October 2000, the
Company purchased inventories from the respective members. The merger was
accounted for as a purchase in accordance with APB No. 16, "Business
Combinations." As such, the contributions of Farmland Industries, Inc. have been
recorded at fair value.

         In October 2001, an indirect subsidiary of Land O'Lakes, Inc. acquired
Purina Mills, Inc. and contributed the business to the Company. As a result,
Land O'Lakes, Inc. increased its direct and indirect ownership in the Company to
92%. Farmland Industries, Inc. retains an 8% ownership interest.

REVENUE RECOGNITION

         Sales are recognized primarily upon shipment of product to the
customer.

STATEMENT PRESENTATION

         The consolidated financial statements include the accounts of the
Company and wholly owned and majority-owned subsidiaries and limited liability
companies. Intercompany transactions and balances have been eliminated. Certain
reclassifications have been made to the 2001 and 2000 consolidated financial
statements to conform to the 2002 presentation.

CASH AND SHORT-TERM INVESTMENTS

         Cash and short-term investments include short-term, highly liquid
investments with original maturities of three months or less.

INVENTORIES

         Inventories are valued at the lower of cost or market. Cost is
determined on an average cost basis.

DERIVATIVE COMMODITY INSTRUMENTS

         The Company uses derivative commodity instruments, primarily futures
contracts, to reduce the exposure to changes in commodity prices. These
contracts are not designated as hedges under Statement of Financial Accounting
Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging
Activities". The futures contracts are marked to market each month and gains and
losses are recognized in earnings.





                                      F-35
<PAGE>
INVESTMENTS

     The equity method of accounting is used for investments in which the
Company has significant influence. Generally, this represents ownership of at
least 20 percent and not more than 50 percent. Investments in less than 20
percent owned companies are stated at cost.

PROPERTY, PLANT AND EQUIPMENT

     Property, plant and equipment are stated at cost. Depreciation is
calculated using the straight-line method over the estimated useful lives (15 to
30 years for land improvements and buildings and 5 to 10 years for machinery and
equipment) of the respective assets.

GOODWILL AND OTHER INTANGIBLE ASSETS

     Goodwill represents the excess of the purchase price over the fair value of
acquired businesses. Upon adoption of the remaining provisions of SFAS No. 142,
"Goodwill and Other Intangible Assets," on January 1, 2002, the Company no
longer amortizes goodwill except for goodwill related to the acquisition of
cooperatives and the formation of joint ventures. See Note 7 for pro forma
effects of adopting this standard.

     Other intangible assets consist primarily of trademarks, patents, and
agreements not to compete. Certain trademarks are no longer amortized because
they have indefinite lives. The remaining other intangible assets are amortized
using the straight-line method over the estimated useful lives, ranging from 3
to 15 years.

RECOVERABILITY OF LONG-LIVED ASSETS

    The test for goodwill impairment is a two-step process, and is performed on
at least an annual basis. The first step is a comparison of the fair value of
the reporting unit (as defined) with its carrying amount, including goodwill. If
this step reflects impairment, then the loss would be measured as the excess of
recorded goodwill over its implied fair value. Implied fair value is the excess
of fair value of the reporting unit over the fair value of all identified assets
and liabilities. The Company assesses the recoverability of other long-lived
assets annually or whenever events or changes in circumstance indicate that
expected future undiscounted cash flows might not be sufficient to support the
carrying amount of an asset. The Company deems an asset to be impaired if a
forecast of undiscounted future operating cash flows is less than its carrying
amount. If an asset is determined to be impaired, the loss is measured as the
amount by which the carrying value of the asset exceeds its fair value.

INCOME TAXES

     The Company's taxable operations pass directly to the joint venture owners
under the LLC organization. Income tax provisions are recorded for a
consolidated subsidiary.

ADVERTISING AND PROMOTION COSTS

     Advertising costs are expensed as incurred. Advertising costs were $17.9
million, $7.9 million, and $2.1 million for the years ended December 31, 2002
and 2001 and the three months ended December 31, 2000, respectively.

RESEARCH AND DEVELOPMENT

     Expenditures for research and development are charged to administration
expense in the year incurred. Total research and development expenses for the
years ended December 31, 2002 and 2001 and the three months ended December 31,
2000 were $9.8 million, $5.3 million and $0.9 million, respectively.

RECENT ACCOUNTING PRONOUNCEMENTS

     The Company adopted the remaining provisions of SFAS 142, "Goodwill and
Other Intangible Assets," on January 1, 2002. Under SFAS 142, goodwill and other
intangible assets that have indefinite lives are no longer amortized except for
goodwill related to the acquisition of cooperatives and the formation of joint
ventures, but




                                      F-36
<PAGE>

rather will be tested for impairment at least annually in accordance with the
provisions of the standard. See Note 7 for additional information on the
adoption of SFAS 142.

     In June 2002, the FASB issued SFAS 146, "Accounting for Costs Associated
with Exit or Disposal Activities." The standard requires that a liability for a
cost associated with an exit or disposal activity be recognized and measured
initially at fair value when the liability is incurred. Under existing
accounting literature, certain costs for exit activities were recognized at the
date a company committed to an exit plan. The provisions of the standard are
effective for exit or disposal activities initiated after December 31, 2002. The
standard is generally expected to delay recognition of certain exit related
costs.

     In November 2002, the FASB issued FASB Interpretation No. 45 ("FIN 45"),
"Guarantor's Accounting and Disclosure Requirement for Guarantees, Including
Indirect Guarantees of Indebtedness of Others" ("The Interpretation"). The
Interpretation requires that upon issuance of certain guarantees, the guarantor
must recognize a liability for the fair value of the obligation it assumes under
that guarantee. The Interpretation also requires additional disclosures by a
guarantor in its interim and annual financial statements about the obligations
associated with guarantees issued. The disclosure requirements are effective for
financial statements of interim or annual periods ending after December 15,
2002, and have been included in Note 15 on page F-14. The recognition and
measurement provisions are effective on a prospective basis to guarantees issued
or modified after December 31, 2002.

ACCOUNTING ESTIMATES

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

2.  RECEIVABLES

     A summary of receivables at December 31 is as follows:

<Table>
<Caption>
                                                               2002        2001
                                                            --------    --------
<S>                                                         <C>         <C>
Trade accounts .........................................    $ 22,458    $ 25,320
Notes and contracts ....................................      23,494       4,628
Notes from sale of trade receivables (see Note 3)  .....      83,158      84,321
Other ..................................................       8,871      13,879
                                                            --------    --------
                                                             137,981     128,148
Less allowance for doubtful accounts ...................      10,599       9,085
                                                            --------    --------
Total receivables, net .................................    $127,382    $119,063
                                                            ========    ========
</Table>

3.  RECEIVABLES PURCHASE FACILITY

     In December 2001, Land O'Lakes, Inc., Land O'Lakes Farmland Feed LLC, and
Purina Mills, LLC established a $100.0 million receivables purchase facility
with CoBank, ACB (CoBank). A wholly-owned unconsolidated special purpose entity,
Land O'Lakes Farmland Feed SPV, LLC, (SPE), was established to purchase certain
receivables from Land O'Lakes, Inc., Land O'Lakes Farmland Feed LLC, and Purina
Mills, LLC. CoBank has been granted an interest in the receivables owned by the
SPE. The transfers of the receivables from the Company to the SPE are structured
as sales and, accordingly, the receivables transferred to the SPE are not
reflected in the Company's consolidated balance sheet. However, the Company
retains the credit risk related to the repayment of the notes receivable with
the SPE, which in turn is dependent upon the credit risk of the SPE's
receivables. Accordingly, the Company has retained reserves for estimated
losses. The Company expects no significant gains or losses from the sale of the
receivables. At December 31, 2002, no amounts were outstanding under this
facility and $100.0 million remained available. The total accounts receivable
sold by the Company during 2002 and 2001 was $2,299.0 million and $289.8
million, respectively.




                                      F-37
<PAGE>

4.  INVENTORIES

     A summary of inventories at December 31 is as follows:

<Table>
<Caption>
                                                         2002            2001
                                                     ------------   ------------
<S>                                                  <C>            <C>
Raw materials ....................................   $     83,187   $     63,435
Finished goods ...................................         29,891         50,124
                                                     ------------   ------------
Total inventories ................................   $    113,078   $    113,559
                                                     ============   ============
</Table>

5.  INVESTMENTS

     The Company's investments at December 31 are as follows:

<Table>
<Caption>
                                                        2002         2001
                                                     ----------   ----------

<S>                                                  <C>          <C>
Harmony Farms, LLC ...............................   $    2,435   $    3,969
New Feeds, LLC ...................................        3,033        3,214
Iowa River Feeds, LLC ............................           --        2,648
Agland Farmland Feed, LLC ........................        2,585        2,435
Pro-Pet, LLC .....................................        2,326        2,362
Nutri-Tech Feeds, LLC ............................           --        2,314
LOLFF SPV, LLC ...................................        1,000        1,805
Northern Country Feeds, LLC ......................        1,704        1,652
CalvaAlto Liquid, LLC ............................        1,302        1,302
T-PM Holding Company .............................           --        1,290
Northern Colorado Feed, LLC ......................           --        1,210
Strauss Feeds, LLC ...............................        1,041        1,073
Nutrikowi, LLC ...................................          876          783
Dakotaland Feeds, LLC ............................          744          736
Other LLCs .......................................        5,927        4,703
                                                     ----------   ----------
Total investments ................................   $   22,973   $   31,496
                                                     ==========   ==========
</Table>

    All of the above investments are accounted for under the equity method with
the exception of a portion of the investments under the caption "Other LLCs."

    During 2002, we sold out interest in several of our equity joint ventures.
We sold our interests in: Iowa River Feeds, LLC, Nutri-Tech Feeds LLC, T-PM
Holding Company, and Northern Colorado Feeds, LLC. These sales related to the
integration efforts of the Purina Mills acquisition. Proceeds from these sales
were $3.7 million.

6.  PROPERTY, PLANT AND EQUIPMENT

     A summary of property plant and equipment at December 31 is as follows:

<Table>
<Caption>

                                                          2002           2001
                                                     ------------   ------------
<S>                                                  <C>            <C>
Land and land improvements .......................   $     29,661   $     23,826
Buildings and building equipment .................        108,551        124,205
Machinery and equipment ..........................        211,649        247,186
Construction in progress .........................         13,328         13,019
                                                     ------------   ------------
                                                          363,189        408,236
Less accumulated depreciation ....................        111,450         81,280
                                                     ------------   ------------
Total property, plant and equipment, net .........   $    251,739   $    326,956
                                                     ============   ============
</Table>


7.  GOODWILL AND OTHER INTANGIBLE ASSETS

GOODWILL The Company adopted the remaining provisions of SFAS No. 142 on January
1, 2002. Had SFAS No. 142 been effective January 1, 2000, net earnings for 2001
and the three months ended December 31, 2000 would have been reported as
follows:




                                      F-38
<PAGE>
<Table>
<Caption>
                                                                                       THREE MONTHS
                                                      YEAR ENDED       YEAR ENDED          ENDED
                                                      DECEMBER 31,     DECEMBER 31,      DECEMBER 31,
                                                         2002             2001              2000
                                                     --------------   --------------   --------------
                                                           ($ IN THOUSANDS)

<S>                                                 <C>          <C>          <C>

Net earnings (loss)...............................   $       54,454   $       39,146   $       (6,228)
Add back: Goodwill amortization, net of tax ......               --              970               65
                                                     --------------   --------------   --------------
Adjusted net earnings (loss)......................   $       54,454   $       40,116   $       (6,163)
                                                     ==============   ==============   ==============

</Table>

The changes in the carrying amount of goodwill for the year ended December 31,
2002, are as follows.

<Table>
<S>                                                                     <C>
Balance as of January 1, 2002..................................         $    104,749
  Reallocation of purchase price...............................               18,330
  Amortization expense.........................................                 (593)
                                                                        ------------
 Balance as of December 31, 2002...............................         $    122,486
                                                                        ============
</Table>

     The reallocation of the purchase price was primarily the result of
finalizing the appraisals related to the acquisition of Purina Mills, Inc.,
which generally resulted in an increase in goodwill and a decrease to property,
plant and equipment.

OTHER INTANGIBLE ASSETS A summary of other intangible assets at December 31 is
as follows:

<Table>
<Caption>
                                                                                                        2002         2001
                                                                                                     ----------   ----------
<S>                                                                                                  <C>          <C>
Amortized other intangible assets
  Trademarks, less accumulated amortization of $262 and $103, respectively .......................   $      621   $      710
  Patents, less accumulated amortization of $1,395 and $241, respectively ........................       14,978       16,132
  Agreements not to compete, less accumulated amortization of $626 and $389, respectively ........          775        1,013
  Other intangible assets, less accumulated amortization of $6,463 and $3,267, respectively ......        3,467        9,578
                                                                                                     ----------   ----------
Total amortized other intangible assets ..........................................................       19,841       27,433
Total non-amortized other intangible assets-trademarks ...........................................       76,963       76,963
                                                                                                     ----------   ----------
Total other intangible assets ....................................................................   $   96,804   $  104,396
                                                                                                     ==========   ==========
</Table>

     Amortization expense for the years ended December 31, 2002 and 2001 was
$4.3 million and $2.4 million, respectively. The estimated amortization expense
related to other intangible assets subject to amortization for the next five
years will approximate $3.0 million annually. The weighted-average life of the
intangible assets subject to amortization is approximately 16 years.

8.  NOTES AND SHORT-TERM OBLIGATIONS

     A summary of notes and short-term obligations at December 31 is as follows:

<Table>
<Caption>
                                                         2002        2001
                                                     ----------   ----------
<S>                                                  <C>          <C>
Union Bank of California line of credit ..........   $    2,000   $    5,000
Jackson Electric .................................          400           --
                                                     ----------   ----------
Total notes and short-term obligations ...........   $    2,400   $    5,000
                                                     ==========   ==========
</Table>

     The lines of credit are held by wholly owned and majority owned
subsidiaries of the Company. The Union Bank of California line of credit of $2
million is unsecured and bears interest, at the Company's election, of either
LIBOR plus 1.50% or Union Bank of California's Reference Rate minus 0.50%. This
line terminates on July 5, 2003 and is renewable annually. Jackson Electric is a
ten year note at 0% ending May 31, 2011.

     Interest paid, net of amount capitalized, for the years ended December 31,
2002, 2001 and the three months ended December 31, 2000 was $0.1 million, $0.7
million and $0.6 million, respectively.

9.  FAIR VALUE OF FINANCIAL INSTRUMENTS

     The following tables provide information of the carrying amount, notional
amount and fair value of financial instruments, including derivative financial
instruments. The carrying value of financial instruments classified as current
assets and current liabilities, such as cash and short-term investments,
receivables, accounts payable, notes and short-term obligations, approximate
fair value due to the short-term maturity of the instruments. The Company




                                      F-39
<PAGE>

had a long term note with Land O'Lakes, Inc. as of December 31, 2001 which was
non-interest bearing and related to the acquisition of Purina Mills, Inc. The
liability was transferred to Land O'Lakes, Inc. and the obligation for the note
payable was relinquished in 2002.



<Table>
<Caption>
                                                   AT DECEMBER 31,
                                   ---------------------------------------------
                                          2002                     2001
                                   -------------------   -----------------------
                                   CARRYING     FAIR      CARRYING       FAIR
                                    AMOUNT      VALUE      AMOUNT        VALUE
                                   --------    -------   ----------    ---------
                                                 (IN THOUSANDS)
<S>                                <C>         <C>       <C>           <C>
Liabilities:
    Notes Payable - Land O'
      Lakes - non-current.....     $     --    $    --   $   59,664    $  59,664


</Table>

     The Company enters into futures and options contract derivatives to reduce
risk on the market value of inventory and fixed or partially fixed purchase and
sale contracts. The notional or contractual amount of derivatives provides an
indication of the extent of the Company's involvement in such instruments at
that time, but does not represent exposure to market risk or future cash
requirements under certain of these instruments.


<Table>
<Caption>
                                                      AT DECEMBER 31,
                                    ------------------------------------------------
                                              2002                      2001
                                    -----------------------   ----------------------
                                      NOTIONAL      FAIR        NOTIONAL      FAIR
                                       AMOUNT       VALUE        AMOUNT       VALUE
                                    ----------     -------    ----------    ---------
                                                     (IN THOUSANDS)
<S>                                 <C>            <C>        <C>           <C>
Derivative financial instruments:
  Commodity futures contracts:
          Commitments to purchase   $   66,186     $(4,179)   $   40,855    $  (3,664)
          Commitments to sell.         (30,202)        864        (4,482)         (71)
</Table>

10.  PENSION AND OTHER POSTRETIREMENT PLANS

     The Company participates in Land O'Lakes, Inc.'s defined benefit pension
plan, which covers substantially all employees. Plan benefits are generally
based on years of service and employees' highest compensation during five
consecutive years of employment. Annual payments to the pension trust fund are
determined in compliance with the Employee Retirement Income Security Act
(ERISA). The actuarial present values of accumulated plan benefits and net
assets available for benefits relating to only the Company's employees are not
available.

     The Company also participates in Land O'Lakes, Inc.'s plans that provide
certain health care benefits for retired employees. Employees become eligible
for these benefits upon meeting certain age and service requirements.
Actuarially determined financial information relating to only the Company's
employees is not available.

    The measurement date for the pension and other postretirement plans is
November 30.

     Costs relating to the plans are allocated to the Company by Land O'Lakes,
Inc. The Company's allocated expenses relating to these plans was $2.6 million,
$1.8 million and $0.4 million for the years ended December 31, 2002, 2001 and
the three months ended December 31, 2000, respectively.

     The Company also has a discretionary capital accumulation plan (CAP) for
certain of its employees, which is an unfunded, defined benefit plan. The
projected benefit obligation and the accumulated benefit obligation of the
unfunded plan were $26.8 million and $24.9 million at December 31, 2002 and
2001, respectively. The accrued discretionary CAP liability was $26.8 million
and $24.9 million at December 31, 2002 and 2001, respectively. The expense for
this plan was $1.7 million for 2002 and $0.0 million for 2001 and 2000.

     Certain Company employees are eligible for benefits under Land O'Lakes,
Inc.'s defined contribution plans. The expense for these plans was $0.2 million,
$0.2 million and $0.1 million for the years ended December 31, 2002, 2001, and
the three months ended December 31, 2000, respectively.




                                      F-40
<PAGE>

11.  ACQUISITIONS, MERGERS AND DIVESTITURES

     On October 11, 2001, an indirect subsidiary of Land O'Lakes acquired 100
percent of the outstanding stock of Purina Mills, Inc. (Purina Mills) and
contributed the stock to Land O'Lakes Farmland Feed LLC. In exchange for this
contribution, Land O'Lakes direct and indirect ownership of Land O'Lakes
Farmland Feed increased to 92.0%. The results of operations of Purina Mills are
included in the consolidated financial statements since that date. Purina Mills
is a commercial and lifestyle feed company. This acquisition allowed the Company
to diversify into lifestyle feed products (other than dog and cat food) under
the leading brands of Purina, Chow, and the "Checkerboard" Nine Square logo.

     The aggregate purchase price was approximately $359 million, net of cash
acquired, of which $247 million represented cash payments for stock and
acquisition costs and $112 million represented debt retirement.

     The following table summarizes the estimated fair value of the assets
acquired and liabilities assumed at the date of acquisition. At December 31,
2001 the Company was in the process of obtaining final third party valuations of
certain assets; thus, the allocation of the purchase price was subject to
refinement. During 2002, the allocation of the purchase price was completed. As
a result of final appraisals and resolutions of other contingencies outstanding
at the date of the acquisition, goodwill was increased by $18.2 million with the
most significant offset to property, plant and equipment.

<Table>
<Caption>
                                                   AT OCTOBER 11, 2001
                                                   -------------------
<S>                                                <C>
Current assets ...................................   $     92,486
Investments ......................................         10,430
Property, plant and equipment ....................        218,913
Goodwill .........................................         86,872
Other intangibles ................................         98,940
Other assets .....................................         32,892
                                                     ------------
          Total assets acquired ..................        540,533
                                                     ------------
Current liabilities ..............................         64,338
Other liabilities ................................        117,638
                                                     ------------
          Total liabilities assumed ..............        181,976
                                                     ------------
          Net assets acquired ....................   $    358,557
                                                     ============
</Table>

     Goodwill of $86.9 million was recognized, none of which is expected to be
deductible for tax purposes. Of the $98.9 million of acquired identifiable
intangible assets, $77.0 million is not subject to amortization, and relates
primarily to trade names and trademarks. The remaining intangible assets of
$21.9 million, have a weighted average useful life of approximately 12 years and
consist of patents in the amount of $16.4 million (14 year weighted average
useful life) and contracts of $5.5 million (3 year weighted average useful
life). The following table summarizes the unaudited pro forma results of
operations for the year ended December 31, 2001 and three months ended December
31, 2000 for the Company as if the Purina Mills acquisition had occurred on
January 1, 2001 and October 1, 2000, respectively. The unaudited pro forma
results of operations are for informational purposes only and do not purport to
represent what the Company's results of operations would actually have been if
the acquisition had actually occurred on those dates.

<Table>
<Caption>
                                                          2001           2000
                                                     ------------   ------------
<S>                                                  <C>            <C>
Net sales ........................................   $  2,502,720   $    627,483
Net earnings .....................................         60,772          6,055
</Table>

12.  RESTRUCTURING AND IMPAIRMENT CHARGES

     In 2002, the Company recorded restructuring and impairment charges of $11.3
million, of which $2.6 million was primarily related to the write-down of
impaired plant assets held for sale to their estimated fair value, and $8.7
million was related to employee severance and outplacement costs for 375
employees at various locations. The balance remaining to be paid at December 31,
2002 for employee severance and outplacement costs was $6.4 million.

     In 2001, the Company recorded restructuring and impairment reversals of
$5.7 million. This reversal of a portion of the prior-year restructuring charge
was primarily due to a change in business strategy following the Purina Mills



                                      F-41
<PAGE>

acquisition, which resulted in the decision to continue to operate plants that
were held for sale at December 31, 2000.

     In the three months ended December 31, 2000, the Company recorded a
restructuring and impairment charge of $9.7 million. This charge of $9.7 million
resulted from initiatives to consolidate facilities and reduce personnel
following the formation of the LLC. Of this amount, $7.2 million related to the
closing and planned sale of 12 plants and consisted of $5.5 million to write
down the book value of the plants and $1.7 million for demolition and
environmental clean-up. The remaining $2.5 million represented severance and
outplacement costs for 119 non-plant employees.


     The following table summarizes the restructuring charge activity and the
resulting reserve for the above-mentioned periods:

<Table>
<Caption>

<S>                                                       <C>
Balance at December 31, 2000 ..........................   $    9,749
2001 Activity:
  Restructuring expenses paid against accrual .........       (3,052)
  Restructuring reversals .............................       (5,728)
  Other ...............................................         (743)
                                                          ----------
Balance at December 31, 2001 ..........................   $      226
                                                          ==========
2002 Activity:
  Restructuring expenses paid against accrual .........       (2,441)
  Restructuring accruals ..............................        8,678
  Other ...............................................          (67)
                                                          ----------
Balance at December 31, 2002 ..........................   $    6,396
                                                          ==========
</Table>

13.  GAIN ON LEGAL SETTLEMENTS

     During 2002, the Company recognized a gain on legal settlements of $7.6
million. The gain resulted from net cash proceeds of $1.6 million and a legal
settlement receivable of $6.0 million for which cash was received on January 17,
2003. The amounts were received from vitamin product suppliers against whom the
Company alleged certain price-fixing claims.

14.  GAIN ON SALE OF INTANGIBLE

     In 2002, the Company recorded a $4.2 million gain on the sale of a customer
list pertaining to the feed phosphate distribution business.

15.  COMMITMENTS AND CONTINGENCIES

     Total rental expense was $12.4 million, $4.8 million and $0.4 million for
the years ended December 31, 2002, 2001 and the three months ended December 31,
2000, respectively. The minimum annual lease payments for the next five years
and thereafter are as follows:

<Table>
<Caption>
         YEAR               AMOUNT
---------------------      --------

<S>                       <C>
2003.................     $     7.1
2004.................           4.6
2005.................           1.6
2006.................           0.5
2007.................           0.3
2008 and thereafter..           0.1
</Table>

    Most of the leases require payment of operating expenses applicable to the
leased assets. Management expects that in the normal course of business most
leases that expire will be renewed or replaced by other leases.

GUARANTEE OF PARENT DEBT

     In November 2001, Land O'Lakes, Inc., which owns 92% of the Company, issued
$350 million of senior notes, due 2011. These notes are guaranteed by certain
domestic wholly-owned subsidiaries of Land O'Lakes, Inc., the Company, and by
each domestic wholly-owned subsidiary of the Company, including Purina Mills,
LLC.



                                      F-42
<PAGE>

     This guarantee is a general unsecured obligation, ranks equally in right of
payment with all existing and future senior indebtedness of Land O'Lakes, is
senior in right of payment to all existing and future subordinated obligations
of Land O'Lakes, and is effectively subordinated to any secured indebtedness of
Land O'Lakes and its subsidiaries, including Land O'Lakes Farmland Feed, to the
extent of the value of the assets securing such indebtedness. The maximum
potential amount of future payments that the Company would be required to make
is $350 million as of December 31, 2002. Currently, the Company does not record
a liability regarding the guarantee. The Company has no recourse provision that
would enable it to recover amounts paid under the guarantee from Land O'Lakes,
Inc. or any other parties.

     The notes are not guaranteed by certain majority-owned subsidiaries of the
Company (the "Non-Guarantors"). Summarized financial information of the
Non-Guarantors, which is consolidated in the financial statements of the
Company, as of and for the periods ended December 31, are as follows:

<Table>
<Caption>
                                                         2002        2001
                                                     ----------   ----------
<S>                                                  <C>          <C>
Total assets .....................................   $   23,433   $   26,509
Net sales ........................................       53,669       73,449
Net earnings .....................................          626          677

</Table>

     In November 2001, Land O'Lakes, Inc. entered into new term facilities
consisting of a $325 million five-year Term Loan A facility and a $250 million
seven-year Term Loan B facility. These facilities are unconditionally guaranteed
by certain domestic wholly owned subsidiaries of Land O'Lakes, Inc., the
Company, and by each domestic wholly-owned subsidiary of the Company, including
Purina Mills, LLC. The maximum potential payment related to this guarantee is
$520 million as of December 31, 2002. The Company does not currently record a
liability related to the guarantee of the Term Loans, and the Company has no
recourse provisions that would enable it to recover from Land O'Lakes, Inc. or
any other parties.

GUARANTEES OF PRODUCER LOANS

     The Company guarantees certain loans to large producers financed by Land
O'Lakes Finance Company. The loans totaled $15.2 million and $19.8 million at
December 31, 2002 and 2001, respectively. Reserves for these guarantees of $0.7
million and $1.0 million at December 31, 2002 and 2001, respectively, are
included in the allowance for doubtful accounts. The maximum amount guaranteed
by the Company is $7.0 million with the remaining balance guaranteed by Land
O'Lakes, Inc. The $0.3 million reduction in the reserve from December 31, 2001
to December 31, 2002 has been included in selling, general and administration
expense. Write-offs related to producer loans were $0.1 million for the year
ended December 31, 2002 and no write offs were recorded in 2001. The Company
does not currently record a liability related to the guarantee of the producer
loans. The Company would have recourse against the producer to partially off-set
the liability.

     The Company also guarantees certain loans to producers and dealers financed
by third party lenders. The loans totaled $2.4 million and $5.1 million at
December 31, 2002 and 2001, respectively. Reserves for these guarantees of $0.5
million and $1.5 million at December 31, 2002 and 2001, respectively, are
included in the consolidated balance sheet. There were insignificant write-offs
related to these loans in 2002 and 2001. The maximum potential payment related
to these guarantees is $1.0 million. The Company does not currently record a
liability related to the guarantees of these producer and dealer loans financed
by third party lenders. The Company has no recourse against the producer or
dealer to partially off-set the potential liability.

GENERAL

     The Company is currently and from time to time involved in litigation and
environmental claims incidental to the conduct of business. The damages claimed
in some of these cases are substantial. Although the amount of liability that
may result from these matters cannot be ascertained, the Company does not
currently believe that, in the aggregate, they will result in liabilities
material to the Company's consolidated financial condition, future results of
operations or cash flows.



                                      F-43
<PAGE>

16.  RELATED PARTY TRANSACTIONS

     In accordance with the Management Services Agreement between Land O'Lakes,
Inc. and the Company, costs are charged to the Company by Land O'Lakes, Inc. for
corporate services such as legal, insurance administration, tax administration,
human resources, payroll and benefit administration, leasing, public relations,
credit and collections, accounting, and IT support. These costs totaled $7.0
million, $6.6 million and $0.9 million for the years ended December 31, 2002,
December 31, 2001 and the three months ended December 31, 2000, respectively. In
addition, payroll and benefit-related costs are paid directly by Land O'Lakes,
Inc. and reimbursed by the Company. These costs totaled $100.9 million, $102.8
million and $14.9 million for the years ended December 31, 2002, 2001 and the
three months ended December 31, 2000, respectively.

     As part of the acquisition of Purina Mills, Inc. on October 11, 2001, Land
O'Lakes, Inc. assumed certain liabilities, including a $59.7 million deferred
tax liability and the Company established a noncurrent note payable for this
liability at December 31, 2001. In 2002, the liability was transferred to Land
O'Lakes, Inc. and the obligation for the note payable was relinquished.

     The Company has a $100 million revolving credit facility with Land O'Lakes,
Inc. which bears interest at LIBOR plus 260 basis points. The facility
terminates on October 31, 2003, and is renewable annually. The Company had a
note receivable from Land O'Lakes, Inc. of $29.5 million at December 31, 2002
and a note payable of $29.2 million at December 31 2001.

    Pursuant to a Feed Supply Agreement dated September 29, 2000 between Land
O'Lakes Farmland Feed and Farmland Industries, Farmland Industries agrees to
purchase all of its branded feed, specialty feeds, catfish, swine and cattle
feed, and ingredients, excluding grain, from Land O'Lakes Farmland Feed. Such
sales are to be made at prices competitive with those available from other
suppliers. Sales to Farmland Industries under the agreement totaled $1.5
million, $6.8 million and $1.9 million for the years ended December 31, 2002,
December 31, 2001 and the three months ended December 31, 2000, respectively.
This Feed Supply Agreement extends for the duration of Land O'Lakes Farmland
Feed, or, for five years following the exercise by Land O'Lakes of its option to
purchase Farmland Industries' interest in Land O'Lakes Farmland Feed. Due to a
disputed provision in the agreement, Farmland Industries has not purchased as
much feed as originally anticipated.

     Sales with unconsolidated subsidiaries of the Company totaled $63.7
million, $45.0 million and $9.5 million for the years ended December 31, 2002,
2001 and the three months ended December 31, 2000, respectively.

17.  ALLOWANCE FOR DOUBTFUL ACCOUNTS

     The activity in the allowance for doubtful accounts is as follows:

<Table>
<Caption>
                                                       ADDITIONS
                                                      ------------
                                         BALANCE AT   NET CHARGES        (OTHER
                                         BEGINNING     TO COSTS       ADDITIONS)/   BALANCE AT
        DESCRIPTION                      OF YEAR      AND EXPENSES     DEDUCTIONS      END OF YEAR
                                       ------------   ------------    ------------    ------------
<S>                                    <C>            <C>             <C>             <C>
Year ended December 31, 2002 .......   $      9,085   $      1,178    $       (336)   $     10,599
Year ended December 31, 2001 .......          4,211            675          (4,199)          9,085
Three months ended December 31, 2000          5,809         (1,598)             --           4,211

</Table>



                                      F-44
<PAGE>



18.  QUARTERLY FINANCIAL INFORMATION (UNAUDITED)


<Table>
<Caption>


                              FIRST          SECOND          THIRD         FOURTH         FULL
          2002               QUARTER        QUARTER        QUARTER        QUARTER         YEAR
                           ------------   ------------   ------------   ------------   ------------

<S>                        <C>            <C>            <C>            <C>            <C>
Net sales ..............   $    603,423   $    576,580   $    594,448   $    655,934   $  2,430,385
Gross profit ...........         72,828         70,336         72,033         71,174        286,371
Net earnings ...........         14,621          8,542         11,832         19,459         54,454
</Table>

<Table>
<Caption>


                                (1)            (1)            (1)
                               FIRST         SECOND          THIRD          FOURTH         FULL
         2001                 QUARTER        QUARTER        QUARTER        QUARTER         YEAR
                           ------------   ------------   ------------   ------------   ------------

<S>                        <C>            <C>            <C>            <C>            <C>
Net sales ..............   $    403,535   $    392,958   $    406,779   $    634,105   $  1,837,377
Gross profit ...........         31,368         35,356         32,232         66,036        164,992
Net earnings ...........          4,010          9,198          8,239         17,699         39,146
</Table>

(1) The first three quarters in 2001 exclude Purina Mills, LLC, which was
acquired on October 11, 2001.

19.  CONSOLIDATING FINANCIAL INFORMATION

     Land O'Lakes, Inc. issued $350 million in senior notes which are guaranteed
by Land O'Lakes, Inc. and certain of its wholly and majority-owned subsidiaries,
including the Company (the "Guarantor Subsidiaries"). Such guarantees are full,
unconditional and joint and several.

     The following supplemental financial information sets forth, on an
unconsolidated basis, balance sheet, statement of operations and cash flow
information for the Company, Guarantor Subsidiaries and the Company's other
subsidiaries (the "Non-Guarantor Subsidiaries"). The supplemental financial
information reflects the investments of the Company in the Guarantor and
Non-Guarantor Subsidiaries using the equity method of accounting.




                                      F-45
<PAGE>
                         LAND O'LAKES FARMLAND FEED LLC

                    SUPPLEMENTAL CONSOLIDATING BALANCE SHEET
                                DECEMBER 31, 2002

<Table>
<Caption>
                                                                                WHOLLY
                                         LAND        WHOLLY                     OWNED
                                        O'LAKES      OWNED                   SUBSIDIARIES
                                       FARMLAND   SUBSIDIARIES  WHOLLY OWNED   OF PURINA      NON-
                                       FEED LLC       OF        PURINA MILLS,   MILLS,     GUARANTOR
                                        PARENT     LOLFF LLC    LLC PARENT       LLC      SUBSIDIARIES  ELIMINATIONS  CONSOLIDATED
                                       ---------  ------------  ------------ ------------ ------------  ------------  ------------
                                                                          ($ IN THOUSANDS)

                                                                                ASSETS
<S>                                    <C>        <C>           <C>          <C>          <C>           <C>            <C>
Current assets:
  Cash and short-term
    investments ....................   $ (15,393)   $ 7,278       $  6,584     $    70      $ 1,817       $      --      $    356
  Receivables, net .................     173,302     20,156         22,623       1,367        6,428         (96,494)      127,382
  Receivable from legal
    settlement .....................          --         --          6,000          --           --              --         6,000
  Inventories ......................      45,116     15,757         45,686       1,934        4,585              --       113,078
  Prepaid expenses and other
    current assets .................       3,224        322          4,079          --          210              --         7,835
  Note receivable - Land
    O'Lakes, Inc. ..................      29,493         --         57,759          --           --         (57,759)       29,493
                                       ---------    -------       --------     -------      -------       ---------      --------
          Total current assets .....     235,742     43,513        142,731       3,371       13,040        (154,253)      284,144
Investments ........................     405,619        258             --       5,491        2,196        (390,591)       22,973
Property, plant and
equipment,
   net .............................      82,581      7,530        155,177       1,114        5,337              --       251,739
Goodwill, net ......................      12,815      3,656        105,202          --          813              --       122,486
Other intangibles ..................          24      2,639         94,044          --           97              --        96,804
Other assets .......................       7,965         --         21,547          --        1,950          (2,700)       28,762
                                       ---------    -------       --------     -------      -------       ---------      --------
          Total assets .............   $ 744,746    $57,596       $518,701     $ 9,976      $23,433       $(547,544)     $806,908
                                       =========    =======       ========     =======      =======       =========      ========

                                                                     LIABILITIES AND EQUITIES

Current liabilities:
  Notes and short-term
    obligations ....................   $   2,400    $    --       $     --     $    --      $ 2,341       $  (2,341)     $  2,400
  Accounts payable .................     189,913     22,803         48,006       5,302        3,656        (148,461)      121,219
  Accrued expenses .................      17,411      2,955         24,299         696        2,773              --        48,134
                                       ---------    -------       --------     -------      -------       ---------      --------
          Total current
            liabilities ............     209,724     25,758         72,305       5,998        8,770        (150,802)      171,753
Notes payable -- Land O'Lakes,
  Inc. -- noncurrent ...............          --      2,700             --          --           --          (2,700)           --
Employee benefits and other
  liabilities ......................          --         --         29,493          --        3,405          (3,451)       29,447
Minority interests .................          --         --             29          --        2,931              --         2,960
Equities:
  Contributed capital ..............     514,987     16,272        358,406       8,882        7,420        (390,591)      515,376
  Retained earnings (accumulated
    deficit) .......................      20,035     12,866         58,468      (4,904)         907              --        87,372
                                       ---------    -------       --------     -------      -------       ---------      --------
          Total equities ...........     535,022     29,138        416,874       3,978        8,327        (390,591)      602,748
                                       ---------    -------       --------     -------      -------       ---------      --------
Commitments and contingencies
Total liabilities and equities .....   $ 744,746    $57,596       $518,701     $ 9,976      $23,433       $(547,544)     $806,908
                                       =========    =======       ========     =======      =======       =========      ========
</Table>

                                      F-46
<PAGE>


                         LAND O'LAKES FARMLAND FEED LLC

               SUPPLEMENTAL CONSOLIDATING STATEMENT OF OPERATIONS
                      FOR THE YEAR ENDED DECEMBER 31, 2002

<Table>
<Caption>
                                            LAND         WHOLLY
                                           O'LAKES       OWNED                       WHOLLY OWNED
                                          FARMLAND    SUBSIDIARIES   WHOLLY OWNED    SUBSIDIARIES        NON-
                                          FEED LLC         OF        PURINA MILLS,    OF PURINA        GUARANTOR
                                           PARENT      LOLFF LLC     LLC PARENT       MILLS, LLC      SUBSIDIARIES   CONSOLIDATED
                                        -----------   ------------   -------------   -------------    ------------   ------------
                                                     ($ IN THOUSANDS)
<S>                                     <C>             <C>           <C>             <C>             <C>            <C>
Net sales .........................     $ 1,312,638     $174,406       $ 860,845        $ 28,827          $53,669     $ 2,430,385
Cost of sales .....................       1,197,551      157,918         719,950          21,395           47,200       2,144,014
                                        -----------     --------       ---------        --------          -------     -----------
Gross profit ......................         115,087       16,488         140,895           7,432            6,469         286,371
Selling, general and
  administration ..................         111,398       10,976          98,160          10,452            5,018         236,004
Restructuring and impairment
  charges .........................          11,266           --              --              --               --          11,266
                                        -----------     --------       ---------        --------          -------     -----------
(Loss) earnings from
operations ........................          (7,577)       5,512          42,735          (3,020)           1,451          39,101
Interest (income) expense, net ....          (3,905)         388          (1,182)            (15)             156          (4,558)
Gain on legal settlements .........              --           --          (7,642)             --               --          (7,642)
Gain on sale of intangible ........          (4,184)          --              --              --               --          (4,184)
Equity in (earnings) loss
  of affiliated companies .........          (2,233)          --             (94)          1,306               --          (1,021)
Minority interest in (loss)
  earnings of subsidiaries ........             (34)         231              34              --              669             900
                                        -----------     --------       ---------        --------          -------     -----------
Earnings (loss) before income taxes           2,779        4,893          51,619          (4,311)             626          55,606
Income tax expense ................              --        1,152              --              --               --           1,152
                                        -----------     --------       ---------        --------          -------     -----------
Net earnings (loss) ...............     $     2,779     $  3,741       $  51,619        $ (4,311)         $   626     $    54,454
                                        ===========     ========       =========        ========          =======     ===========
</Table>


                                      F-47
<PAGE>


                         LAND O'LAKES FARMLAND FEED LLC

               SUPPLEMENTAL CONSOLIDATING STATEMENT OF CASH FLOWS
                      FOR THE YEAR ENDED DECEMBER 31, 2002


<Table>
<Caption>
                                                                                WHOLLY
                                         LAND        WHOLLY                     OWNED
                                        O'LAKES      OWNED                   SUBSIDIARIES
                                       FARMLAND   SUBSIDIARIES  WHOLLY OWNED   OF PURINA      NON-
                                       FEED LLC       OF        PURINA MILLS,   MILLS,     GUARANTOR
                                        PARENT     LOLFF LLC    LLC PARENT       LLC      SUBSIDIARIES  ELIMINATIONS  CONSOLIDATED
                                       ---------  ------------  ------------ ------------ ------------  ------------  ------------
                                                                           ($ IN THOUSANDS)
<S>                                    <C>        <C>           <C>          <C>          <C>           <C>            <C>
CASH FLOWS FROM OPERATING
  ACTIVITIES:
  Net earnings (loss) ...............  $   2,779    $ 3,741       $ 51,619     $(4,311)      $   626     $      --     $  54,454
  Adjustments to reconcile net
    earnings (loss) to net cash
    provided (used) by operating
    activities:
    Depreciation and amortization ....    15,085        909         27,808          77           519            --        44,398
    Bad debt expense .................     2,775         --            425          --            --            --         3,200
    Receivable from legal
      settlement .....................        --         --         (6,000)         --            --            --        (6,000)
    (Increase) decrease in other
      assets .........................    (4,200)        17         (6,761)         --          (278)        7,143        (4,079)
    Increase (decrease) in other
      liabilities ....................    67,858     (3,569)        (4,662)         --           177       (69,004)       (9,200)
    Restructuring and impairment
      charges ........................    11,266         --             --          --            --            --        11,266
    Equity in (earnings) losses of
       affiliated companies ..........    (2,233)        --            (94)      1,306            --            --        (1,021)
    Minority interest ................       (34)       231             34          --           669            --           900
    Gain on sale of intangible .......    (4,184)        --             --          --            --            --        (4,184)
    Other ............................     1,647       (609)           865          --          (609)           --         1,294
  Changes in current assets and
    liabilities, net of
    acquisitions and divestitures:
    Receivables ......................    68,356     (6,009)         1,619      (3,937)       (1,818)      (71,538)      (13,327)
    Inventories ......................     1,102       (223)        (2,592)        658         1,427            --           372
    Other current assets .............     1,529        565         (7,622)      4,875            69            --          (584)
    Accounts payable .................  (127,544)     4,277           (712)        429        (3,331)      131,058         4,177
    Accrued expenses .................    (2,032)     1,538        (13,630)        802         1,242            --       (12,080)
                                       ---------    -------       --------     -------       -------     ---------     ---------
  Net cash provided (used) by
    operating activities .............    32,170        868         40,297        (101)       (1,307)       (2,341)       69,586

CASH FLOWS FROM INVESTING
ACTIVITIES:
  Additions to property, plant and
    equipment ........................  (18,129)      (486)        (7,337)        (43)          (59)           --       (26,054)
  Proceeds from sale of
    investments ......................     3,700         --             --          --            --            --         3,700
  Proceeds from sale of property,
    plant and equipment ..............     6,600         --             --          --            --            --         6,600
  Dividends from investments in
    affiliated companies .............     3,118         --            608          --            --            --         3,726
  Other ..............................       750         --             --          --            --            --           750
                                       ---------    -------       --------     -------       -------     ---------     ---------
  Net cash used by investing
    activities .......................    (3,961)      (486)        (6,729)        (43)          (59)           --       (11,278)

CASH FLOWS FROM FINANCING
ACTIVITIES:
  (Decrease) increase in
    short-term debt ..................   (12,391)     5,478             --          --         1,972         2,341        (2,600)
  Proceeds from note payable to
    Land O'Lakes, Inc. ...............   476,083         --         15,445          --            --       (41,531)      449,997
  Payments on note payable to
    Land O'Lakes, Inc. ...............  (485,883)    (4,110)       (56,976)         --        (3,262)       41,531      (508,700)
  Capital contributions by
    members ..........................       332         --             --          --            --            --           332
  Other ..............................    (1,969)     1,151            391          --           427            --            --
                                       ---------    -------       --------     -------       -------     ---------     ---------
  Net cash (used) provided by
    financing activities .............   (23,828)     2,519        (41,140)         --          (863)        2,341       (60,971)
                                       ---------    -------       --------     -------       -------     ---------     ---------
  Net increase (decrease) in
    cash .............................     4,381      2,901         (7,572)       (144)       (2,229)           --        (2,663)

Cash and short-term investments
  at beginning of year ...............   (19,774)     4,377         14,156         214         4,046            --         3,019
                                       ---------    -------       --------     -------       -------     ---------     ---------
Cash and short-term investments
  at end of year ..................... $ (15,393)   $ 7,278       $  6,584     $    70       $ 1,817     $      --     $     356
                                       =========    =======       ========     =======       =======     =========     =========
</Table>


                                      F-48
<PAGE>


                         LAND O'LAKES FARMLAND FEED LLC

                    SUPPLEMENTAL CONSOLIDATING BALANCE SHEET
                                DECEMBER 31, 2001

<Table>
<Caption>
                                                                                WHOLLY
                                         LAND        WHOLLY                     OWNED
                                        O'LAKES      OWNED                   SUBSIDIARIES
                                       FARMLAND   SUBSIDIARIES  WHOLLY OWNED   OF PURINA      NON-
                                       FEED LLC       OF        PURINA MILLS,   MILLS,     GUARANTOR
                                        PARENT     LOLFF LLC    LLC PARENT       LLC      SUBSIDIARIES  ELIMINATIONS  CONSOLIDATED
                                       ---------  ------------  ------------ ------------ ------------  ------------  ------------
                                                                           ($ IN THOUSANDS)
<S>                                    <C>        <C>           <C>          <C>          <C>           <C>            <C>
                                                                                ASSETS
Current assets:
  Cash and short-term
   investments .....................   $ (19,774)   $ 4,377       $ 14,156     $    214     $ 4,046       $      --      $  3,019
  Receivables, net .................     103,219     14,147          9,680       12,417       4,556         (24,956)      119,063
  Inventories ......................      46,219     15,534         43,393        2,402       6,011              --       113,559
  Prepaid expenses and
    other current assets ...........       2,883        887          2,423           --         279              --         6,472
                                       ---------    -------       --------     --------     -------       ---------      --------

          Total current assets .....     132,547     34,945         69,652       15,033      14,892         (24,956)      242,113
Investments ........................     411,654        258             28       11,077       1,303        (392,824)       31,496
Property, plant and equipment,
  net ..............................      90,710      7,887        219,420        1,147       7,792              --       326,956
Goodwill, net ......................      13,262      3,656         86,872           --         959              --       104,749
Intangible assets, net .............       4,896         --         99,169           --         331              --       104,396
Other assets .......................      65,082      3,246         19,684           --       1,232         (65,369)       23,875
                                       ---------    -------       --------     --------     -------       ---------      --------
          Total assets .............   $ 718,151    $49,992       $494,825     $ 27,257     $26,509       $(483,149)     $833,585
                                       =========    =======       ========     ========     =======       =========      ========

                                                                      LIABILITIES AND EQUITIES
Current liabilities:
  Notes and short-term
    obligations ....................   $   4,509    $    23       $     --     $     --     $   468       $      --      $  5,000
  Notes payable -- Land O'Lakes,
    Inc. -- current ................      29,210         --             --           --          --              --        29,210
  Accounts payable .................      78,418     12,211         24,137       14,009       5,670         (17,403)      117,042
  Accrued expenses .................      13,170      1,418         19,120         (108)      1,532              --        35,132
                                       ---------    -------       --------     --------     -------       ---------      --------
          Total current
           liabilities .............     125,307     13,652         43,257       13,901       7,670         (17,403)      186,384
Notes payable -- Land O'Lakes,
  Inc. -- noncurrent ...............      59,664      6,512         58,763           --       5,290         (70,565)       59,664
Employee benefits and other
  liabilities ......................         755      2,644         32,980           --         277              --        36,656
Minority interests .................        (840)       910             28           --       2,821              --         2,919
Equities:
  Contributed capital ..............     515,046     18,300        350,598       16,299       9,982        (395,181)      515,044
  Retained earnings
    (accumulated deficit) ..........      18,219      7,974          9,199       (2,943)        469              --        32,918
                                       ---------    -------       --------     --------     -------       ---------      --------
          Total equities ...........     533,265     26,274        359,797       13,356      10,451        (395,181)      547,962
                                       ---------    -------       --------     --------     -------       ---------      --------
Commitments and contingencies
Total liabilities and equities .....   $ 718,151    $49,992       $494,825     $ 27,257     $26,509       $(483,149)     $833,585
                                       =========    =======       ========     ========     =======       =========      ========
</Table>


                                      F-49
<PAGE>


                         LAND O'LAKES FARMLAND FEED LLC

                SUPPLEMENTAL CONSOLIDATING STATEMENT OF OPERATIONS
                      FOR THE YEAR ENDED DECEMBER 31, 2001



<Table>
<Caption>
                                            LAND         WHOLLY
                                           O'LAKES       OWNED                       WHOLLY OWNED
                                          FARMLAND    SUBSIDIARIES   WHOLLY OWNED    SUBSIDIARIES        NON-
                                          FEED LLC         OF        PURINA MILLS,    OF PURINA        GUARANTOR
                                           PARENT      LOLFF LLC     LLC PARENT       MILLS, LLC      SUBSIDIARIES   CONSOLIDATED
                                        -----------   ------------   -------------   -------------    ------------   ------------
                                                               ($ IN THOUSANDS)
<S>                                     <C>           <C>           <C>              <C>              <C>            <C>
Net sales .........................     $ 1,392,936     $168,128       $ 195,773         $ 7,091          $73,449     $ 1,837,377
Cost of sales .....................       1,279,960      151,710         165,438           5,711           69,566       1,672,385
                                        -----------     --------       ---------         -------          -------     -----------
Gross profit ......................         112,976       16,418          30,335           1,380            3,883         164,992
Selling, general and
administration ....................          90,492        8,907          23,491           2,080            2,215         127,185
Restructuring and impairment
  reversals .......................          (5,728)          --              --              --               --          (5,728)
                                        -----------     --------       ---------         -------          -------     -----------
Earnings (loss) from operations ...          28,212        7,511           6,844            (700)           1,668          43,535
Interest expense (income), net ....           5,039          706            (128)             (1)             472           6,088
Equity in (earnings) loss of
 affiliated companies .............          (2,612)          --             (93)            128               --          (2,577)
Minority interest in earnings
(loss) of subsidiaries ............               3          374             (18)             --              519             878
                                        -----------     --------       ---------         -------          -------     -----------
Net earnings (loss) ...............     $    25,782     $  6,431       $   7,083         $  (827)         $   677     $    39,146
                                        ===========     ========       =========         =======          =======     ===========
</Table>


                                      F-50
<PAGE>


                         LAND O'LAKES FARMLAND FEED LLC

               SUPPLEMENTAL CONSOLIDATING STATEMENT OF CASH FLOWS
                      FOR THE YEAR ENDED DECEMBER 31, 2001

<Table>
<Caption>
                                                                                WHOLLY
                                         LAND        WHOLLY                     OWNED
                                        O'LAKES      OWNED                   SUBSIDIARIES
                                       FARMLAND   SUBSIDIARIES  WHOLLY OWNED   OF PURINA      NON-
                                       FEED LLC       OF        PURINA MILLS,   MILLS,     GUARANTOR
                                        PARENT     LOLFF LLC     LLC PARENT      LLC      SUBSIDIARIES  ELIMINATIONS  CONSOLIDATED
                                       ---------  ------------  ------------ ------------ ------------  ------------  ------------
                                                                           ($ IN THOUSANDS)
<S>                                    <C>        <C>           <C>          <C>          <C>           <C>            <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
  Net earnings (loss) ..............   $  25,782    $ 6,431       $  7,083    $   (827)      $   677      $      --    $  39,146
  Adjustments to reconcile net
    earnings (loss) to net cash
    (used) provided by operating
    activities:
    Depreciation and amortization ..      20,364        732          7,559          --           976             --       29,631
    Bad debt recovery ..............        (783)        --             --          --            --             --         (783)
    (Increase) decrease in other
      assets .......................     (69,257)     1,065          7,752      (8,451)          289         63,843       (4,759)
    (Decrease) increase in other
      liabilities ..................      (6,705)        31         (2,427)      2,366           718             --       (6,017)
    Restructuring and impairment
      reversal .....................      (5,728)        --             --          --            --             --       (5,728)
    Equity in (earnings) losses of
      affiliated companies .........      (2,612)        --            (93)        128            --             --       (2,577)
    Minority interest ..............           3        374            (18)         --           519             --          878
  Changes in current assets and
    liabilities, net of
    acquisitions and divestitures:
    Receivables ....................      13,680      4,366         20,140     (12,333)         (724)        12,860       37,989
    Inventories ....................      11,931     (1,555)         3,083      (2,402)         (621)            --       10,436
    Other current assets ...........       6,396       (146)           107          --           (85)            --        6,272
    Accounts payable ...............      (6,258)    (1,435)        (9,357)     23,002          (233)       (17,038)     (11,319)
    Accrued expenses ...............     (12,653)      (515)        (4,677)       (122)          103             --      (17,864)
                                       ---------    -------       --------    --------       -------      ---------    ---------
  Net cash (used) provided by
    operating activities ...........     (25,840)     9,348         29,152       1,361         1,619         59,665       75,305

CASH FLOWS FROM INVESTING
ACTIVITIES:
  Additions to property, plant and
equipment ..........................      (9,467)    (1,490)        (8,178)     (1,264)       (1,532)            --      (21,931)
  Proceeds from sale of property,
    plant and equipment ............       5,082         44           (127)        117            95             --        5,211
                                       ---------    -------       --------    --------       -------      ---------    ---------
  Net cash used by investing
    activities .....................      (4,385)    (1,446)        (8,305)     (1,147)       (1,437)            --      (16,720)

CASH FLOWS FROM FINANCING
ACTIVITIES:
  Increase (decrease) in
    short-term debt ................     362,276     (4,636)            (8)         --           263       (356,866)       1,029
  Proceeds from note payable to
    Land O'Lakes, Inc. .............      58,763         --             --          --         2,066        297,201      358,030
  Payments on note payable to
    Land O'Lakes, Inc. .............    (404,594)    (2,488)       (15,023)         --          (860)            --     (422,965)
  Capital contributed by members ...          --         --          8,340          --            --             --        8,340
                                       ---------    -------       --------    --------       -------      ---------    ---------
  Net cash provided (used) by
    financing activities ...........      16,445     (7,124)        (6,691)         --         1,469        (59,665)     (55,566)
                                       ---------    -------       --------    --------       -------      ---------    ---------
Net (decrease) increase in
  cash and short-term
  investments ......................     (13,780)       778         14,156         214         1,651             --        3,019

Cash and short-term investments
 at beginning of year ..............      (5,994)     3,599             --          --         2,395             --           --
                                       ---------    -------       --------    --------       -------      ---------    ---------
Cash and short-term investments
 at end of year ....................   $ (19,774)   $ 4,377       $ 14,156    $    214       $ 4,046      $      --    $   3,019
                                       =========    =======       ========    ========       =======      =========    =========
</Table>


                                      F-51

<PAGE>


                         LAND O'LAKES FARMLAND FEED LLC

                SUPPLEMENTAL CONSOLIDATING STATEMENT OF OPERATION
                  FOR THE THREE MONTHS ENDED DECEMBER 31, 2000

<Table>
<Caption>
                                              LAND
                                            O'LAKES
                                            FARMLAND    WHOLLY OWNED       NON-
                                            FEED LLC    SUBSIDIARIES     GUARANTOR
                                             PARENT     OF LOLFF LLC    SUBSIDIARIES  CONSOLIDATED
                                           ---------    ------------    ------------  ------------
                                                               ($ IN THOUSANDS)
<S>                                        <C>            <C>             <C>           <C>
Net sales ..............................   $ 347,714      $ 29,041        $ 13,153      $ 389,908
Cost of sales ..........................     315,473        26,140          12,630        354,243
                                           ---------      --------        --------      ---------
Gross profit ...........................      32,241         2,901             523         35,665
Selling, general and administration ....      28,254         1,482             759         30,495
Restructuring and impairment
  charges ..............................       9,700            --              --          9,700
                                           ---------      --------        --------      ---------
(Loss) earnings from operations ........      (5,713)        1,419            (236)        (4,530)
Interest expense, net ..................       1,808           114             130          2,052
Equity in earnings of affiliated
  companies ............................        (305)           (3)             --           (308)
Minority interest in (loss) earnings
  of subsidiaries ......................         (17)          106            (135)           (46)
                                           ---------      --------        --------      ---------

Net (loss) earnings ....................   $  (7,199)     $  1,202        $   (231)     $  (6,228)
                                           =========      ========        ========      =========

</Table>


                                      F-52
<PAGE>


                         LAND O'LAKES FARMLAND FEED LLC

               SUPPLEMENTAL CONSOLIDATING STATEMENT OF CASH FLOWS
                  FOR THE THREE MONTHS ENDED DECEMBER 31, 2000

<Table>
<Caption>
                                                 LAND
                                                O'LAKES    WHOLLY OWNED
                                                FARMLAND   SUBSIDIARIES
                                                FEED LLC       OF         NON-GUARANTOR
                                                 PARENT     LOLFF LLC      SUBSIDIARIES    ELIMINATIONS   CONSOLIDATED
                                               ---------   ------------   --------------   ------------   ------------
                                                                        ($ IN THOUSANDS)
<S>                                            <C>          <C>             <C>              <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net (loss) earnings ......................   $  (7,199)   $  1,202        $  (231)         $    --        $  (6,228)
  Adjustments to reconcile net (loss)
    earnings to net cash (used) provided by
    operating activities:
    Depreciation and amortization ..........       3,062          61            474               --            3,597
    Bad debt expense .......................       1,260          --             --               --            1,260
    (Increase) decrease in other assets ....     (19,141)      6,047         (1,346)             669          (13,771)
    Increase (decrease) in other
      liabilities ..........................      25,630     (12,552)        (1,506)              --           11,572
    Restructuring and impairment charges ...       9,700          --             --               --            9,700
    Equity in earnings of affiliated
      companies ............................        (305)         (3)            --               --             (308)
    Minority interest ......................         (17)        106           (135)              --              (46)
  Changes in current assets and
    liabilities, net of acquisitions
    and divestitures:
    Receivables ............................    (115,772)      1,992            761           (7,118)        (120,137)
    Inventories ............................     (66,889)     (2,098)          (971)              --          (69,958)
    Other current assets ...................     (10,014)       (268)            69               --          (10,213)
    Accounts payable .......................      92,363      (2,651)         3,599             (425)          92,886
    Accrued expenses .......................      22,627         196            245               --           23,068
                                               ---------    --------        -------          -------        ---------
  Net cash (used) provided by operating
    activities .............................     (64,695)     (7,968)           959           (6,874)         (78,578)
CASH FLOWS FROM INVESTING ACTIVITIES:
  Additions to property, plant and
    equipment ..............................     (18,406)        (59)        (2,887)              --          (21,352)
  Proceeds from sale of property, plant
    and equipment ..........................       1,743          --             73               --            1,816
                                               ---------    --------        -------          -------        ---------
  Net cash used by investing activities ....     (16,663)        (59)        (2,814)              --          (19,536)
CASH FLOWS FROM FINANCING ACTIVITIES:
  (Decrease) increase in short-term debt ...     (13,793)      6,917          3,973            6,874            3,971
  Proceeds from note payable to
    Land O'Lakes, Inc. .....................     185,243          --             --               --          185,243
  Payments on note payable to
    Land O'Lakes, Inc. .....................     (91,100)         --             --               --          (91,100)
                                               ---------    --------        -------          -------        ---------
  Net cash provided by financing
    activities .............................      80,350       6,917          3,973            6,874           98,114
                                               ---------    --------        -------          -------        ---------
  Net (decrease) increase in cash and
   short-term investments ..................      (1,008)     (1,110)         2,118               --               --
Cash and short-term investments at
  beginning of year ........................      (3,804)      4,709           (905)              --               --
                                               ---------    --------        -------          -------        ---------
Cash and short-term investments at
  end of year ..............................   $  (4,812)   $  3,599        $ 1,213          $    --        $      --
                                               =========    ========        =======          =======        =========
</Table>


                                      F-53
<PAGE>


                          INDEPENDENT AUDITORS' REPORT

The Board of Directors
Land O'Lakes, Inc:

         We have audited the accompanying consolidated balance sheet of Land
O'Lakes Feed Division (the Company) as of September 30, 2000 and the related
consolidated statements of operations and cash flows for the nine months ended
September 30, 2000. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.

         We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. 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 audit provides a
reasonable basis for our opinion.

         In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Land O'Lakes
Feed Division as of September 30, 2000 and the results of their operations and
their cash flows for the nine months ended September 30, 2000 in conformity with
accounting principles generally accepted in the United States of America.

                                                          /s/ KPMG LLP

Minneapolis, Minnesota
January 28, 2002


                                      F-54
<PAGE>



                           LAND O'LAKES FEED DIVISION

                           CONSOLIDATED BALANCE SHEET

<Table>
<Caption>
                                                           SEPTEMBER 30,
                                                              2000
                                                         ----------------
                                                         ($ IN THOUSANDS)
<S>                                                      <C>
ASSETS

Current assets:
  Cash and short-term investments ....................      $  5,989
  Receivables, net ...................................        74,650
  Inventories ........................................        49,283
  Prepaid expenses and other current assets ..........         3,458
                                                            --------
          Total current assets .......................       133,380
Investments ..........................................        18,577
Property, plant and equipment, net ...................        70,692
Goodwill, net ........................................        11,068
Other assets .........................................        14,765
                                                            --------
          Total assets ...............................      $248,482
                                                            ========

LIABILITIES AND EQUITIES
Current liabilities:
  Notes and short-term obligations ...................      $  6,394
  Accounts payable ...................................        52,649
  Accrued expenses ...................................        13,014
  Other current liabilities ..........................         4,598
                                                            --------
          Total current liabilities ..................        76,655
Other liabilities ....................................         1,754
Minority interests ...................................         2,934
Investment and advances by Land O'Lakes, Inc. ........       167,139
                                                            --------
Total liabilities and investments and advances by
  Land O'Lakes, Inc. .................................      $248,482
                                                            ========
</Table>

          See accompanying notes to consolidated financial statements.


                                      F-55
<PAGE>



                           LAND O'LAKES FEED DIVISION

                      CONSOLIDATED STATEMENT OF OPERATIONS

<Table>
<Caption>
                                                           FOR THE NINE
                                                           MONTHS ENDED
                                                           SEPTEMBER 30,
                                                               2000
                                                         ----------------
                                                         ($ IN THOUSANDS)
<S>                                                      <C>
Net sales ............................................      $ 702,171
Cost of sales ........................................        627,414
Selling and administration ...........................         53,059
                                                            ---------
Earnings from operations .............................         21,698
Interest expense, net ................................            444
Equity in earnings of affiliated companies ...........         (1,410)

Minority interest in earnings of subsidiaries ........            445
                                                            ---------
Earnings before income taxes .........................         22,219
Income tax expense ...................................          2,837
                                                            ---------
Net earnings .........................................      $  19,382
                                                            =========
</Table>

          See accompanying notes to consolidated financial statements.


                                      F-56
<PAGE>


                           LAND O'LAKES FEED DIVISION

                      CONSOLIDATED STATEMENT OF CASH FLOWS

<Table>
<Caption>
                                                                 FOR THE NINE
                                                                    MONTHS
                                                                     ENDED
                                                                 SEPTEMBER 30,
                                                                     2000
                                                              ----------------
                                                              ($ IN THOUSANDS)
<S>                                                               <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net earnings .............................................      $ 19,382
  Adjustments to reconcile net earnings to net cash
     provided by operating activities:
     Depreciation and amortization .........................         9,177
     Bad debt recovery .....................................           (14)
     Increase in other assets ..............................         1,103
     Decrease in other liabilities .........................        (7,670)
     Equity in earnings of affiliated companies ............        (1,410)
     Minority interest .....................................           445
  Changes in current assets and liabilities, net of
     acquisitions and divestitures:
     Receivables ...........................................       (14,481)
     Inventories ...........................................           560
     Other current assets ..................................           885
     Accounts payable ......................................        (2,720)
     Accrued expenses ......................................        (1,530)
     Other current liabilities .............................         4,598
                                                                  --------
  Net cash provided by operating activities ................         8,325
CASH FLOWS FROM INVESTING ACTIVITIES:
  Additions to property, plant and equipment ...............       (13,104)
  Acquisition of investments, net of cash acquired .........        (2,522)
  Proceeds from sale of property, plant and equipment ......           255
                                                                  --------
  Net cash used by investing activities ....................       (15,371)
CASH FLOWS FROM FINANCING ACTIVITIES:
  Increase in short-term debt ..............................         5,100
  Net investments and advances by Land O'Lakes, Inc. .......        (8,393)
                                                                  --------
  Net cash used by financing activities ....................        (3,293)
  Net decrease in cash and short-term investments ..........       (10,339)
Cash and short-term investments at beginning of period .....        16,328
                                                                  --------
Cash and short-term investments at end of period ...........      $  5,989
                                                                  ========
</Table>


          See accompanying notes to consolidated financial statements.


                                      F-57
<PAGE>


                           LAND O'LAKES FEED DIVISION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2000
                           ($ IN THOUSANDS IN TABLES)

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF OPERATIONS

         The Land O'Lakes Feed Division (the "Company") produces both commercial
and lifestyle feed for a variety of animals, including dairy cattle, beef
cattle, swine, poultry, horses, and other specialty animals. The Company is a
division of Land O'Lakes, Inc.

     REVENUE RECOGNITION

     Net sales and allowances for customer discounts are generally recognized
upon shipment of product and transfer of title to the customer. The Company
classifies shipping and handling costs as part of cost of sales.

STATEMENT PRESENTATION

     The accompanying consolidated financial statements have been prepared on
the accrual basis of accounting and include the accounts of the Land O'Lakes
Feed Division and wholly-owned and majority-owned subsidiaries, and limited
liability companies that were part of the initial contribution of Land O'Lakes,
Inc. to Land O'Lakes Farmland Feed LLC in October 2000.

     These financial statements do not necessarily reflect the financial
position and results of operations of the Company in the future or what the
financial position and results of operations would have been had the Company
been an independent entity during the periods presented. Certain costs are
charged to the Company by Land O'Lakes, Inc. and are generally based on
proportional allocations and in certain circumstances based on specific
identification of applicable costs. Intercompany transactions and balances have
been eliminated.

CASH AND SHORT-TERM INVESTMENTS

     Cash and short-term investments include short-term, highly liquid
investments with original maturities of three months or less.

INVENTORIES

     Inventories are valued at the lower of cost or market. Cost is determined
on a first-in, first-out or average cost basis.

DERIVATIVE COMMODITY INSTRUMENTS

     The Company uses derivative commodity instruments, primarily futures
contracts, to reduce the exposure to changes in commodity prices. These
contracts are designated as hedges under SFAS No. 80, "Accounting for Futures
Contracts." Unrealized gains and losses on unsettled contracts were
reflected in receivables. Realized gains and losses were reflected in cost of
sales. The net gains and losses deferred and expensed at September 30, 2000 are
immaterial. The aggregate fair value of our derivatives was ($0.5) million at
September 30, 2000.


                                      F-58
<PAGE>


INVESTMENTS

     The equity method of accounting is used for investments in which the
Company has a significant influence. Generally this represents ownership of at
least 20 percent and not more than 50 percent. Investments in less than 20
percent owned companies are stated at cost.

PROPERTY, PLANT AND EQUIPMENT

     Property, plant and equipment are stated at cost. Depreciation is
calculated using the straight-line method over the estimated useful lives (10 to
20 years for land improvements and buildings, 3 to 5 years for machinery and
equipment, and 5 years for software) of the respective assets in accordance with
the straight-line method. Accelerated methods of depreciation are used for
income tax purposes.

INTANGIBLES

     The excess purchase price paid over net assets of businesses acquired
(goodwill) is generally amortized on a straight-line basis over periods ranging
from 15 to 20 years. Accumulated amortization of goodwill at September 30, 2000
was $0.7 million.

RECOVERABILITY OF LONG-LIVED ASSETS

     The Company assesses the recoverability of goodwill and other long-lived
assets whenever events or changes in circumstances indicate that expected future
undiscounted cash flows may not be sufficient to support the carrying amount of
an asset. The Company deems an asset to be impaired if a forecast of
undiscounted future operating cash flows is less than its carrying amount. If an
asset is determined to be impaired, the loss is measured as the amount by which
the carrying value of the asset exceeds its fair value.

INCOME TAXES

     The Company is part of Land O'Lakes, Inc. which is a non-exempt
agricultural cooperative and is taxed on all non-member earnings and any member
earnings not paid or allocated to members by qualified written notices of
allocation as that term is used in section 1388 of the Internal Revenue Code.
Land O'Lakes, Inc. files a consolidated tax return with its fully taxable
subsidiaries.

     Income taxes have been allocated to the Company on the basis of its taxable
income included in the consolidated Land O'Lakes, Inc. return. Deferred income
taxes have been recognized, using existing tax rates, for temporary differences
between the carrying values of assets and liabilities for financial reporting
purposes and income tax purposes.

ADVERTISING COSTS

     Advertising costs are expensed as incurred. Advertising costs were $2.8
million for the nine months ended September 30, 2000.


RESEARCH AND DEVELOPMENT

     Expenditures for research and development are charged to administration
expense in the year incurred. Total research and development expense for the
nine months ended September 30, 2000 was $1.6 million.

FAIR VALUE OF FINANCIAL INSTRUMENTS

     All financial instruments are carried at amounts that approximate estimated
fair value, except for investments in cooperatives, for which it is not
practicable to provide fair value information.


                                      F-59
<PAGE>

FUTURE ACCOUNTING REQUIREMENTS

     Statement of Financial Accounting Standards No. 133 "Accounting for
Derivative Instruments and Hedging Activities", effective for the year ending
December 31, 2001, will require derivatives to be recorded on the balance sheet
as assets or liabilities, measured at fair value. The Company has determined
that the impact upon adoption will not have a material effect on its
consolidated financial statements.

ACCOUNTING ESTIMATES

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

2.  RECEIVABLES

     A summary of receivables is as follows:

<Table>
<Caption>
                                             SEPTEMBER 30,
                                                 2000
                                             -------------
<S>                                          <C>
Trade accounts ..........................      $77,067
Other ...................................        3,320
                                               -------
                                                80,387
Less allowance for doubtful accounts ....        5,737
                                               -------

Total receivables, net ..................      $74,650
                                               =======
</Table>


3.  INVENTORIES

    A summary of inventories is as follows:

<Table>
<Caption>
                            SEPTEMBER 30,
                               2000
                            ------------
<S>                         <C>
Raw materials ..........      $40,072
Finished goods .........        9,211
                              -------
Total inventories ......      $49,283
                              =======
</Table>

4.  INVESTMENTS

    A summary of investments is as follows:

<Table>
<Caption>
                                              SEPTEMBER 30,
                                                  2000
                                              -------------
<S>                                           <C>
New Feeds, LLC ...........................      $ 3,897
Land O'Lakes/Harvest States Feed, LLC ....        3,500
Iowa River Feeds, LLC ....................        2,943
Pro-Pet, LLC .............................        2,913
Nutri-Tech Feeds, LLC ....................        2,183
Northern Country Feeds, LLC ..............        1,856
CalvaAlto Liquid, LLC ....................          875
Nutra Blend, LLC .........................           --
Other -- LLC's ...........................          410
                                                -------
Total investments ........................      $18,577
                                                =======
</Table>

     All of the above investments are accounted for under the equity method with
the exception of a portion of the investments under the caption "Other LLC's."



                                      F-60
<PAGE>


5.  PROPERTY, PLANT AND EQUIPMENT

    A summary of property, plant and equipment is as follows:

<Table>
<Caption>
                                                SEPTEMBER 30,
                                                   2000
                                                -------------
<S>                                              <C>
Land and land improvements ..................      $  6,354
Buildings and building equipment ............        43,420
Machinery and equipment .....................        81,947
Construction in progress ....................         7,313
                                                   --------
                                                    139,034
Less accumulated depreciation ...............        68,342
                                                   --------
Total property, plant and equipment, net ....      $ 70,692
                                                   ========
</Table>

6.  NOTES AND SHORT-TERM OBLIGATIONS

    A summary of notes and short-term obligations is as follows:

<Table>
<Caption>
                                                SEPTEMBER 30,
                                                    2000
                                                -------------
<S>                                             <C>
Union Bank of California line of credit .....      $3,100

Bank of America line of credit ..............       3,294
                                                   ------
Total notes and short-term obligations ......      $6,394
                                                   ======
</Table>

     The lines of credit are held by a wholly owned and a majority owned
subsidiary of the Company. The Union Bank of California line of credit of $4
million is unsecured and bears interest, at the Company's election, of either
LIBOR plus 1.50% or Union Bank of California's Reference Rate minus 0.50%. This
line terminates on July 5, 2002 and is renewable annually. The Bank of America
line of credit of $7 million, which bears interest of prime less 1.30%,
terminates in September 2001 and is renewable annually.

     Interest paid, net of amount capitalized, for the nine months ended
September 30, 2000 was $0.4 million.

7.  LEASE COMMITMENTS

     Total rental expense was $1.7 million for the nine months ended September
30, 2000. The minimum annual lease payments for the next five calendar years and
thereafter are as follows:

<Table>
<Caption>
        YEAR                AMOUNT
------------------          -------
<S>                         <C>
2001 ...................    $2,389
2002 ...................     3,568
2003 ...................     2,659
2004 ...................     1,661
2005 ...................     1,064
2006 and thereafter ....     2,403
</Table>

     Most of the leases require payment of operating expenses applicable to the
leased assets. Management expects that in the normal course of business most
leases that expire will be renewed or replaced by other leases.

8.  FAIR VALUE OF FINANCIAL INSTRUMENTS

     The following table provides information on the notional amount and fair
value of financial instruments, including derivative financial instruments. The
carrying value of financial instruments classified as current assets and current
liabilities, such as cash and short-term investments, receivables, accounts
payable, notes and short-term obligations, approximate fair value due to the
short-term maturity of the instruments.

<Table>
<Caption>

                                              SEPTEMBER 2000
                                            -----------------
                                            NOTIONAL     FAIR
                                             AMOUNT     VALUE
                                            --------    -----
                                              (IN THOUSANDS)
<S>                                         <C>         <C>
Derivative financial instruments:
  Commodity futures contracts
     Commitments to purchase .........      $ 29,458    $(801)
     Commitments to sell .............      $(12,454)   $ 326
</Table>


                                      F-61
<PAGE>


9.  INCOME TAXES

     The components of the income tax provision are summarized as follows:

<Table>
<Caption>
                           FOR THE NINE
                           MONTHS ENDED
                           SEPTEMBER 30,
                               2000
                           -------------
<S>                        <C>
Current expense:
  Federal ..............      $1,242
  State ................         184
                              ------
                               1,426
Deferred expense .......       1,411
                              ------
Income tax expense .....      $2,837
                              ======
</Table>

     The effective tax rate differs from the statutory rate primarily as a
result of the following:

<Table>
<Caption>
                                               FOR THE NINE
                                               MONTHS ENDED
                                               SEPTEMBER 30,
                                                    2000
                                               -------------
<S>                                            <C>
Statutory rate ..............................      35.0%
Patronage refunds ...........................     (24.3)
State income tax, net of federal benefit ....       1.2
Amortization of goodwill ....................       0.2
Meals and entertainment .....................       0.6
Other, net ..................................       0.1
                                                   ----
Effective tax rate ..........................      12.8%
                                                   ====
</Table>

     The significant components of the deferred tax assets and liabilities are
as follows:

<Table>
<Caption>
                                             SEPTEMBER 30,
                                                 2000
                                             -------------
<S>                                          <C>
Deferred tax assets related to:
  Accrued expenses ......................      $1,142
  Allowance for doubtful accounts .......         446
  Inventories ...........................         304
  Intangible assets .....................         579
                                               ------
Total deferred tax assets ...............       2,471
Deferred tax liabilities related to:
  Joint ventures ........................         351
  Property, plant and equipment .........         678
                                               ------
  Total deferred tax liabilities ........       1,029
                                               ------
  Net deferred tax assets ...............      $1,442
                                               ======
</Table>

     SFAS No. 109 "Accounting for Income Taxes" requires consideration of a
valuation allowance if it is "more likely than not" that benefits of deferred
tax assets will not be realized. Management has determined, based on prior
earnings history and anticipated earnings, that no valuation allowance is
necessary. Income taxes paid for the nine months ended September 30, 2000 were
$1.4 million.

10. INVESTMENT AND ADVANCES BY LAND O'LAKES, INC.

     Investment and advances by Land O'Lakes, Inc. represents Land O'Lakes,
Inc.'s ownership interest in the recorded net assets of the Company. All cash
and intercompany transactions flow through this account. A summary of the
activity for the nine months ended September 30, 2000 is as follows:

<Table>
<Caption>
                                            2000
                                         ---------
<S>                                      <C>
Balance at beginning of period ....      $ 156,150
Net earnings ......................         19,382
Net intercompany activity .........         (8,393)
                                         ---------
Balance at end of period ..........      $ 167,139
                                         =========
</Table>


                                      F-62
<PAGE>


11. PENSION AND OTHER POSTRETIREMENT PLANS

     The Company participates in Land O'Lakes, Inc.'s defined pension plan,
which covers substantially all employees. Plan benefits are generally based on
years of service and employees' highest compensation during five consecutive
years of employment. Annual payments to the pension trust fund are determined in
compliance with the Employee Retirement Income Security Act (ERISA). The
actuarial present values of accumulated plan benefits and net assets available
for benefits relating to only the Company's employees are not available.

     The Company also participates in Land O'Lakes, Inc.'s plans that provide
certain health care benefits for retired employees. Employees become eligible
for these benefits upon meeting certain age and service requirements.
Actuarially determined financial information relating to only the Company's
employees is not available.

     Certain Company employees are eligible for benefits under Land O'Lakes,
Inc.'s defined contribution plans.

     Costs relating to the plans are allocated to the Company by Land O'Lakes,
Inc. The Company's allocated expenses relating to these plans was $2.7 million
for the nine months ended September 30, 2000.

12. COMMITMENTS AND CONTINGENCIES

GUARANTEES OF PRODUCER LOANS

     The Company also guarantees certain loans to large producer financed by
Land O'Lakes Finance Company. The loans totaled $17.4 million at September 30,
2000. A reserve of $2.3 million at September 30, 2000 is included in the
allowance for doubtful accounts. There were no writeoffs related to these loans
in the nine months ended September 30, 2000.

GENERAL

     The Company is currently and from time to time involved in litigation and
environmental claims to the conduct of business. The damages claimed in some of
these cases, are substantial. Although the amount of liability that may result
from these matters cannot be ascertained, the Company does not currently believe
that, in the aggregate, they will result in liabilities material to the
Company's consolidated financial condition, future results of operations or cash
flows.

13. RELATED PARTY TRANSACTIONS

     Costs allocated to the Company by Land O'Lakes, Inc. relate to corporate
services such as legal, insurance administration, tax administration, human
resources, payroll and benefit administration, leasing, public relations, credit
and collections, accounting, and IT support. These costs totaled $4.5 million
for the nine months ended September 30, 2000.

     Sales with unconsolidated subsidiaries of the Company totaled $37.0 million
for the nine months ended September 30, 2000.


14. SUBSEQUENT EVENT

     On October 1, 2000, Land O'Lakes, Inc. and Farmland Industries, Inc.
combined their feed businesses to form Land O'Lakes Farmland Feed LLC. Through
their relative contributions, Land O'Lakes, Inc. and Farmland Industries, Inc.
had ownership interests of 73.7% and 26.3%, respectively. The initial capital
contributions made by each of the members to the Company consisted primarily of
property, plant, and equipment. In October 2000, the Company purchased inventory
from the respective members. The merger was accounted for as a purchase in
accordance with APB No. 16, "Business Combinations." As such, the contributions
of Farmland Industries, Inc. have been recorded at fair value.


                                      F-63
<PAGE>


15. CONSOLIDATING FINANCIAL INFORMATION

     Land O'Lakes, Inc. issued $350 million in senior notes which are guaranteed
by Land O'Lakes, Inc. and certain of its wholly and majority owned subsidiaries,
including the Company, (the "Guarantor Subsidiaries"). Such guarantees are full,
unconditional and joint and several.

     The following supplemental financial information sets forth, on an
unconsolidated basis, balance sheet, statement of operations and cash flow
information for the Company, Guarantor Subsidiaries and the Company's other
subsidiaries (the "Non-Guarantor Subsidiaries"). The supplemental financial
information reflects the investments of the Company in the Guarantor and
Non-Guarantor Subsidiaries using the equity method of accounting.


                                      F-64
<PAGE>


                           LAND O'LAKES FEED DIVISION

                    SUPPLEMENTAL CONSOLIDATING BALANCE SHEET
                               SEPTEMBER 30, 2000

<Table>
<Caption>
                                                LAND
                                            O'LAKES FEED    WHOLLY OWNED     NON-
                                              DIVISION      SUBSIDIARIES   GUARANTOR
                                               PARENT       OF LOL FEED   SUBSIDIARIES  ELIMINATIONS   CONSOLIDATED
                                            ------------    ------------  ------------  ------------   ------------
                                                                        ($ IN THOUSANDS)
<S>                                         <C>             <C>           <C>           <C>            <C>
                                                                            ASSETS
Current assets:
  Cash and short-term investments ......      $    (655)      $ 7,549      $   (905)      $     --       $  5,989
  Receivables, net .....................         77,346        16,704         4,612        (24,012)        74,650
  Inventories ..........................         33,677        11,213         4,393             --         49,283
  Prepaid expenses .....................          2,708           481           269             --          3,458
                                              ---------       -------      --------       --------       --------
          Total current assets .........        113,076        35,947         8,369        (24,012)       133,380
Investments ............................         37,531         7,895            --        (26,849)        18,577
Property, plant and equipment, net .....         58,627         7,205         4,860             --         70,692
Goodwill, net ..........................          5,545         4,500         1,023             --         11,068
Other assets ...........................          8,155         3,926         2,684             --         14,765
                                              ---------       -------      --------       --------       --------
          Total assets .................      $ 222,934       $59,473      $ 16,936       $(50,861)      $248,482
                                              =========       =======      ========       ========       ========

                                                                    LIABILITIES AND EQUITIES

Current liabilities:
  Notes and short-term obligations .....      $   1,715       $ 4,652      $     27       $     --       $  6,394
  Accounts payable .....................         38,891        15,909         2,587         (4,738)        52,649
  Accrued expenses .....................         10,571         1,174         1,269             --         13,014
  Other current liabilities ............          4,598            --            --             --          4,598
                                              ---------       -------      --------       --------       --------
          Total current liabilities ....         55,775        21,735         3,883         (4,738)        76,655
Other liabilities ......................             21        17,516         3,491        (19,274)         1,754
Minority interests .....................             (1)          809         2,126             --          2,934
Investment and advances by Land
  O'Lakes, Inc. ........................        167,139        19,413         7,436        (26,849)       167,139
                                              ---------       -------      --------       --------       --------
Total liabilities and investments
 and advances by Land O'Lakes, Inc. ....      $ 222,934       $59,473      $ 16,936       $(50,861)      $248,482
                                              =========       =======      ========       ========       ========

</Table>


                                      F-65
<PAGE>


                           LAND O'LAKES FEED DIVISION

                SUPPLEMENTAL CONSOLIDATING STATEMENT OF OPERATION
                    FOR NINE MONTHS ENDED SEPTEMBER 30, 2000

<Table>
<Caption>
                                             LAND
                                           O'LAKES
                                             FEED       WHOLLY OWNED        NON-
                                           DIVISION     SUBSIDIARIES     GUARANTOR
                                            PARENT      OF LOL FEED     SUBSIDIARIES   CONSOLIDATED
                                          ---------     ------------    ------------   ------------
                                                              ($ IN THOUSANDS)
<S>                                       <C>           <C>             <C>             <C>
Net sales ..........................      $ 606,550       $ 65,623         $29,998      $ 702,171
Cost of sales ......................        542,612         57,319          27,483        627,414
Selling and administration .........         46,648          4,926           1,485         53,059
                                          ---------       --------         -------      ---------
Earnings from operations ...........         17,290          3,378           1,030         21,698
Interest (income) expense, net .....         (1,106)           881             669            444
Equity in earnings of affiliated
  companies ........................         (1,081)          (329)             --         (1,410)
Minority interest in (loss) earnings
  of subsidiaries ..................             (1)           240             206            445
                                          ---------       --------         -------      ---------
Earnings before income taxes .......         19,478          2,586             155         22,219
Income tax expense .................          2,725             --             112          2,837
                                          ---------       --------         -------      ---------
Net earnings .......................      $  16,753       $  2,586         $    43      $  19,382
                                          =========       ========         =======      =========
</Table>


                                      F-66
<PAGE>


                           LAND O'LAKES FEED DIVISION

               SUPPLEMENTAL CONSOLIDATING STATEMENT OF CASH FLOWS
                  FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000

<Table>
<Caption>

                                                         LAND
                                                     O'LAKES FEED     WHOLLY OWNED
                                                       DIVISION       SUBSIDIARIES   NON-GUARANTOR
                                                        PARENT        OF LOL FEED    SUBSIDIARIES    ELIMINATIONS   CONSOLIDATED
                                                     ------------     -------------  -------------   ------------   ------------
                                                                            ($ IN THOUSANDS)
<S>                                                  <C>              <C>            <C>             <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net earnings ..................................       $ 16,753        $  2,586        $    43        $    --        $ 19,382
  Adjustments to reconcile net earnings
    to net cash provided (used) by
    operating activities:
    Depreciation and amortization ...............          8,290             565            322             --           9,177
    Bad debt recovery ...........................            (14)             --             --             --             (14)
    Decrease (increase) in other assets .........          2,086          (1,833)           850             --           1,103
    (Decrease) increase in other liabilities ....         (9,407)         (2,124)         2,827          1,034          (7,670)
    Equity in earnings of affiliated
      companies .................................         (1,081)           (329)            --             --          (1,410)
    Minority interest ...........................             (1)            240            206             --             445
  Changes in current assets and liabilities,
    net of acquisitions and divestitures:
    Receivables .................................        (11,718)         (9,157)        (1,572)         7,966         (14,481)
    Inventories .................................          7,599          (6,920)          (119)            --             560
    Other current assets ........................          1,095            (156)           (54)            --             885
    Accounts payable ............................        (10,756)         11,585         (1,482)        (2,067)         (2,720)
    Accrued expenses ............................          4,443          (5,944)           (29)            --          (1,530)
    Other current liabilities ...................          4,598              --             --             --           4,598
                                                        --------        --------        -------        -------        --------
  Net cash provided (used) by operating
    activities ..................................         11,887         (11,487)           992          6,933           8,325

CASH FLOWS FROM INVESTING ACTIVITIES:
  Additions to property, plant and
    equipment ...................................        (10,565)         (2,076)          (463)            --         (13,104)
  Acquisition of investments, net of cash
    acquired ....................................         (2,522)             --             --             --          (2,522)
  Proceeds from sale of property, plant and
    equipment ...................................            211              44             --             --             255
                                                        --------        --------        -------        -------        --------
  Net cash used by investing activities .........        (12,876)         (2,032)          (463)            --         (15,371)

CASH FLOWS FROM FINANCING ACTIVITIES:
  Increase (decrease) in short-term debt ........            722           4,652           (274)            --           5,100
  Net investments and advances by
    Land O'Lakes, Inc. ..........................         (7,066)          7,203         (1,597)        (6,933)         (8,393)
                                                        --------        --------        -------        -------        --------
  Net cash (used) provided by financing
    activities ..................................         (6,344)         11,855         (1,871)        (6,993)         (3,293)
                                                        --------        --------        -------        -------        --------
  Net decrease in cash and short-term
    investments .................................         (7,333)         (1,664)        (1,342)            --         (10,339)

Cash and short-term investments at
    beginning of period .........................          5,376           9,213          1,739             --          16,328
                                                        --------        --------        -------        -------        --------
Cash and short-term investments at
    end of period ...............................       $ (1,957)       $  7,549        $   397        $    --        $  5,989
                                                        ========        ========        =======        =======        ========
</Table>


                                      F-67


<PAGE>



                          INDEPENDENT AUDITORS' REPORT

The Board of Managers
Purina Mills, LLC:

We have audited the accompanying consolidated balance sheets of Purina Mills,
LLC and subsidiaries as of December 31, 2002 and 2001, and the related
consolidated statements of operations, cash flows and equities for the year
ended December 31, 2002, for the period October 12, 2001 through December 31,
2001, for the period January 1, 2001 through October 11, 2001, for the six
months ended December 31, 2000 and for the six months ended June 30, 2000. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

         We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Purina
Mills, LLC and subsidiaries as of December 31, 2002 and 2001, and the results of
their operations and their cash flows for the year ended December 31, 2002, for
the period October 12, 2001 through December 31, 2001, for the period January 1,
2001 through October 11, 2001, for the six months ended December 31, 2000 and
for the six months ended June 30, 2000 in conformity with accounting principles
generally accepted in the United States of America.

         As discussed in Note 1 to the consolidated financial statements, the
Company's plan of reorganization under Chapter 11 of the United States
Bankruptcy Code became effective on June 30, 2000. As a result of the adoption
of "fresh-start" reporting, the consolidated financial information for the
period after the emergence from bankruptcy is presented on a different cost
basis than for the periods before the emergence from bankruptcy and, therefore,
is not comparable.

         As discussed in Note 1 to the consolidated financial statements, in
2002, the Company adopted the provisions of the Financial Accounting Standards
Board's Statement of Financial Accounting Standards No. 142, "Goodwill and Other
Intangible Assets." In 2001, the Company adopted the provisions of the Financial
Accounting Standards Board's Statement of Financial Accounting Standards No.
133, "Accounting for Derivative Instruments and Hedging Activities," as amended
by Statement No. 138, "Accounting for Certain Derivative Instruments and Certain
Hedging Activities"; Statement No. 141, "Business Combinations"; certain
provisions of Statement No. 142, "Goodwill and Other Intangible Assets," as
required for goodwill and intangible assets resulting from business combinations
consummated after June 30, 2001; and Statement No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets."

                                              /s/ KPMG LLP

Minneapolis, Minnesota
January 30, 2003



                                      F-68
<PAGE>



                               PURINA MILLS, LLC

                          CONSOLIDATED BALANCE SHEETS

<Table>
<Caption>
                                                                    DECEMBER 31,
                                                             ---------------------------
                                                                 2002           2001
                                                             ------------   ------------
                                                                  ($ IN THOUSANDS)
<S>                                                          <C>            <C>
ASSETS

Current assets:
  Cash and short-term investments ........................   $      6,654   $     14,370
  Receivables, net .......................................         23,990         22,097
  Receivable from legal settlement .......................          6,000             --
  Inventories ............................................         47,620         45,795
  Prepaid expenses and other current assets ..............          4,079          2,423
  Note receivable from Land O'Lakes Farmland Feed LLC ....         57,759         15,445
                                                             ------------   ------------
          Total current assets ...........................        146,102        100,130
Investments ..............................................          5,491         11,105
Property, plant and equipment, net .......................        156,291        220,567
Goodwill .................................................        105,202         86,872
Other intangibles, net ...................................         94,044         99,169
Other assets .............................................         21,547         19,684
                                                             ------------   ------------
          Total assets ...................................   $    528,677   $    537,527
                                                             ============   ============

LIABILITIES AND EQUITIES

Current liabilities:
  Accounts payable .......................................   $     53,308   $     53,591
  Accrued expenses .......................................         24,995         19,012
                                                             ------------   ------------
          Total current liabilities ......................         78,303         72,603
Notes payable -- Land O'Lakes Farmland Feed LLC ..........             --         58,763
Employee benefits and other liabilities ..................         29,493         32,980
Minority interests .......................................             29             28
Equities:
  Contributed capital ....................................        367,288        366,897
  Retained earnings ......................................         53,564          6,256
                                                             ------------   ------------
          Total equities .................................        420,852        373,153
                                                             ------------   ------------
Commitments and contingencies
Total liabilities and equities ...........................   $    528,677   $    537,527
                                                             ============   ============
</Table>


           See accompanying notes to consolidated financial statements



                                      F-69
<PAGE>


                 PURINA MILLS, LLC (FORMERLY PURINA MILLS, INC.)

                      CONSOLIDATED STATEMENTS OF OPERATIONS

<Table>
<Caption>
                                                                                                  POST-EMERGENCE      PRE-EMERGENCE
                                              POST-LOL           POST-LOL         PRE-LOL             PRE-LOL            PRE-LOL
                                              OWNERSHIP          OWNERSHIP        OWNERSHIP          OWNERSHIP          OWNERSHIP
                                              ---------          ---------        ---------          ---------          ---------
                                                 YEAR         OCTOBER 12, 2001  JANUARY 1, 2001      SIX MONTHS         SIX MONTHS
                                                ENDED             THOUGH           THROUGH             ENDED              ENDED
                                           DECEMBER 31, 2002  DECEMBER 31, 2001 OCTOBER 11, 2001  DECEMBER 31, 2000  JUNE 30, 2000
                                           -----------------  ----------------- ----------------  -----------------  -------------
                                                              ($ IN THOUSANDS)
<S>                                        <C>                <C>               <C>               <C>                <C>
Net sales ................................     $    889,672      $    202,864      $    666,421      $    425,259      $    414,546
Cost of sales ............................          741,345           171,149           548,449           345,268           337,425
                                               ------------      ------------      ------------      ------------      ------------
Gross profit .............................          148,327            31,715           117,972            79,991            77,121
Selling, general and administration ......          108,612            25,571           122,190            67,249            73,869
Restructuring and impairment charges .....               --                --                --             3,534            24,924
                                               ------------      ------------      ------------      ------------      ------------
Earnings (loss) from operations ..........           39,715             6,144            (4,218)            9,208           (21,672)
Interest (income) expense, net ...........           (1,197)             (129)           13,463             7,027             9,759
Gain on legal settlements ................           (7,642)               --            (4,472)             (345)          (24,398)
Equity in loss (earnings) of affiliated
  companies ..............................            1,212                35               (12)               91              (112)
Minority interest in earnings (loss) of
  subsidiaries ...........................               34               (18)               85               (55)              (81)
                                               ------------      ------------      ------------      ------------      ------------
Earnings (loss) before income taxes,
  extraordinary item and "fresh start"
  revaluation ............................           47,308             6,256           (13,282)            2,490            (6,840)
Income tax expense .......................               --                --               854             2,971                --
                                               ------------      ------------      ------------      ------------      ------------
Earnings (loss) before extraordinary
  item and "fresh start" revaluation .....           47,308             6,256           (14,136)             (481)           (6,840)
Extraordinary item-gain on
  extinguishment of debt, net of income
  tax expense of $59,582 .................               --                --                --                --          (159,359)
Revaluation of assets and liabilities
  pursuant to the adoption of "fresh-
  start" reporting .......................               --                --                --                --            (2,483)
                                               ------------      ------------      ------------      ------------      ------------
Net earnings (loss) ......................     $     47,308      $      6,256      $    (14,136)     $       (481)     $    155,002
                                               ============      ============      ============      ============      ============
</Table>

           See accompanying notes to consolidated financial statements






                                      F-70
<PAGE>




                 PURINA MILLS, LLC (FORMERLY PURINA MILLS, INC.)

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<Table>
<Caption>
                                                                                                  POST-EMERGENCE      PRE-EMERGENCE
                                              POST-LOL           POST-LOL         PRE-LOL             PRE-LOL            PRE-LOL
                                              OWNERSHIP          OWNERSHIP        OWNERSHIP          OWNERSHIP          OWNERSHIP
                                              ---------          ---------        ---------          ---------          ---------
                                                  YEAR        OCTOBER 12, 2001  JANUARY 1, 2001      SIX MONTHS         SIX MONTHS
                                                 ENDED            THOUGH           THROUGH             ENDED              ENDED
                                            DECEMBER 31, 2002  DECEMBER 31, 2001 OCTOBER 11, 2001  DECEMBER 31, 2000  JUNE 30, 2000
                                            -----------------  ----------------- ----------------  -----------------  -------------
                                                                      ($ IN THOUSANDS)
<S>                                          <C>               <C>               <C>               <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net earnings (loss) ......................     $     47,308      $      6,256      $    (14,136)     $       (481)     $  155,002
  Adjustments to reconcile net earnings
   (loss) to net cash provided by
   operating activities
   Gain on extinguishment of debt ..........               --                --                --                --        (159,359)
   Gain on revaluation pursuant to
      fresh-start reporting ................               --                --                --                --          (2,483)
     Depreciation and amortization .........           27,885             7,559            35,217            21,352          28,612
     Bad debt expense ......................              425                --                --                --              --
     Receivable from legal settlement ......           (6,000)               --                --                --              --
     (Increase) decrease in other assets ...           (6,761)             (699)            2,832              (723)          2,875
     (Decrease) increase in other liabilities          (4,662)              (61)              (15)           (4,308)          1,809
     Equity in loss (earnings) of affiliated
        companies ..........................            1,212                35               (12)               91            (112)
     Minority interest .....................               34               (18)               85               (55)            (81)
     Other .................................              865                --            (4,898)            3,138          (5,616)
  Changes in current assets and liabilities,
    net of acquisitions and divestitures:
     Receivables ...........................           (2,318)            7,807             8,379            (3,445)          8,810
     Inventories ...........................           (1,934)              681             3,523              (344)          8,339
     Other current assets ..................           (2,732)              107              (546)              135             (85)
     Accounts payable ......................             (283)           13,645           (23,678)           25,111         (15,425)
     Accrued expenses ......................          (12,828)           (4,799)             (873)          (18,002)          8,495
                                                 ------------      ------------      ------------      ------------      ----------
  Net cash provided by operating activities            40,211            30,513             5,878            22,469          30,781
CASH FLOWS FROM INVESTING ACTIVITIES:
  Additions to property, plant and equipment           (7,380)           (9,442)          (11,698)          (13,510)         (8,642)
  Payments for investments .................              (15)              (10)             (645)             (851)           (504)
  Proceeds from investments ................              608                --             1,102               578             435
  Proceeds from sale of property, plant and
   equipment ...............................               --                --                --                --          15,757
                                                 ------------      ------------      ------------      ------------      ----------
  Net cash (used) provided by investing
   activities ..............................           (6,787)           (9,452)          (11,241)          (13,783)          7,046

CASH FLOWS FROM FINANCING ACTIVITIES:
  Payments on note payable to Land O'Lakes
     Farmland Feed LLC .....................          (56,976)          (15,023)               --                --              --
  Proceeds from note payable to Land O'Lakes
     Farmland Feed LLC .....................           15,445                --           132,062                --              --
  Payments on term loan ....................               --                (8)         (156,023)          (15,025)       (103,021)
  Capital contributions by members .........              391                --                --                --              --
  Other ....................................               --                --                --               852          60,251
                                                 ------------      ------------      ------------      ------------      ----------
   Net cash used by financing activities ...          (41,140)          (15,031)          (23,961)          (14,173)        (42,770)
   Net (decrease) increase in cash and
    short-term investments .................           (7,716)            6,030           (29,324)           (5,487)         (4,943)
Cash and short-term investments at beginning
 of period .................................           14,370             8,340            37,664            43,151          48,094
                                                 ------------      ------------      ------------      ------------      ----------
Cash and short-term investments at end of
  period ...................................     $      6,654      $     14,370      $      8,340      $     37,664      $   43,151
                                                 ============      ============      ============      ============      ==========
</Table>

           See accompanying notes to consolidated financial statements




                                      F-71
<PAGE>


                 PURINA MILLS, LLC (FORMERLY PURINA MILLS, INC.)

                       CONSOLIDATED STATEMENTS OF EQUITIES

<Table>
<Caption>
                                                                      ADDITIONAL                       RETAINED
                                                       COMMON          PAID-IN        CONTRIBUTED      (DEFICIT)
                                                       STOCK           CAPITAL          CAPITAL         EARNINGS           TOTAL
                                                    ------------     ------------     ------------    ------------     ------------
                                                              ($ IN THOUSANDS)
<S>                                                 <C>              <C>              <C>             <C>              <C>
BALANCE DECEMBER 31, 1999 ......................    $          1     $    109,499     $         --    $   (325,302)    $   (215,802)
     Capital contribution ......................                           60,000                                            60,000
     Net income - six months ended June 30,
     2000 ......................................                                                           155,002          155,002
     "Fresh-start" adjustments:
        Cancellation of former equity
    and elimination of deficit .................              (1)        (169,499)              --         169,500               --
          Issuance of new equity ...............             100          184,900                               --          185,000
                                                    ------------     ------------     ------------    ------------     ------------
BALANCE JUNE 30, 2000 ..........................             100          184,900               --            (800)         184,200

POST-EMERGENCE
     Net loss - six months ended December 31,
     2000 ......................................                                                              (481)            (481)
     Other .....................................                                                              (831)            (831)
                                                    ------------     ------------     ------------    ------------     ------------
BALANCE DECEMBER 31, 2000 ......................             100          184,900               --          (2,112)         182,888
     Net loss ..................................                                                           (14,136)         (14,136)
     Land O'Lakes acquisition ..................            (100)        (184,900)         366,897          16,248          198,145
                                                    ------------     ------------     ------------    ------------     ------------
BALANCE OCTOBER 11, 2001 .......................              --               --          366,897              --          366,897
     Net earnings ..............................                                                             6,256            6,256
                                                    ------------     ------------     ------------    ------------     ------------
BALANCE DECEMBER 31, 2001 ......................              --               --          366,897           6,256          373,153
     Capital contribution ......................                                               391                              391
     Net earnings ..............................                                                            47,308           47,308
                                                    ------------     ------------     ------------    ------------     ------------
BALANCE DECEMBER 31, 2002 ......................    $         --     $         --     $    367,288    $     53,564     $    420,852
                                                    ============     ============     ============    ============     ============
</Table>

          See accompanying notes to consolidated financial statements.




                                      F-72
<PAGE>



                 PURINA MILLS, LLC (FORMERLY PURINA MILLS, INC.)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           ($ IN THOUSANDS IN TABLES)


1. ORGANIZATION

ORGANIZATION

         Pursuant to the Agreement and Plan of Merger among PM Holdings
Corporation ("Holdings"), Koch Agriculture Company ("Koch Agriculture") and Arch
Acquisition Corporation, dated as of January 9, 1998 (the "Merger Agreement"),
Arch Acquisition Corporation was merged with and into Holdings (the "Merger"),
with Holdings being the surviving corporation.

         As a result of the Merger, which closed on March 12, 1998, Koch
Agriculture owned 100% of Holdings, which owned 100% of Purina Mills. The
sources of funds required to consummate the Merger included $350 million of
Senior Subordinated Notes ("Notes").

         Faced with an inability to service future interest payments on the
Notes on October 28, 1999 (the "Petition Date"), Holdings and certain of its
subsidiaries (the "Debtor") filed voluntary petitions for reorganization (the
"Reorganization Cases") under Chapter 11 of the United States Bankruptcy Code,
as amended, with the United States Bankruptcy Court for the District of Delaware
(the "Bankruptcy Court").

         On January 18, 2000, Purina Mills filed a Form 8-K with the Securities
and Exchange Commission, which included a Plan of Reorganization (the "Plan")
and a disclosure statement. The Plan provided for, among other things, the
merger of Purina Mills with and into Holdings prior to the effective date of the
Plan. By operation of the merger, Holdings would succeed to the business
previously conducted by Purina Mills and would change its name to Purina Mills,
Inc. As described in the disclosure statement, a settlement was also negotiated
between Koch Industries, Inc. ("Koch Industries") and a committee representing
holders of Notes ("Noteholders") whereby Koch Industries agreed to make a
capital contribution of $60 million to the Company. The Plan, as amended, was
approved by the creditors and confirmed on April 5, 2000 by the Bankruptcy
Court.

         On May 19, 2000, Purina Mills merged with and into Holdings with
Holdings being the surviving corporation, renamed Purina Mills, Inc. (the
"Company"). The Company's request to list its stock on the NASDAQ National
Market was granted on June 26, 2000, and the Plan became effective on June 29,
2000 (the "Effective Date"). The Company emerged from Chapter 11 as of the
beginning of business on June 30, 2000.

         As of the Effective Date, in accordance with AICPA Statement of
Position 90-7, Financial Reporting by Entities in Reorganization Under the
Bankruptcy Code ("SOP 90-7"), the Company was required to adopt "fresh-start"
reporting and reflect the effects of such adoption in the financial statements
for the period through the Effective Date. In adopting fresh-start reporting,
the Company, with the assistance of its financial advisors, was required to
determine its reorganization value, which represents the fair value of the
entity before considering liabilities and approximates the amount a willing
buyer would pay for the net assets of the Company immediately after its
emergence from Chapter 11 status. The reorganization value of the Company was
determined by consideration of several factors, including the Company's
historical financial performance, its business plan and financial projections,
its fiscal 2000 budget, publicly available data of companies whose operations
are generally comparable to the operations of the Company and economic and
industry data trends. As a result of adopting "fresh-start" reporting, the
December 31, 1999 consolidated balance sheet is not comparable to the December
31, 2000 consolidated balance sheet. Operating results subsequent to the
Effective Date are comparable to the operating results prior to the Effective
Date except for amortization of intangibles, interest expense, restructuring
expenses, benefit for income taxes and extraordinary items.

         The adjustments to reflect the consummation of the Plan, including the
gain on extinguishment of debt related to pre-petition liabilities and the
adjustment to record assets and liabilities at their fair values (including the





                                      F-73
<PAGE>


establishment of reorganization value in excess of amounts allocable to
identifiable assets), have been reflected in the consolidated financial
statements as of the Effective Date. As a result of such adjustments, $330.0
million of retained deficit was eliminated.

         As of the Effective Date, the Company was authorized to issue
20,000,000 shares of its $0.01 par value common stock. On or about August 15,
2000 and October 30, 2000, the Company made distributions of cash and partial
distributions of new common stock of the Company to holders of claims that had
been allowed to that date. The Company issued 9,910,000 shares to holders of
allowed unsecured claims and 90,000 shares to certain employees under the
Company's Key Employee Retention Program, of which 8,410,017 shares have been
distributed and the remaining 1,589,983 shares are held in escrow by the
transfer agent. Further distributions were made quarterly until all allowed
claims have been satisfied.

         From January 1, 2000 through December 31, 2000, the Company incurred
$28.4 million in restructuring costs. These expenses included advisory and
financing fees and expenses incurred in connection with the Reorganization
Cases, including costs to re-establish the Company's payroll and benefits
programs, moving costs to centralize certain administrative functions and
relocate commodity purchasing personnel from Koch Agriculture including payments
made to Koch Industries for transitional services, severance costs in connection
with restructuring to reduce future administrative costs, and compensation
expense under the Key Employee Retention Plan. A summary of such expenses is as
follows (in thousands):


<Table>
<Caption>
                                                    POST-EMERGENCE       PRE-EMERGENCE
                                                 ------------------   ------------------
                                                      SIX MONTHS          SIX MONTHS
                                                        ENDED               ENDED
                                                  DECEMBER 31, 2000      JUNE 30, 2000
                                                 ------------------   ------------------
<S>                                              <C>                  <C>
Advisory fees and expenses ...................   $            1,108   $           11,438
Moving, severance and service costs ..........                   32                7,006
Compensation expense .........................                2,394                6,480
                                                 ------------------   ------------------
                                                 $            3,534   $           24,924
                                                 ==================   ==================
</Table>


         On October 11, 2001, pursuant to an Agreement and Plan of Merger, LOL
Holdings III, Inc., an indirect wholly-owned subsidiary of Land O'Lakes, Inc.
was merged into Purina Mills, Inc. ("PMI"), with PMI being the surviving
corporation. As a result of the merger, LOL Holdings II, Inc., a wholly-owned
subsidiary of Land O'Lakes, Inc. owned 100% of PMI. Subsequently, PMI was
reorganized as a limited liability company, renamed Purina Mills, LLC ("Purina
Mills") and LOL Holdings II, Inc. contributed the business to Land O'Lakes
Farmland Feed LLC. Upon the formation of Purina Mills, LLC, provisions for
income taxes were no longer recorded since the taxable operations pass directly
to the owner.

         The merger has been accounted for as a purchase transaction in
accordance with Statement of Financial Accounting Standards No. 141 ("SFAS 141")
and, accordingly, the consolidated financial statements for periods subsequent
to October 11, 2001 reflect the purchase price, including transaction costs,
allocated to tangible and intangible assets acquired and liabilities assumed,
based on their estimated fair value as of October 11, 2001. The consolidated
financial statements for periods prior to October 11, 2001 have been prepared on
the predecessor cost basis of Purina Mills, LLC.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

REVENUE RECOGNITION

         Sales are recognized primarily upon shipment of product to the
customer.

STATEMENT PRESENTATION

         The consolidated financial statements include the accounts of the
Company and wholly owned and majority-owned subsidiaries and limited liability
companies. Intercompany transactions and balances have been eliminated. Certain
reclassifications have been made to the 2001 and 2000 consolidated financial
statements to conform to the 2002 presentation.





                                      F-74
<PAGE>


CASH AND SHORT-TERM INVESTMENTS

         Cash and short-term investments include short-term, highly liquid
investments with original maturities of three months or less.

INVENTORIES

         Inventories are valued at the lower of cost or market. Cost is
determined on an average cost basis.

DERIVATIVE COMMODITY INSTRUMENTS

         The Company uses derivative commodity instruments, primarily futures
contracts, to reduce the exposure to changes in commodity prices. These
contracts are not designated as hedges under Statement of Financial Accounting
Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging
Activities". The futures contracts are marked to market each month and gains and
losses are recognized in earnings.

INVESTMENTS

         The equity method of accounting is used for investments in which the
Company has significant influence. Generally, this represents ownership of at
least 20 percent and not more than 50 percent. Investments in less than 20
percent owned companies are stated at cost.

PROPERTY, PLANT AND EQUIPMENT

         Property, plant and equipment are stated at cost. Depreciation is
calculated using the straight-line method over the estimated useful lives (15 to
30 years for land improvements and buildings and 5 to 10 years for machinery and
equipment) of the respective assets.

GOODWILL AND OTHER INTANGIBLE ASSETS

         Goodwill represents the excess of the purchase price over the fair
value of acquired businesses. Upon adoption of the remaining provisions of SFAS
No. 142, "Goodwill and Other Intangible Assets," on January 1, 2002, the Company
no longer amortizes goodwill. See Note 8 for pro forma effects of adopting this
standard.

         Other intangible assets consist primarily of trademarks, patents, and
agreements not to compete. Certain trademarks are no longer amortized because
they have indefinite lives. The remaining other intangible assets are amortized
using the straight-line method over the estimated useful lives, ranging from 3
to 12 years.

RECOVERABILITY OF LONG-LIVED ASSETS

         The test for goodwill impairment is a two-step process, and is
performed on at least an annual basis. The first step is a comparison of the
fair value of the reporting unit (as defined) with its carrying amount,
including goodwill. If this step reflects impairment, then the loss would be
measured as the excess of recorded goodwill over its implied fair value. Implied
fair value is the excess of fair value of the reporting unit over the fair value
of all identified assets and liabilities. The Company assesses the
recoverability of other long-lived assets annually or whenever events or changes
in circumstance indicate that expected future undiscounted cash flows might not
be sufficient to support the carrying amount of an asset. The Company deems an
asset to be impaired if a forecast of undiscounted future operating cash flows
is less than its carrying amount. If an asset is determined to be impaired, the
loss is measured as the amount by which the carrying value of the asset exceeds
its fair value.

INCOME TAXES

         The Company's taxable operations pass directly to the joint venture
owners under the LLC organization. As a result, no provision for income taxes is
provided in the accompanying consolidated statement of operations.




                                      F-75
<PAGE>

ADVERTISING AND PROMOTION COSTS

         Advertising costs are expensed as incurred. Advertising costs were
$12.0 million, $2.5 million, $8.2 million, $5.6 million and $5.2 million for the
year ended December 31, 2002, for the period October 12, 2001 through December
31, 2001, for the period January 1, 2001 through October 11, 2001, for the six
months ended December 31, 2000 and the six months ended June 30, 2000,
respectively.

RESEARCH AND DEVELOPMENT

         Expenditures for research and development are charged to expense in the
year incurred. Total research and development expenses for the year ended
December 31, 2002, for the period October 12, 2001 through December 31, 2001,
for the period January 1, 2001 through October 11, 2001, for the six months
ended December 31, 2000 and the six months ended June 30, 2000 were $8.4
million, $2.3 million, $6.1 million, $3.8 million and $3.4 million,
respectively.

RECENT ACCOUNTING PRONOUNCEMENTS

         The Company adopted the remaining provisions of SFAS 142, "Goodwill and
Other Intangible Assets," on January 1, 2002. Under SFAS 142, goodwill and other
intangible assets that have indefinite lives are no longer amortized except for
goodwill related to the formation of joint ventures, but rather will be tested
for impairment at least annually in accordance with the provisions of the
standard. See Note 8 for additional information on the adoption of SFAS 142.

         In June 2002, the FASB issued SFAS 146, "Accounting for Costs
Associated with Exit or Disposal Activities." The standard requires that a
liability for a cost associated with an exit or disposal activity be recognized
and measured initially at fair value when the liability is incurred. Under
existing accounting literature, certain costs for exit activities were
recognized at the date a company committed to an exit plan. The provisions of
the standard are effective for exit or disposal activities initiated after
December 31, 2002. The standard is generally expected to delay recognition of
certain exit related costs.

         In November 2002, the FASB issued FASB Interpretation No. 45 ("FIN
45"), "Guarantor's Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others ("The Interpretation").
The Interpretation requires that upon issuance of certain guarantees, the
guarantor must recognize a liability for the fair value of the obligation it
assumes under that guarantee. The Interpretation also requires additional
disclosures by a guarantor in its interim and annual financial statements about
the obligations associated with guarantees issued. The disclosure requirements
are effective for financial statements of interim or annual periods ending after
December 15, 2002, and have been included in Note 12 on page F-13. The
recognition and measurement provisions are effective on a prospective basis to
guarantees issued or modified after December 31, 2002.

ACCOUNTING ESTIMATES

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

3. RECEIVABLES

         A summary of receivables at December 31 is as follows:

<Table>
<Caption>
                                                  2002         2001
                                               ----------   ----------
<S>                                            <C>          <C>
Notes from sale of trade receivables
(see Note 4) ...............................   $   26,717   $   16,937

Other ......................................        3,347       10,809
                                               ----------   ----------
                                                   30,064       27,746
Less allowance for doubtful accounts .......        6,074        5,649
                                               ----------   ----------
Total receivables, net .....................   $   23,990   $   22,097
                                               ==========   ==========
</Table>




                                      F-76
<PAGE>

4.  RECEIVABLES PURCHASE FACILITY

         In December 2001, Land O'Lakes, Inc., Land O'Lakes Farmland Feed LLC,
and Purina Mills, LLC established a $100.0 million receivables purchase facility
with CoBank, ACB (CoBank). A wholly owned unconsolidated special purpose entity,
Land O'Lakes Farmland Feed SPV, LLC, (SPE), was established to purchase certain
receivables from the Company. CoBank has been granted an interest in the
receivables owned by the SPE. The transfers of the receivables from the Company
to the SPE are structured as sales and, accordingly, the receivables transferred
to the SPE are not reflected in the Company's consolidated balance sheet.
However, the Company retains the credit risk related to the repayment of the
notes receivable with the SPE, which in turn is dependent upon the credit risk
of the SPE's receivables. Accordingly, the Company has retained reserves for
estimated losses. The Company expects no significant gains or losses from the
sale of the receivables. At December 31, 2002, no amounts were outstanding under
this facility and $100.0 million remained available. The total accounts
receivable sold by the Company during 2002 and 2001 were $942.8 million and $0.0
million, respectively.

5. INVENTORIES

         A summary of inventories at December 31 is as follows:

<Table>
<Caption>
                                        2002          2001
                                   ------------   ------------
<S>                                <C>            <C>
Raw materials ..................   $     33,207   $     34,079
Finished goods .................         14,413         11,716
                                   ------------   ------------
Total inventories ..............   $     47,620   $     45,795
                                   ============   ============
</Table>

6.  INVESTMENTS

         The Company's investments at December 31 are as follows:

<Table>
<Caption>
                                            2002          2001
                                       ------------   ------------
<S>                                    <C>            <C>
Harmony Farms, LLC .................   $      2,435   $      3,969
T-PM Holding Company ...............             --          1,290
Northern Colorado Feed, LLC ........             --          1,210
ESSV, LLC ..........................            893             --
Alliance Milk Products, LLC ........             --            874
Eastern Block, Inc. ................            524            545
Y-Not, LLC .........................            579            560
Eastgate Feed and Grain, LLC .......            296            214
Eslabon Companies ..................            165            225
Other ..............................            599          2,218
                                       ------------   ------------
Total investments ..................   $      5,491   $     11,105
                                       ============   ============
</Table>

7.  PROPERTY, PLANT AND EQUIPMENT

         A summary of property plant and equipment at December 31 is as follows:


<Table>
<Caption>
                                                 2002          2001
                                             ------------   ------------
<S>                                          <C>            <C>
Land and land improvements ...............   $     17,167   $     11,041
Buildings and building equipment .........         52,766         65,745
Machinery and equipment ..................        108,917        140,207
Construction in progress .................          8,496         10,138
                                             ------------   ------------
                                                  187,346        227,131
Less accumulated depreciation ............         31,055          6,564
                                             ------------   ------------
Total property, plant and equipment,
    net .................................    $    156,291   $    220,567
                                             ============   ============
</Table>





                                      F-77
<PAGE>

8. GOODWILL AND OTHER INTANGIBLE ASSETS

GOODWILL The Company adopted the remaining provisions of SFAS No. 142 on January
1, 2002. Had SFAS No. 142 been effective January 1, 2000, net earnings for 2001
and 2000 would have been reported as follows:




<Table>
<Caption>
                                             POST-LOL          POST-LOL           PRE-LOL           PRE-LOL             PRE-LOL
                                             OWNERSHIP         OWNERSHIP          OWNERSHIP         OWNERSHIP           OWNERSHIP
                                          ----------------  -----------------  ----------------  ------------------  -------------
                                                YEAR        OCTOBER 12, 2001   JANUARY 1, 2001      SIX MONTHS        SIX MONTHS
                                               ENDED             THOUGH           THROUGH             ENDED              ENDED
                                         DECEMBER 31, 2002  DECEMBER 31, 2001  OCTOBER 11, 2001   DECEMBER 31, 2000  JUNE 30, 2000
                                         -----------------  -----------------  ----------------   -----------------  -------------
<S>                                       <C>               <C>                <C>                <C>                <C>
Net earnings (loss) .................     $         47,308      $       6,256      $    (14,136)      $        (481)  $    155,002
Add back: Goodwill amortization
 net  of tax ........................                   --                 --             5,070               3,315             --
                                          ----------------      -------------      ------------       -------------    -----------
Net earnings (loss) .................     $         47,308      $       6,256      $     (9,066)      $       2,834    $   155,002
                                          ================      =============      ============       =============    ===========
</Table>

         The changes in the carrying amount of goodwill for the year ended
December 31, 2002, are as follows:

<Table>
<Caption>
<S>                                                <C>
  Balance as of January 1, 2002 ................   $   86,872
  Reallocation of purchase price ...............       18,330
                                                   ----------
 Balance as of December 31, 2002 ...............   $  105,202
                                                   ==========
</Table>

         The reallocation of the purchase price was primarily the result of
finalizing the appraisals related to the merger with LOL Holdings III, Inc.

OTHER INTANGIBLE ASSETS A summary of other intangible assets at December 31 is
as follows:

<Table>
<Caption>
                                                                                               2002           2001
                                                                                           ------------   ------------
<S>                                                                                        <C>            <C>
       Amortized other intangible assets:
         Patents, less accumulated amortization of $1,395 and $1,467, respectively .....   $     14,978   $     16,747
         Other intangible assets,  less accumulated amortization of $670 and $3,242,
          respectively .................................................................          2,103          5,459
                                                                                           ------------   ------------
       Total amortized other intangible assets .........................................         17,081         22,206
       Total non-amortized other intangible assets-trademarks ..........................         76,963         76,963
                                                                                           ------------   ------------
       Total other intangible assets ...................................................   $     94,044   $     99,169
                                                                                           ============   ============
</Table>

         Amortization expense for the year ended December 31, 2002, the period
October 12, 2001 through December 31, 2001, and the period January 1, 2001
through October 11, 2001 was $3.3 million, $1.0 million, and $5.0 million,
respectively. The estimated amortization expense related to other intangible
assets subject to amortization for the next five years will approximate $1.7
million annually. The weighted-average life of the intangible assets subject to
amortization is approximately 13 years.

9. FAIR VALUE OF FINANCIAL INSTRUMENTS

         The following table provides information on the notional amount and
fair value of financial instruments, including derivative financial instruments.
The carrying value of financial instruments classified as current assets and
current liabilities, such as cash and short-term investments, receivables,
accounts payable, notes and short-term obligations, approximate fair value due
to the short-term maturity of the instruments.

         The Company enters into futures and options contract derivatives to
reduce risk on the market value of inventory and fixed or partially fixed
purchase and sale contracts. The notional or contractual amount of derivatives
provides an indication of the extent of the Company's involvement in such
instruments at that time, but does not represent exposure to market risk or
future cash requirements under certain of these instruments.





                                      F-78
<PAGE>
<Table>
<Caption>
                                                                  AT DECEMBER 31,
                                          ------------------------------------------------------------
                                                      2002                            2001
                                          ----------------------------    ----------------------------
                                             NOTIONAL         FAIR           NOTIONAL        FAIR
                                             AMOUNT           VALUE          AMOUNT          VALUE
                                          ------------    ------------    ------------    ------------
                                                                 (IN THOUSANDS)

<S>                                       <C>             <C>             <C>             <C>
Derivative financial instruments:
Commodity futures contracts
  Commitments to purchase .............   $     23,924    $     (1,775)   $      6,034    $       (106)
  Commitments to sell .................        (22,761)             48          (2,282)           (123)
</Table>


10.  PENSION AND OTHER POSTRETIREMENT PLANS

    The Company participates in the Land O'Lakes defined benefit pension plan,
which in 2002 covered employees whose employment was governed by the terms of a
collective bargaining agreement. Plan benefits are generally based on years of
service and employees' highest compensation during five consecutive years of
employment. Annual payments to the pension trust fund are determined in
compliance with the Employee Retirement Income Security Act (ERISA). The
actuarial present values of accumulated plan benefits and net assets available
for benefits relating to only the Company's employees are not available.

    Costs relating to the plan were allocated to the Company by Land O'Lakes in
2002. The Company's expenses relating to these plans was $0.2 million, $0.1
million and ($0.1) million for the years ended December 31, 2002, 2001 and 2000,
respectively.

    The Company also has a discretionary capital accumulation plan (CAP), which
is an unfunded, defined benefit plan. The projected benefit obligation and the
accumulated benefit obligation of the unfunded plan were $26.8 million and $24.9
million at December 31, 2002 and 2001, respectively. The accrued discretionary
CAP liability was $26.8 million and $24.9 million at December 31, 2002 and 2001,
respectively. The expense for this plan was $1.7 million for 2002, $1.7 million
for 2001 and $1.7 million for 2000.

11.  GAIN ON LEGAL SETTLEMENTS

    The Company recognized a gain on legal settlements of $7.6 million, $4.5
million, $0.3 million, and $24.4 million for the year ended December 31, 2002,
for the period January 1, 2001 through October 11, 2001, for the six months
ended December 31, 2000 and for the six months ended June 30, 2000,
respectively, related to the litigation with vitamin product suppliers against
whom the Company alleged certain price-fixing claims. The $6.0 million legal
settlement receivable recorded as of December 31, 2002 was collected on January
17, 2003.

12.  COMMITMENTS AND CONTINGENCIES

     Total rental expense was $5.8 million, $1.4 million, $5.1 million, $4.2
million, and $3.3 million for the year ended December 31, 2002, for the period
October 12, 2001 through December 31, 2001, for the period January 1, 2001
through October 11, 2001, for the six months ended December 31, 2000 and the six
months ended June 30, 2000, respectively. The minimum annual lease payments for
the next five years and thereafter are as follows:

<Table>
<Caption>
                          YEAR                          AMOUNT
                          ----                       -------------
<S>                                                  <C>
2003 .............................................   $  2,024.0
2004 .............................................      1,019.0
2005 .............................................        428.9
2006 .............................................         60.6
2007 .............................................         39.4
2008 and thereafter ..............................         42.7
</Table>

    Most of the leases require payment of operating expenses applicable to the
leased assets. Management expects that in the normal course of business most
leases that expire will be renewed or replaced by other leases.



                                      F-79
<PAGE>

GUARANTEE OF PARENT DEBT

    In November 2001, Land O'Lakes, Inc., which owns 92% of the Company, issued
$350 million of senior notes, due 2011. These notes are guaranteed by the
Company and certain of its domestic wholly owned subsidiaries.

    This guarantee is a general unsecured obligation, ranks equally in right of
payment with all existing and future senior indebtedness of Land O'Lakes, is
senior in right of payment to all existing and future subordinated obligations
of Land O'Lakes, and is effectively subordinated to any secured indebtedness of
Land O'Lakes and its subsidiaries, including Purina Mills, to the extent of the
value of the assets securing such indebtedness. The maximum potential amount of
future payments that the Company would be required to make is $350 million as of
December 31, 2002. Currently, the Company does not record a liability regarding
the guarantee. The Company has no recourse provision that would enable it to
recover amounts paid under the guarantee from Land O'Lakes or any other parties.

    The notes are not guaranteed by certain majority-owned subsidiaries of the
Company (the "Non-Guarantors"). Summarized financial information of the
Non-Guarantors, which is consolidated in the financial statements of the
Company, as of and for the periods ended December 31, are as follows:

<Table>
<Caption>
                                                            2002       2001
                                                          -------    -------
<S>                                                       <C>        <C>
Total assets ..........................................   $ 1,933    $   645
Net sales .............................................     1,859        601
Net loss ..............................................      (625)       (70)

</Table>

    In November 2001, Land O'Lakes entered into new term facilities consisting
of a $325 million five-year Term Loan A facility and a $250 million seven-year
Term Loan B facility. These facilities are unconditionally guaranteed by the
Company and certain of its wholly owned subsidiaries. The maximum potential
payment related to this guarantee is $520 million as of December 31, 2002. The
Company does not currently record a liability related to the guarantee of the
Term Loans, and the Company has no recourse provisions that would enable it to
recover from Land O'Lakes or any other party.

GUARANTEES OF PRODUCER LOANS

    The company also guarantees certain loans to producers and dealers financed
by third party lenders. The loans totaled $2.4 million and $5.1 million at
December 31, 2002 and 2001, respectively. Reserves for these guarantees of $.5
million and $1.5 million at December 31, 2002 and 2001, respectively, are
included in the balance sheet. There were insignificant write-offs related to
these loans in 2002 and 2001. The maximum potential payment related to these
guarantees is $1.0 million. The company does not currently record a liability
related to the guarantees of these producer and dealer loans financed by third
party lenders. The company has no recourse against the producer or dealer to
partially off-set the potential liability.

GENERAL

    The Company is currently and from time to time involved in litigation and
environmental claims incidental to the conduct of business. The damages claimed,
in some of these cases, are substantial. Although the amount of liability that
may result from these matters cannot be ascertained, the Company does not
currently believe that, in the aggregate, they will result in liabilities
material to the Company's consolidated financial condition, future results of
operations or cash flows.

13.  RELATED PARTY TRANSACTIONS

    As part of the merger with Land O'Lakes Farmland Feed in October, 2001, the
Company no longer records certain selling, general and administrative expenses.
The costs include corporate and other overhead costs which are paid for and
expensed by Land O'Lakes Farmland Feed.

    A borrowing arrangement has been established between the Company and Land
O'Lakes Farmland Feed for the purpose of financing our working capital.
Borrowings under the arrangement with Land O'Lakes Farmland Feed bear no
interest.



                                      F-80
<PAGE>

14.  ALLOWANCE FOR DOUBTFUL ACCOUNTS

    The activity in the allowance for doubtful accounts is as follows:

<Table>
<Caption>
                                                    ADDITIONS
                                                  ------------
                                     BALANCE AT    NET CHARGES
                                     BEGINNING      TO COSTS     (OTHER ADDITIONS)/       BALANCE AT
         DESCRIPTION                 OF YEAR      AND EXPENSES       DEDUCTIONS           END OF YEAR
                                   ------------   ------------   -----------------       ----------------


<S>                                <C>            <C>             <C>                     <C>
Year ended December 31, 2002 ...   $      5,649   $       (221)   $       (646)           $      6,074

October 12, 2001 through
  December 31, 2001 ............          6,205           (722)           (166)                  5,649

January 1, 2001 through
  October 11, 2001 .............          7,390         (1,996)           (811)                  6,205

Six months ended December 31,
  2000 .........................         13,377         (2,233)          3,754                   7,390

Six months ended June 30,
  2000 .........................         15,733           (231)          2,125                  13,377


</Table>

15.  QUARTERLY FINANCIAL INFORMATION (UNAUDITED)


<Table>
<Caption>

                               FIRST          SECOND          THIRD         FOURTH           FULL
           2002               QUARTER        QUARTER         QUARTER        QUARTER          YEAR
                            ------------   ------------    ------------   ------------    ------------


<S>                         <C>            <C>             <C>            <C>             <C>
Net sales ...............   $    214,863   $    199,919    $    205,511   $    269,379    $    889,672
Gross profit ............         36,870         35,840          37,072         38,545         148,327
Net earnings (loss) .....          9,116          5,957          10,098         22,137          47,308
</Table>

<Table>
<Caption>


                               FIRST          SECOND          THIRD          FOURTH          FULL
           2001               QUARTER        QUARTER         QUARTER        QUARTER          YEAR
                            ------------   ------------    ------------   ------------    ------------

<S>                         <C>            <C>             <C>            <C>             <C>
Net sales ...............   $    220,368   $    192,987    $    198,464   $    257,466    $    869,285
Gross profit ............         39,150         35,785          38,251         36,501         149,687
Net earnings (loss) .....             81         (5,277)          1,305         (3,989)         (7,880)
</Table>




                                      F-81
<PAGE>


                                 AGRILIANCE, LLC

                           CONSOLIDATED BALANCE SHEETS

<Table>
<Caption>
                                                           (UNAUDITED)
                                                           NOVEMBER 30,      AUGUST 31,
                                                               2002            2002
                                                          -------------    -------------
                                                                ($ IN THOUSANDS)
                           ASSETS
<S>                                                       <C>              <C>

Current assets:
  Cash ................................................   $      15,728    $      10,161
  Trade receivables, net of allowance for bad
     debts of $16,419 and $16,136, respectively .......         516,375          393,763
  Rebates receivable ..................................         113,088          102,668
  Other receivables ...................................          38,032           28,729
  Receivable from Land O'Lakes, Inc. ..................           1,274            1,791
  Receivable from CHS Cooperatives ....................             285              250
  Inventories .........................................         442,007          376,988
  Vendor prepayments ..................................          24,774            5,735
  Prepaid expenses ....................................           1,576            2,873
                                                          -------------    -------------
          Total current assets ........................       1,153,139          922,958
Property, plant and equipment:
  Land and land improvements ..........................          17,733           18,231
  Buildings ...........................................          62,849           64,656
  Machinery and equipment .............................         101,212          103,133
  Construction in progress ............................          10,582            3,599
                                                          -------------    -------------
          Total property, plant and equipment .........         192,376          189,619
  Less accumulated depreciation .......................         (79,719)         (76,840)
                                                          -------------    -------------
          Net property, plant and equipment ...........         112,657          112,779
Other assets ..........................................          20,818           21,468
                                                          -------------    -------------
          Total assets ................................   $   1,286,614    $   1,057,205
                                                          =============    =============

LIABILITIES AND MEMBERS' EQUITY

Current liabilities:
  Short-term debt .....................................   $      50,000    $      66,500
  Accounts payable ....................................         571,551          488,625
  Customer prepayments ................................         238,758           22,063
  Accrued expenses ....................................          69,905           69,772
  Payable to Farmland Industries, Inc, net of
     receivable .......................................          34,112           42,826
  Other current liabilities ...........................           6,237           11,117
                                                          -------------    -------------
          Total current liabilities ...................         970,563          700,903
Long-term debt ........................................         100,000          100,000
Other noncurrent liabilities ..........................           7,820            7,960
Members' equity:
  Contributed capital .................................         159,089          159,089
  Retained earnings ...................................          49,142           89,253
                                                          -------------    -------------
Total members' equity .................................         208,231          248,342
                                                          -------------    -------------

Total liabilities and members' equity .................   $   1,286,614    $   1,057,205
                                                          =============    =============
</Table>



          See accompanying notes to consolidated financial statements.


                                      F-82
<PAGE>



                                 AGRILIANCE, LLC

                      CONSOLIDATED STATEMENTS OF OPERATIONS

<Table>
<Caption>
                                                          THREE MONTHS ENDED
                                                             NOVEMBER 30,
                                                          2002            2001
                                                     ------------    ------------
                                                         ($ IN THOUSANDS)
                                                           (UNAUDITED)

<S>                                                  <C>             <C>
Net sales ........................................   $    592,730    $    685,294
Cost of sales ....................................        544,208         639,576
                                                     ------------    ------------
          Gross profit ...........................         48,522          45,718
Depreciation and amortization ....................          6,226           7,033
Selling, general, and administrative expense .....         60,789          56,652
                                                     ------------    ------------
          Loss from operations ...................        (18,493)        (17,967)
Interest expense, net ............................          2,768           4,102
Gain on sale of assets ...........................         (1,150)           (918)
                                                     ------------    ------------
          Net loss ...............................   $    (20,111)   $    (21,151)
                                                     ============    ============

</Table>





          See accompanying notes to consolidated financial statements.



                                     F-83
<PAGE>



                                 AGRILIANCE, LLC

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<Table>
<Caption>
                                                               THREE MONTHS ENDED NOVEMBER 30,
                                                                    2002           2001
                                                               ------------    ------------
                                                                    ($ IN THOUSANDS)
                                                                       (UNAUDITED)


<S>                                                            <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss .................................................   $    (20,111)   $    (21,151)
  Adjustments to reconcile net loss to net cash provided
     by operating activities:
     Depreciation and amortization .........................          6,226           7,033
     Bad debt expense ......................................          1,649             537
     Gain on sale of assets ................................         (1,150)           (918)
     Decrease in other non-current assets ..................            413             441
     Decrease in other non-current liabilities .............           (140)           (201)
  Changes in current assets and liabilities:
     Trade receivables .....................................       (123,527)        (43,418)
     Receivables/payables from related parties .............         (8,232)         27,159
     Rebates receivable ....................................        (10,420)         (5,295)
     Other receivables .....................................         (9,969)          4,058
     Inventories ...........................................        (65,019)        (23,703)
     Vendor prepayments ....................................        (19,039)        (20,209)
     Accounts payable and customer prepayments .............        303,002         222,213
     Accrued expenses ......................................         (8,030)        (21,008)
     Other current assets and liabilities ..................          1,132           2,162
                                                               ------------    ------------
  Net cash provided by operating activities ................         46,785         127,700
                                                               ------------    ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Additions to property, plant and equipment ...............         (7,706)         (2,287)
  Proceeds from sale of property, plant and equipment ......          2,988           3,369
                                                               ------------    ------------
  Net cash (used) provided by investing activities .........         (4,718)          1,082
                                                               ------------    ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Payment on short-term debt ..............................        (16,500)        (69,000)
  Decrease in cash overdraft ...............................             --         (32,727)
  Distribution of earnings to members ......................        (20,000)             --
                                                               ------------    ------------
  Net cash used by financing activities ....................        (36,500)       (101,727)
                                                               ------------    ------------
  Net change in cash and cash equivalents ..................          5,567          27,055
Cash and cash equivalents at beginning of period ...........         10,161              --
                                                               ------------    ------------
Cash and cash equivalents at end of period .................   $     15,728    $     27,055
                                                               ============    ============
</Table>





                                      F-84


<PAGE>


                                 AGRILIANCE, LLC

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

    The unaudited consolidated financial statements reflect, in the opinion of
the management of Agriliance, LLC (the "Company"), all normal recurring
adjustments necessary for a fair statement of the financial position and results
of operations and cash flows for the interim periods. The statements are
condensed and, therefore do not include all of the information and footnotes
required by accounting principles generally accepted in the United States of
America for complete financial statements. These statements should be read in
conjunction with the audited consolidated financial statements and footnotes for
the year ended August 31, 2002. The results of operations and cash flows for
interim periods are not indicative of results for a full year.


2.  SHORT-TERM DEBT

    The Company has a $185 million revolving credit agreement with Chase
Manhattan which expires December 31, 2003. Short-term debt is secured by the
Company's inventory and the accounts receivable of its wholly owned subsidiary,
Agro Distribution. At November 30, 2002, $50 million was outstanding. Interest
on borrowings under this revolving credit agreement was charged at 3.63% (LIBOR
+ 2.25%) at November 30, 2002.



                                      F-85
<PAGE>





                          INDEPENDENT AUDITORS' REPORT

The Board of Directors
Agriliance, LLC:

    We have audited the accompanying consolidated balance sheets of Agriliance,
LLC and subsidiaries as of August 31, 2002 and 2001, and the related
consolidated statements of operations, cash flows, and members' equity for the
years ended August 31, 2002 and 2001 and for the eight months ended August 31,
2000. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

    We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Agriliance, LLC and
subsidiaries as of August 31, 2002 and 2001, and the results of their operations
and their cash flows for the years ended August 31, 2002 and 2001 and for the
eight months ended August 31, 2000 in conformity with accounting principles
generally accepted in the United States of America.

                                                   /s/ KPMG LLP

Minneapolis, Minnesota
October 25, 2002




                                      F-86
<PAGE>
                                 AGRILIANCE, LLC

                           CONSOLIDATED BALANCE SHEETS

<Table>
<Caption>
                                                                           AUGUST 31
                                                               ----------------------------------
                                                                    2002               2001
                                                               ---------------    ---------------
                                                                        ($ IN THOUSANDS)
<S>                                                            <C>                <C>
ASSETS

Current assets:
  Cash .....................................................   $        10,161    $            --
  Trade receivables, net of allowance for bad
     debts of $16,134 and $14,002 in 2002 and 2001,
     respectively...........................................           393,763            275,322
  Rebates receivable .......................................           102,668            118,976
  Other receivables ........................................            28,729             42,383
  Receivable from Land O'Lakes, Inc. .......................             1,791              2,653
  Receivable from CHS Cooperatives .........................               250                267
  Inventories ..............................................           376,988            489,726
  Vendor prepayments .......................................             5,735             23,650
  Prepaid expenses .........................................             2,873              3,519
                                                               ---------------    ---------------
          Total current assets .............................           922,958            956,496
Property, plant and equipment:
  Land and land improvements ...............................            18,231             19,159
  Buildings ................................................            64,656             65,837
  Machinery and equipment ..................................           103,133             99,255
  Construction in progress .................................             3,599              2,351
                                                               ---------------    ---------------
          Total property, plant and equipment ..............           189,619            186,602
  Less accumulated depreciation ............................           (76,840)           (51,922)
                                                               ---------------    ---------------
          Net property, plant and equipment ................           112,779            134,680
Other assets ...............................................            21,468             23,427
                                                               ---------------    ---------------
          Total assets .....................................   $     1,057,205    $     1,114,603
                                                               ===============    ===============

LIABILITIES AND MEMBERS' EQUITY

Current liabilities:
  Cash overdraft ...........................................   $            --    $        32,727
  Short-term debt ..........................................            66,500             87,000
  Current portion of long-term debt ........................                --             15,000
  Accounts payable .........................................           488,625            507,686
  Customer prepayments .....................................            22,063             47,361
  Accrued expenses .........................................            69,772             70,017
  Payable to Farmland Industries, Inc, net of
     receivable ............................................            42,826             32,763
  Other current liabilities ................................            11,117              9,787
                                                               ---------------    ---------------
          Total current liabilities ........................           700,903            802,341
Long-term debt .............................................           100,000            100,000
Other noncurrent liabilities ...............................             7,960             10,964
Members' equity:
  Contributed capital ......................................           159,089            159,089
  Retained earnings ........................................            89,253             42,209
                                                               ---------------    ---------------
Total members' equity ......................................           248,342            201,298
                                                               ---------------    ---------------

Total liabilities and members' equity ......................   $     1,057,205    $     1,114,603
                                                               ===============    ===============
</Table>


          See accompanying notes to consolidated financial statements.




                                      F-87
<PAGE>



                                 AGRILIANCE, LLC

                      CONSOLIDATED STATEMENTS OF OPERATIONS


<Table>
<Caption>
                                                                                                EIGHT MONTHS
                                                            YEAR ENDED        YEAR ENDED            ENDED
                                                             AUGUST 31,        AUGUST 31,          AUGUST 31,
                                                               2002               2001               2000
                                                          ---------------    ---------------    ---------------
                                                                             ($ IN THOUSANDS)
<S>                                                       <C>                <C>                <C>
Net sales .............................................   $     3,625,849    $     4,072,248    $     3,455,901
Cost of sales .........................................         3,299,251          3,696,350          3,122,353
                                                          ---------------    ---------------    ---------------
          Gross profit ................................           326,598            375,898            333,548
Selling, general, and administrative expense ..........           268,994            310,655            237,346
Asset impairment charge ...............................                --             14,820                 --
                                                          ---------------    ---------------    ---------------
          Earnings from operations ....................            57,604             50,423             96,202
Interest expense, net .................................            13,014             28,462             15,558
Gain on sale of assets ................................            (2,454)            (3,092)            (9,169)
                                                          ---------------    ---------------    ---------------
          Net earnings ................................   $        47,044    $        25,053    $        89,813
                                                          ===============    ===============    ===============
</Table>



          See accompanying notes to consolidated financial statements.



                                      F-88
<PAGE>
                                 AGRILIANCE, LLC

                      CONSOLIDATED STATEMENTS OF CASH FLOWS


<Table>
<Caption>
                                                                                                     EIGHT MONTHS
                                                                     YEAR ENDED       YEAR ENDED         ENDED
                                                                     AUGUST 31,       AUGUST 31,       AUGUST 31,
                                                                        2002             2001             2000
                                                                    -------------    -------------    -------------
                                                                                    ($ IN THOUSANDS)
<S>                                                                 <C>              <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net earnings ..................................................   $      47,044    $      25,053    $      89,813
  Adjustments to reconcile net earnings to net cash
     provided by operating activities:
     Depreciation and amortization ..............................          27,930           38,319            3,397
     Bad debt expense ...........................................           5,442            5,792               --
     Gain on sale of assets .....................................          (2,454)          (3,092)              --
     Asset impairment charge ....................................              --           14,820               --
     Decrease (increase) in other non-current assets ............           1,022           (3,288)          (5,893)
     (Decrease) increase in other non-current liabilities .......          (3,004)             113               --
  Changes in current assets and liabilities:
     Trade receivables ..........................................        (123,883)         182,405          (18,330)
     Receivables/payables from related parties ..................          10,942           43,396           40,691
     Rebates receivable .........................................          16,308          (12,160)         (39,338)
     Other receivables ..........................................          13,654            4,986          (10,727)
     Inventories ................................................         112,738           87,482              337
     Vendor prepayments .........................................          17,915           82,757          (45,764)
     Accounts payable and customer prepayments ..................         (44,359)        (358,319)           5,302
     Accrued expenses ...........................................            (245)          10,383           16,563
     Other current assets and liabilities .......................           1,976           13,612           33,294
                                                                    -------------    -------------    -------------
  Net cash provided by operating activities .....................          81,026          132,259           69,345
                                                                    -------------    -------------    -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Additions to property, plant and equipment ....................         (15,688)         (23,871)            (247)
  Proceeds from sale of property, plant and equipment ...........          13,050           22,044               --
  Acquisition of working capital from members ...................              --               --          (98,395)
                                                                    -------------    -------------    -------------
  Net cash used by investing activities .........................          (2,638)          (1,827)         (98,642)
                                                                    -------------    -------------    -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
  (Payment on) proceeds from short-term debt ....................         (20,500)         (88,000)          75,000
  Payments on long-term debt ....................................         (15,000)         (35,000)              --
  (Decrease) increase in cash overdraft .........................         (32,727)          (7,212)          26,734
  Distribution of earnings to members ...........................              --             (220)         (72,437)
                                                                    -------------    -------------    -------------
  Net cash used by financing activities .........................         (68,227)        (130,432)          29,297
                                                                    -------------    -------------    -------------
  Net change in cash and cash equivalents .......................          10,161               --               --
Cash and cash equivalents at beginning of period ................              --               --               --
                                                                    -------------    -------------    -------------
Cash and cash equivalents at end of period ......................   $      10,161    $          --    $          --
                                                                    =============    =============    =============
</Table>


          See accompanying notes to consolidated financial statements.



                                      F-89
<PAGE>


                                 AGRILIANCE, LLC

                   CONSOLIDATED STATEMENTS OF MEMBERS' EQUITY

<Table>
<Caption>
                                                              RETAINED
                                                              EARNINGS            TOTAL
                                            CONTRIBUTED      (ACCUMULATED        MEMBERS'
                                              CAPITAL          DEFICIT)           EQUITY
                                           --------------   --------------    --------------
                                                           ($ IN THOUSANDS)
<S>                                        <C>              <C>               <C>
Initial capital contributions...........   $      159,089   $           --    $      159,089
Net earnings ...........................               --           89,813            89,813
Distribution to members ................               --          (72,437)          (72,437)
                                           --------------   --------------    --------------
Balance, August 31, 2000 ...............          159,089           17,376           176,465
Net earnings ...........................               --           25,053            25,053
Distribution to members ................               --             (220)             (220)
                                           --------------   --------------    --------------
Balance, August 31, 2001 ...............          159,089           42,209           201,298
Net earnings ...........................               --           47,044            47,044
                                           --------------   --------------    --------------
Balance, August 31, 2002 ...............   $      159,089   $       89,253    $      248,342
                                           ==============   ==============    ==============
</Table>


          See accompanying notes to consolidated financial statements.



                                      F-90
<PAGE>



                                 AGRILIANCE, LLC

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A. ORGANIZATION

         Agriliance, LLC (Agriliance or the Company) was established on January
1, 2000. Agriliance consists of the agronomy marketing operations of three major
food marketing and agricultural supply cooperatives: Land O'Lakes, Inc. (50%
ownership); CHS Cooperatives (25% ownership); and Farmland Industries, Inc. (25%
ownership) (the members). See also note 9.

         For the period from January 1, 2000 to July 29, 2000 (the date at which
the Company established its own financing facilities), the Company's earnings
were allocated to the members under an interim profit sharing agreement. Profits
and losses of the Company subsequent to July 29, 2000 are allocated to members
in proportion to their percentage ownership interests. The liability of each
member is limited to each member's respective capital account balance.

         The initial capital contributions made by the members to the Company
consisted primarily of property, plant and equipment from all the members, and
the entire operations of Agro Distribution LLC from Land O'Lakes, Inc. and CHS
Cooperatives. All contributions were valued at the net book values of the
members. In addition, on July 29, 2000, the Company purchased its working
capital from the respective members.

B. STATEMENT PRESENTATION

         The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries, with intercompany transactions
eliminated.

C. REVENUE RECOGNITION

         Revenue is recognized as it is earned, which generally occurs when
fertilizer, chemical, and agricultural products are delivered or services are
provided.

D. INCOME TAXES

         The Company's taxable operations pass directly to the joint venture
owners under the LLC organization. As a result, no provision for income taxes is
provided in the accompanying consolidated statement of operations.

E. INVENTORIES

         Inventories are stated primarily at the lower of cost or market. Cost
is determined on a first-in, first-out or average-cost basis.

F. REBATES RECEIVABLE

         Rebates receivable have been accrued based on contractual agreements
combined with current sales and market data.

G. PROPERTY, PLANT AND EQUIPMENT

         Property, plant and equipment are stated at cost. Depreciation is
provided over the estimated useful lives (10 to 20 years for land improvements
and buildings, and 3 to 5 years for machinery and equipment) of the respective
assets in accordance with the straight-line method. The Company assesses the
recoverability of long-lived assets whenever events or changes in circumstances
indicate that expected future undiscounted cash flows may not be



                                      F-91
<PAGE>



sufficient to support the carrying amount of an asset. The Company deems an
asset to be impaired if a forecast of undiscounted future operating cash flows
is less than its carrying amount. If an asset is determined to be impaired, the
loss is measured as the amount by which the carrying value of the asset exceeds
its fair value.

H. FAIR VALUE OF FINANCIAL INSTRUMENTS

         Statement of Financial Accounting Standards (SFAS) No. 107, Disclosures
about Fair Value of Financial Instruments, requires disclosure of the fair value
of all financial instruments to which the Company is a party. All financial
instruments are carried at amounts that approximate estimated fair value.

I. ACCOUNTING ESTIMATES

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

J. RECLASSIFICATIONS

         Certain reclassifications have been made to the prior period
consolidated financial statements to conform with the current year presentation.

2. SHORT-TERM DEBT

         The Company has a $225 million revolving credit agreement with JP
Morgan, which expires December 27, 2002, and is expected to be extended to
December 26, 2003. Short-term debt is secured by the Company's inventory and the
accounts receivable of its wholly owned subsidiary, Agro Distribution, LLC. At
August 31, 2002 and 2001, $66.5 million and $87 million, respectively, were
outstanding. Interest on borrowings under this revolving credit agreement was
charged at 4.06% (LIBOR + 2.25%) and 5.28% (LIBOR + 1.5%) at August 31, 2002 and
2001, respectively.

3. LONG-TERM DEBT

         The Company has a long-term credit agreement with JP Morgan, which
expires June 28, 2004. Long-term debt is secured by the Company's inventory and
the accounts receivable of its wholly owned subsidiary, Agro Distribution, LLC.
At August 31, 2002 and 2001, $100 million and $115 million, respectively, were
outstanding. Interest on borrowings under this long-term credit agreement was
charged at 4.06% (LIBOR + 2.25%) and 4.96% (LIBOR +1.5%) at August 31, 2002 and
2001, respectively.

         Future maturities of long-term debt are as follows:

<Table>
<Caption>
                       YEAR ENDING
                        AUGUST 31,                             ($ IN THOUSANDS)
------------------------------------------------------------   ---------------
<S>                                                            <C>
2003 .......................................................   $            --
2004 .......................................................           100,000
</Table>


         The loan agreement includes certain restrictive financial covenants. At
August 31, 2002 and 2001, the Company was in compliance with these covenants.

         Interest paid on short-term and long-term debt for the years ended
August 31, 2002 and 2001 and for the eight months ended August 31, 2000 totaled
$12.9 million, $31.5 million and $14.4 million, respectively.



                                      F-92
<PAGE>



4. RECEIVABLES PURCHASE FACILITY

         The Company has a $200 million receivables purchase facility with
CoBank. A wholly owned subsidiary, Agriliance SPV, Inc., purchases the
receivables from Agriliance and transfers them to CoBank. Such transactions are
structured as sales and, accordingly, the receivables transferred to CoBank are
not reflected in the consolidated balance sheet. At August 31, 2002 and 2001,
$69 million and $200 million, respectively, were outstanding under this
facility. The total accounts receivable sold during the years ended August 31,
2002 and 2001 and the eight months ended August 31, 2000 were $2,949 million,
$3,317 million and $592 million, respectively.

5. PENSION AND OTHER POSTRETIREMENT PLANS

<Table>
<Caption>
                                                                                                      EIGHT MONTHS
                                                                 YEAR ENDED         YEAR ENDED           ENDED
                                                                 AUGUST 31,         AUGUST 31,         AUGUST 31,
                                                                   2002                2001               2000
                                                               --------------     --------------     --------------
                                                                                 ($ IN THOUSANDS)
<S>                                                            <C>                <C>                <C>
Pension benefits:
  Total plan assets at fair value ..........................   $       54,001     $       43,352     $       28,431
  Total projected benefit obligation .......................          (57,755)           (46,854)           (25,913)
                                                               --------------     --------------     --------------
          Funded status ....................................   $       (3,754)    $       (3,502)    $        2,518
                                                               ==============     ==============     ==============
Accrued pension cost recognized in the consolidated
balance sheet ..............................................   $           65     $          400     $        3,177
Benefits cost ..............................................            4,817              3,778              1,207
Employer contribution ......................................            4,684              2,013              6,403
Benefits paid ..............................................            1,197                974                757
Discount rate ..............................................             7.25%              7.25%              7.25%
Expected return on plan assets .............................             9.00%              9.50%              9.50%
Rate of compensation increase ..............................             4.00%              4.50%              4.50%
</Table>


         The Company has a defined contribution plan in which the Company
matches 50% of the first 6% of contributions. The Company contributed
$2,343,000, $2,410,000 and $6,4302,000 to the plan for the years ended August
31, 2002 and 2001 and the eight months ended August 31, 2000, respectively.

         In addition to the defined benefit and defined contribution retirement
plans, the Company has a supplemental executive retirement plan, which is an
unfunded defined benefit plan. The actuarial present value of the projected
benefit obligation totaled $1,539,000 and $1,932,000 at August 31, 2002 and
2001, respectively.

         The Company also provides certain health care benefits for retired
employees.

<Table>
<Caption>
                                                                                                     EIGHT MONTHS
                                                                 YEAR ENDED         YEAR ENDED           ENDED
                                                                 AUGUST 31,         AUGUST 31,         AUGUST 31,
                                                                    2002               2001               2000
                                                               --------------     --------------     --------------
                                                                                 ($ IN THOUSANDS)
<S>                                                            <C>                <C>                <C>
Other postretirement benefits:
  Total plan assets at fair value ..........................   $           --     $           --     $           --
  Total projected benefit obligation .......................           (5,501)            (5,379)            (3,240)
                                                               --------------     --------------     --------------
          Funded status ....................................   $       (5,501)    $       (5,379)    $       (3,240)
                                                               ==============     ==============     ==============
Accrued benefit cost recognized in the consolidated
balance sheet ..............................................   $       (4,152)    $       (3,491)    $       (3,076)
Benefits cost ..............................................              836                555                213
Benefits paid ..............................................              140                140                128
Discount rate ..............................................             7.25%              7.25%              7.25%
</Table>


         For measurement purposes, a 6.0% annual rate of increase in the per
capita cost of covered health care benefits was assumed.

6. RELATED PARTY TRANSACTIONS

         Land O'Lakes, Inc., CHS Cooperatives, and Farmland Industries, Inc.
charged the Company for accounting, legal, risk management, building,
advertising, and certain employee benefit and other employee-related expenses.
Total purchased services were:



                                      F-93
<PAGE>



<Table>
<Caption>
                                                                                     EIGHT MONTHS
                                                      YEAR ENDED      YEAR ENDED        ENDED
                                                      AUGUST 31,      AUGUST 31,      AUGUST 31,
                                                         2002             2001           2000
                                                     -------------   -------------   -------------
                                                                    ($ IN THOUSANDS)
<S>                                                  <C>             <C>             <C>
         Land O'Lakes, Inc. ......................   $      11,269   $       9,897   $       2,678
         CHS Cooperatives ........................           3,906           3,783           3,764
         Farmland Industries, Inc ................           1,132           1,265           4,161
</Table>

         The Company made the following sales to related parties:

<Table>
<Caption>
                                                                                     EIGHT MONTHS
                                                       YEAR ENDED     YEAR ENDED         ENDED
                                                       AUGUST 31,     AUGUST 31,       AUGUST 31,
                                                         2002            2001            2000
                                                     -------------   -------------   -------------
                                                                   ($ IN THOUSANDS)
<S>                                                  <C>             <C>             <C>
         Land O'Lakes, Inc. ......................   $       1,794   $       2,102   $       2,666
         CHS Cooperatives ........................         166,034         139,188         102,935
         Farmland Industries, Inc ................           5,845           8,128           4,394
</Table>


         During the years ended August 31, 2002 and 2001 and the eight months
ended August 31, 2000, the Company made product purchases from Farmland
Industries, Inc. totaling $485,692,000, $697,916,000 and $395,316,000,
respectively.

         During the years ended August 31, 2002 and 2001 and the eight months
ended August 31, 2000, the Company made product purchases from Land O' Lakes,
Inc. totaling $6,758,000, $5,301,000 and $2,678,000, respectively.

         In addition, during the years ended August 31, 2002 and 2001 and the
eight months ended August 31, 2000, the Company made product purchases from CF
Industries, Inc. (Land O'Lakes, Inc. and CHS Cooperatives hold a combined 54.5%
interest in CF Industries, Inc.) totaling $453,655,000, $609,245,000 and
$330,064,000, respectively.

7. LEASE COMMITMENTS

         The future minimum lease commitments under noncancellable operating
leases are as follows:

<Table>
<Caption>
                                                   YEAR ENDING
                                                   AUGUST 31,
                                               ------------------
                                                                   ($ IN THOUSANDS)
<S>                                            <C>                 <C>
                                               2003..............        $10,456
                                               2004..............          7,503
                                               2005..............          4,752
                                               2006..............          2,261
                                               2007 and thereafter           982
</Table>


         Rent expense for the years ended August 31, 2002 and 2001 and the eight
months ended August 31, 2000 was $19,870,000, $21,409,000 and $13,151,000,
respectively.

8. ASSET IMPAIRMENT CHARGE

         During the year ended August 31, 2001, as a result of difficult
economic conditions, an impairment charge of $14,820,000 was recorded to write
down certain retail facility assets of Agro Distribution, LLC to their estimated
fair value.

9. CONTINGENCIES WITH FARMLAND INDUSTRIES, INC.

         Farmland Industries, Inc. (Farmland), a 25% owner of the Company and
the largest supplier of fertilizer products to the Company, filed for Chapter 11
bankruptcy court protection on May 31, 2002. Prior to that filing, the Company
initiated a claim of setoff for a total of $19.9 million owed to Farmland for
fertilizer purchases. This setoff was intended to protect the accounts
receivable due from Farmland recorded in the consolidated balance sheet which
totaled $10.3 million at August 31, 2002. In addition, the Company has claims
against Farmland aggregating



                                      F-94
<PAGE>



$9.7 million related to fertilizer pricing disputes, which amount has not been
recorded in the consolidated balance sheet as of August 31, 2002. Subsequent to
the Company's claim for setoff, Farmland initiated a lawsuit against the Company
claiming amounts were improperly setoff. The amount of the claim against the
Company has not yet been quantified by Farmland. Management of the Company is of
the opinion that the Company has substantive defenses against the claim, and
accordingly, no reserves have been recorded against the accounts receivable due
from Farmland in the accompanying consolidated financial statements as of and
for the year ended August 31, 2002.

10. CONTINGENCIES

A. ENVIRONMENTAL

The Company is required to comply with various environmental laws and
regulations incident to its normal business operations. The Company has reserved
for future costs of remediation of identified issues. Additional costs for
losses which may be identified in the future cannot be presently determined;
however, management does not believe any such issues would materially affect the
financial position of the Company.

B. GENERAL

Certain claims and lawsuits have been filed in the ordinary course of business.
It is management's opinion that settlement of all litigation would not require
payment of an amount which would be material to the financial position of the
Company.

11. SUBSEQUENT EVENTS

On October 1, 2001, the Agriliance Board of Directors approved a $35 million
dividend distribution to its members. On October 15, 2002 a distribution of $20
million was made, and $15 million will be disbursed on December 15, 2002.




                                      F-95