MONSANTO/SOLUTIA RETIREES

2008 RETIREE WELFARE PLAN

INTERIM REPORT

This is an interim report on the implementation of the 2008 Retiree Welfare Plan for the “pre-spin”, Medicare Eligible, Retirees who retired from Pharmacia (f/k/a Monsanto) and had their welfare benefits transferred to Solutia upon its spin-off.

The 2008 Welfare Plan includes medical coverage and life insurance. This plan was the result of the Solutia bankruptcy settlement which required the establishment of a VEBA (voluntary employees’ beneficiary association) trust to assure funds are available to reimburse Solutia for the costs incurred in providing the benefits.

The VEBA trust was established with two fund sub accounts holding assets. Sub Account 1 was initially funded by Solutia with $175 M in cash to cover “pre-spin” Retiree welfare benefits. Sub Account 2 was funded with the Solutia stock resulting from the retiree claim allowed in the bankruptcy to cover both “pre-spin” and “post-spin” Retiree welfare benefits. Sub Account 2 will not be utilized until the funds in Sub Account 1 are exhausted. The VEBA trust became operational in March 2008 with Solutia receiving reimbursements from Sub Account 1 from that time forward in 2008.

The trust fund is in good shape because it is restricted by government regulation to be invested in interest-bearing accounts, government bonds, etc. The trust fund has no direct exposure to the stock market. As of year-end 2008 the fund has a balance of $167 M after reimbursements to Solutia for the costs of medical coverage and life insurance.

The 2008 Retiree Welfare Plan became effective May 1, 2008. Modifications to benefits, primarily premium increases for medical coverage, have resulted in a significant reduction in participants in the medical benefits portion of the plan. At the time of Solutia’s bankruptcy there were approx. 16,000 “pre-spin” participants (retirees, spouses and dependents). Information provided by Solutia indicates there were approx. 13,000 in April 2008. As of October 2008 there were approx. 9,900, a reduction of 24% from April. Based on this information it is likely that Sub Account 1 will survive the “pre-spin” participants.

Life insurance benefits are separate from medical coverage and apply to all Retirees who retired on or before December 31, 2001 (in certain designated amounts) even if Retirees do not participate in the medical coverage. The VEBA trust also reimburses Solutia for the costs of providing life insurance.