chiquita brands south pacific limited

Chiquita Brands South Pacific Limited Annual Report 2004

ContentsChairman’s Report 1

CEO’s Report 2

2004 Highlights 4

Five Year Financial Summary 5

Directors’ Report 6

Corporate Governance 11

Financials 16

Statement of Financial Performance 17

Statement of Financial Position 18

Statement of Cash Flows 19

Notes to the Financial Statements 20

Shareholder Information 63

Directors’ Declaration 64

Independent Audit Report 65

Company Details 68

1

Chairman’s ReportChiquita Brands South Pacific Limited (Chiquita) has changed its financial year end from 31 December to 30 June. This change was necessary to ensureconsistency with the Company’s tax year end and enable more meaningful comparison of results withthose of competitors.

As 2004 is the transitional year, this report is necessary to present the results for the period 1 January 2004 – 30 June 2004. However, thecomparatives presented in this report, as required by the Corporations Act, are for the 12 months ended 31 December 2003. This will makemeaningful comparison difficult for most financial statement users. To help overcome this issue the five year financial summary has beenrestated (See page 5) to represent the performance of the business on an annualised basis with a 30 June year end.

During the past six months, the management of Chiquita has workedeffectively towards improving the performance of continuing operations and controlling the one off costs associated with the closure of discontinuedbusinesses, of $4 million. After considerable effort under these particularlydifficult circumstances, Chiquita can now state with confidence that thebusiness restructuring and rationalisation program that commenced in June 2002 is complete.

Three key events dominated the period:

- The conclusion of the sale of Angas Park to Sunbeam Foods Limited;

- The effective exit of the Kangara processing operations, with strategicalliances established to outsource provision of these services in the areas of packing and marketing;

- The continued drive for improved occupational health and safety at Chiquita Mushrooms, which will lead to improved operatingperformance.

Whilst these initiatives have had an impact on current results, they werefundamental to providing a stable business platform upon which Chiquitacould grow. The sale of Angas Park and exit of Kangara’s processingoperations represent a watershed for the Company, ending a period offailed expansion into businesses that did not provide long-term strategicbenefits and acceptable returns.

Chiquita now comprises two key industry segments - Agribusiness and Trading. Agribusiness includes Blueberry Farms of Australia, ChiquitaMushrooms, Chiquita Bananas and Kangara Foods. Trading continues to include Chiquita Trading, Chiquita Nibbles and Chiquita Export.

Earnings before interest and tax (EBIT) for continuing operations were$4.7 million for the six months ended 30 June 2004, exceeding 2004budget expectations by 24%. This result is underpinned by the strongperformance of the Company’s Agribusiness operations through costcontainment, organic growth in existing markets and penetration into new markets. The result is down on the same period for 2003 due to the excess supply of bananas and a hailstorm that had an adverse impact on berries.

Sales were $105 million, excluding discontinued operations. This is anincrease of 1% on 2003 despite both berry and banana sales tracking at 50% of 2003 sales.

The gearing of the Company continues to improve providing capacity tofurther consolidate Chiquita’s position within each core business. This willensure market leadership through synergies, innovation and supplycategory management. As at 30 June 2004, core debt (excluding workingcapital) was $22 million, with net core debt to shareholders funds at 47%.

The Board is committed to achieving the highest standards of corporategovernance. To date all matters required to be addressed under the ASX best practice recommendations have been implemented or are in the process of being implemented. Following the resignation of Mr R Kistinger the Board has commenced a search for a suitably qualifiedindependent director. It is anticipated that an appointment will beannounced late in 2004.

Anthony G. HartnellChairman

2

CEO’s ReportFollowing conclusion of restructuring, Chiquita now hastwo key segments: Agribusiness and Trading. Agribusinessencompasses Blueberry Farms of Australia, ChiquitaMushrooms, Bananas North Queensland and KangaraFoods. Trading continues to include Chiquita Trading, Chiquita Nibbles and Chiquita Export.

The sale of Angas Park was a pivotal transaction in steering Chiquita back toour core focus and competence in the fresh produce sector. The continuedinvestment in the dried fruit industry was untenable on the scale of AngasPark alone. After protracted negotiations with Sunbeam Foods Limited, we resolved to exit this industry and re-invest in core businesses.

The effective exit of the Kangara processing operations leaves Chiquita wellplaced to grow the farm management business through our association withTimbercorp, and further strengthen our relationship with the major chains.The once off costs associated with the closure of the Kangara processingoperations and the sale of Angas Park totalled $4 million.

This intensive rationalisation program has seen core debt decrease from$100 million to $22 million over a two year period. Whilst we havesought to apply the proceeds from the sale of businesses to the retirementof debt has not always been possible due to the restructuring costsassociated with business closures. June represents the peak point in ourworking capital cycle and this has a direct impact on borrowing levels atthis time. Additional pressure was placed on these facilities in June 2004due to the Kangara closure costs. Proceeds from Kangara’s asset sales andliquidation of remaining working capital will be received after balance dateand used to repay borrowings.

AGRIBUSINESS OPERATIONSBlueberry Farms of Australia (BFA)BFA’s performance in 2004, whilst below that of the same period in 2003,

was in line with expectations. The 2003 / 2004 harvest was impacted by

unseasonal hailstorms experienced at the Corindi operations in March 2003.

Overall yield and fruit quality was compromised with minimal fruit harvested

and sold between January and June 2004. To date the outlook for the

2004 / 2005 crop is positive with good bud growth and fruit set.

Chiquita MushroomsChiquita Mushrooms has had a very strong year, driven primarily by ourimprovement in occupational health and safety and increased salesresulting from the acquisition of Mittagong Mushrooms.

During the financial period, the Board resolved to implement a program to streamline our mushroom operations aimed at improving workplacepractices whilst enhancing our drive to strengthen the occupational healthand safety environment. This initiative involved a voluntary redundancyprogram of 68 workers at a cost of $1.1 million.

Bananas North QueenslandThe market for bananas continues to be over supplied as cane growersincreasingly move cultivated cane crops to banana plantations. Accordingly,prices and returns remain depressed. We experienced a very difficult start to the banana season, as did most growers in the Tully area. Adverseweather during the first quarter limited production, and in the secondquarter prices were well below expectations due to over supply.

The outlook for the start of the 2004 / 2005 financial year is subdued due to higher volumes and depressed prices. We anticipate returns will remaindepressed for the foreseeable future. The ownership of the banana farms is integral to our supply chain and relationship with the major retail chains. A prerequisite for such supply arrangements is the ability to demonstrate a dependable and stable grower base with an emphasis on a degree of own supply.

Kangara FoodsKangara Foods has been a particularly difficult challenge. Over the past two years we have remained true to our strategy of exiting agricultural riskand those aspects of the business in which we did not, and could not,achieve a position of dominance. All costs associated with the exit of farmownership and closure of the processing operations have been recognised.The focus now is to grow the farm management business.

3

Pictured left to right:David Green, Chief Financial Officer & Company Secretary, Mark Robinson, General Manager Chiquita Trading & Banana Farms, Ray Tanti, General Manager Chiquita Nibbles,

Stephen Little, General Manager Chiquita Mushrooms, Peter McPherson, General Manager Blueberry Farms of Australia & Chiquita Export and Richard Hamley General Manager Kangara Foods.

In June 2004, following the surrender of our licence over the 355 hectare citrus orchard, Chiquita commenced farm managementservices for Timbercorp.

At that time Timbercorp committed to developing a further 300 hectares of citrus on the Kangara Foods property commencing October 2004. This will place 655 hectares of citrus under Kangara Foods management,which is in line with the time frame developed in 2003 as part of ourstrategic alliance with Timbercorp.

TRADING OPERATIONSChiquita TradingChiquita Trading has performed ahead of expectations for the six monthperiod despite disappointing revenues from two key product categories:bananas due to supply and pricing pressures, and imported kiwifruit due to a late start to the New Zealand season. The diversified categoryhas shown steady growth in 2004 following successful implementation of strategies commenced in 2003. Relationships with key growers andsuppliers continue to improve providing the necessary stable supply base to facilitate supply chain management for the major retail chains.Significant focus remains on continuing to develop improved infrastructureand removing costs from the supply chain.

With the strong Australian dollar, existing export markets have remainedsubdued. Further development of new export markets remains difficult,however this is an area of on-going focus with reasonable progress made to date.

Chiquita NibblesChiquita Nibbles is the largest supplier of snacking lines in the freshproduce section of major supermarkets around Australia. The ability todistribute product at highly competitive prices is a key to our success.Sourced from local growers and international agents, the various snackingproducts are sold either loose or pre-packed. Overall sales of nut productsfor the period have been below expectations, driven predominantly bylower than anticipated consumer demand. Traditionally, the Nibblesbusiness enjoys the bulk of its earnings in the July to December period.

OUTLOOKThe earnings expectation for the full year to June 2005 is an EBIT in excess of $13 million despite the absence of revenues from Angas Park and Kangara’s processing operations. Average debt levels, in the absence of acquisitions, will continue to decline to less than $20 million.

The strategy commenced in June 2002 has now provided Chiquita with a strong platform upon which to grow and become a dominant force inthe Australian agricultural industry. The reduction in debt through the sale of non-core businesses combined with the year-on-year growth in earningsfrom continuing operations have significantly improved the credit risk profileof the company. This leaves Chiquita well placed to grow core businessesthrough acquisitions that compliment, or bolt-on to, existing StrategicBusiness Units (SBUs).

In addition the Company, together with its strategic partners, intends to grow the farm management business which will generate the ability toundertake category management services of that produce to the major retail chains.

4

2004 HighlightsThe conclusion of the sale of Angas Park to Sunbeam Foods Limited

Effective exit from Kangara processingoperations, with strategic alliances established to outsource provision of these services in theareas of packing and marketing

Continued drive for improved OccupationalHealth & Safety at Chiquita Mushrooms

Strong performance of Agribusiness operationsthrough cost containment, organic growth in existing markets and penetration into new markets

Further reduction of net debt by $10.6 million in the 6 months to 30 June 2004($37 million over 12 months to 30 June 2004)

20

40

60

80

100

120

$ M

illio

ns

Net Debt As at 30 June

2000 2001 2002 2003 2004

Earnings Before Tax - Continuing Operations (before significant items) Twelve months to 30 June

2

4

6

8

10

12

$ M

illio

ns

2000 2001 2002 2003 2004

5

2004 2003 2002 2001 2000For years ended 30 June $'000 $'000 $'000 $'000 $'000

PROFITABILITYNet sales 281,597 294,405 312,954 276,652 205,009 EBITDA Earnings before interest, tax, depreciation and amortisation (before significant items) 8,664 16,347 14,895 9,008 14,067 Depreciation and amortisation 5,632 4,729 7,366 7,185 6,234 EBIT Earnings before interest, tax and significant items 3,032 11,618 7,529 1,823 7,833 Net interest charges 4,708 5,017 6,354 4,810 2,116 Earnings before tax and significant items (1,676) 6,601 1,175 (3,194) 6,018

Represented by:Earnings before tax and significant items - continuing operations 10,905 3,252 6,448 2,392 4,177Earnings before tax and significant items - discontinuing operations (12,581) 3,349 (5,273) (5,586) 1,841

Net profit after tax (before significant items) (4,543) 10,336 (3,939) (1,285) 3,686 Net profit after tax (after significant items) (24,973) 10,189 (36,163) (1,962) 4,105

BALANCE SHEETCapital employed 82,053 143,826 138,523 183,875 72,687 Net debt 34,962 71,936 76,696 106,291 25,151 Shareholder funds 47,091 71,890 61,827 77,584 47,536

CASH FLOWNet cash flows from operations (4,655) 15,356 6,571 (14,490) 8,238 Capital expenditure and acquisitions (15,903) (13,889) (5,677) (65,473) (8,978)

FINANCIAL RATIOSBasic EPS before significant items (cents) (3.15) 7.18 (5.74) (2.01) 10.23 Basic EPS (cents) (17.33) 7.07 (52.67) (3.06) 11.39 Return on average shareholders' equity (%) (1) (4.89%) 11.13% (4.88%) (2.28%) 9.10%Net tangible asset backing per share (cents) 30.64 42.60 35.24 89.07 103.84 Net interest cover (times) 0.64 2.32 1.18 0.38 3.70 Gearing (net debt to shareholders' equity) (%) 74% 100% 124% 137% 71%

OTHERFully paid shares ('000) 144,448 144,048 144,048 68,032 41,884Convertible securities - number of shares ('000) (2) - - 6,100 6,100 6,100

Share price- year low ($) $0.51 $0.30 $0.29 $0.29 $0.78- year high ($) $0.98 $0.75 $0.66 $1.11 $1.12- close ($) $0.64 $0.71 $0.45 $0.45 $0.95

Market capitalisation $'000 92,447 102,274 64,822 30,614 39,790

(1) Based on net operating profit before significant items

(2) Repaid via intercompany funding on 15 January 2003

Five Year Financial Summary

6

Directors’ ReportYour directors present their report for the financialperiod ended 30 June 2004.

DirectorsThe names of directors in office at any time during the financial period anduntil the date of this report are as follows. Directors were in office for thisentire period unless otherwise stated.

Anthony G. HartnellMano D. BabiolakisBruce W. KempCarl C. SchokmanCraig A. StephenFrancis A. CostaRobert F. Kistinger

Robert F. Kistinger resigned from the Board on 2 March 2004

Principal ActivitiesThe principal activities of the consolidated entity during the financial period were:

- The manufacturing, marketing and distribution of fruit, vegetables, juiceand dried fruit and nuts within Australia and to export markets; and

- The growing of bananas, mushrooms, blueberries, raspberries, carrots,grapes, citrus and other fruits, in Australia

On 26 April 2004 the Company completed the sale of Angas Park FruitCompany Pty Ltd and Loxton Fruit Processors Pty Ltd to Sunbeam FoodsLimited for total consideration of $23.2 million.

During the period the Company successfully finalised the restructure of itsKangara processing operations. Kangara is now focused on growing its farmmanagement business through Chiquita’s alliance with Timbercorp, and alsoin facilitating citrus category management services with the major retailersthrough a strategic alliance with Yandilla Park. All citrus packing, citrus juicingand carrot processing ceased during the period. On 1 June 2004 Kangarasurrendered its citrus licence to Timbercorp. This immediately releasesKangara from any agricultural risk associated with the Kangara citrus land and is the first step in developing the farm management services business.

There were no other significant changes in the nature of the activities of theconsolidated entity during the period.

Earnings per ShareBasic earnings per share (4.45) cents

DividendsCents per share

Final dividend recommendedon ordinary shares (six months ended 30 June 2004) Nil

Final dividend recommendedon ordinary shares (year ended 31 December 2003) Nil

Review and Results of OperationsRefer to the Chairman’s Report and CEO’s Report in the front section of thisAnnual Report.

Significant Changes in the State of AffairsIn the opinion of the directors there were no significant changes in the stateof affairs of the consolidated entity that occurred during the financial periodunder review not otherwise disclosed in this report or the financialstatements.

Likely Developments and ResultsRefer to the Chairman’s Report and the CEO’s Report in the front section of this Annual Report.

Significant Events After Balance DateNo matters or circumstances have arisen since the end of the financialperiod which significantly affected or may significantly affect the operations ofthe consolidated entity, the results of those operations or the state of affairsof the consolidated entity in future financial years.

EmployeesThe consolidated entity employed an average of 1,170 employees during the period ended 30 June 2004 (year ended 31 December 2003:1,383 employees).

Environmental Issues Chiquita Brands South Pacific Limited and all of its subsidiaries arecommitted to conducting all business activities having proper respect for the environment while continuing to meet other expectations ofshareholders, employees, customers and suppliers. All group companiesare subject to environmental regulations under various Federal, State andlocal laws relating predominantly to air, noise and water emission levels,and the Directors are not aware of any non-compliance with theseregulations. The consolidated entity is committed to achieving a level of environmental performance that meets or exceeds Federal, State andlocal requirements, and improves its use of natural resources andminimises waste. Chiquita Mushrooms Pty Ltd has entered into theGreenhouse Challenge, a Federal Government initiative designed toreduce greenhouse gas emissions while improving performance.

Information on Directors Anthony G. Hartnell - ChairmanQualifications - Solicitor B.Ec (ANU); LLB (Hons)(ANU);

LLM (Highest Hons.) (George Washington University) A.M.

Age: 61

Experience - Appointed Chairman in 1985. Board member since 1984.Former Chairman of the Australian Securities and Investments Commissionand National Companies & Secretaries Commission. Serves and hasserved on boards of both public (including listed) and private companies.Directorships currently held include Television & Media Services Ltd andANU Endowment for Excellence.

Mano D. BabiolakisQualifications - B. Com. (Rhodes University South Africa)

Age: 43

Experience - Appointed to the Board on 12 April 2002. Former CEO ofInterfresh Limited, the largest horticultural concern in Zimbabwe. PresentlyCEO and Managing Director of Chiquita and Director of Zymex HoldingsPty Ltd. Has 18 years experience in the agricultural sector.

Bruce W. KempQualifications - Dip. Mech. Eng. (Monash University) Dip. Ind. Eng.

(Kettering University USA)

Age: 61

Experience - Appointed to the Board 24 February 2000. Former ChiefExecutive of Southcorp Wines. Presently Chief Executive of Global WineAdvice. Directorships include Anthony Smith Australasia Pty Ltd, PipersBrook Vineyards Limited and Rabobank Advisory Board.

Carl C. SchokmanQualifications - B. Com. (Deakin University); FCPA; FAICD; FTIA

Age: 51

Experience - Appointed to the Board on 29 May 2002. Presently the ChiefExecutive Officer of Costa Investment Holdings Pty Ltd. Has several yearsexperience in public accounting with an emphasis on business advisoryservices. Is a Fellow of the Institute of Company Directors and the TaxationInstitute of Australia.

Craig A. StephenQualifications - CPA B.S. (University of Cincinnati)

Age: 44

Experience - Appointed to the Board on 15 January 1998. Has several years experience consulting to large public clients whilst with Ernst & Young.Joined Chiquita Brands International, Inc. in 1990 as a Corporate Planner.Currently serves as President & Chief Operating Officer, Chiquita Banana -Far and Middle East, Austral/Asia Region.

Francis A. CostaQualifications - OAM

Age: 66

Experience - Appointed to the Board on 29 May 2002. Director of CostaBros. Annuities Pty Ltd and Managing Director and Executive Chairman ofCosta’s Pty Ltd. President of the Geelong Football Club. Honoured with an Order of Australia Medal for services to youth and the community.

Interest in the Shares and Options of the Company andany Related Bodies CorporateThe relevant interests of each of the directors in the shares and optionsissued by the companies within the consolidated entity as notified by thedirectors to the Australian Stock Exchange in accordance with S205G(1) of the Corporations Act 2001, at the date of this report are as follows:

7

Exchange Ordinary Quoted Executive

Shares Options Options

Anthony G. Hartnell 404,185 Nil Nil

Mano D. Babiolakis 3,100,000 Nil 600,000

Bruce W. Kemp 174,999 Nil Nil

Carl C. Schokman 342,826 Nil Nil

Craig A. Stephen (1) 390,000 Nil Nil

Francis A. Costa 37,032,395 Nil Nil

Robert F. Kistinger Nil Nil Nil (1) As trustee for the CBSP Employee Share Plan

Pictured left to right:Anthony Hartnell, Francis Costa, Carl Schokman, Craig Stephen, Bruce Kemp and Mano Babiolakis.

8

Directors’ and Executive Officers’ EmolumentsThe Remuneration Committee of the Board of Directors is responsiblefor determining and reviewing compensation arrangements for theManaging Director and management team and determining andreviewing the annual bonus system for employees. The Committee isalso responsible for recommending a total of Director’s remuneration tobe approved by resolution of shareholders at the Annual General Meetingof the Company. The appropriateness of the nature and amount ofemoluments is reviewed on a periodic basis by reference to the relevantemployment market conditions with the overall objective of ensuringmaximum shareholder benefit from the retention of a high quality Board andmanagement team. The Managing Director and management team aregiven the opportunity to receive their base emolument in a variety of formsincluding cash and fringe benefits such as motor vehicles and expensepayment benefits.

It is intended that the manner of payment chosen will be optimal for therecipient without creating undue cost for the Company. To assist in achievingthese objectives, the nature and amount of the Managing Director’s andmanagement team members’ emoluments are linked to the Company'sfinancial and operational performance. All senior executives have theopportunity to participate in the annual bonus system which currentlyprovides cash and share option incentives where specified criteria are metincluding criteria relating to profitability, cash flow, share price growth andindividual performance targets.

Details of the nature and amount of each element of the emolument ofeach director of the Company and each of the five executive officers of theCompany and the consolidated entity receiving the highest emolument forthe financial period are as follows:

Annual Emoluments Long Term Emoluments

Base Fee Other Options Granted Remuneration Superannuation Total$ $ Number $ % $ $

DirectorsA.G. Hartnell 26,000 - - - - - 26,000

M.D. Babiolakis 186,957 69,665 300,000 24,000 8.0% 18,377 298,999

B.W. Kemp 15,000 - - - - 1,350 16,350

C.C. Schokman - - - - - 14,413 14,413

C. A. Stephen 14,413 - - - - - 14,413

F.A. Costa 14,413 - - - - - 14,413

R.F. Kistinger - - - - - - -

384,588

Executive OfficersD.K. GreenCFO and Company Secretary 97,587 9,413 50,000 5,667 4.8% 5,500 118,167

S.S. LittleGeneral ManagerChiquita Mushrooms 89,141 12,859 50,000 5,667 5.0% 5,500 113,167

R.J. TantiGeneral Manager Chiquita Nibbles 91,265 10,735 50,000 5,667 5.0% 5,500 113,167

P.J. McPhersonGeneral Manager BFA& Chiquita Export 75,027 14,663 50,000 5,667 5.0% 17,810 113,167

M.E. RobinsonGeneral Manager Chiquita Trading & Banana Farms 87,280 13,053 50,000 5,667 5.0% 7,167 113,167

For the six month period ended 30 June 2004

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Directors’ Report continued

The elements of emoluments have been determined having regard to thecost to the Company and the consolidated entity. Executives are thosedirectly accountable and responsible for the operational management andstrategic direction of the Company and the consolidated entity.

The category “Other” includes the value of any non-cash benefits provided.

Options granted as part of the remuneration have been valued using theBlack-Scholes option pricing model, which takes into account factors such asthe option exercise price, current level and volatility of the underlying shareprice and the time to maturity of the option.

2004 Meetings of DirectorsDuring the financial period the following meetings were held:

Eligible to Number Eligible to Number Eligible to Number Eligible to Numberattend attended attend attended attend attended attend attended

A.G. Hartnell 4 4 1 1 1 1 Nil Nil

M.D. Babiolakis 4 4 1 1 Nil Nil 4 4

B.W. Kemp 4 4 Nil Nil 1 1 4 4

C.C. Schokman 4 4 1 1 1 1 4 4

C.A. Stephen 4 4 1 1 Nil Nil 4 4

F.A. Costa 4 4 1 1 1 1 Nil Nil

R.F. Kistinger 1 1 Nil Nil Nil Nil Nil Nil

*attendance by M.D. Babiolakis at remuneration and audit committee meetings is by invitation.

Director Board of Directors Remuneration Committee Nomination Committee Audit CommitteeMeetings Meetings Meetings Meetings

* * **

Indemnification and Insurance of Directors and OfficersThe Company has not, during or since the reporting period, in respect ofany person who is or has been an officer of the Company:

- Indemnified or made any relevant agreement for indemnifying against aliability incurred as an officer, including costs and expenses in successfullydefending legal proceedings; or

- Paid or agreed to pay a premium in respect of a contract insuring against a liability incurred as an officer for the costs or expenses to defend legalproceedings, with the exception of the following matters:

During the financial period the Company paid premiums to insure all of the directors and officers against liabilities for costs incurred by them in defending proceedings for conduct involving any actual or alleged error,misstatement, misleading statement, omission, neglect or breaches of duties and wrongful acts.

Disclosure of the total amount of the premiums paid under this renewedinsurance policy is prohibited under the provisions of the insurance contract.

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Share OptionsAs at the date of this report, there were 1,823,225 unissued ordinary shares in the Company under Options.

Refer to Note 29 of the financial statements for further details of the options outstanding.

During the financial period, Mr Babiolakis exercised options to acquire400,000 fully paid ordinary shares in Chiquita Brands South Pacific Limited at a weighted average price of $0.435.

No further options were exercised since the end of the financial period.

Options Granted to Directors and any of the Five MostHighly Paid Officers300,000 options over unissued shares in Chiquita Brands South PacificLimited were granted to the Managing Director, Mr Babiolakis, in May 2004.

300,000 options over unissued shares in Chiquita Brands South PacificLimited were granted to members of the Chiquita Executive, excluding Mr Babiolakis, in May 2004.

The terms and conditions of these options are included in the notes to the financial statements.

Rounding of AmountsThe company is an entity to which ASIC Class Order 98/100 applies and,accordingly, amounts in the financial statements and directors' report havebeen rounded to the nearest thousand dollars.

Corporate GovernanceIn recognising the need for the highest standards of corporate behaviour andaccountability, the Directors of Chiquita Brands South Pacific Limited supportand adhere to the principles of Corporate Governance. The Company’scorporate governance statement is contained within this Annual Report.

Signed in accordance with a resolution of the Board of Directors.

Anthony G. HartnellChairman

Dated this 26th day of August 2004

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Corporate GovernanceChiquita Brands South Pacific Limited (the Company)and the Board are committed to achieving anddemonstrating the highest standards of corporategovernance.

An extensive review of the Company’s corporate governance frameworkwas completed in 2003 in light of the best practice recommendationsreleased by the Australian Stock Exchange (“ASX”) Corporate GovernanceCouncil. As a result of this review the Company implemented a corporategovernance framework which is broadly consistent with those best practicerecommendations. The Company and its controlled entities together arereferred to as the Group in this statement.

The Board resolved, notwithstanding the Corporate Governance Councilrecommendation of majority independence at the board level, that thecomposition of the Company’s Board remain unchanged at this point intime. As set out on page 7 the Board comprise 6 members including theManaging Director and 5 non-executive directors. Under the CorporateGovernance Council’s definition of independence 3 of the non-executivedirectors, who represent the interests of substantial shareholders, fail the test of independence (hereafter referred to as “non-independent” directors).The Board considered the replacement of 2 of the existing non-independentmembers but believed that ultimately this would not be in the Company’sinterest because of the wealth of commercial acumen and industryexperience that these directors bring to the Board. Whilst the Boardrecognise the risk for the interest of substantial shareholders to act in concertto the detriment of other shareholders, it believes this unlikely due to theCompany’s history of very open and robust debate at the board level, bothby and between independent and “non-independent” directors. Further theBoard believe that the significant difference in geographic business interestsand strategic nature of the investments held by substantial shareholdersoperate to ensure these directors act in the best interests of all shareholders.

As part of this review the Board also considered achieving majorityindependence through the creation of an additional 4 Board seats.Notwithstanding the change required to the Company’s constitution

to accommodate any increased number of directorships, the Board resolved that such a move would not be conducive to effective discussionand decision making, and was cost prohibitive for a company of Chiquita’s size.

Following the resignation of Mr. Robert Kistinger on 2nd March 2004 the Company has commenced a search for an appropriately qualifiedindependent director. It is anticipated that this search will be completed, and the appointment announced, late in 2004.

Management and the Board The relationship between the Board and senior management is important to the Group’s long term success. Day to day management of the Group’saffairs and the implementation of the corporate strategy and policy initiativesare formally delegated by the Board to the Managing Director and seniorexecutives as set out in the board charter. These delegations are reviewedon an annual basis.

The Directors are responsible to the shareholders for the performance of the Company in both the short and the longer term and seek to balancesometimes competing objectives in the best interest of the Group as awhole. Their focus is to enhance the interests of shareholders and other key stakeholders and to ensure the Group is properly managed.

A description of the Company’s main corporate governance practices areset out below.

The Board of DirectorsThe Board operates in accordance with the board principles set out in itscharter which is available on the Company website. The charter details the Board’s composition and responsibilities.

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Board CompositionThe charter states that:

- The Board is to be comprised of both executive and non-executivedirectors with a majority of non-executive directors. Non-executivedirectors bring a fresh perspective to the Board’s consideration ofstrategic, risk and performance matters and are best placed to exerciseindependent judgment and review and constructively challenge theperformance of management

- In recognition of the importance of independent views and the Board’srole in supervising the activities of management the Chairman must bean independent non-executive director

- The Chairman is elected by the full board and is required to meetregularly with the Managing Director

- The Company is to maintain a mix of Directors on the Board fromdifferent backgrounds with complementary skills and experience

ResponsibilitiesThe responsibilities of the Board include:

- Contributing to the development of and approving the corporatestrategy

- Reviewing and approving business plans, the annual budget and financial plans including major capital expenditure initiatives

- Overseeing and monitoring:

- organisational performance and the achievement of the Group’sstrategic goals and objectives

- compliance with the Company’s Code of Conduct

- progress of major capital expenditures and other significantcorporate projects including any acquisitions or divestments

- Monitoring financial performance including approval of the annual and half-year financial reports and liaison with the Company’sexternal auditors

- Appointment, performance assessment and, if necessary, removal ofthe Managing Director

- Ratifying the appointment and/or removal and contributing to theperformance assessment of the members of the senior managementteam including the Chief Financial Officer (CFO) and the CompanySecretary

- Ensuring there are effective management processes in place andapproving major corporate initiatives

- Ensuring the significant risks facing the Group, including thoseassociated with its legal compliance obligations have been identifiedand appropriate and adequate control, monitoring, accountability and reporting mechanisms are in place

- Reporting to shareholders

Board MembersDetails of the members of the Board, their experience, qualifications, terms of office and independent status are set out on page 7. All Directors,except the Managing Director are non-executive directors.

The Directors in office were appointed based on the skills and experiencethey could bring to board deliberations on current emerging issues. A boardnomination committee has been established and details of the nominationcommittee are set out overleaf. Details of the nomination, selection andappointment processes are available on the Company website.

In addition, the Board seeks to ensure that:

- The size of the Board is conducive to both effective discussion and effective decision making; and

- Its membership represents an appropriate balance, experience and knowledge of the industry.

Directors’ IndependenceThe Board acknowledges the importance placed on the independence of directors by the ASX in promoting an environment of good corporategovernance. As previously stated the Board has considered theindependence of each director as defined in the guidelines and believedirectors representing the interest of substantial shareholders to beindependent notwithstanding this relationship.

Term of OfficeThe Company’s Constitution specifies that one third of directors (with the exception of the Managing Director) must retire from office atthe Company’s Annual General Meeting (AGM). The directors to retireat the AGM are the longest serving directors, since last being elected orre-elected. Where eligible, a director may stand for re-election.

Chairman and Managing Director (MD)The Chairman is responsible for leading the Board, ensuring that boardactivities are organised and efficiently conducted and for ensuringdirectors are properly briefed for meetings. The MD is responsible forimplementing Group strategies and policies. The Board charter specifiesthat these are separate roles to be undertaken by separate people.

Commitment Non-executive directors are expected to spend sufficient time preparing for and attending board and committee meetings and associated activities.

The number of meetings of the Company’s Board of Directors and of eachboard committee held during the six months ended 30 June 2004, and thenumber of meetings attended by each director is disclosed on page 9.

13

Corporate Governance continued

Independent Professional AdviceDirectors and board committees have the right, in connection with theirduties and responsibilities, to seek independent professional advice at theCompany’s expense. Prior written approval of the Chairman is required, but this will not be unreasonably withheld.

Performance AssessmentAs part of the Company’s corporate governance procedures the Boardintends to undertake an annual assessment of its collective performance and seeks specific feedback from an independent consultant on particularaspects of its performance. The results and any action plans will bedocumented together with specific performance goals which are established for the coming year.

Corporate ReportingThe MD and CFO have certified to the Board that to the best of theirknowledge and belief the Company’s financial reports are complete andpresent a true and fair view, in all material respects, of the financial conditionand operational results of the Company and Group.

Board CommitteesThe Board has established a number of committees to assist in theexecution of its duties and to allow detailed consideration of complex issues.Current committees of the Board are the nomination, remuneration andaudit committees. The committee structure and membership is reviewedfrom time-to-time.

Each of these committees has its own written charter setting out its role and responsibilities, composition, structure, membershiprequirements and the manner in which the committee is to operate. All of these charters are reviewed on an annual basis and are available on the Company website. All matters determined by committees aresubmitted to the Board as recommendations for board decisions. Additional requirements for specific reporting to the Board are addressed in the charter of individual committees.

Nomination CommitteeThe nomination committee consists of all Australia directors absent theManaging Director and CEO.

Details of these directors’ qualifications and experience are set out on page 7.Attendance at Nomination Committee meetings are set out on page 9.

The main responsibilities of the committee are to:

- Conduct a review of the membership of the Board having regard to present and future needs of the Company and to makerecommendations on board composition and appointments

- Identifying suitable candidates for board vacancies

- Oversee the annual performance assessment program

- Oversee board succession including succession of the Chairperson.

When the need for a new director is identified or an existing directoris required to stand for re-election, the committee reviews the rangeof skills, experience and expertise on the Board, identifies its needs andprepares a short-list of candidates with appropriate skills and experience.Where necessary, advice will be sought from independent search consultants.

The full board will then appoint the most suitable candidate who must stand for election at the next Annual General Meeting of the Company.Reappointment of existing directors is not automatic and is contingent ontheir past performance and contribution to the Company.

New directors will be provided with a letter of appointment setting out theirresponsibilities, rights and the terms and conditions of their employment.

Remuneration CommitteeThe remuneration committee consists of the following directors:

Mr. A. Hartnell (Chairperson)

Mr. F. Costa

Mr. C. Schokman

Mr. C. Stephen

Details of these Directors’ qualifications and experience are set out on page 7.Attendance at remuneration committee meetings are set out on page 9.

14

The remuneration committee advises the Board on remuneration policiesand practices generally, and makes other specific recommendations onremuneration packages and other terms of employment for executivedirectors, other senior executives and non-executive directors.

Each member of the senior executive team signs a formal employmentcontract at the time of their appointment covering a range of matterincluding their duties, rights, responsibilities and any entitlements ontermination.

Executive remuneration and other terms of employment are reviewedannually by the committee having regard to personal and comparativeperformance, contribution to long term growth, relevant comparativeinformation and where appropriate independent expert advice. As well as a base salary, remuneration packages may include superannuation,retirement and termination entitlements, performance-related bonuses and fringe benefits.

Further information on directors’ and executives’ remuneration is set out in the Directors’ Report and Note 30 to the financial report.

The remuneration committees’ terms of reference include responsibility for reviewing any transactions between the organisation and the directors,or any interest associated with the Directors, to ensure the structure andthe terms of the transaction are in compliance with the Corporations Act2001 and are appropriately disclosed.

The committee also assumes responsibility for management successionplanning, including the implementation of appropriate executive developmentprograms and ensuring adequate arrangements are in place, so thatappropriate candidates are recruited for later promotion to senior positions.

Audit CommitteeThe audit committee consists of the following non-executive directors:

Mr. B. Kemp (Chairperson)

Mr. C. Stephen

Mr. C. Schokman

Details of these directors’ qualifications and experience are set out on page 7. Attendance at audit committee meetings are set out on page 9. All Directors have the right to attend Audit Committee Meetings.

The audit committee operates in accordance with a charter which isavailable on the Company website.

The main responsibilities of the committee are to:

- Review, assess and approve the annual report, the half-year financialreport and all other financial information published by the Company or released to the market

- Assist the Board in reviewing the effectiveness of the organisation’sinternal control environment, covering:

- effectiveness and efficiency of operations

- reliability of financial reporting

- compliance with applicable laws and regulations

- Oversee the effective operation of the risk management framework

- Recommend to the Board the appointment, removal and remuneration of the external and internal auditors, and review the terms of theengagement, the scope and quality of the audit and assess performance

- Consider the independence and competence of the external andinternal auditor on an ongoing basis

- Review and approve the level of non-audit services provided by the external auditors and ensure it does not adversely impact on auditor independence

- Review and monitor related party transactions and assess their propriety

- Report to the Board on matters relevant to the committee’s role and responsibilities.

In fulfilling its responsibilities, the audit committee:

- Receives regular reports from management and the external andinternal auditors

- Meets with the auditors at least twice a year or more frequently if necessary

15

Corporate Governance continued

- Requires the MD and CFO to state in writing to the Board that theCompany’s financial reports present a true and fair view, in all materialrespects, of the Company’s and Group’s financial condition, operationalresults and are in accordance with relevant accounting standards.

- Reviews any significant disagreements between the auditors andmanagement, irrespective of whether they have been resolved

- Is given the opportunity to meet separately with the external andinternal auditors without the presence of management

- Provides the external and internal auditors with a clear line of directcommunication at any time to either the Chairman of the auditcommittee or the Chairman of the Board.

The audit committee has authority, within the scope of its responsibilities, to seek any information it requires from any employee or external party.

AuditorsThe audit committee charter requires that the Company only appointauditors who clearly demonstrate quality and independence. The performance of the Company’s internal and external auditors isreviewed annually and applications for tender of audit services are requested as deemed appropriate, taking into consideration assessment of performance, existing value and tender costs.

An analysis of fees paid to the auditors, including a breakdown of fees for non-audit services, is provided in Note 25 to the financial report.

Risk Assessment and ManagementThe Board is responsible for ensuring there are adequate policies in relation to risk oversight and management, and internal control systems.Management is currently undertaking a program to review, enhance andformalise existing Company policies to ensure that they are appropriate andadequate to identify, assess, address and monitor the strategic, operational,legal, reputation and financial risks, to enable achievement of the Group’sbusiness objectives.

Considerable importance is placed on creating and maintaining a strongcontrol environment. Accordingly, detailed control procedures coveringmanagement accounting, financial reporting, project appraisal, environment,health and safety, IT security, compliance and other risk management issuesare being formally documented.

An organisational structure with clearly drawn lines of accountability anddelegation of authority is being finalised. Adherence to the Code of Conductis required at all times and the board actively promotes a culture of qualityand integrity.

The implementation and management of the Company’s risk managementpolicy is the responsibility of the CFO. The Board is to receive reports fromthe CFO on material risks that may impede meeting business objectives.The CFO is to ensure that appropriate controls are in place to effectivelymanage those risks. This will be monitored by the Board.

The Environment, Health and Safety ManagementThe Company recognises the importance of environmental andoccupational health and safety (OH&S) issues and is committed to thehighest levels of performance and monitors these issues and implementsappropriate actions. OH&S policies and procedures have been drafted and will be incorporated into this system in the near future. The Company has engaged the services of an OH&S auditor who is charged with theresponsibility of providing the board with regular updates on OH&Scompliance throughout the Group.

Information on compliance with environmental regulations is set out inthe Directors’ report.

Code of ConductThe Company has developed a Code of Conduct (the Code) which has been fully endorsed by the Board and applies to all directors andemployees. The Code will be regularly reviewed and updated asnecessary to ensure it reflects the highest standards of behaviour andprofessionalism and the practices necessary to maintain confidence in the Group’s integrity.

The Code is available for review on the Company’s website and coverssuch matters as conflicts of interest, trading in the Company’s shares bydirectors and employees, ethical and legal responsibilities etc.

Continuous Disclosure and Shareholder CommunicationThe Company Secretary has been nominated as the person responsiblefor communications with the ASX. This role includes responsibility forensuring compliance with continuous disclosure to the ASX, analysts,brokers, shareholders, the media and the public.

The Company has written policies and procedures on informationdisclosure that focus on continuous disclosure of any informationconcerning the Company and its controlled entitles that a reasonableperson would expect to have a material effect on the price of theCompany’s securities. All information disclosed to the ASX is posted onthe Company’s website as soon as it has been disclosed to the ASX.

All shareholders receive a copy of the Company’s annual reports. In addition, the Company seeks to provide opportunities for shareholders to participate through electronic means. All significant Companyannouncements, media briefings, details of Company meetings, pressreleases, and financial reports are available on the Company’s website.

FinancialsStatement of Financial Performance 17

Statement of Financial Position 18

Statement of Cash Flows 19

Notes to the Financial Statements 20

1. Statement of Significant Accounting Policies 20

2. Revenue 24

3. Loss from Ordinary Activities 25

4. Expenses from Ordinary Activities 26

5. Individually Significant Items 26

6. Income Tax Expense 27

7. Dividends 28

8. Earnings per Share 28

9. Cash Assets 28

10. Receivables 29

11. Inventories 30

12. Self-generating & Regenerating Assets 30

13. Other Financial Assets 31

14. Controlled Entities 31

15. Property, Plant & Equipment 32

16. Intangible Assets 34

17. Other Assets 34

18. Payables 35

19. Interest-bearing Liabilities 36

20. Provisions 37

21. Contributed Equity 38

22. Accumulated Losses 39

23. Expenditure Commitments 40

24. Contingent Liabilities 41

25. Auditors’ Remuneration 41

26. Deed of Cross Guarantee 42

27. Segment Reporting 44

28. Cash Flow Information 46

29. Employee Benefits 48

30. Director & Executive Disclosures 51

31. Related Party Transactions 56

32. Events Subsequent to Reporting Date 56

33. Financial Instruments 56

34. Discontinued Operations 60

35. International Financial Reporting Standards (IFRS) 61

Shareholder Information 63

Directors’ Declaration 64

Independent Audit Report 65

Company Details 68

17

Statement of Financial PerformanceFor the six month period ended 30 June 2004

Consolidated Chiquita BrandsEntity South Pacific Ltd

6 months 12 months 6 months 12 monthsended 30 ended 31 ended 30 ended 31Jun 2004 Dec 2003 Jun 2004 Dec 2003

Note $'000 $'000 $'000 $'000

Revenues from ordinary activities 2 146,680 325,538 13,609 15,326 Expenses from ordinary activities other than borrowing costs 4 (157,460) (335,962) (22,653) (33,417)Borrowing costs expensed 3 (1,635) (5,799) (281) (948)

Loss from ordinary activities before income tax expense 3 (12,415) (16,223) (9,325) (19,039)Income tax (benefit) / expense relating to ordinary activities 6 (6,002) 2,019 (4,077) 482

Net loss attributable to members of Chiquita BrandsSouth Pacific Limited (6,413) (18,242) (5,248) (19,521)

Non-owner transaction changes in equityDecrease in retained profits on adoption of revised accounting standards:

AASB 1028 - “Employee Benefits” 22 - (115) - (4)

Total revenues, expenses and valuation adjustments attributable tomembers of Chiquita Brands South Pacific Limited and recogniseddirectly in equity - (115) - (4)

Total changes in equity from non-owner transactions attributable tomembers of Chiquita Brands South Pacific Limited (6,413) (18,357) (5,248) (19,525)

Basic earnings per share (cents per share) 8 (4.45) (12.66)Franked dividend per share (cents per share) 7 0.00 0.00

The accompanying notes form part of these financial statements.

Statement of Financial PositionAs at 30 June 2004


18

30 Jun 31 Dec 30 Jun 31 Dec2004 2003 2004 2003

Note $'000 $'000 $'000 $'000

CURRENT ASSETSCash assets 9 - 4,236 1,516 2,195Receivables 10 20,245 23,814 391 3,038Inventories 11 9,425 23,292 279 583 Self-generating and regenerating assets 12 4,552 5,943 2,477 298 Current tax assets 6 5,707 1,238 5,707 - Other 17 1,192 4,099 14 101

TOTAL CURRENT ASSETS 41,121 62,622 10,384 6,215

NON-CURRENT ASSETSReceivables 10 557 560 14,113 20,526 Other financial assets 13 387 387 32 8,376Property, plant and equipment 15 49,556 58,570 12,022 11,932 Self-generating and regenerating assets 12 10,360 10,923 9,830 9,830Deferred tax assets 6 7,093 4,450 7,093 140 Intangible assets 16 2,829 7,896 504 521

TOTAL NON-CURRENT ASSETS 70,782 82,786 43,594 51,325

TOTAL ASSETS 111,903 145,408 53,978 57,540

CURRENT LIABILITIESPayables 18 18,811 30,213 529 1,613 Interest-bearing liabilities 19 12,347 6,837 2,051 2,081 Current tax liabilities 6 - 1,476 - 394Provisions 20 7,502 8,076 574 211

TOTAL CURRENT LIABILITIES 38,660 46,602 3,154 4,299

NON-CURRENT LIABILITIESInterest-bearing liabilities 19 22,615 42,964 1,041 949 Deferred tax liabilities 6 2,652 1,662 2,652 72 Provisions 20 885 850 44 59

TOTAL NON-CURRENT LIABILITIES 26,152 45,476 3,737 1,080

TOTAL LIABILITIES 64,812 92,078 6,891 5,379

NET ASSETS 47,091 53,330 47,087 52,161

EQUITYContributed equity 21 93,069 92,895 93,069 92,895Accumulated losses 22 (45,978) (39,565) (45,982) (40,734)

TOTAL EQUITY 47,091 53,330 47,087 52,161



Note $'000 $'000 $'000 $'000

CASH FLOWS FROM OPERATING ACTIVITIESReceipts from customers 120,452 290,014 28,841 15,061Payments to suppliers and employees (132,043) (284,242) (21,273) (11,706)Dividends received 2(a) 7 15 - -Interest received 2(b) 18 55 - -Borrowing costs (1,635) (5,858) (282) (923)Income tax (paid) / refunded (1,207) (303) (275) (355)

NET CASH (USED IN) / PROVIDED BY OPERATING ACTIVITIES 28(a) (14,408) (319) 7,011 2,077

CASH FLOWS FROM INVESTING ACTIVITIESProceeds from sale of property, plant and equipment 1,271 33,364 53 41Proceeds from sale of investments - 74 - -Proceeds from sale of a controlled entity (net of cash disposed) 34 27,284 - 8,665 -Purchase of property, plant and equipment (4,036) (18,893) (467) (3,227)

NET CASH PROVIDED BY / (USED IN) INVESTING ACTIVITIES 24,519 14,545 8,251 (3,186)

CASH FLOWS FROM FINANCING ACTIVITIESProceeds from issue of shares 174 - 174 -Proceeds from borrowings - other loans 8,632 21,673 - 10,510Repayment of borrowings - other loans (23,000) (26,201) - - Repayment of borrowings - related parties - (7,214) (16,177) (7,214)Finance lease and hire purchase borrowings 642 4,064 132 66Finance lease and hire purchase payments (1,398) (1,518) (70) (58)

NET CASH (USED IN) / PROVIDED BY FINANCING ACTIVITIES (14,950) (9,196) (15,941) 3,304

NET (DECREASE) / INCREASE IN CASH HELD (4,839) 5,030 (679) 2,195

CASH AT THE BEGINNING OF THE FINANCIAL PERIOD 4,236 (794) 2,195 -

CASH AT THE END OF THE FINANCIAL PERIOD 28(c) (603) 4,236 1,516 2,195


19

Statement of Cash FlowsFor the six month period ended 30 June 2004


20

Notes to the Financial StatementsFor the six month period ended 30 June 2004

1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIESThe financial report is a general purpose financial report, which has beenprepared in accordance with the requirements of the Corporations Act2001, which includes applicable Accounting Standards. Other mandatoryprofessional reporting requirements (Urgent Issues Group ConsensusViews) have also been complied with.

The financial report has been prepared in accordance with the historicalcost convention, except for self-generating and regenerating assets whichare measured at net market value.

Changes in Accounting PoliciesThe accounting polices adopted are consistent with those adopted in themost recent annual report.

Financial PeriodThe Company obtained approval from ASIC to change its financial yearend from 31 December to 30 June. The change was implemented toensure the Company’s financial year end is consistent with its tax yearend and to provide more meaningful comparison of its results with itscompetitors. These consolidated financial statements have been preparedfor a six month period from 1 January 2004 to 30 June 2004. The priorperiod is for the 12 months ended 31 December 2003.

Principles of ConsolidationThe consolidated financial statements are those of the consolidated entity,Chiquita Brands South Pacific Limited, and all entities that Chiquita BrandsSouth Pacific Limited controlled from time to time during the period andat balance date.

Information from the financial statements of subsidiaries is included fromthe date the parent company obtains control until such time as controlceases. Where there is a loss of control of a subsidiary, the consolidatedfinancial statements include the results for the part of the reporting periodduring which the parent company had control.

Subsidiary acquisitions are accounted for using the purchase method of accounting.

The financial statements of subsidiaries are prepared for the samereporting period as the parent company, using consistent accountingpolicies.

All intercompany balances and transactions, including unrealised profitsarising from intra-group transactions, have been eliminated in full.

Cash and Cash EquivalentsCash on hand and in banks are stated at nominal value.

For the purposes of the Statement of Cash Flows, cash includes cash onhand and in banks, and money market investments readily convertible tocash within two working days, net of outstanding bank overdrafts.

Bank overdrafts are carried at the principal amount.

Interest is charged as an expense as it accrues.

ReceivablesTrade receivables are recognised and carried at original invoice amountless a provision for any uncollectible debts. An estimate for doubtful debts is made when collection of the full amount is no longer probable.Bad debts are written-off as incurred.

Other debtors relate principally to GST refunds and expensereimbursements outstanding at balance date and are carried at thenominal amount due.

Receivables from related parties are recognised and carried at thenominal amount due. Interest is taken up as income on an accrual basis.

InventoriesRaw Materials and StoresRaw materials and stores are valued at the lower of cost and netrealisable value. Costs incurred in bringing each product to its presentlocation and condition are accounted for on a first-in first-out basis.

Finished Goods and Work in ProgressFinished goods and work in progress are valued at the lower of cost and net realisable value. Costs incurred in bringing each product to itspresent location and condition are accounted for using average cost.

Self-generating and Regenerating Assets (SGARAs)Self-generating and Regenerating Assets are measured at their net market value at each reporting date. The net market value is determined,in the absence of an active and liquid market in the Group’s growingassets, as the net present value of cash flows expected to be generatedby these growing assets (discounted at a risk adjusted interest rate). Net increments and decrements in the market value of the growingassets are recognised as revenues or expenses in the profit or loss,determined as:

(i) The difference between the total net market value of the growingassets recognised at the beginning of the financial period and thetotal net market value of the growing assets recognised at thereporting date; less

(ii) Costs incurred during the financial period to acquire and plant the growing assets.

Costs incurred in maintaining or enhancing the growing assets arerecognised as expenses when incurred.

The market value of the produce picked during the financial period andrecognised as revenue is determined as the net market value of the cropsimmediately after picking, less the cost of picking. Short lived growingassets such as mushrooms, raspberries and carrots are accounted for on a cost basis because cost is considered more relevant and reliable.

21

All non-current SGARA values have been determined in accordance with a directors’ valuation at each reporting date. In determining themarket value the following factors have been taken into account:(i) The productive life of the SGARA;

(ii) The period over which the SGARA will mature;

(iii) The expected future sales price;

(iv) The cost expected to arise throughout the life of the SGARA; and

(v) Net cash flows are discounted at a pre-tax average real rate of 15% per annum and it is assumed that inflation will continue at the current rate.

Cash flows are gross of income tax and are expressed in real terms.

Expected future sale prices for all SGARAs is constant in real terms, based on average prices throughout the current financial period. Costs, expected to arise throughout the life of the SGARAs, are constantin real terms, based on average costs throughout the financial period.Details of plantings are outlined in Note 12.

Mushrooms, raspberries and carrots (being short lived growing crops)have been valued on a cost basis and are disclosed as current SGARAs.

InvestmentsInvestments are brought to account at cost. The carrying amount ofinvestments is reviewed annually by the Directors to ensure it is not inexcess of the recoverable amount of the investments. The recoverableamount is assessed from the underlying net assets in the particular entities.

Property, Plant and EquipmentCost and ValuationProperty, plant and equipment are brought to account at cost, less whereapplicable, any accumulated depreciation or amortisation. The carryingamount of property, plant and equipment is reviewed by the Directors toensure it is not in excess of the recoverable amount.

Depreciation and AmortisationThe depreciable amounts of all property, plant and equipment, includingbuildings and capitalised leased assets, but excluding freehold land aredepreciated over their useful lives commencing from the time the asset is held ready for use.

Depreciation is provided on a straight line basis on all property, plant andequipment other than freehold land, and water rights.

Major depreciation periods are:

Freehold Buildings 33 years

Leasehold Improvements 5 years

Plant and Equipment 5 to 20 years

Market Lease Premiums 20 years

LeasesLeases are classified at inception as either operating or finance leasesbased on the economic substance of the agreement to reflect the risksand benefits incidental to ownership.

Operating LeasesThe minimum lease payments of operating leases, where the lessoreffectively retains substantially all of the risks and benefits of ownership of the leased item, are recognised as an expense on a straight line basis.

Lease payments for operating leases, where substantially all the risk andbenefits remain with the lessor, are charged as expenses in the period in which they are incurred.

Finance LeasesCosts of improvement to or on leasehold property is capitalised,disclosed as leasehold improvements, and amortised over the unexpiredperiod of the lease or the estimated useful lives of the improvements,whichever is the shorter.

Leases of property, plant and equipment where substantially all the risks and benefits incidental to ownership of the asset, but not the legalownership, are transferred to the Company are classified as finance leases.Finance leases are capitalised, recording an asset and a liability equal to thepresent value of the minimum lease payments, including any guaranteedresidual values. Leased assets are amortised over their estimated useful lives.Lease payments are allocated between the reduction of the lease liability and the lease interest expense for the period.

IntangiblesShare Issue ExpensesCosts associated with the public issue of shares and the listing of theCompany on the Australian Stock Exchange incurred prior to 1999 are beingwritten off over a period of twenty years. Costs incurred from1999 onwardshave been written off against the proceeds of the share issues.

Acquisition CostsProfessional costs associated with the listing of Chiquita and theassociated acquisition, have been capitalised in these accounts and arebeing written off over a period of twenty years from the completion date of 15th January, 1998. Costs associated with all acquisitions byChiquita are also capitalised and written off over twenty years.

GoodwillGoodwill is amortised using the straight line method over the periodduring which benefits are expected to be received, which is assumed to be twenty years.

22

Brand NamesThe value of brand names are supported by an external valuation. Brand names are recorded in the financial statements at cost. No amortisation is provided against the carrying value of these brandnames on the basis that their lives are considered to be very long (in excess of fifty years) and that their terminal value approximates their carrying value.

Recoverable AmountNon-current assets are not carried at an amount above their recoverableamount, and where carrying values exceed this recoverable amountassets are written down. In determining recoverable amount, theexpected net cash flows have been discounted to their present valueusing a market determined discount rate.

PayablesLiabilities for trade creditors and other amounts are carried at cost whichis the fair value of the consideration to be paid in the future for goods and services received, whether or not billed to the consolidated entity.

Payables to related parties are carried at the principal amount.

Interest, when charged by the lender, is recognised as an expense on an accrual basis.

Employee EntitlementsProvision is made for employee entitlement benefits accumulated as aresult of employees rendering services up to the reporting date. Thesebenefits include wages and salaries, annual leave and long service leave.Liabilities arising in respect of wages and salaries, annual leave and anyother employee entitlements are measured on the remuneration ratesexpected to be paid when the liability is settled.

Employee entitlement expenses arise in respect of the followingcategories:

- Wages and salaries, non-monetary benefits, annual leave, long service leave, sick leave and other leave entitlements;

- Other types of employee entitlements are charged againstprofits on a net basis in their respective categories.

The employee share plans described in Note 29 do not result in anyvalues being charged as an employee entitlement expense.

ProvisionsProvisions for restructuring are recognised for all restructuring andredundancy liabilities that the consolidated entity has incurred at balancedate and can reliably measure.

Interest-Bearing LiabilitiesAll loans (including commercial bills and convertible notes) are measuredat the principal amount. Interest is charged as an expense as it accrues.

The finance lease liabilities are as determined in accordance with therequirement of AASB 1008 “Leases”.

Contributed EquityIssued and paid-up capital is recognised at the fair value of theconsideration received by the Company.

Any transaction costs arising on the issue of ordinary shares arerecognised directly in equity as a reduction of the share proceedsreceived.

Revenue RecognitionRevenue is recognised to the extent that it is probable that the economicbenefits will flow to the entity and the revenue can be reliably measured.The following specific recognition criteria must also be met beforerevenue is recognised:

Sale of Goods:Control of goods has passed to the buyer, which is upon delivery.

Rendering of Services:Revenue from rendering services is recognised in the period in whichthe service is provided.

Interest:Control of a right to receive consideration for the provision of, orinvestment in, assets has been attained.

Dividends:Control of a right to receive consideration for the investment in assets is attained, usually evidenced by approval of the dividend at a meeting of shareholders.

TaxesIncome TaxTax-effect accounting is applied using the liability method whereby incometax is regarded as an expense and is calculated on the accounting profit afterallowing for permanent differences. To the extent timing differences occurbetween the time items are recognised in the financial statements and whenitems are taken into account in determining taxable income, the net relatedtaxation benefit or liability, calculated at current rates, is disclosed as a futureincome tax benefit or a provision for deferred income tax. The net futureincome tax benefit relating to tax losses and timing differences is not carriedforward as an asset unless the benefit is virtually certain of being realised.


23

Tax ConsolidationThe Company is the head entity in the tax-consolidated group comprising all the wholly owned subsidiaries set out in Note 14. The implementation date for the tax-consolidated group is 1 January2003. The head entity recognises all of the current and deferred taxassets and liabilities of the tax consolidated group (after elimination of intragroup transactions).

The tax-consolidated group has entered into a tax funding agreement that requires wholly owned subsidiaries to make contributions to thehead entity for:

- Deferred tax balances recognised by the head entity onimplementation date, including the impact of any relevantreset tax cost bases; and

- Current tax assets and liabilities and deferred tax balancesarising from external transactions occurring after theimplementation of tax consolidation.

Under the tax funding agreement, the contributions are calculated on a stand alone basis so that the contributions are equivalent to the taxbalances generated by external transactions entered into by the whollyowned subsidiaries. The contributions are payable as set out in theagreement and reflect the timing of the head entity's obligations to makepayment to the relevant tax authorities. The assets and liabilities arisingunder the tax funding agreement are recognised as intercompany assets and liabilities with a consequential adjustment to income taxexpense / revenue.

Goods and Services Tax (GST)Revenue, expenses and assets are recognised net of the amount of GST,except:

- Where the GST incurred on a purchase of goods and servicesis not recoverable from the taxation authority, in which casethe GST is recognised as part of the cost of acquisition of theasset or as part of the expense item as applicable; and

- Receivables and payables are stated with the amount of GSTincluded.

Foreign CurrenciesTransactions in foreign currencies of entities within the consolidated entityare converted to local currency at the rate of exchange ruling at the dateof the transaction.

Amounts payable to and by the entities within the consolidated entity that are outstanding at the balance date and are denominated in foreigncurrencies have been converted to local currency using rates of exchangeruling at the end of the financial period.

All resulting exchange differences arising on settlement or re-statement arebrought to account in determining the profit or loss for the financial period,and transaction costs, premiums and discounts on forward currencycontracts are deferred and amortised over the life of the contract.

The Company does not enter into speculative forward exchangecontracts.

Earnings per Share (EPS)Basic EPS is calculated as net profit attributable to members, adjusted toexclude costs of servicing equity (other than dividends) and preferenceshare dividends, divided by the weighted average number of ordinaryshares, adjusted for any bonus element.

Diluted EPS is calculated as the net profit attributable to members,adjusted for:

- Cost of servicing equity (other than dividends) and preferenceshare dividends;

- The after tax effect of dividends and interest associated withthe dilutive potential ordinary shares that have beenrecognised as expenses; and

- Other non-discretionary changes in revenue or expensesduring the period that would result from the dilution ofpotential ordinary shares;

divided by the weighted average number of ordinary shares and dilutivepotential ordinary shares, adjusted for any bonus element.

ComparativesWhere necessary, comparatives have been reclassified and repositionedfor consistency with current year disclosures.



24


Note $'000 $'000 $'000 $'000

2. REVENUERevenue from operating activitiesRevenue from sale of goods 91,172 229,382 1,893 8,435Revenue from services 897 1,870 73 212Net market value of growing crops harvested 28,420 58,231 1,062 6,232Net increment in market value of growing assets 530 298 1,850 298

Total revenue from operating activities 121,019 289,781 4,878 15,177

Revenue from non-operating activitiesProceeds on disposal of property, plant and equipment 1,271 33,878 53 41Rent 51 108 - -Dividends received 2(a) 7 15 - -Interest received 2(b) 18 55 - -Other revenue 1,099 1,627 13 108Proceeds on disposal of subsidiaries 34 23,215 - 8,665 -Proceeds on disposal of non-current investments - 74 - -

Total revenue from non-operating activities 25,661 35,757 8,731 149

Total revenue from ordinary activities 146,680 325,538 13,609 15,326

(a) Dividend revenue from:Wholly-owned controlled entities - - - -Other persons / corporations 7 15 - -

Total dividend revenue 7 15 - -

(b) Interest revenue from:Wholly-owned controlled entities - - - - Other persons / corporations 18 55 - -

Total interest revenue 18 55 - -

25




$'000 $'000 $'000 $'000

3. LOSS FROM ORDINARY ACTIVITIESLoss from ordinary activities before income tax expense has been determined aftercharging / (crediting) the following items:Expenses:Borrowing costs:

Other related parties 2 276 230 637 Finance lease costs 135 351 15 35 Other persons / corporations 1,498 5,172 36 276

Total borrowing costs expensed 1,635 5,799 281 948

Depreciation of non-current assets:Buildings and improvements 401 809 27 44 Plant and equipment 1,672 3,951 221 418 Plant and equipment under lease 372 348 47 66

Total depreciation 2,445 5,108 295 528

Amortisation of non-current assets:Market lease premiums 15 37 - -Goodwill 227 420 17 35

Total amortisation 242 457 17 35

Total depreciation and amortisation expenses 2,687 5,565 312 563

Net loss / (gain) on disposal of non-current assets:Property, plant and equipment 528 (708) 28 12Investment in a controlled entity - - 581 -Investments - other - (51) - -

Net foreign currency losses / (gains) 69 (107) - -Bad and doubtful debts - trade debtors 604 98 - -Rental expense on operating leases 4,758 6,928 51 65Provision for employee entitlements 1,605 3,437 89 163Superannuation contributions 1,662 3,739 184 503

26




Note $'000 $'000 $'000 $'000

4. EXPENSES FROM ORDINARY ACTIVITIES(Excluding borrowing costs)

Cost of goods sold 101,171 241,090 3,378 10,385Farming and production costs 19,286 20,277 690 1,535Marketing, selling and distribution expenses 10,445 22,206 - -Administration costs 2,072 3,996 1,291 399Other expenses from ordinary activities 4(a) 24,486 48,393 17,294 21,098

Total expenses from ordinary activities (excluding borrowing costs) 157,460 335,962 22,653 33,417

(a) Included in other expenses from ordinary activities are the following:Written-down value of non-current assets sold - 41,524 8,665 -Net assets of controlled entity sold 21,666 - - -Provision for diminution in value of investment and receivables - - 7,993 20,759

5. INDIVIDUALLY SIGNIFICANT ITEMS CHARGEDIN OPERATING LOSS FROM ORDINARYACTIVITIES BEFORE INCOME TAX EXPENSE

Restructuring charges 1,524 625 - -Write-down of property, plant and equipment 1,686 4,780 - -Write-down of leased information system - 1,517 - -Write-down and scrapping of inventory 1,681 1,378 - -Write-down of other assets - 916 - -Loss on sale of property, plant and equipment 421 9,524 - -SGARA write-down 725 - - -Lease payouts 416 - - -Surplus lease costs 306 - - -Other closure costs 371 - - -(Write-back) / write-down in carrying value of subsidiaries’ net assets (1,550) 3,100 - -Provision for diminution in value of investment in controlled entities - - - 3,872Provision for diminution in value of receivables from controlled entities - - 7,993 16,887

5,580 21,840 7,993 20,759

27




$'000 $'000 $'000 $'000

6. INCOME TAX EXPENSE

The prima facie tax on loss from ordinary activities before taxis reconciled to the income tax (benefit) / expense as follows:Loss from ordinary activities before income tax (12,415) (16,223) (9,325) (19,039)

Prima facie tax payable on loss from ordinary activities before income tax at 30% (2003: 30%) (3,724) (4,867) (2,798) (5,712)Tax effect of permanent differences:

SGARA adjustment - - (555) -Amortisation of intangible assets 32 126 5 10Loss on sale of property, plant and equipment not assessable for tax purposes - 4,343 - -Provision for diminution in value of investments and receivables - - 2,398 5,335Tax on capital (loss) / gains on the sale of property, not taxable for accounting purposes (2,700) 3,088 (2,700) -Tax losses recognised as deferred tax asset - (894) - -Under / (over) provision in previous year - 510 - (21)Other items (net) 390 (287) (427) 870

Income tax (benefit) / expense relating to loss from ordinary activities (6,002) 2,019 (4,077) 482

Tax assets and liabilitiesCurrent tax payable - 1,476 - 394Provision for deferred income tax - non-current 2,652 1,662 2,652 72Future income tax benefit - current 5,707 1,238 5,707 - Future income tax benefit - non-current 7,093 4,450 7,093 140Income tax losses recognisedFuture income tax benefit arising from tax losses included in future income tax benefit 5,849 1,238 - -All future income tax benefits arising from tax losses have been brought to account at balance date.

The future tax benefit will only be obtained if:

(a) Future assessable income is derived of a nature and an amount sufficient to enable the benefit to be realised;

(b) The conditions of deductibility imposed by income tax legislation continue to be complied with; and

(c) No changes in income tax legislation adversely affect the consolidated entity in realising the benefit.


28



Note $'000 $'000 $'000 $'000

7. DIVIDENDS

(a) Dividends paid during the period 22No dividends were paid during the period (2003: $Nil)

(b) Franking credit balanceThe amount of franking credits available for subsequent financial years are:Franking credit balance at the end of the financial period 123 123Franking credits available within the group 1,152 1,152

Total franking credits 1,275 1,275

8. EARNINGS PER SHAREThe following reflects the income and share data used in thecalculations of basic earnings per share

Net loss - used in calculating basic earnings per share (6,413) (18,242)

Number of shares

Weighted average number of ordinary shares outstanding during the periodused in calculation of basic EPS 144,196,773 144,048,386

No calculation of diluted earnings per share has been made because the potential ordinary shares relating to options granted by the Company are not dilutive,as defined in AASB 1027 “Earnings per Share”.

9. CASH ASSETSNote $'000 $'000 $'000 $'000

Cash at bank 28(c) - 4,236 1,516 2,195

29




Note $'000 $'000 $'000 $'000

10. RECEIVABLES

CURRENTTrade debtors 10(a),(b),(c) 17,471 21,765 218 2,751 Provision for doubtful debts (830) (699) - -

16,641 21,066 218 2,751Other debtors 3,474 2,575 161 272 Sundry loan 10(c) 118 157 - - Amounts other than trade debts receivable from related parties:

Employees 10(c) 12 16 12 15

20,245 23,814 391 3,038

NON-CURRENTTrade debtors 240 243 - - Deposits 95 95 - - Other loans 222 222 222 222 Amounts other than trade debts receivable from:

Wholly-owned controlled entities 10(c), 31 - - 45,431 43,851Provision for diminution in value of receivables from wholly-owned controlled entities - - (31,540) (23,547)

557 560 14,113 20,526

(a) Related party receivablesTrade debtors include the following amounts receivable from related parties:

Wholly-owned controlled entities - - 68 1,254

(b) Australian dollar equivalentsAustralian dollar equivalent of amounts receivable in foreign currencynot effectively hedged:

United States Dollars 18 89 - -

(c) Terms and conditionsTerms and conditions relating to the above financial instruments(i) Trade debtors are non-interest bearing and credit sales terms vary from 14 to 30 days depending on the individual

terms negotiated with customers.

(ii) The sundry loan is to an unrelated party, is repayable on demand and is secured over property. Interest is charged at rates specified in the loan agreement.

(iii) Employee loans are unsecured and bear interest at the rate necessary to ensure Fringe Benefits Tax is not incurred.They represent temporary advances repayable over ten years.

(iv) Details of the terms and conditions of related party receivables are set out in Note 31.



$'000 $'000 $'000 $'000

11. INVENTORIESCURRENTRaw materials and stores at cost 2,160 4,455 261 380Raw materials and stores at net realisable value 388 - - -Work in progress at cost 53 9,223 - -Work in progress at net realisable value 728 - - -Finished goods at cost 6,096 9,614 18 203

9,425 23,292 279 583

12. SELF-GENERATING AND REGENERATING ASSETSCURRENTGrapes - at net market value - 1,850 - -Fruit - at net market value 2,477 298 2,477 298Vegetables - at cost 2,075 3,795 - -

4,552 5,943 2,477 298

NON-CURRENTFruit - at net market value 10,360 10,923 9,830 9,830

10,360 10,923 9,830 9,830

30

The SGARA valuations are based on the following plantings:

SGARAs Hectares Hectares Location Growing crop Productive life Non-matureplanted planted plant (approx) - 2004 (approx) - 2003 maturity

FruitBlueberries 250 ha 270 ha New South Wales Blueberries Between 1 & 11 yrs Between now

and 2006

Bananas 219 ha 219 ha Queensland Bananas Up to 9 yrs N/A

Raspberries 8 ha 11 ha New South Wales Raspberries Less than 1 yr N/A

Other Nil 77 ha South Australia Prunes & Apricots Between 5 & 10 yrs N/A

Vegetables Victoria andMushrooms N/A N/A New South Wales Mushrooms Less than 1 yr N/A

GrapesUnder the terms of a licence agreement over 430 hectares of vineyards in South Australia, the consolidated entity has ownership of grapehanging crops and rights to all income derived from these grape hanging crops. As at 30 June 2004, the value of the grape hanging crop wasassessed as $Nil, (31 Dec 2003: $1.85 million) consistent with the growth cycle of the grapes.



31



Note $'000 $'000 $'000 $'000

13. OTHER FINANCIAL ASSETSNON-CURRENTInvestments comprise:Unlisted shares in other corporations - at cost 387 387 32 32 Unlisted shares in controlled entities - at cost 14 - - 20,411 39,956 Provision for write-down to recoverable amount - - (20,411) (31,612)

387 387 32 8,376


Note $'000 $'000

14. CONTROLLED ENTITIESInvestments in Controlled Entities comprise:Name

Angas Park Fruit Company Pty Ltd - 100 - 19,548

CBSP Pty Ltd 100 100 18,290 18,290

Chiquita Brands Brisbane Pty Ltd* 100 100 - -

Chiquita Brands Melbourne Pty Ltd* 100 100 - -

Chiquita Nibbles Pty Ltd* 100 100 - -

Chiquita Foods Pty Ltd* 100 100 - -

Chiquita Mushrooms Holdings Pty Ltd 100 100 - -

Chiquita Mushrooms Pty Ltd 100 100 - -

Chiquita North Queensland Pty Ltd* 100 100 - -

Chiquita Plantations Innisfail Pty Ltd* 100 100 - -

Fruitexpress Pty Ltd* 100 100 - -

Chiquita Export (Australia) Pty Ltd* 100 100 - -

Kangara Foods Pty Ltd 100 100 2,121 2,118

Loxton Fruit Processors Pty Ltd - 100 - -

13 20,411 39,956

* Wholly-owned subsidiaries of CBSP Pty Ltd

All controlled entities are incorporated in Australia.

Beneficial Chiquita Brandspercentage held (%) South Pacific Ltd

32




$'000 $'000 $'000 $'000

15. PROPERTY, PLANT AND EQUIPMENT

LAND AND BUILDINGSAt cost 40,399 41,685 8,523 7,517Accumulated depreciation (13,043) (13,053) (348) (321)

Total Land and Buildings 27,356 28,632 8,175 7,196

PLANT AND EQUIPMENTAt cost 38,679 49,094 6,168 6,830Accumulated depreciation (21,061) (26,277) (2,785) (2,595)

17,618 22,817 3,383 4,235

LEASED/HIRE PURCHASE PLANT AND EQUIPMENTAt cost 4,966 6,983 596 605Accumulated depreciation (630) (1,728) (132) (104)

4,336 5,255 464 501

Total Plant and Equipment 21,954 28,072 3,847 4,736

MARKET LEASE PREMIUMSAt cost 609 609 - -Accumulated depreciation (363) (348) - -

Total Market Lease Premiums 246 261 - -

WATER RIGHTSAt cost - 1,605 - -Accumulated amortisation - - - -

Total Water Rights - 1,605 - -

TOTAL PROPERTY, PLANT AND EQUIPMENTTotal property, plant and equipment at cost 84,653 99,976 15,287 14,952Accumulated depreciation and amortisation (35,097) (41,406) (3,265) (3,020)

Total written-down amount 49,556 58,570 12,022 11,932

(a) Assets pledged as securityAll freehold land and buildings are secured by mortgage debenture which has been granted as security over bank loans (Refer to Note 19).Assets under lease are pledged as security for the associated lease liabilities.

(b) ValuationsA directors’ valuation of freehold land and buildings was undertaken on 31 December 2003. The valuation was based on a combination of anassessment of the properties current market values and long term strategic income potential. The total valuation for freehold land and buildingswas $31.05 million.

33


15. PROPERTY PLANT AND EQUIPMENT continued

(c) ReconciliationsMovement in the carrying amounts for each class of property, plant and equipment between the beginning and the end of thecurrent financial period:

Land & Plant & Leased Plant Market Lease Water TotalBuildings Equipment & Equipment Premiums Rights

$'000 $'000 $'000 $'000 $'000 $'000

2004 MOVEMENTSConsolidated Entity:Balance at the beginning of period (2004) 28,632 22,817 5,255 261 1,605 58,570Additions 228 2,839 953 - 16 4,036 Disposals (720) (4,236) (1,600) - (1,621) (8,177)Depreciation and amortisation expense (401) (1,672) (372) (15) - (2,460)Transfers 147 (599) 100 - - (352) Write-down of assets (530) (1,531) - - - (2,061)

Carrying amount at the end of period (2004) 27,356 17,618 4,336 246 - 49,556

Chiquita Brands South Pacific Limited:Balance at the beginning of period (2004) 7,196 4,235 501 - - 11,932 Additions - 412 55 - - 467 Disposals - (37) (45) - - (82)Depreciation and amortisation expense (27) (221) (47) - - (295)Transfers 1,006 (1,006) - - - -

Carrying amount at the end of period (2004) 8,175 3,383 464 - - 12,022

2003 MOVEMENTSConsolidated Entity:Balance at the beginning of year (2003) 25,655 36,070 1,350 600 4,982 68,657Additions 8,926 6,209 3,758 - - 18,893Disposals (5,707) (15,260) (782) (302) (3,377) (25,428)Transfers 567 (844) 3,387 - - 3,110 Depreciation and amortisation expense (809) (3,358) (941) (37) - (5,145)Write-down of assets - - (1,517) - - (1,517)

Carrying amount at the end of year (2003) 28,632 22,817 5,255 261 1,605 58,570

Chiquita Brands South Pacific Limited:Balance at the beginning of year (2003) 6,683 2,628 493 - - 9,804Additions 532 2,078 99 - - 2,709 Disposals - (1) (52) - - (53)Depreciation and amortisation expense (44) (418) (66) - - (528)Transfers 25 (52) 27 - - -

Carrying amount at the end of year (2003) 7,196 4,235 501 - - 11,932

34




$'000 $'000 $'000 $'000

16. INTANGIBLE ASSETS

Goodwill at cost 3,290 7,595 - -Accumulated amortisation (965) (4,236) - -

2,325 3,359 - -

Share issue expenses 618 618 618 618Accumulated amortisation (247) (235) (247) (235)

371 383 371 383

Brand names - 4,016 - -Accumulated amortisation - - - -

- 4,016 - -

Acquisition costs 199 199 199 199Accumulated amortisation (66) (61) (66) (61)

133 138 133 138

2,829 7,896 504 521

17. OTHER ASSETS

CURRENTPrepayments 1,192 4,099 14 101

35




$'000 $'000 $'000 $'000

18. PAYABLES

CURRENTTrade creditors and accrued expenses 17,846 29,594 528 1,610Sundry creditors 965 619 1 3

18,811 30,213 529 1,613

(a) Australian dollar equivalentsAustralian dollar equivalent of amounts payable inforeign currency not effectively hedged:

United States Dollars 237 198 - -Japanese Yen - 8 - -

237 206 - -

(b) Terms and conditionsTerms and conditions relating to the above financial instruments(i) Trade creditors for operating expenses are normally settled on 30 day terms. Trade creditors for purchase of trading stock are normally

settled on 21 day terms.(ii) Sundry creditors are normally settled on 30 day terms once invoices have been received.

36




Note $'000 $'000 $'000 $'000

19. INTEREST-BEARING LIABILITIES

CURRENTSecured liabilitiesBank overdrafts 28(c) 603 - - -Bank borrowings 10,500 5,000 1,913 1,913Lease liability 23(a) 1,156 1,111 105 135Hire purchase liability 23(b) 88 726 33 33

12,347 6,837 2,051 2,081

NON-CURRENTSecured liabilitiesBank borrowings 17,805 37,673 805 673Lease liability 23(a) 4,728 3,842 236 243Hire purchase liability 23(b) 82 1,449 - 33

22,615 42,964 1,041 949

(a) Terms and conditions(i) As at balance date, the Company had finance leases with lease terms of 6 months to 5 years. The average discount rate implicit in

the leases is 7.8% pa. Secured lease liabilities are secured by a charge over the leased assets.

(ii) As at balance date, the Company had hire purchase agreements with an average remaining term of 3 years. The average discount rate implicit in the hire purchase agreements is 8.74% pa. Secured hire purchase liabilities are secured by a charge over the hirepurchase assets.

(iii) Bank financing facilities available to the consolidated entity are described in Note 28(d) and have weighted average effective interest rates as follows:

Bank overdraft 9.10%Bank borrowings and seasonal line 6.78%

Repayment terms of the facilities are as follows:Bank overdraft - annual reviewSeasonal line - repayable by 31 December each yearBank borrowings - repayable over 3 years from balance date

The bank facilities are secured by cross deeds of covenant between mortgage debentures over all assets of Chiquita Brands South PacificLimited and its subsidiaries.

37




Note $'000 $'000 $'000 $'000

20. PROVISIONS

CURRENTEmployee entitlements 29 5,299 7,214 231 211Restructuring 20(a) 2,203 862 343 -

7,502 8,076 574 211

NON-CURRENTEmployee entitlements 29 885 850 44 59Restructuring 20(a) - - - -

885 850 44 59

(a) RestructuringCURRENTBalance 1 January 862 2,181 - -Increase in provisions 1,451 - 343 -Restructuring costs paid during the year (110) (1,184) - -Transfer from non-current provisions - other - 215 - -Provisions not required written back to operating loss - (350) - -

2,203 862 343 -

NON-CURRENTBalance 1 January - 215 - -Transfer to current provisions - restructuring - (215) - -

- - - -


38



Note $'000 $'000 $'000 $'000

21. CONTRIBUTED EQUITY

CURRENT144,448,386 (2003: 144,048,386) fully paid ordinary shares 21(a) 93,069 92,895 93,069 92,895

Movement in issued and paid-up ordinary share capital of theCompany during the last two financial reporting periods were:

Number IssueDate Details of shares price $'000

31 Dec 2002 Balance 144,048,386 92,895

No movements during year ended 31 December 2003

31 Dec 2003 Balance 144,048,386 92,895

27 Apr 2004 Exercise of 2002 options 400,000 0.435 174

30 Jun 2004 Balance 144,448,386 93,069

Terms and conditions of contributed equity

(a) Ordinary sharesOrdinary shares have the right to receive dividends as declared and, in the event of winding up the Company, to participatein the proceeds from the sale of all surplus assets in proportion to the number of shares held.

(b) Share optionsOptions over ordinary shares:Employee share option planDuring the period Nil options were granted over ordinary shares.Executive share option planDuring the period 600,000 options (year ended 31 December 2003: 750,000) were granted over ordinary shares.Details of the terms and exercise prices are outlined in Note 29.

39




Note $'000 $'000 $'000 $'000

22. ACCUMULATED LOSSES

Accumulated losses at the beginning of the financial period (39,565) (21,208) (40,734) (21,209)

Net loss attributable to the members of Chiquita Brands South Pacific Limited (6,413) (18,242) (5,248) (19,521)

Adjustment arising from the adoption of revised accounting standards:

AASB 1028 - “Employee Benefits” - (115) - (4)

Available for appropriation (45,978) (39,565) (45,982) (40,734)

Dividends provided for or paid 7 - - - -

Accumulated losses at the end of the financial period (45,978) (39,565) (45,982) (40,734)

40




Note $'000 $'000 $'000 $'000

23. EXPENDITURE COMMITMENTS

(a) Finance Lease CommitmentsDue not later than 1 year 1,516 1,462 127 160 Due later than 1 year but not later than 5 years 5,451 4,434 259 270Due later than 5 years - 146 - -

Minimum lease payments 6,967 6,042 386 430 Less future finance charges (1,083) (1,089) (45) (52)

Total lease liability 5,884 4,953 341 378

Current liability 19 1,156 1,111 105 135 Non-current liability 19 4,728 3,842 236 243

5,884 4,953 341 378

(b) Hire Purchase CommitmentsDue not later than 1 year 109 477 38 38 Due later than 1 year but not later than 5 years 86 1,793 - 38

Minimum hire purchase payments 195 2,270 38 76 Less future finance charges (25) (95) (5) (10)

Total hire purchase liability 170 2,175 33 66

Current liability 19 88 726 33 33 Non-current liability 19 82 1,449 - 33

170 2,175 33 66

(c) Operating Lease Commitments (Non-cancellable)Due not later than 1 year 4,798 7,645 13 53 Due later than 1 year but not later than 5 years 7,679 13,950 13 41 Due later than 5 years 560 2,044 - -

Aggregate lease expenditure contracted for at balance date 13,037 23,639 26 94

Aggregate expenditure commitments comprise:Amounts provided for surplus lease space - current provision 162 181 - - Amounts not provided for rental commitments 12,875 23,458 26 94

Aggregate lease expenditure contracted for at balance date 13,037 23,639 26 94

41


23. EXPENDITURE COMMITMENTS continuedThe consolidated entity leases production plant and equipment underfinance leases expiring within one to five years. At the end of the leaseterm the consolidated entity has the option to purchase the equipment at a residual value.

The consolidated entity leases property, plant and equipment underoperating leases expiring from one to eight years. Leases generallyprovide the consolidated entity with the right to renewal at which timeall terms are renegotiated. Some lease payments comprise a baseamount plus an incremental rental. Incremental rentals are based onmovements in the Consumer Price Index.

Surplus lease space commitments represents payment due for vacantpremises under a non-cancellable operating lease, and have beenrecognised as a liability in the current financial period, as the remainingpayments for the premises will provide no further benefits to theconsolidated entity. The payments have been discounted at the rateimplicit in the lease. Certain assets under operating leases have beensublet to third parties. The total of future minimum lease paymentsexpected to be received at the reporting date is $46,296.

In September 2003 Chiquita sold its Kangara citrus orchard, vineyardsand vacant land to Timbercorp Limited (TL), through Orchard

Investment Management Limited (OIM). Following the sale OIM enteredinto a lease with TL, who then granted a licence to Chiquita to occupy thecitrus orchards and vineyards, and harvest the hanging fruit and grapes forthe term of the licence. During that term Chiquita has ownership of thehanging fruit and grapes and has rights to all income derived from them. It is also liable for any expenses incurred in farming and harvesting the fruitand grapes. The licence fee paid by Chiquita is 11% of the purchase price of the land.

The terms of the licences were 1 year for the citrus orchards and up to 3 years for the vineyards. The licence for citrus was surrendered on 1 June2004 with Chiquita assuming farm management responsibility from thatdate, for which Chiquita receives a fee of $600 per hectare. As at the dateof this report it is envisaged that the 3 year licence over the vineyard willcontinue for the full term. Included in operating lease commitments is $4.32 million being the maximum licence fee payable to TL.

(d) Capital Expenditure CommitmentsThe consolidated entity did not have any material commitments for capital expenditure at balance date.



$'000 $'000 $'000 $'000

24. CONTINGENT LIABILITIES

Bank guarantees have been provided to cover certaintrade creditors providing fresh produce to the group 802 752 - -


$ $ $ $

25. AUDITORS’ REMUNERATION

Amounts received or due and receivable by the auditors for:Auditing or reviewing the financial report 213,000 314,284 25,000 25,000Other services 80,272 76,029 - -

293,272 390,313 25,000 25,000


42


26. DEED OF CROSS GUARANTEEPursuant to Class Order 98/1418, relief has been granted to certainentities controlled by Chiquita Brands South Pacific Limited from theCorporations Act 2001 requirements for preparation, audit andpublication of financial reports.

As a condition of the Class Order, Chiquita Brands South Pacific Limitedand the controlled entities subject to the Class order, CBSP Pty Ltd,Chiquita Foods Pty Ltd, Chiquita Brands Brisbane Pty Ltd, ChiquitaBrands Melbourne Pty Ltd, Chiquita Nibbles Pty Ltd and ChiquitaMushrooms Holdings Pty Ltd entered into a Deed of Cross Guaranteeon 23 December 1998.

The effect of the Deed is that Chiquita Brands South Pacific Limited has guaranteed to pay any deficiency in the event of winding up thecontrolled entities. The controlled entities have also given a similarguarantee in the event that Chiquita Brands South Pacific Limited iswound up.

The consolidated statement of financial performance and the statement of financial position of the entities which are parties to the Deed of CrossGuarantee are as follows:

Parties to Deed of Cross Guarantee

6 months 12 monthsended 30 ended 31Jun 2004 Dec 2003

$'000 $'000

Statement of Financial PerformanceRevenue from ordinary activities 94,722 163,462Other expenses from ordinary activities (excluding borrowing costs) (100,498) (199,105)Borrowing costs (313) (1,945)Loss from ordinary activities before income tax (6,089) (37,588)Income tax (benefit) / expense relating to ordinary activities (3,061) 639Loss attributable to closed group (3,028) (38,227)

Non-owner transaction changes in equityIncrease in retained profits on adoption of revised accounting standards:

AASB 1028 “Employee Benefits” - (62)

Total changes in equity from non-owner transactions attributable to the closed group (3,028) (38,289)

Accumulated LossesAccumulated losses at the beginning of the financial period (63,408) (25,119)Loss from ordinary activities after income tax expense (3,028) (38,289)Dividends provided for or paid - -

Accumulated losses at the end of the financial period (66,436) (63,408)

43


Parties to Deed of Cross Guarantee26. DEED OF CROSS GUARANTEE continued30 Jun 31 Dec

2004 2003$'000 $'000

Statement of Financial Position

Current AssetsCash assets - 8,014Receivables 9,188 13,480 Inventories 6,464 8,642 Self-generating and regenerating assets 2,477 298Current tax assets 5,707 -Other 267 835

Total Current Assets 24,103 31,269

Non-Current AssetsReceivables 8,472 13,156Other financial assets 13,385 21,731Property, plant and equipment 15,765 15,344Self-generating and regenerating assets 9,830 9,830 Intangible assets 1,510 1,572Deferred tax assets 7,093 3,398

Total Non-Current Assets 56,055 65,031

Total Assets 80,158 96,300

Current LiabilitiesPayables 12,144 17,477Interest-bearing liabilities 14,208 5,748Provisions 3,821 3,036

Total Current Liabilities 30,173 26,261

Non-Current LiabilitiesInterest-bearing liabilities 20,237 39,999 Deferred tax liabilities 2,652 209 Provisions 463 344

Total Non-Current Liabilities 23,352 40,552

Total Liabilities 53,525 66,813

Net Assets 26,633 29,487

EquityContributed equity 93,069 92,895 Accumulated losses (66,436) (63,408)

Total Equity 26,633 29,487

44


1. The grape farming operations were previously included in the Processing segment. Due to the associated operations now being discontinued, the activity has been reclassified to theagribusiness segment for the current period and previous year.

Segment products and locationsThe consolidated entity’s operations are organised and managed separately according to the nature of the products and services they provide,with each segment offering different products and serving different markets.

The Agribusiness segment is involved with the growing and selling of own farm fruit. The Processing segment is involved with packing andselling fruit. The Trading segment is involved in the marketing and distribution of fruit and vegetables, dried fruits and nuts. Geographically, thegroup operates primarily in Australia.

27. SEGMENT REPORTING Agribusiness1 Trading


$'000 $'000 $'000 $'000

REVENUESales to customers outside the consolidated entity 35,629 63,211 69,614 160,770 Other revenue from customers outside the consolidated entity 419 1,597 66 100

Total sales revenue 36,048 64,808 69,680 160,870 Intersegment revenue 12,842 33,670 1,198 2,632

Total segment / consolidated revenue 48,890 98,478 70,878 163,502

RESULTSSegment / consolidated (loss) / profit before tax 4,750 13,353 (11) 2,530Income tax (benefit) / expense 1,253 4,086 104 570

Net (loss) / profit 3,497 9,267 (115) 1,960

ASSETSSegment Assets / Total Assets 68,844 80,704 22,594 26,852

LIABILITIESSegment Liabilities / Total Liabilities 32,386 42,737 16,621 18,615

(a) OTHER

Acquisition of property, plant and equipment, intangible assetsand other non-current assets 1,808 10,608 730 733Depreciation 1,436 2,765 169 333 Amortisation 24 - 45 124

(b) ADDITIONAL DISCLOSURES FOR SEGMENT /CONSOLIDATED (LOSS) / PROFIT BEFORE TAX:

Segment / consolidated (loss) / profit before tax 4,750 13,353 (11) 2,530 Add back items included in consolidated (loss) / profit before tax

Significant items (1,527) (590) - (256)Net increment in market value of growing assets 530 298 - - Borrowing costs (495) (1,160) (68) (196)

Earnings before interest, tax and significant items 6,242 14,805 57 2,982

45

Segment accounting policiesThe group generally accounts for intersegment sales and transfers as if the transfers were to third parties at current market prices.Segment accounting policies are the same as the consolidated entity’s policies described in Note 1. During the financial period there wereno changes in segment accounting policies that had a material effect on the segment information.

Discontinued Operations Unallocated Consolidated EntityProcessing

6 months 12 months 6 months 12 months 6 months 12 monthsended 30 ended 31 ended 30 ended 31 ended 30 ended 31Jun 2004 Dec 2003 Jun 2004 Dec 2003 Jun 2004 Dec 2003

$'000 $'000 $'000 $'000 $'000 $'000

15,776 65,800 - - 121,019 289,781 1,944 34,038 23,232 22 25,661 35,757

17,720 99,838 23,232 22 146,680 325,538 231 1,063 (14,271) (37,365) - -

17,951 100,901 8,961 (37,343) 146,680 325,538

(16,565) (26,530) (589) (5,576) (12,415) (16,223)(4,202) (732) (3,157) (1,905) (6,002) 2,019

(12,363) (25,798) 2,568 (3,671) (6,413) (18,242)

13,390 32,217 7,075 5,635 111,903 145,408

8,052 22,504 7,753 8,222 64,812 92,078

1,344 6,836 154 716 4,036 18,893 642 1,508 198 502 2,445 5,108 46 29 127 304 242 457

(16,565) (26,530) (589) (5,576) (12,415) (16,223)

(5,603) (19,477) 1,550 (1,517) (5,580) (21,840)- - - - 530 298

(1,095) (4,443) 23 - (1,635) (5,799)

(9,867) (2,610) (2,162) (4,059) (5,730) 11,118

46




$'000 $'000 $'000 $'000

28. CASH FLOW INFORMATION

(a) Reconciliation of the net loss after tax to the netcash flows from operations

Net loss after income tax (6,413) (18,242) (5,248) (19,521)Cash flows excluded from loss from ordinary activitiesattributable to operating activities

Non-cash flows in loss from ordinary activitiesAmortisation 242 457 17 35 Depreciation 2,445 5,108 295 528Decrease / (increase) in SGARA 1,132 (1,483) (2,180) (296)Loss / (gain) on disposal of non-current assets 528 (708) 28 12 Significant items - loss on disposal of property, plant & equipment 421 9,525 - - Write-down of property, plant and equipment 2,061 6,297 - - (Write-back) / write-down in carrying value of subsidiaries’ net assets (1,550) 3,100 - - Net gain on disposal of investments - (51) (532) - Decrease in investments in controlled entities - - - 3,872

Changes in assets and liabilities, net of the effects of purchaseand disposal of subsidiaries

(Increase) / decrease in trade and other debtors 71 (921) 25,086 16,369 (Increase) / decrease in prepayments 2,730 (1,912) 87 (23)(Increase) / decrease in inventories (3,550) 772 304 756 (Decrease) / increase in trade creditors and accruals (5,660) (2,165) (724) 179(Decrease) / increase in provision for employee entitlements 570 (408) 6 39Provision for income tax (1,416) 1,476 (394) 213Deferred income tax liability 1,143 (1,304) 2,581 (123)Future income tax benefit (7,112) 1,544 (12,658) 37 Increase / (decrease) in provisions (50) (1,404) 343 -

Net cash (used in) / provided by operating activities (14,408) (319) 7,011 2,077

(b) Non-cash Financing and Investing Activities(i) Operating lease transactions

During the period the consolidated entity entered into operating leases of plant and equipment with an aggregate value of $29,368 (year ended 31 Dec 2003: $70,000). These acquisitions are not reflected in the statement of cash flows.

47




Note $'000 $'000 $'000 $'000

28. CASH FLOW INFORMATION continued

(c) Reconciliation of CashCash at the end of the financial period as shown in the statementof cash flows is reconciled to items in the statement offinancial position as follows:

Cash 9 - 4,236 1,516 2,195Bank overdraft 19 (603) - - -

(603) 4,236 1,516 2,195

(d) Loan FacilitiesAt balance date, the following financing facilities had beennegotiated and were available:Bank overdraft 1,000 1,000 - -Bank borrowings 45,000 45,000 - -Seasonal line 12,000 - - -

58,000 46,000 - -

Facilities used at balance date:Bank overdraft 603 - - - Bank borrowings 22,805 42,673 - -Seasonal line 5,500 - - -

28,908 42,673 - -

The available facilities shown above include a seasonal line of $12.0 million (31 Dec 2003: $10.0 million) which is available 1 February to 31 December of each year, to assist with the finance of the seasonal build up of inventories. Utilisation of this facility at 30 June 2004 was $5.5 million (31 Dec 2003: $Nil). All financing is held in the name of CBSP Pty Ltd.

48




$'000 $'000 $'000 $'000

29. EMPLOYEE BENEFITSEmployee benefitsThe aggregate employee benefit liability is comprised of:Provision for employee benefits, accrued wages and salaries and on costsProvisions - current 5,299 7,214 231 211 Provisions - non-current 885 850 44 59

6,184 8,064 275 270

(a) Employee numbersIn the six month period ended 30 June 2004, the consolidated entity employed on average 1,170 staff (year ended 31 Dec 2003: 1,383)

(b) Employee and Executive Share and Option schemes

(i) Chiquita Brands South Pacific Limited Employee Share Option Plan and Share Acquisition Plan

The Company has established an Employee Share Option Plan (“Option Plan”) and an Employee Share Acquisition Plan (“Acquisition Plan”).The Option Plan and Acquisition Plan provide that shares issued pursuant to these plans will be limited to a maximum of 4% of the issuedordinary capital of the Company at any time. Eligibility for both plans is to be determined at the discretion of the Board.The exercise price for options issued under the Option Plan is the higher of $1.00 or the weighted average price of shares on the ASX in the three business days preceding the grant date (or if no shares are traded on any of these days, the three business days on which sharesare traded preceding the grant date) that is specified as the initial price on the face of the certificates. The Board reserves the right to set adifferent exercise price, however under no circumstances may the exercise price be less than $0.20. Options issued under the Option Plan are to be issued free of charge and are not able to be traded.The issue price of shares issued pursuant to the Acquisition Plan is the higher of $1.00 or the weighted average price of shares sold on the ASX during the three trading days prior to the allotment date or, if in the opinion of the Board the average price so determined isunrepresentative or otherwise distorted, the Board may fix a sale price by reference to the sale price of shares on the ASX on such othernumber of days or such basis as the Board deems appropriate. Consideration for the issue of shares under the Acquisition Plan will be byway of interest-free loans repayable on termination of employment.

No ordinary shares were issued under the Acquisition Plan during the financial period (year ended 31 December 2003: Nil). At the inceptionof this plan, 340,000 shares were issued to the CBSP Employee Share Plan Trustee at an issue price of $1.20 per share. A loan of $408,000was also advanced by the Company to the Plan Trustee, at that time, to fund the purchase of the shares. At balance date the balance of theloan was $224,307. The CBSP Employee Share Plan trustee currently holds 390,000 shares. No other instruments are held under theAcquisition Plan. The shares carry full dividend and voting rights.

The market value of Ordinary Shares in Chiquita Brands South Pacific Limited closed at $0.64 on 30 June 2004.

49


29. EMPLOYEE BENEFITS continued(b) Employee and Executive Share and Option schemes continued(ii) Chiquita Brands South Pacific Limited Executive Share Option Plan

Details of options issued to the Managing Director and Executives under the Executive Share Option Plan are set out as part of Note 30.

(c) Options held at the beginning of the reporting period

The following table summarises information about options held by employees and executives as at 1 January 2004Weighted average

Number of options Grant date Vesting date Expiry date exercise price

135,000 12 Feb 1999 2 Dec 1999 to 2 Dec 2001 12 Feb 2004 1.000

20,000 29 Dec 1999 29 Dec 1999 to 29 Dec 2001 29 Dec 2004 1.000

251,225 27 Mar 2000 27 Mar 2000 to 27 Mar 2002 26 Mar 2005 1.154

400,000 29 May 2002 29 May 2003 29 May 2004 0.435

750,000 29 May 2003 29 May 2004 29 May 2005 0.672

1,556,225

600,000 Not granted 29 May 2005 29 May 2006 (i)


2,456,225

(i) Options expiring on 29 May 2006 and 2007 have an exercise price based on the weighted average price of ordinary sharesof Chiquita Brands South Pacific Limited for the 20 trading days immediately prior to 29 May 2004 and 2005 respectively.

2004 2004 2003 2003 Number Weighted Number Weighted

of options average of options averageNote exercise price exercise price

Information with respect to the number of options granted underthe employee and executive option schemes are as follows:

Balance at the beginning of period 29(c) 1,556,225 0.73 933,425 0.80Granted 29(d) 600,000 0.62 750,000 0.67Forfeited (233,000) - (127,200) -Exercised 29(e) (400,000) 0.435 - -

Balance at the end of period 29(f) 1,523,225 0.73 1,556,225 0.73

Exercisable at the end of period 923,225 - 806,225 -

50


29. EMPLOYEE BENEFITS continued(d) Options granted during the reporting period:

The following table summarises information about options granted by Chiquita Brands South Pacific Limited to employees andexecutives during the period:

6 months 12 monthsended 30 Jun ended 31 Dec

2004 2003

Grant Date 29 May 2004 29 May 2003Vesting Date 29 May 2005 29 May 2004Expiry Date 29 May 2006 29 May 2005Weighted Average Price 0.620 0.672Number of options granted 600,000 750,000

(e) Options exercised

400,000 options were exercised during the period.

(f) Options held at the end of the reporting period

The following table summarises information about options held by employees and executives as at 30 June 2004:

Weighted averageNumber of options Grant Date Vesting Date Expiry date exercise price

20,000 29 Dec 1999 29 Dec 1999 to 29 Dec 2001 29 Dec 2004 1.000

228,225 27 Mar 2000 27 Mar 2000 to 27 Mar 2002 26 Mar 2005 1.154

675,000 29 May 2003 29 May 2004 29 May 2005 0.672

600,000 29 May 2004 29 May 2005 29 May 2006 0.620

1,523,225


1,823,225

(i) Options expiring on 29 May 2007 have an exercise price based on the weighted average price of ordinary sharesof Chiquita Brands South Pacific Limited for the 20 trading days immediately prior to 29 May 2005.

(g) Fair values of optionsThe fair value of each option is estimated on the date of grant using the Black-Scholes option-pricing model with the following weightedaverage assumptions used for grants made on the following dates:

29 May 2003 29 May 2004

Dividend yield 1.00% 1.00%

Expected volatility 37.40% 38.50%

Historical volatility 37.40% 38.50%

Risk-free interest rate 5.00% 4.00%

Expected life of option 2.0 years 2.0 years

The dividend yield reflects the assumption that the current dividend payout will continue with no anticipated increases. The expected life of theoptions is based on the option expiry date and is not necessarily indicative of exercise patterns that may occur. The expected volatility reflectsthe assumption that the historical volatility is indicative of future trends, which may also not necessarily be the actual outcome.

51


29. EMPLOYEE BENEFITS continuedThe resulting weighted average fair values per option for those options held at the end of the reporting period and vesting during the period are:

Number of options Grant date Vesting date Weighted average fair value

675,000 29 May 2003 29 May 2004 0.16

600,000 29 May 2004 29 May 2005 0.16

Currently, these fair values are not recognised as expenses in the financial statements. However, should these grants be expensed, they wouldbe amortised over the vesting periods resulting in an increase in employee benefits expense of $58,000 for the period ended 30 June 2004(year ended 31 December 2003: $96,667). Note that no adjustments to these amounts have been made to reflect estimated or actual forfeitures(i.e. options that do not vest).

30. DIRECTOR & EXECUTIVE DISCLOSURES(a) Details of specified Directors and Specified Executives(i) Specified directorsA.G. Hartnell Chairman (non-executive)M.D. Babiolakis Managing Director and Chief Executive OfficerB.W. Kemp Director (non-executive)C.C. Schokman Director (non-executive)C.A. Stephen Director (non-executive)F.A. Costa Director (non-executive)R.F. Kistinger Director (non-executive): resigned 2 March 2004

(ii) Specified executivesD.K. Green Chief Financial Officer and Company SecretaryS.S. Little General Manager Chiquita MushroomsR.J. Tanti General Manager Chiquita NibblesP.J. McPherson General Manager Blueberry Farms and Chiquita ExportM.E. Robinson General Manager Chiquita Trading and Banana FarmsR. Hamley General Manager Kangara Foods

(b) Remuneration of Specified Directors and Specified Executives(i) Remuneration PolicyThe Remuneration Committee of the Board of Directors is responsible for determining and reviewing compensation arrangements for theManaging Director and management team and determining and reviewing the annual bonus system for employees. The Committee is alsoresponsible for recommending a total of Director’s remuneration to be approved by resolution of shareholders at the Annual General Meeting of the Company. The appropriateness of the nature and amount of emoluments is reviewed on a periodic basis by reference to the relevantemployment market conditions with the overall objective of ensuring maximum shareholder benefit from the retention of a high quality Boardand management team. The Managing Director and management team are given the opportunity to receive their base emolument in a varietyof forms including cash and fringe benefits such as motor vehicles and expense payment benefits.

It is intended that the manner of payment chosen will be optimal for the recipient without creating undue cost for the Company. To assist inachieving these objectives, the nature and amount of the Managing Director’s and management team members’ emoluments are linked to theCompany’s financial and operational performance. All senior executives have the opportunity to participate in the annual bonus system whichcurrently provides cash and share option incentives where specified criteria are met including criteria relating to profitability, cash flow, shareprice growth and individual performance targets.

52


30. DIRECTOR & EXECUTIVE DISCLOSURES continued(ii) Remuneration of Specified Directors and Specified Executives

Primary Post Employment Equity

Salary & Fees Cash bonus Non Monetary Super Totalbenefits -annuation Options $

2004 Remuneration - Specified Directors (6 months)

A.G. Hartnell 26,000 - - - - 26,000

M.D. Babiolakis 186,957 - 69,665 18,377 24,000 298,999

B.W. Kemp 15,000 - - 1,350 - 16,350

C.C. Schokman - - - 14,413 - 14,413

C.A. Stephen 14,413 - - - - 14,413

F.A. Costa 14,413 - - - - 14,413

R.F. Kistinger - - - - - -

256,783 - 69,665 34,140 24,000 384,588

2003 Remuneration - Specified Directors (12 months)

A.G. Hartnell 52,000 - - - - 52,000

M.D. Babiolakis 398,723 - 115,331 35,946 48,000 598,000

B.W. Kemp 30,000 - - 2,700 - 32,700

C.C. Schokman 28,825 - - - - 28,825

C.A. Stephen 28,825 - - - - 28,825

F.A. Costa 28,825 - - - - 28,825

R.F. Kistinger 28,825 - - - - 28,825

D.M. Doyle - - - - - -

596,023 - 115,331 38,646 48,000 798,000

2004 Remuneration - Specified Executives (6 months)

D.K. Green 97,587 - 9,413 5,500 5,667 118,167

S.S. Little 89,141 - 12,859 5,500 5,667 113,167

R.J. Tanti 91,265 - 10,735 5,500 5,667 113,167

P.J. McPherson 75,027 - 14,663 17,810 5,667 113,167

M.E. Robinson 87,280 - 13,053 7,167 5,667 113,167

R. Hamley 39,921 - 9,500 28,728 667 78,816

480,221 - 70,223 70,205 29,002 649,651

Primary Post Employment Equity

Salary & Fees Cash bonus Non Monetary Super Totalbenefits -annuation Options $

2003 Remuneration - Specified Executives (12 months)

D.K. Green 191,248 - 18,825 10,760 12,000 232,833

S.S. Little 154,259 34,300 25,716 10,760 12,000 237,035

R.J. Tanti 153,430 28,000 20,255 16,315 12,000 230,000

P.J. McPherson 142,061 - 27,560 35,379 12,000 217,000

M.E. Robinson 167,075 - 22,165 10,760 12,000 212,000

R. Hamley 58,810 - 12,545 9,235 - 80,590

866,883 62,300 127,066 93,209 60,000 1,209,458

(c) Remuneration options: Granted and vested during the period

53


30. DIRECTOR & EXECUTIVE DISCLOSURES continued

Terms and conditions for each grant

Vested Granted Grant Value per Exercise First LastNumber Number Date option at price per Exercise Exercise

grant date $ share $ Date Date

Specified DirectorsM.D. Babiolakis 300,000 300,000 29 May 04 0.16 0.62 29 May 05 29 May 06

Specified ExecutivesD.K. Green 75,000 50,000 29 May 04 0.16 0.62 29 May 05 29 May 06

S.S. Little 75,000 50,000 29 May 04 0.16 0.62 29 May 05 29 May 06

R.J. Tanti 75,000 50,000 29 May 04 0.16 0.62 29 May 05 29 May 06

P.J. McPherson 75,000 50,000 29 May 04 0.16 0.62 29 May 05 29 May 06

M.E. Robinson 75,000 50,000 29 May 04 0.16 0.62 29 May 05 29 May 06

R. Hamley - 50,000 29 May 04 0.16 0.62 29 May 05 29 May 06

675,000 600,000

Balance at Net Balance Vested at 30 June 2004beginning of Granted as Options Change at end of

period Remuneration Exercised Other period Not 1 Jan 2004 30 Jun 2004 Total Exercisable Exercisable

Specified DirectorsM.D. Babiolakis 700,000 300,000 (400,000) - 600,000 300,000 - 300,000

Specified ExecutivesD.K. Green 75,000 50,000 - - 125,000 75,000 - 75,000

S.S. Little 75,000 50,000 - - 125,000 75,000 - 75,000

R.J. Tanti 75,000 50,000 - - 125,000 75,000 - 75,000

P.J. McPherson 140,000 50,000 - - 190,000 140,000 - 140,000

M.E. Robinson 125,000 50,000 - - 175,000 125,000 - 125,000

R. Hamley - 50,000 - - 50,000 - - -

1,190,000 600,000 (400,000) - 1,390,000 790,000 - 790,000

54


30. DIRECTOR & EXECUTIVE DISCLOSURES continued(d) Option holdings of Specified Directors and Specified Executives

(e) Shareholdings of Specified Directors and Specified ExecutivesBalance at Balance at

beginning of period On Exercise Net Change end of period1 Jan 2004 of Options Other 30 Jun 2004

Specified DirectorsA.G. Hartnell 404,185 - - 404,185

M.D. Babiolakis 2,700,000 400,000 - 3,100,000

B.W. Kemp 174,999 - - 174,999

C.C. Schokman 342,826 - - 342,826

C.A. Stephen (1) 390,000 - - 390,000

F.A. Costa 37,032,395 - - 37,032,395

Specified ExecutivesD.K. Green 186,500 - 440,000 626,500

S.S. Little - - - -

R.J. Tanti - - - -

P.J. McPherson 155,082 - (6,000) 149,082

M.E.Robinson - - - -

R. Hamley - - - -

41,385,987 400,000 434,000 42,219,987

(1) As trustee for the CBSP Employee Share Plan

All equity transactions of specified directors and specified executives other than those arising from the exercise of remuneration options havebeen entered into under market terms and conditions.

55


30. DIRECTOR & EXECUTIVE DISCLOSURES continued(f) Loans to Specified Directors and Specified Executives

Balance at Interest Interest Write Balance at Number inbeginning of period charged not charged off end of period group at end

$ $ $ $ $ of period

6 months ended 30 June 2004Specified Directors - - - - - - Specified Executives 3,527 - - - 3,527 1

Total 3,527 - - - 3,527 1

12 months ended 31 December 2003Specified Directors - - - - - - Specified Executives 3,527 - - - 3,527 1

Total 3,527 - - - 3,527 1

No individual specified Directors or Specified Executives have loans in excess of $100,000.

Terms and conditions of loansThe loan to a specified Executive is unsecured and interest free. It represents temporary advances repayable over ten years.

(g) Other transactions and balances with Specified Directors and Specified Executives

Sales

Mr F. Costa is a director of and has an interest in the Costa’s Group. The Costa’s Group acquired produce from the consolidated entity on thesame terms and conditions as the consolidated entity’s other customers. Details of these transactions are listed below.

Amounts recognised at the reporting date in relation to other transactions 6 months 12 monthsended 30 Jun ended 31 Dec

2004 2003$'000 $'000

Assets and liabilitiesCurrent assets

Trade receivables 884 1,128Non-current assets - -Total Assets 884 1,128Current liabilities - -Non-current liabilities - -

Total Liabilities - -Revenue and expensesRevenue 8,227 15,317Cost of sales - -

56


31. RELATED PARTY TRANSACTIONS(a) Wholly-owned Group TransactionsThe Company supplied product totalling $1,456,767 (year ended 31 December 2003: $8,954,829) of sales revenue to controlled entities undernormal commercial terms and conditions.Significant amounts of product were sold from agribusiness and processing operations to trading operations.These sales and purchases are made at arms length and are eliminated upon consolidation.

(b) Transactions with Other Related PartiesRefer to Note 30 for transactions with director related entities.

(c) Ultimate ParentChiquita Brands South Pacific Limited is the ultimate parent entity.

32. EVENTS SUBSEQUENT TO REPORTING DATENo matters or circumstances have arisen since the end of the financial period which significantly affected or may affect the operations of theconsolidated entity.

Total carrying amount Aggregate as per the statement of Net Fair

financial position Value30 Jun 31 Dec 30 Jun 31 Dec

2004 2003 2004 2003Note $'000 $'000 $'000 $'000

33. FINANCIAL INSTRUMENTS

(a) Net Fair ValuesThe aggregate net fair values of financial assets and financial liabilitiesrecognised at balance date are as follows:

Financial AssetsCash 9 - 4,236 - 4,236 Receivables - Trade Debtors 10 16,881 21,309 16,881 21,309Sundry Loans/Other Debtors 10 3,909 3,049 3,909 3,049 Employee Loans 10 12 16 12 16 Unlisted Shares 13 387 387 779 1,086

Total Financial Assets 21,189 28,997 21,581 29,696

Financial LiabilitiesBank Overdraft 19 603 - 603 - Trade Creditors and Accrued Expenses 18 17,846 29,594 17,846 29,594 Sundry Creditors 18 965 619 965 619 Bank Borrowings 19 28,305 42,673 28,305 42,673 Finance Lease Liability 19 5,884 4,953 5,884 4,953 Hire Purchase Liability 19 170 2,175 170 2,175

Total Financial Liabilities 53,773 80,014 53,773 80,014

There are no financial assets or financial liabilities that are unrecognised at the balance date.

57


33. FINANCIAL INSTRUMENTS continuedThe following methods and assumptions are used to determine the net fair values of recognised financial assets and liabilities:

Cash, Cash Equivalents and Short-Term InvestmentsThe carrying amount approximates fair value because of their short-term to maturity.

Trade Receivables, Trade Creditors and Accrued Expenses, Sundry Creditors and Dividends ReceivableThe carrying amount approximates fair value because of their short-term to maturity.

Sundry Loans / Other Debtors and Employee Loans ReceivableThe carrying amount approximates fair value due to the nature of the loan arrangements and the security held.

Unlisted SharesFor investments where there is no quoted market price, a reasonable estimate of the fair value is determined by referenceto the expected cash flows or the underlying net asset base of the investment/security.

Bank BorrowingsThe carrying amount approximates fair value.

Finance Lease and Hire Purchase LiabilitiesThe carrying amount approximates fair value due to the nature of the lease and hire purchase arrangements and the current lending ratesfor similar types of lending arrangements.

(b) Credit Risk ExposureThe consolidated entity’s maximum exposure to credit risk at balance date in relation to each class of recognised financial asset is thecarrying amount of those assets as indicated in the balance sheet.

Concentrations of Credit RiskThe consolidated entity’s credit risk in relation to trade accounts receivable is concentrated in the major national fruit and vegetable retailersoperating within Australia.Credit risk in trade receivables is managed in the following ways:- Payment terms range from 14 to 30 days depending on terms negotiated with major customers, and- The consolidated entity uses the market credit service in each wholesale market location to collect debts from smaller customers.

This guarantees collection on 14 day terms.The maximum credit risk exposure does not take into account the value of any collateral or other security held, in the event otherentities/parties fail to perform their obligations under the financial instruments in question.

33. FINANCIAL INSTRUMENTS continued(c) Interest Rate RiskThe consolidated entity’s exposure to interest rate risk, which is the risk that a financial instrument’s value will fluctuate as a result of changesin market interest rates and the effective weighted average interest rates on classes of financial assets and financial liabilities, is as follows:

30 Jun 31 Dec 30 Jun 31 Dec 30 Jun 31 Dec2004 2003 2004 2003 2004 2003$'000 $'000 $'000 $'000 $'000 $'000

(i) Financial Assets

Cash - 4,236 - - - -

Receivables - Trade Debtors - - - - - -

Sundry Loans/Other Debtors - - - - - -

Employee Loans - - - - - -

Unlisted Shares - - - - - -

Total Financial Assets - 4,236 - - - -

(ii) Financial Liabilities

Bank Overdraft 603 - - - - -

Trade Creditors and Accrued Expenses - - - - - -

Sundry Creditors - - - - - -

Bank Borrowings 28,305 42,673 - - - -

Finance Lease Liability - - 1,156 1,111 4,728 3,842

Hire Purchase Liability - - 88 726 82 1,449

Total Financial Liabilities 28,908 42,673 1,244 1,837 4,810 5,291

N/A - not applicable for non-interest bearing financial instruments.

58


Floating Interest Rate Within 1 Year 1 to 5 Years

30 Jun 31 Dec 30 Jun 31 Dec 30 Jun 31 Dec 30 Jun 31 Dec2004 2003 2004 2003 2004 2003 2004 2003$'000 $'000 $'000 $'000 $'000 $'000 % %

- - - - - 4,236 5.25% 4.80%

- - 16,881 21,309 16,881 21,309 N/A N/A

- - 3,909 3,049 3,909 3,049 N/A N/A

- - 12 16 12 16 N/A N/A

- - 387 387 387 387 N/A N/A

- 21,189 24,761 21,189 28,997

- - - - 603 - 9.10% 8.63%

- - 17,846 29,594 17,846 29,594 N/A N/A

- - 965 619 965 619 N/A N/A

- - - - 28,305 42,673 6.78% 6.47%

- - - - 5,884 4,953 7.80% 7.80%

- - - - 170 2,175 8.74% 8.74%

- - 18,811 30,213 53,773 80,014

59

More than 5 years Non-interest Bearing Total Weighted AverageEffective Interest Rate

60


34. DISCONTINUED OPERATIONSOn 25 February 2004 the Company announced the conditional sale of its investment in Angas Park Fruit Company Pty Ltd and its subsidiaryLoxton Fruit Processors Pty Ltd (“Angas Park”). The sale was completedon 26 April 2004. The impact of the sale of Angas Park is reflected in the results of the current period.

On 31 March the Company announced the immediate closure of thecitrus packing, marketing and juicing operations at Kangara Foods Pty Ltd.Proceeds from the sale of some surplus plant and equipment andinventory were received from April to June 2004. Proceeds from the

sale of remaining surplus assets of this operation are expected to berealised by 31 December 2004.

The impact of both the sale of Angas Park and the closure at Kangara areincluded in Note 5 “Individually Significant Items”.

The operations of Angas Park and the citrus packing, marketing and juicingoperations of Kangara are reported in Note 27 “Segment Reporting” aspart of the Group’s processing segment.

Financial information relating to the discontinued operations for theperiod to the date of disposal is set out below.

6 months 12 monthsended 30 Jun ended 31 Dec

2004 2003

The financial performance of the discontinued operations to the date of sale/closure which have been incorporated into the statement of financial performance is as follows:Revenue from ordinary activities 17,951 104,948 Expenses from ordinary activities (including borrowing costs) (34,516) (129,246)

Loss from ordinary activities before income tax (16,565) (24,298)Income tax benefit (4,202) (62)

Net loss attributable to members of the parent entity (12,363) (24,236)

The carrying amounts of assets and liabilities of the discontinued operations at the date of sale/closure were:Total Assets 35,257 35,204 Total Liabilities 7,245 22,504

Net Assets 28,012 12,700

The net cash flows of the discontinued operations which have been incorporatedinto the Statement of Cash Flows are as follows:Net cash inflow / (outflow) from ordinary activities (14,487) (9,912)Net cash inflow / (outflow) from investing activities (22) 27,088 Net cash inflow / (outflow) from financing activities 18,989 (27,350)

Net increase / (decrease) in cash generated by the discontinued operations 4,480 (10,174)

Details of the sale of the operations which have been incorporated into the current period results are as follows:Proceeds from sale of a controlled entity (net of cash disposed) 27,284 -Bank overdraft disposed (5,296) -Sale and warranty costs 1,227 -

Net sales price 23,215 - Proceeds from sale of property, plant and equipment 1,271 - Carrying amount of net assets sold 28,012 -

Loss on sale before income tax (3,526) - Income tax benefit (3,876) -

Profit on sale after income tax 350 -

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35. INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS)The adoption of Australian equivalents to International Financial ReportingStandards (IFRS) will be first reflected in the Group’s financial statements forthe half year ending 31 December 2005 and the year ending 30 June 2006.

The Group has established a project team to manage the transition toAustralian equivalents to IFRS, including training of staff and system andinternal control changes necessary to gather all the required financialinformation. The project team is chaired by the Chief Financial Officer and reports semi-annually to the audit committee. The project team hasprepared a timetable for managing the transition to Australian equivalentsto IFRS and is currently on schedule. To date, the project team hasreviewed the Australian equivalents to IFRS approved by the AASB as effective for financial years beginning on or after 1 January 2005, in order to identify the key areas where accounting policy changes will be required. In some cases choices of accounting policies are available,including elective exemptions under AASB1 “First-time Adoption ofAustralian Equivalents to International Financial Reporting Standards”.These choices are in the process of being analysed to determine themost appropriate accounting policies for the Group.

The most significant changes that will be required to the Group’s existingaccounting policies identified to date are set out below. At this stage thecompany has been unable to reliably quantify the impacts of all thesechanges on the current financial report.

(a) GoodwillUnder AASB 3 “Business Combinations” amortisation of goodwill will be prohibited, and will be replaced by annual impairment testingfocusing on the cash flows of the related cash generating unit.

This will result in a change to the Group’s current accounting policy,whereby goodwill is amortised using the straight line method over the period during which benefits are expected to be received, whichis assumed to be twenty years. In accordance with AASB 1013 “Accounting for Goodwill” additional provisions are raised against theunamortised balance of goodwill to the extent that future benefits are no longer probable.

Based on information available as at the date of this report, theapplication of AASB 3 “Business Combinations” would not beexpected to have a material impact on the current financialstatements given that impairment testing of unamortised goodwill is applied under the existing accounting treatment. Had AASB 3“Business Combinations” been applied to the financial statements for the period ended 30 June 2004, the impact would have been a reduction in the goodwill amortisation charge of $227,000 and a corresponding reduction in net loss attributable to members of $227,000.

Reliable estimation of the future financial effect of this change in accounting policy is impracticable because the conditions under which impairment will be assessed in future periods are not yet known.

(b) Impairment of assetsUnder AASB 136 “Impairment of Assets”, strict tests will be applied to determine whether impairment has occurred. Where indicators ofimpairment exist, the recoverable amount of an asset is determined as the higher of net selling price and value in use; value in use beingdetermined as the present value of future cash flows.

This will result in a refinement to the Group’s current accounting policy whereby non-current assets are not carried at an amountabove recoverable amount, and recoverable amount is based ondiscounted cash flows.

Based on information available as at the date of this report, theapplication of AASB 136 “Impairment of Assets” would not beexpected to have a material impact on the current financialstatements given that assessments of recoverable amount under theexisting accounting treatment are based on discounted cash flows.

Reliable estimation of the future financial effect of this change inaccounting policy is impracticable because the conditions underwhich impairment will be assessed are not yet known.

(c) Share based paymentsUnder AASB 2 “Share-based Payment”, the Company will be required to determine the fair value of options granted to employees as remuneration and expense that value in the Statement of FinancialPerformance over the vesting period. This standard is not limited to options; it extends to other forms of equity based remuneration. The standard applies to all share-based payments granted after 7 November 2002 which have not vested at 1 January 2005.

This will result in a change to the Group’s current accounting policy which provides disclosure of the fair value of options granted, with no impact on the Statement of Financial Performance.

The impact of this change will be a reduction in profit and acorresponding increase in reserves by the amounts that are required to be expensed. There is no expected impact on net assets. Reliablequantification of these impacts in future periods is impracticable becausethe details of future equity based remuneration plans are unknown.

Had AASB 2 “Share-based Payment” been applicable to the financialstatements for the period ended 30 June 2004, the impact wouldhave been an increase in loss attributable to members of $58,000,with the creation of an Option Reserve for the same amount.

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35. INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS) continued(d) Income taxes

Under AASB 112 “Income Taxes”, deferred tax balances aredetermined using the balance sheet method which calculatestemporary differences based on the carrying amounts of an entity'sassets and liabilities in the Statement of Financial Position compared to their associated tax bases.

In addition, current and deferred taxes attributable to amountsrecognised directly in equity are also recognised directly in equity.

This will result in a change to the Group’s current accounting policy,under which items are only tax-effected if they are included in thedetermination of pre-tax accounting profit or loss and/or taxable income or loss, and current and deferred taxes are not recogniseddirectly in equity.

Reliable estimation of the future impact of this change cannot bemade pending finalisation of the tax consolidation process.

The above should not be regarded as a complete list of changes inaccounting policies that will result from the transition to Australianequivalents to IFRS, as not all standards have been analysed in detail asyet, and decisions have not yet been made where choices of accountingpolices are available. For these reasons it is not yet possible to quantifythe overall impact of the transition to Australian equivalents to IFRS onthe Group’s financial position and reported results.

Shareholder InformationFor the year ended 30 June 2004

Shareholders Shareholding Units % of Total Shares

Statement of Quoted Shares at 20 August 2004

Fully paid ordinary shares 144,108,386 Number of shareholders 1,536 Voting rights are one vote per person on a show of hands or one vote per fully paid share on a poll.

Statement of Quoted Shares at 20 August 20041 to 1,000 175 103,015 0.07%1,001 to 5,000 560 1,669,760 1.16%5,001 to 10,000 287 2,295,626 1.59%10,001 to 100,000 445 12,401,069 8.61%100,001 and over 69 127,638,916 88.57%

1,536 144,108,386 100.00%

As at 20 August 2004 there were 99 shareholders who held less than a marketable parcel of 705 shares.

Twenty Largest Shareholders (of quoted shares) as at 20 August 2004 Shareholding Units % of Total SharesCosta Bros. Annuities Pty Ltd 36,600,000 25.40%

Chiquita Far East Holdings B.V. 15,117,950 10.49%

Invia Custodian Pty Ltd - Black A/C 11,603,798 8.05%

Invia Custodian Pty Ltd - Thirty Five A/C 5,800,000 4.03%

National Nominees Limited 5,560,381 3.86%

Queensland Investment Corporation 5,496,307 3.82%

AMP Life Limited 5,292,944 3.67%

Permanent Trustee Australia Ltd - MMC0002 A/C 3,944,222 2.74%

Mr Manoussos Babiolakis 3,100,000 2.15%

IOOF Investment Management Ltd 2,716,051 1.88%

Lion Capital Pty Ltd 2,700,000 1.87%

UBS Nominees - Prime Broking A/C 2,269,407 1.57%

JP Morgan Nominees Australia Ltd 1,943,452 1.35%

Westpac Custodian Nominees Ltd 1,872,139 1.30%

Permanent Trustee Australia Ltd - MMC0001 A/C 1,700,000 1.18%

ANZ Nominees Ltd 1,672,458 1.16%

Gwynvill Trading Pty Ltd 1,610,000 1.12%

National Nominees Limited - Equipsuper A/C 1,462,579 1.01%

Cogent Nominees Pty Ltd 1,430,151 0.99%

Argo Investments Ltd 1,400,000 0.97%

113,291,839 78.61%

Unquoted SharesCraig Allen Stephen as Trustee for CBSP Employee Share Plan was the holder of 340,000 unquoted ordinary shares at the date of this report.

Substantial Shareholder's Register as at 20 August 2004Costa Bros. Annuities Pty Ltd (and related entities) 37,032,395Invia Custodian Pty Ltd 18,243,964Chiquita Far East Holdings B.V. 15,117,950Perennial Value Management Ltd 8,912,681

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64

The Directors of the Company declare that:

1. The financial statements and notes of the Company and of the consolidated entity, as set out on pages 17 to 62, are in accordance with theCorporations Act 2001:

(a) comply with Accounting Standards and the Corporations Regulations 2001; and

(b) give a true and fair view of the financial position as at 30 June 2004 and of the performance for the six month period ended on that dateof the Company and the consolidated entity.

2. In the Directors’ opinion there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due andpayable.

The Company and wholly-owned subsidiaries have entered into a deed of cross guarantee under which the Company and its subsidiaries guaranteethe debts of each other.

At the date of this declaration, there are reasonable grounds to believe that the companies which are party to this deed of cross guarantee will be ableto meet any obligations or liabilities to which they are, or may become subject to, by virtue of the deed.

This declaration is made in accordance with a resolution of the Board of Directors.

DirectorAnthony G. Hartnell


Directors’ DeclarationFor the six month period ended 30 June 2004

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To members of Chiquita Brands South Pacific Limited

ScopeThe financial report and directors’ responsibilityThe financial report comprises the Statement of Financial Position, Statement of Financial Performance, Statement of Cash Flows, accompanying notesto the financial statements, and the Directors’ Declaration for Chiquita Brands South Pacific Limited (the Company) and the consolidated entity, for thesix months ended 30 June 2004. The consolidated entity comprises both the Company and the entities it controlled during that period.

The Directors of the Company are responsible for preparing a financial report that gives a true and fair view of the financial position and performanceof the Company and the consolidated entity, and that complies with Accounting Standards in Australia, in accordance with the Corporations Act 2001.This includes responsibility for the maintenance of adequate accounting records and internal controls that are designed to prevent and detect fraud anderror, and for the accounting policies and accounting estimates inherent in the financial report.

Audit approachWe conducted an independent audit of the financial report in order to express an opinion on it to the members of the Company. Our audit wasconducted in accordance with Australian Auditing Standards in order to provide reasonable assurance as to whether the financial report is free ofmaterial misstatement. The nature of an audit is influenced by factors such as the use of professional judgement, selective testing, the inherent limitations of internal control, and the availability of persuasive rather than conclusive evidence. Therefore, an audit cannot guarantee that all materialmisstatements have been detected.

We performed procedures to assess whether in all material respects the financial report presents fairly, in accordance with the Corporations Act 2001,including compliance with Accounting Standards in Australia, and other mandatory financial reporting requirements in Australia, a view which isconsistent with our understanding of the Company’s and the consolidated entity’s financial position, and of their performance as represented by theresults of their operations and cash flows.

We formed our audit opinion on the basis of these procedures, which included:

- Examining, on a test basis, information to provide evidence supporting the amounts and disclosures in the financial report, and

- Assessing the appropriateness of the accounting policies and disclosures used and the reasonableness of significant accounting estimates made by the directors.

While we considered the effectiveness of management’s internal controls over financial reporting when determining the nature and extent of ourprocedures, our audit was not designed to provide assurance on internal controls.

We performed procedures to assess whether the substance of business transactions was accurately reflected in the financial report. These and ourother procedures did not include consideration or judgement of the appropriateness or reasonableness of the business plans or strategies adopted by the directors and management of the Company.

Independent Audit Report

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Independent Audit Report continued

IndependenceWe are independent of the Company, and have met the independence requirements of Australian professional ethical pronouncements and theCorporations Act 2001. In addition to our audit of the financial report, we were engaged to undertake the services disclosed in the notes to the financialstatements. The provision of these services has not impaired our independence.

Audit opinionIn our opinion, the financial report of Chiquita Brands South Pacific Limited is in accordance with:

(a) the Corporations Act 2001, including:

(i) giving a true and fair view of the financial position of Chiquita Brands South Pacific Limited and the consolidated entity at 30 June 2004 and of their performance for the six months ended on that date; and

(ii) complying with Accounting Standards in Australia and the Corporations Regulations 2001; and

(b) other mandatory financial reporting requirements in Australia.

Ernst & Young

D. BalcombePartner

Melbourne


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Notes

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Chiquita Brands South Pacific Limited(Incorporated in Australia)ACN 002 687 961ABN 41 002 687 961

Registered OfficeChiquita Brands South Pacific LimitedLevel 2, 768 Lorimer StreetPORT MELBOURNE VIC [email protected]

DirectorsAnthony G. Hartnell, ChairmanMano D. Babiolakis, Managing DirectorBruce W. KempCarl C. SchokmanCraig A. StephenFrancis A. Costa

Company SecretaryDavid K. Green

Stock Exchange ListingChiquita Brands South Pacific Limited shares are quoted on the Australian Stock Exchange.The code under which the Company’s Ordinary Shares are traded is CHQ.

Share RegisterComputershare Registry Services Pty LtdLevel 3, 60 Carrington StreetSYDNEY NSW 2000Telephone: +61 2 8234 5000Facsimile: +61 2 8234 5050

Company Details

Registered OfficeChiquita Brands South Pacific LimitedLevel 2, 768 Lorimer StreetPort Melbourne VIC 3207 AustraliaTelephone: +61 3 8645 1600Facsimile: +61 3 8645 1674Email: [email protected]

This Annual Report was designed and produced by Ckaos Ink Pty Ltd

chiquita brands south pacific limited

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