##### Table of Contents









SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





Form 10-K/A





|   |  |                                                                                             
|-- |  | --------------------------------------------------------------------------------------------
|þ  |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934    
|  
|   |  | for the fiscal year ended August 31, 2004                                                   
|  
|or
|  
|o  |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934
|   |  | for the transition period
    from           to           .                                 

Commission file number: 0-50150





CHS Inc.


(Exact name of registrant as specified in its charter)


|                                                                                                 |  |                                                                       
|------------------------------------------------------------------------------------------------ |  | ----------------------------------------------------------------------
|Minnesota                                                                                        |  | 41-0251095                                                            
|(State or other jurisdiction of
    incorporation or organization)                               |  | (I.R.S. Employer
    Identification Number)                           
|                                                                                                
|5500 Cenex Drive
    Inver Grove Heights, Minnesota 55077(Address of principal executive office) |  | (651) 355-6000(Registrants Telephone number,
    including area code)




SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE
ACT:


None


SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE
ACT:


8% Cumulative Redeemable Preferred Stock


(Title of Class)





þ o




o þ










DOCUMENTS INCORPORATED BY REFERENCE












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TABLE OF CONTENTS



|                                                         |                                                                       |  |  |  |  |  |  | 
|-------------------------------------------------------- | --------------------------------------------------------------------- |  |  |  |  |  |  | 
|Explanatory Note                                        
|PART II.                                                
|                                                         | Item 8. Financial Statements and Supplementary Data                  
|PART IV.                                                
|                                                         | Item 15. Exhibits, Financial Statements and Reports Filed on Form 8-K
|SIGNATURES                                              
|Consent of Independent Registered Public Accounting Firm
|Independent Auditors' Consent                           
|Certification Pursuant to Section 302                   
|Certification Pursuant to Section 302                   
|Certification Pursuant to Section 906                   
|Certification Pursuant to Section 906                   



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##### Table of Contents



CHS Inc.







Explanatory Note







PART II.







|        |                                            
|------- | -------------------------------------------
|Item 8. | Financial Statements and Supplementary Data






PART IV.







|         |                                                                 
|-------- | ----------------------------------------------------------------
|Item 15. | Exhibits, Financial Statements and Reports Filed on
    Form 8-K

(a)(1)     FINANCIAL STATEMENTS






|                                                                                     |  |  |      | 
|------------------------------------------------------------------------------------ |  |  | ---- | 
|Independent Auditors Report                                                         |  |  | F-33 | 
|Balance Sheets as of March 31, 2005 and 2004                                         |  |  | F-34 | 
|Statements of Income for the years ended March 31, 2005,
    2004 and 2003           |  |  | F-35 | 
|Statements of Members Capital for the years ended
    March 31, 2005, 2004 and 2003 |  |  | F-36 | 
|Statements of Cash Flows for the years ended March 31,
    2005, 2004 and 2003       |  |  | F-37 | 
|Notes to Financial Statements for the years ended March 31,
    2005, 2004 and 2003  |  |  | F-38 | 

(a)(3)     EXHIBITS


| |   |    |  |                                                                                                                                                                                                                             
| | - | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 3 | .1 |  | Articles of Incorporation of the Company, as amended.(13)                                                                                                                                                                   
| | 3 | .2 |  | Articles of Amendment to the Articles of Incorporation.(17)                                                                                                                                                                 
| | 3 | .3 |  | Bylaws of the Company, as amended.(13)                                                                                                                                                                                      
| | 4 | .1 |  | Resolution Creating a Series of Preferred Equity to be
    Designated 8% Cumulative Redeemable Preferred Stock.(14)                                                                                                         
| | 4 | .2 |  | Form of Certificate Representing 8% Cumulative Redeemable
    Preferred Stock.(15)                                                                                                                                          
| | 4 | .3 |  | Unanimous Written Consent Resolution of the Board of Directors
    Amending the Amended and Restated Resolution Creating a Series
    of Preferred Equity to be Designated 8% Cumulative Redeemable
    Preferred Stock.(15)

1



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| |    |      |  |                                                                                                                                                                                                                                                                     
| | -- | ---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 4  | .4   |  | Unanimous Written consent Resolution of the Board of Directors
    Amending the Amended and Restated Resolution Creating a Series
    of Preferred Equity to be Designated 8% Cumulative Redeemable
    Preferred Stock to change the record date for dividends.(16)
| | 10 | .1   |  | Lease between the Port of Kalama and North Pacific Grain
    Growers, Inc., dated November 22, 1960.(1)                                                                                                                                                             
| | 10 | .2   |  | Limited Liability Company Agreement for the Wilsey-Holsum Foods,
    LLC dated July 24, 1996.(1)                                                                                                                                                                    
| | 10 | .3   |  | Long Term Supply Agreement between Wilsey-Holsum Foods, LLC and
    Harvest States Cooperatives dated August 30, 1996.*(1)                                                                                                                                          
| | 10 | .4   |  | TEMCO, LLC Limited Liability Company Agreement between Cargill,
    Incorporated and Cenex Harvest States Cooperatives dated as of
    August 26, 2002.(12)                                                                                                         
| | 10 | .5   |  | Cenex Harvest States Cooperatives Supplemental Savings Plan.(7)                                                                                                                                                                                                     
| | 10 | .6   |  | Cenex Harvest States Cooperatives Supplemental Executive
    Retirement Plan.(7)                                                                                                                                                                                    
| | 10 | .7   |  | Cenex Harvest States Cooperatives Senior Management Compensation
    Plan.(7)                                                                                                                                                                                       
| | 10 | .8   |  | Cenex Harvest States Cooperatives Executive Long-Term Variable
    Compensation Plan.(7)                                                                                                                                                                            
| | 10 | .9   |  | Cenex Harvest States Cooperatives Share Option Plan.(21)                                                                                                                                                                                                            
| | 10 | .9A  |  | Amendment to Cenex Harvest States Share Option Plan, dated
    June 28, 2001.(10)                                                                                                                                                                                   
| | 10 | .9B  |  | Amendment No. 2 to Cenex Harvest States Share Option Plan,
    dated May 2, 2001.(21)                                                                                                                                                                               
| | 10 | .9C  |  | Amendment No. 3 to Cenex Harvest States Share Option Plan,
    dated June 4, 2002.(21)                                                                                                                                                                              
| | 10 | .9D  |  | Amendment No. 4 to Cenex Harvest States Share Option Plan,
    dated April 6, 2004.(21)                                                                                                                                                                             
| | 10 | .10  |  | CHS Inc. Share Option Plan Option Agreement.(21)                                                                                                                                                                                                                    
| | 10 | .11  |  | CHS Inc. Share Option Plan Trust Agreement.(21)                                                                                                                                                                                                                     
| | 10 | .11A |  | Amendment No. 1 to the Trust Agreement.(21)                                                                                                                                                                                                                         
| | 10 | .12  |  | $225,000,000 Note Agreement (Private Placement Agreement) dated
    as of June 19, 1998 among Cenex Harvest States Cooperatives
    and each of the Purchasers of the Notes.(2)                                                                                     
| | 10 | .12A |  | First Amendment to Note Agreement ($225,000,000 Private
    Placement), effective September 10, 2003, among CHS Inc.
    and each of the Purchasers of the notes.(18)                                                                                               
| | 10 | .13  |  | Credit Agreement (Revolving Loan) dated as of May 21, 2003
    among Cenex Harvest States Cooperatives, CoBank, ACB, SunTrust
    Bank, Cooperative Centrale Raiffeisen-Boerenleenbank B.A., BNP
    Paribas and the Syndication Parties.(16)                       
| | 10 | .13A |  | First Amendment to Credit Agreement dated as of May 20,
    2004 between CHS Inc., CoBank, ACB, and the Syndication Parties.
    (20)                                                                                                                               
| | 10 | .14  |  | $200 Million Term Loan Credit Agreement dated as of
    June 1, 1998 among Cenex Harvest States Cooperatives,
    CoBank, ACB, and St. Paul Bank for Cooperatives, including
    Exhibit 2.4 (form of $200 Million Promissory Note).(2)                             
| | 10 | .14A |  | First Amendment to Credit Agreement (Term Loan), effective as of
    May 31, 1999 among Cenex Harvest States Cooperatives,
    CoBank, ACB, and St. Paul Bank for Cooperatives.(4)                                                                                  
| | 10 | .14B |  | Second Amendment to Credit Agreement (Term Loan) dated
    May 23, 2000 by and among Cenex Harvest States
    Cooperatives, CoBank, ACB, St. Paul Bank for Cooperatives
    and the Syndication Parties.(6)                                                         
| | 10 | .14C |  | Third Amendment to Credit Agreement (Term Loan) dated
    May 23, 2001 among Cenex Harvest States Cooperatives,
    CoBank, ACB, and the Syndication Parties.(9)                                                                                                    
| | 10 | .14D |  | Fourth Amendment to Credit Agreement (Term Loan) dated
    May 22, 2002 among Cenex Harvest States Cooperatives,
    CoBank, ACB and the Syndication Parties.(11)                                                                                                   
| | 10 | .14E |  | Fifth Amendment to Credit Agreement (Term Loan) dated
    May 21, 2003 by and among Cenex Harvest States
    Cooperatives, CoBank, ACB and the Syndication Parties.(21)                                                                                             
| | 10 | .14F |  | Sixth Amendment to Credit Agreement (Term Loan) dated as of
    May 20, 2004 by and among CHS Inc., CoBank, ACB, and the
    Syndication Parties.(20)                                                                                                               
| | 10 | .15  |  | Limited Liability Agreement of United Harvest, LLC dated
    November 9, 1998 between United Grain Corporation and Cenex
    Harvest States Cooperatives.(3)                                                                                                        

2



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| |    |      |  |                                                                                                                                                                                                                
| | -- | ---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 10 | .16  |  | Joint Venture Agreement for Agriliance LLC, dated as of
    January 1, 2000 among Farmland Industries, Inc., Cenex
    Harvest States Cooperatives, United Country Brands, LLC and Land
    O Lakes, Inc.(5)  
| | 10 | .17  |  | Employment Agreement dated November 6, 2003 by and between
    John D. Johnson and CHS Inc.(18)                                                                                                                
| | 10 | .18  |  | CHS Inc. Special Supplemental Executive Retirement Plan.(18)                                                                                                                                                   
| | 10 | .19  |  | Note purchase and Private Shelf Agreement dated as of
    January 10, 2001 between Cenex Harvest States Cooperatives
    and The Prudential Insurance Company of America.(8)                                   
| | 10 | .19A |  | Amendment No. 1 to Note Purchase and Private Shelf
    Agreement, dated as of March 2, 2001.(8)                                                                                                                
| | 10 | .20  |  | Note Purchase Agreement and Series D & E Senior
    Notes dated October 18, 2002.(12)                                                                                                                          
| | 10 | .21  |  | 2003 Amended and Restated Credit Agreement ($15 million,
    2 Year Facility) dated December 16, 2003 between
    CoBank, ACB, U.S. AgBank, FCB and the National Cooperative
    Refinery Association, Inc.(19)
| | 10 | .22  |  | Note Purchase and Private Shelf Agreement between CHS Inc. and
    Prudential Capital Group dated as of April 13, 2004.(20)                                                                                    
| | 21 | .1   |  | Subsidiaries of the Registrant.(21)                                                                                                                                                                            
| | 23 | .1   |  | Consent of Independent Registered Public Accounting Firm.(22)                                                                                                                                                  
| | 23 | .2   |  | Independent Auditors Consent.(22)                                                                                                                                                                             
| | 24 | .1   |  | Power of Attorney.(21)                                                                                                                                                                                         
| | 31 | .1   |  | Certification Pursuant to Section 302 of the Sarbanes-Oxley
    Act of 2002.(22)                                                                                                                               
| | 31 | .2   |  | Certification Pursuant to Section 302 of the Sarbanes-Oxley
    Act of 2002.(22)                                                                                                                               
| | 32 | .1   |  | Certification Pursuant to 18 U.S.C. Section 1350, as
    Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002.(22)                                                                            
| | 32 | .2   |  | Certification Pursuant to 18 U.S.C. Section 1350, as
    Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002.(22)                                                                            






| |   |                                                                                                                                                                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | * | Pursuant to Rule 406 of the Securities Act of 1933, as
    amended, confidential portions of Exhibit 10.3 have been
    deleted and filed separately with the Securities and Exchange
    Commission pursuant to a request for confidential treatment.



| |     |                                                                                                                                                       
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | Incorporated by reference to the Companys Registration
    Statement on Form S-1 (File No. 333-17865), filed
    February 7, 1997.                   
|
| | (2) | Incorporated by reference to the Companys Form 10-Q
    Transition Report for the period June 1, 1998 to
    August 31, 1998, filed October 14, 1998.
|
| | (3) | Incorporated by reference to the Companys Form 10-Q
    for the quarterly period ended November 30, 1998, filed
    January 13, 1999.                
|
| | (4) | Incorporated by reference to the Companys Form 10-Q
    for the quarterly period ended May 31, 1999, filed
    July 13, 1999.                        
|
| | (5) | Incorporated by reference to the Companys Form 10-Q
    for the quarterly period ended February 29, 2000 filed
    April 11, 2000.                   
|
| | (6) | Incorporated by reference to the Companys Form 10-Q
    for the quarterly period ended May 31, 2000, filed
    July 10, 2000.                        
|
| | (7) | Incorporated by reference to the Companys Form 10-K
    for the year ended August 31, 2000, filed November 22,
    2000.                             
|
| | (8) | Incorporated by reference to the Companys Form 10-Q
    for the quarterly period ended February 28, 2001, filed
    April 10, 2001.                  
|
| | (9) | Incorporated by reference to the Companys Form 10-Q
    for the quarterly period ended May 31, 2001, filed
    July 3, 2001.                         

3



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|     |                                                                                                                                                        
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------
|(10) | Incorporated by reference to the Companys Registration
    Statement on Form S-2 (File No. 333-65364), filed
    October 26, 2001.                    
|    
|(11) | Incorporated by reference to the Companys Form 10-Q
    for the quarterly period ended May 31, 2002, filed
    July 3, 2002.                          
|    
|(12) | Incorporated by reference to the Companys Form 10-K
    for the year ended August 31, 2002, filed November 25,
    2002.                              
|    
|(13) | Incorporated by reference to the Companys Form 10-Q
    for the quarterly period ended November 30, 2002, filed
    January 9, 2003.                  
|    
|(14) | Incorporated by reference to Amendment No. 1 to the
    Companys Registration Statement on Form S-2 (File
    No. 333-101916), dated January 13, 2003.
|    
|(15) | Incorporated by reference to Amendment No. 2 to the
    Companys Registration Statement on Form S-2 (File
    No. 333-101916), dated January 23, 2003.
|    
|(16) | Incorporated by reference to the Companys Form 10-Q
    for the quarterly period ended May 31, 2003, filed
    July 2, 2003.                          
|    
|(17) | Incorporated by reference to the Companys Form 8-K,
    filed August 5, 2003.                                                                         
|    
|(18) | Incorporated by reference to the Companys Form 10-K
    for the year ended August 31, 2003 filed on
    November 21, 2003.                            
|    
|(19) | Incorporated by reference to the Companys Form 10-Q
    for the quarterly period ended February 29, 2004, filed
    April 7, 2004.                    
|    
|(20) | Incorporated by reference to the Companys Form 10-Q
    for the quarterly period ended may 31, 2004, filed
    July 12, 2004.                         
|    
|(21) | Incorporated by reference to the Companys Form 10-K
    for the year ended August 31, 2004 filed November 18,
    2004.                               
|    
|(22) | Filed herewith.                                                                                                                                        

(c)     Reports on Form 8-K












|    |         
|--- | --------
|(c) | Exhibits





|    |          
|--- | ---------
|(d) | Schedules



Supplemental Information




4



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SIGNATURES




|    |  |                                                                                          |  |                      
|--- |  | ---------------------------------------------------------------------------------------- |  | ---------------------
|By: |  | /s/ JOHN SCHMITZJohn
    SchmitzExecutive Vice President and
    Chief Financial Officer |  | Date: August 15, 2005

5



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CHS INC.


CONSOLIDATED BALANCE SHEETS


|                                   |                                   |                        |           |         |      |   |           |         | 
|---------------------------------- | --------------------------------- | ---------------------- | --------- | ------- | ---- | - | --------- | ------- | 
|                                   |                                   | August 31              |          
|                                   |                                   |                        |          
|                                   |                                   | 2004                   |           |         | 2003 |  
|                                   |                                   |                        |           |         |      |  
|                                   |                                   | (Dollars in thousands) |          
|ASSETS                            
|Current assets:                    |                                   |                        |           |         |      |   |           |        
|                                   | Cash and cash equivalents         |                        | $         | 136,491 |      |   | $         | 168,249 | 
|                                   | Receivables                       |                        |           | 834,965 |      |   |           | 763,780 | 
|                                   | Inventories                       |                        |           | 723,893 |      |   |           | 801,883 | 
|                                   | Other current assets              |                        |           | 273,355 |      |   |           | 178,661 | 
|                                   |                                   |                        |           |         |      |  
|Total current assets               |                                   |                        | 1,968,704 |         |      |   | 1,912,573 |        
|Investments                        |                                   |                        | 575,816   |         |      |   | 532,893   |        
|Property, plant and equipment      |                                   |                        | 1,249,655 |         |      |   | 1,122,982 |        
|Other assets                       |                                   |                        | 237,117   |         |      |   | 239,520   |        
|                                   |                                   |                        |           |         |      |  
|Total assets                       |                                   | $                      | 4,031,292 |         |      | $ | 3,807,968 |        
|                                   |                                   |                        |           |         |      |  
|                                  
|LIABILITIES AND EQUITIES          
|Current liabilities:               |                                   |                        |           |         |      |   |           |        
|                                   | Notes payable                     |                        | $         | 116,115 |      |   | $         | 251,131 | 
|                                   | Current portion of long-term debt |                        |           | 35,117  |      |   |           | 14,951  | 
|                                   | Customer credit balances          |                        |           | 88,686  |      |   |           | 58,417  | 
|                                   | Customer advance payments         |                        |           | 64,042  |      |   |           | 123,383 | 
|                                   | Checks and drafts outstanding     |                        |           | 64,584  |      |   |           | 85,239  | 
|                                   | Accounts payable                  |                        |           | 717,501 |      |   |           | 627,250 | 
|                                   | Accrued expenses                  |                        |           | 305,650 |      |   |           | 254,415 | 
|                                   | Dividends and equities payable    |                        |           | 83,569  |      |   |           | 39,049  | 
|                                   |                                   |                        |           |         |      |  
|Total current liabilities          |                                   |                        | 1,475,264 |         |      |   | 1,453,835 |        
|Long-term debt                     |                                   |                        | 648,701   |         |      |   | 648,222   |        
|Other liabilities                  |                                   |                        | 148,526   |         |      |   | 111,555   |        
|Minority interests in subsidiaries |                                   |                        | 130,715   |         |      |   | 112,645   |        
|Commitments and contingencies      |                                   |                        |           |         |      |   |           |        
|Equities                           |                                   |                        | 1,628,086 |         |      |   | 1,481,711 |        
|                                   |                                   |                        |           |         |      |  
|Total liabilities and equities     |                                   | $                      | 4,031,292 |         |      | $ | 3,807,968 |        
|                                   |                                   |                        |           |         |      |  



F-1



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##### Table of Contents



CHS INC.


CONSOLIDATED STATEMENTS OF OPERATIONS


|                                      |                             |                               |            |            |      |   |           |           |  |   |           |           | 
|------------------------------------- | --------------------------- | ----------------------------- | ---------- | ---------- | ---- | - | --------- | --------- |  | - | --------- | --------- | 
|                                      |                             | For the Years Ended August 31 |           
|                                      |                             |                               |           
|                                      |                             | 2004                          |            |            | 2003 |   |           | 2002      | 
|                                      |                             |                               |            |            |      |   |           |           | 
|                                      |                             | (Dollars in thousands)        |           
|Revenues:                             |                             |                               |            |            |      |   |           |           |  |   |           |          
|                                      | Net sales                   |                               | $          | 10,909,333 |      |   | $         | 9,270,734 |  |   | $         | 7,156,454 | 
|                                      | Other revenues              |                               |            | 141,303    |      |   |           | 122,578   |  |   |           | 107,351   | 
|                                      |                             |                               |            |            |      |   |           |           | 
|                                      |                             |                               | 11,050,636 |            |      |   | 9,393,312 |           |  |   | 7,263,805 |          
|Cost of goods sold                    |                             |                               | 10,604,245 |            |      |   | 9,060,555 |           |  |   | 6,940,050 |          
|Marketing, general and administrative |                             |                               | 208,284    |            |      |   | 183,757   |           |  |   | 182,175   |          
|                                      |                             |                               |            |            |      |   |           |           | 
|Operating earnings                    |                             |                               | 238,107    |            |      |   | 149,000   |           |  |   | 141,580   |          
|Gain on sale of investment            |                             |                               | (14,666    | )          |      |   |           |           |  |   |           |          
|Gain on legal settlements             |                             |                               | (692       | )          |      |   | (10,867   | )         |  |   | (2,970    | )        
|Interest                              |                             |                               | 51,625     |            |      |   | 48,675    |           |  |   | 42,455    |          
|Equity income from investments        |                             |                               | (79,022    | )          |      |   | (47,299   | )         |  |   | (58,133   | )        
|Minority interests                    |                             |                               | 33,830     |            |      |   | 21,950    |           |  |   | 15,390    |          
|                                      |                             |                               |            |            |      |   |           |           | 
|Income before income taxes            |                             |                               | 247,032    |            |      |   | 136,541   |           |  |   | 144,838   |          
|Income taxes                          |                             |                               | 25,700     |            |      |   | 12,700    |           |  |   | 18,700    |          
|                                      |                             |                               |            |            |      |   |           |           | 
|Net income                            |                             | $                             | 221,332    |            |      | $ | 123,841   |           |  | $ | 126,138   |          
|                                      |                             |                               |            |            |      |   |           |           | 
|Distribution of net income:           |                             |                               |            |            |      |   |           |           |  |   |           |          
|                                      | Patronage refunds           |                               | $          | 166,850    |      |   | $         | 90,000    |  |   | $         | 92,900    | 
|                                      | Unallocated capital reserve |                               |            | 54,482     |      |   |           | 33,841    |  |   |           | 33,238    | 
|                                      |                             |                               |            |            |      |   |           |           | 
|Net income                            |                             | $                             | 221,332    |            |      | $ | 123,841   |           |  | $ | 126,138   |          
|                                      |                             |                               |            |            |      |   |           |           | 



F-2



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##### Table of Contents



CHS INC.


CONSOLIDATED STATEMENTS OF EQUITIES AND COMPREHENSIVE
INCOME


|                                                          |                            |                                                    |           |             |              |   |        |           |  |             |           |   |       |         |          |           |               |   |         |         |  |   |          |         |   |   |       |  |  |   |           |         |  
|--------------------------------------------------------- | -------------------------- | -------------------------------------------------- | --------- | ----------- | ------------ | - | ------ | --------- |  | ----------- | --------- | - | ----- | ------- | -------- | --------- | ------------- | - | ------- | ------- |  | - | -------- | ------- | - | - | ----- |  |  | - | --------- | ------- | -
|                                                          |                            | For the Years Ended August 31, 2004, 2003 and 2002 |          
|                                                          |                            |                                                    |          
|                                                          |                            |                                                    |           | Accumulated |              |   |       
|                                                          |                            | Capital                                            |           |             | Nonpatronage |   |        |           |  | Unallocated |           |   | Other |         |          | Allocated |               |   |        
|                                                          |                            | Equity                                             |           |             | Equity       |   |        | Preferred |  |             | Patronage |   |       | Capital |          |           | Comprehensive |   |         | Capital |  |   | Total    |        
|                                                          |                            | Certificates                                       |           |             | Certificates |   |        | Stock     |  |             | Refunds   |   |       | Reserve |          |           | Income (Loss) |   |         | Reserve |  |   | Equities |        
|                                                          |                            |                                                    |           |             |              |   |        |           |  |             |           |   |       |         |          |           |               |   |         |         |  |   |          |        
|                                                          |                            | (Dollars in thousands)                             |          
|Balances, September 1, 2001                               |                            | $                                                  | 971,873   |             |              | $ | 28,158 |           |  |             |           |   |       | $       | 90,230   |           |               | $ | 164,757 |         |  | $ | (1,915   | )       |   | $ | 8,050 |  |  | $ | 1,261,153 |        
|Dividends and equity retirement determination             |                            |                                                    | 33,484    |             |              |   |        |           |  |             |           |   |       |         | 38,670   |           |               |   |         |         |  |   |          |         |   |   |       |  |  |   | 72,154    |        
|Patronage distribution                                    |                            |                                                    | 92,484    |             |              |   |        |           |  |             |           |   |       |         | (128,900 | )         |               |   | (3,666  | )       |  |   |          |         |   |   |       |  |  |   | (40,082   | )      
|Equities retired                                          |                            |                                                    | (31,099   | )           |              |   | (46    | )         |  |             |           |   |       |         |          |           |               |   |         |         |  |   |          |         |   |   |       |  |  |   | (31,145   | )      
|Equities issued                                           |                            |                                                    | 2,600     |             |              |   |        |           |  |             |           |   |       |         |          |           |               |   |         |         |  |   |          |         |   |   |       |  |  |   | 2,600     |        
|Preferred stock issued, net                               |                            |                                                    |           |             |              |   |        |           |  | $           | 9,325     |   |       |         |          |           |               |   | (3,428  | )       |  |   |          |         |   |   |       |  |  |   | 5,897     |        
|Preferred stock dividends                                 |                            |                                                    |           |             |              |   |        |           |  |             |           |   |       |         |          |           |               |   | (240    | )       |  |   |          |         |   |   |       |  |  |   | (240      | )      
|Other, net                                                |                            |                                                    | (106      | )           |              |   | (339   | )         |  |             |           |   |       |         |          |           |               |   | 100     |         |  |   |          |         |   |   |       |  |  |   | (345      | )      
|Comprehensive income:                                     |                            |                                                    |           |             |              |   |        |           |  |             |           |   |       |         |          |           |               |   |         |         |  |   |          |         |   |   |       |  |  |   |           |        
|                                                          | Net income                 |                                                    |           |             |              |   |        |           |  |             |           |   |       |         |          | 92,900    |               |   |         | 33,238  |  |   |          |         |   |   |       |  |  |   |           | 126,138 |  
|                                                          | Other comprehensive loss   |                                                    |           |             |              |   |        |           |  |             |           |   |       |         |          |           |               |   |         |         |  |   |          | (49,982 | ) |   |       |  |  |   |           | (49,982 | )
|                                                          |                            |                                                    |           |             |              |   |        |           |  |             |           |   |       |         |          |           |               |   |         |         |  |   |          |        
|Total comprehensive income                                |                            |                                                    |           |             |              |   |        |           |  |             |           |   |       |         |          |           |               |   |         |         |  |   |          |         |   |   |       |  |  |   | 76,156    |        
|                                                          |                            |                                                    |           |             |              |   |        |           |  |             |           |   |       |         |          |           |               |   |         |         |  |   |          |        
|Dividends and equities payable                            |                            |                                                    | (28,640   | )           |              |   |        |           |  |             |           |   |       |         | (27,870  | )         |               |   |         |         |  |   |          |         |   |   |       |  |  |   | (56,510   | )      
|                                                          |                            |                                                    |           |             |              |   |        |           |  |             |           |   |       |         |          |           |               |   |         |         |  |   |          |        
|Balances, August 31, 2002                                 |                            |                                                    | 1,040,596 |             |              |   | 27,773 |           |  |             | 9,325     |   |       |         | 65,030   |           |               |   | 190,761 |         |  |   | (51,897  | )       |   |   | 8,050 |  |  |   | 1,289,638 |        
|Dividends and equity retirement determination             |                            |                                                    | 28,639    |             |              |   |        |           |  |             |           |   |       |         | 27,870   |           |               |   |         |         |  |   |          |         |   |   |       |  |  |   | 56,509    |        
|Patronage distribution                                    |                            |                                                    | 61,784    |             |              |   |        |           |  |             |           |   |       |         | (92,900  | )         |               |   | 4,638   |         |  |   |          |         |   |   |       |  |  |   | (26,478   | )      
|Equities retired                                          |                            |                                                    | (31,092   | )           |              |   | (52    | )         |  |             |           |   |       |         |          |           |               |   |         |         |  |   |          |         |   |   |       |  |  |   | (31,144   | )      
|Equities issued                                           |                            |                                                    | 350       |             |              |   |        |           |  |             |           |   |       |         |          |           |               |   |         |         |  |   |          |         |   |   |       |  |  |   | 350       |        
|Preferred stock issued, net                               |                            |                                                    |           |             |              |   |        |           |  |             | 86,379    |   |       |         |          |           |               |   | (3,895  | )       |  |   |          |         |   |   |       |  |  |   | 82,484    |        
|Preferred stock redeemed                                  |                            |                                                    |           |             |              |   |        |           |  |             | (2,002    | ) |       |         |          |           |               |   |         |         |  |   |          |         |   |   |       |  |  |   | (2,002    | )      
|Preferred stock dividends                                 |                            |                                                    |           |             |              |   |        |           |  |             |           |   |       |         |          |           |               |   | (3,575  | )       |  |   |          |         |   |   |       |  |  |   | (3,575    | )      
|Other, net                                                |                            |                                                    | (2,440    | )           |              |   | (3     | )         |  |             |           |   |       |         |          |           |               |   | (4      | )       |  |   |          |         |   |   |       |  |  |   | (2,447    | )      
|Comprehensive income:                                     |                            |                                                    |           |             |              |   |        |           |  |             |           |   |       |         |          |           |               |   |         |         |  |   |          |         |   |   |       |  |  |   |           |        
|                                                          | Net income                 |                                                    |           |             |              |   |        |           |  |             |           |   |       |         |          | 90,000    |               |   |         | 33,841  |  |   |          |         |   |   |       |  |  |   |           | 123,841 |  
|                                                          | Other comprehensive income |                                                    |           |             |              |   |        |           |  |             |           |   |       |         |          |           |               |   |         |         |  |   |          | 33,584  |   |   |       |  |  |   |           | 33,584  |  
|                                                          |                            |                                                    |           |             |              |   |        |           |  |             |           |   |       |         |          |           |               |   |         |         |  |   |          |        
|Total comprehensive income                                |                            |                                                    |           |             |              |   |        |           |  |             |           |   |       |         |          |           |               |   |         |         |  |   |          |         |   |   |       |  |  |   | 157,425   |        
|                                                          |                            |                                                    |           |             |              |   |        |           |  |             |           |   |       |         |          |           |               |   |         |         |  |   |          |        
|Dividends and equities payable                            |                            |                                                    | (10,800   | )           |              |   |        |           |  |             |           |   |       |         | (27,000  | )         |               |   | (1,249  | )       |  |   |          |         |   |   |       |  |  |   | (39,049   | )      
|                                                          |                            |                                                    |           |             |              |   |        |           |  |             |           |   |       |         |          |           |               |   |         |         |  |   |          |        
|Balances, August 31, 2003                                 |                            |                                                    | 1,087,037 |             |              |   | 27,718 |           |  |             | 93,702    |   |       |         | 63,000   |           |               |   | 220,517 |         |  |   | (18,313  | )       |   |   | 8,050 |  |  |   | 1,481,711 |        
|Dividends and equity retirement determination             |                            |                                                    | 10,800    |             |              |   |        |           |  |             |           |   |       |         | 27,000   |           |               |   | 1,249   |         |  |   |          |         |   |   |       |  |  |   | 39,049    |        
|Patronage distribution                                    |                            |                                                    | 66,500    |             |              |   |        |           |  |             |           |   |       |         | (90,000  | )         |               |   | (5,222  | )       |  |   |          |         |   |   |       |  |  |   | (28,722   | )      
|Equities retired                                          |                            |                                                    | (10,292   | )           |              |   | (47    | )         |  |             |           |   |       |         |          |           |               |   |         |         |  |   |          |         |   |   |       |  |  |   | (10,339   | )      
|Capital equity certificates exchanged for preferred stock |                            |                                                    | (12,990   | )           |              |   |        |           |  |             | 12,990    |   |       |         |          |           |               |   | (150    | )       |  |   |          |         |   |   |       |  |  |   | (150      | )      
|Equities issued                                           |                            |                                                    | 13,355    |             |              |   |        |           |  |             |           |   |       |         |          |           |               |   |         |         |  |   |          |         |   |   |       |  |  |   | 13,355    |        
|Preferred stock redeemed, treasury                        |                            |                                                    |           |             |              |   |        |           |  |             |          |   |       |         |          |           |               |   |         |         |  |   |          |         |   |   |       |  |  |   |          |        
|Preferred stock dividends                                 |                            |                                                    |           |             |              |   |        |           |  |             |           |   |       |         |          |           |               |   | (7,975  | )       |  |   |          |         |   |   |       |  |  |   | (7,975    | )      
|Other, net                                                |                            |                                                    | (7,669    | )           |              |   | (85    | )         |  |             |           |   |       |         |          |           |               |   | (30     | )       |  |   |          |         |   |   |       |  |  |   | (7,784    | )      
|Comprehensive income:                                     |                            |                                                    |           |             |              |   |        |           |  |             |           |   |       |         |          |           |               |   |         |         |  |   |          |         |   |   |       |  |  |   |           |        
|                                                          | Net income                 |                                                    |           |             |              |   |        |           |  |             |           |   |       |         |          | 166,850   |               |   |         | 54,482  |  |   |          |         |   |   |       |  |  |   |           | 221,332 |  
|                                                          | Other comprehensive income |                                                    |           |             |              |   |        |           |  |             |           |   |       |         |          |           |               |   |         |         |  |   |          | 11,178  |   |   |       |  |  |   |           | 11,178  |  
|                                                          |                            |                                                    |           |             |              |   |        |           |  |             |           |   |       |         |          |           |               |   |         |         |  |   |          |        
|Total comprehensive income                                |                            |                                                    |           |             |              |   |        |           |  |             |           |   |       |         |          |           |               |   |         |         |  |   |          |         |   |   |       |  |  |   | 232,510   |        
|                                                          |                            |                                                    |           |             |              |   |        |           |  |             |           |   |       |         |          |           |               |   |         |         |  |   |          |        
|Dividends and equities payable                            |                            |                                                    | (32,100   | )           |              |   |        |           |  |             |           |   |       |         | (50,060  | )         |               |   | (1,409  | )       |  |   |          |         |   |   |       |  |  |   | (83,569   | )      
|                                                          |                            |                                                    |           |             |              |   |        |           |  |             |           |   |       |         |          |           |               |   |         |         |  |   |          |        
|Balances, August 31, 2004                                 |                            | $                                                  | 1,114,641 |             |              | $ | 27,586 |           |  | $           | 106,692   |   |       | $       | 116,790  |           |               | $ | 261,462 |         |  | $ | (7,135   | )       |   | $ | 8,050 |  |  | $ | 1,628,086 |        
|                                                          |                            |                                                    |           |             |              |   |        |           |  |             |           |   |       |         |          |           |               |   |         |         |  |   |          |        



F-3



---



##### Table of Contents



CHS INC.


CONSOLIDATED STATEMENTS OF CASH FLOWS


|                                                     |                                                                                                 |                                                      |                                       |          |         |         |          |          |         |         |          |          |         |          |  
|---------------------------------------------------- | ----------------------------------------------------------------------------------------------- | ---------------------------------------------------- | ------------------------------------- | -------- | ------- | ------- | -------- | -------- | ------- | ------- | -------- | -------- | ------- | -------- | -
|                                                     |                                                                                                 | For the Years Ended August 31                        |                                      
|                                                     |                                                                                                 |                                                      |                                      
|                                                     |                                                                                                 | 2004                                                 |                                       |          | 2003    |         |          | 2002     |        
|                                                     |                                                                                                 |                                                      |                                       |          |         |         |          |          |        
|                                                     |                                                                                                 | (Dollars in thousands)                               |                                      
|Cash flows from operating activities:                |                                                                                                 |                                                      |                                       |          |         |         |          |          |         |         |          |         
|                                                     | Net income                                                                                      |                                                      | $                                     | 221,332  |         |         | $        | 123,841  |         |         | $        | 126,138  |        
|                                                     | Adjustments to reconcile net income to net cash provided by
    (used in) operating activities: |                                                      |                                       |          |         |         |          |          |         |         |          |          |        
|                                                     |                                                                                                 | Depreciation and amortization                        |                                       |          | 108,399 |         |          |          | 111,347 |         |          |          | 103,986 |         
|                                                     |                                                                                                 | Noncash income from equity investments               |                                       |          | (79,022 | )       |          |          | (47,299 | )       |          |          | (58,133 | )       
|                                                     |                                                                                                 | Minority interests                                   |                                       |          | 33,830  |         |          |          | 21,950  |         |          |          | 15,390  |         
|                                                     |                                                                                                 | Noncash portion of patronage dividends received      |                                       |          | (4,986  | )       |          |          | (1,795  | )       |          |          | (2,327  | )       
|                                                     |                                                                                                 | Loss (gain) on sale of property, plant and equipment |                                       |          | 775     |         |          |          | 741     |         |          |          | (6,418  | )       
|                                                     |                                                                                                 | Deferred tax expense                                 |                                       |          | 8,500   |         |          |          | 9,000   |         |          |          | 4,400   |         
|                                                     |                                                                                                 | Gain on sale of investment                           |                                       |          | (14,666 | )       |          |          |         |         |          |          |         |         
|                                                     |                                                                                                 | Other, net                                           |                                       |          | 1,150   |         |          |          | 4,052   |         |          |          | 5,467   |         
|                                                     |                                                                                                 | Changes in operating assets and liabilities:         |                                       |          |         |         |          |          |         |         |          |          |         |         
|                                                     |                                                                                                 |                                                      | Receivables                           |          |         | (59,039 | )        |          |         | (18,669 | )        |          |         | (32,517  | )
|                                                     |                                                                                                 |                                                      | Inventories                           |          |         | 88,261  |          |          |         | (25,692 | )        |          |         | (255,107 | )
|                                                     |                                                                                                 |                                                      | Other current assets and other assets |          |         | (89,237 | )        |          |         | (83,347 | )        |          |         | (86,636  | )
|                                                     |                                                                                                 |                                                      | Customer credit balances              |          |         | 27,639  |          |          |         | 30,238  |          |          |         | (12,025  | )
|                                                     |                                                                                                 |                                                      | Customer advance payments             |          |         | (59,354 | )        |          |         | (45,740 | )        |          |         | 59,988   |  
|                                                     |                                                                                                 |                                                      | Accounts payable and accrued expenses |          |         | 121,647 |          |          |         | 135,310 |          |          |         | 92,781   |  
|                                                     |                                                                                                 |                                                      | Other liabilities                     |          |         | 28,060  |          |          |         | 2,569   |          |          |         | 9,079    |  
|                                                     |                                                                                                 |                                                      |                                       |          |         |         |          |          |        
|Net cash provided by (used in) operating activities  |                                                                                                 |                                                      | 333,289                               |          |         |         | 216,506  |          |         |         | (35,934  | )       
|                                                     |                                                                                                 |                                                      |                                       |          |         |         |          |          |        
|Cash flows from investing activities:                |                                                                                                 |                                                      |                                       |          |         |         |          |          |         |         |          |         
|                                                     | Acquisition of property, plant and equipment                                                    |                                                      |                                       | (245,148 | )       |         |          | (175,689 | )       |         |          | (140,169 | )      
|                                                     | Proceeds from disposition of property, plant and equipment                                      |                                                      |                                       | 34,530   |         |         |          | 26,886   |         |         |          | 20,205   |        
|                                                     | Investments                                                                                     |                                                      |                                       | (49,757  | )       |         |          | (43,478  | )       |         |          | (6,211   | )      
|                                                     | Equity investments redeemed                                                                     |                                                      |                                       | 65,158   |         |         |          | 35,939   |         |         |          | 37,689   |        
|                                                     | Investments redeemed                                                                            |                                                      |                                       | 9,481    |         |         |          | 8,467    |         |         |          | 6,310    |        
|                                                     | Proceeds from sale of investment                                                                |                                                      |                                       | 25,000   |         |         |          |          |         |         |          |          |        
|                                                     | Changes in notes receivable                                                                     |                                                      |                                       | (6,888   | )       |         |          | (6,630   | )       |         |          | (22,031  | )      
|                                                     | Acquisitions of intangible assets                                                               |                                                      |                                       |          |         |         |          | (767     | )       |         |          | (29,501  | )      
|                                                     | Acquisitions of working capital, net                                                            |                                                      |                                       |          |         |         |          | (13,030  | )       |         |          | (5,750   | )      
|                                                     | Distributions to minority owners                                                                |                                                      |                                       | (15,908  | )       |         |          | (4,444   | )       |         |          | (7,413   | )      
|                                                     | Other investing activities, net                                                                 |                                                      |                                       | 2,248    |         |         |          | (507     | )       |         |          | (685     | )      
|                                                     |                                                                                                 |                                                      |                                       |          |         |         |          |          |        
|Net cash used in investing activities                |                                                                                                 |                                                      | (181,284                              | )        |         |         | (173,253 | )        |         |         | (147,556 | )       
|                                                     |                                                                                                 |                                                      |                                       |          |         |         |          |          |        
|Cash flows from financing activities:                |                                                                                                 |                                                      |                                       |          |         |         |          |          |         |         |          |         
|                                                     | Changes in notes payable                                                                        |                                                      |                                       | (135,016 | )       |         |          | (81,383  | )       |         |          | 235,319  |        
|                                                     | Borrowings on long-term debt                                                                    |                                                      |                                       | 35,457   |         |         |          | 175,000  |         |         |          | 30,000   |        
|                                                     | Principal payments on long-term debt                                                            |                                                      |                                       | (15,299  | )       |         |          | (89,512  | )       |         |          | (17,968  | )      
|                                                     | Payments on derivative financial instruments, net                                               |                                                      |                                       | (287     | )       |         |          | (7,574   | )       |         |          |          |        
|                                                     | Changes in checks and drafts outstanding                                                        |                                                      |                                       | (21,431  | )       |         |          | 988      |         |         |          | (3,557   | )      
|                                                     | Proceeds from sale of preferred stock, net of expenses                                          |                                                      |                                       | (151     | )       |         |          | 82,484   |         |         |          | 5,897    |        
|                                                     | Redemptions of preferred stock                                                                  |                                                      |                                       |          |         |         |          | (2,002   | )       |         |          |          |        
|                                                     | Preferred stock dividends paid                                                                  |                                                      |                                       | (7,975   | )       |         |          | (3,575   | )       |         |          | (240     | )      
|                                                     | Retirements of equities                                                                         |                                                      |                                       | (10,339  | )       |         |          | (31,144  | )       |         |          | (31,145  | )      
|                                                     | Cash patronage dividends paid                                                                   |                                                      |                                       | (28,722  | )       |         |          | (26,478  | )       |         |          | (40,082  | )      
|                                                     |                                                                                                 |                                                      |                                       |          |         |         |          |          |        
|Net cash (used in) provided by financing activities  |                                                                                                 |                                                      | (183,763                              | )        |         |         | 16,804   |          |         |         | 178,224  |         
|                                                     |                                                                                                 |                                                      |                                       |          |         |         |          |          |        
|Net (decrease) increase in cash and cash equivalents |                                                                                                 |                                                      | (31,758                               | )        |         |         | 60,057   |          |         |         | (5,266   | )       
|Cash and cash equivalents at beginning of period     |                                                                                                 |                                                      | 168,249                               |          |         |         | 108,192  |          |         |         | 113,458  |         
|                                                     |                                                                                                 |                                                      |                                       |          |         |         |          |          |        
|Cash and cash equivalents at end of period           |                                                                                                 | $                                                    | 136,491                               |          |         | $       | 168,249  |          |         | $       | 108,192  |         
|                                                     |                                                                                                 |                                                      |                                       |          |         |         |          |          |        



F-4



---



##### Table of Contents



CHS INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




|   |                                            
|-- | -------------------------------------------
|1. | Summary of Significant Accounting Policies:



| |              
| | -------------
| | Organization:





| |               
| | --------------
| | Consolidation:







| |                  
| | -----------------
| | Cash Equivalents:





| |             
| | ------------
| | Inventories:





| |                                  
| | ---------------------------------
| | Derivative Financial Instruments:



F-5



---



##### Table of Contents



CHS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |                      
| | ---------------------
| | Commodity Price Risk:









| |                    
| | -------------------
| | Interest Rate Risk:



F-6



---



##### Table of Contents



CHS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








| |                       
| | ----------------------
| | Foreign Currency Risk:





| |             
| | ------------
| | Investments:





| |                               
| | ------------------------------
| | Property, Plant and Equipment:







| |                                      
| | -------------------------------------
| | Goodwill and Other Intangible Assets:



F-7



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##### Table of Contents



CHS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |                     
| | --------------------
| | Revenue Recognition:





| |                            
| | ---------------------------
| | Environmental Expenditures:





| |              
| | -------------
| | Income Taxes:





| |                      
| | ---------------------
| | Comprehensive Income:





| |                  
| | -----------------
| | Use of Estimates:



F-8



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##### Table of Contents



CHS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                                  
| | ---------------------------------
| | Recent Accounting Pronouncements:











F-9



---



##### Table of Contents



CHS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                   
| | ------------------
| | Reclassifications:



2.     Receivables:




|                                      |  |                        |         |  |      |   |         | 
|------------------------------------- |  | ---------------------- | ------- |  | ---- | - | ------- | 
|                                      |  | 2004                   |         |  | 2003 |  
|                                      |  |                        |         |  |      |  
|                                      |  | (Dollars in thousands) |        
|Trade                                 |  | $                      | 835,066 |  |      | $ | 748,398 | 
|Other                                 |  |                        | 55,708  |  |      |   | 47,000  | 
|                                      |  |                        |         |  |      |  
|                                      |  |                        | 890,774 |  |      |   | 795,398 | 
|Less allowances for doubtful accounts |  |                        | 55,809  |  |      |   | 31,618  | 
|                                      |  |                        |         |  |      |  
|                                      |  | $                      | 834,965 |  |      | $ | 763,780 | 
|                                      |  |                        |         |  |      |  



|                              |  |                       |       |  |      |   |       |      |  |   |       | 
|----------------------------- |  | --------------------- | ----- |  | ---- | - | ----- | ---- |  | - | ----- | 
|                              |  | 2004                  |       |  | 2003 |   |       | 2002 | 
|                              |  |                       |       |  |      |   |       |      | 
|                              |  | (Dollars in millions) |      
|Africa                        |  | $                     | 112   |  |      | $ | 99    |      |  | $ | 135   | 
|Asia                          |  |                       | 1,104 |  |      |   | 815   |      |  |   | 407   | 
|Europe                        |  |                       | 158   |  |      |   | 156   |      |  |   | 282   | 
|North America, excluding U.S. |  |                       | 456   |  |      |   | 367   |      |  |   | 298   | 
|South America                 |  |                       | 209   |  |      |   | 166   |      |  |   | 100   | 
|                              |  |                       |       |  |      |   |       |      | 
|                              |  | $                     | 2,039 |  |      | $ | 1,603 |      |  | $ | 1,222 | 
|                              |  |                       |       |  |      |   |       |      | 

3.     Inventories:




|                            |  |                        |         |  |      |   |         | 
|--------------------------- |  | ---------------------- | ------- |  | ---- | - | ------- | 
|                            |  | 2004                   |         |  | 2003 |  
|                            |  |                        |         |  |      |  
|                            |  | (Dollars in thousands) |        
|Grain and oilseed           |  | $                      | 308,207 |  |      | $ | 370,381 | 
|Energy                      |  |                        | 277,801 |  |      |   | 292,095 | 
|Feed and farm supplies      |  |                        | 110,885 |  |      |   | 95,589  | 
|Processed grain and oilseed |  |                        | 25,740  |  |      |   | 42,688  | 
|Other                       |  |                        | 1,260   |  |      |   | 1,130   | 
|                            |  |                        |         |  |      |  
|                            |  | $                      | 723,893 |  |      | $ | 801,883 | 
|                            |  |                        |         |  |      |  



F-10



---



##### Table of Contents



CHS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


4.     Investments:




|                |                                              |                        |         |         |      |   |         |         | 
|--------------- | -------------------------------------------- | ---------------------- | ------- | ------- | ---- | - | ------- | ------- | 
|                |                                              | 2004                   |         |         | 2003 |  
|                |                                              |                        |         |         |      |  
|                |                                              | (Dollars in thousands) |        
|Cooperatives:   |                                              |                        |         |         |      |   |         |        
|                | CF Industries, Inc.                          |                        | $       | 152,996 |      |   | $       | 152,996 | 
|                | Land OLakes, Inc.                           |                        |         | 31,057  |      |   |         | 27,105  | 
|                | Ag Processing, Inc.                          |                        |         | 24,866  |      |   |         | 24,481  | 
|                | CoBank ACB (CoBank)                          |                        |         | 16,625  |      |   |         | 22,505  | 
|Joint ventures: |                                              |                        |         |         |      |   |         |        
|                | United Country Brands, LLC (Agriliance, LLC) |                        |         | 167,597 |      |   |         | 129,286 | 
|                | Ventura Foods, LLC                           |                        |         | 107,719 |      |   |         | 107,464 | 
|                | TEMCO, LLC                                   |                        |         | 5,776   |      |   |         | 9,087   | 
|Other           |                                              |                        | 69,180  |         |      |   | 59,969  |        
|                |                                              |                        |         |         |      |  
|                |                                              | $                      | 575,816 |         |      | $ | 532,893 |        
|                |                                              |                        |         |         |      |  





|                        |  |                        |         |  |      |   |         | 
|----------------------- |  | ---------------------- | ------- |  | ---- | - | ------- | 
|                        |  | 2004                   |         |  | 2003 |  
|                        |  |                        |         |  |      |  
|                        |  | (Dollars in thousands) |        
|Current assets          |  | $                      | 286,613 |  |      | $ | 193,632 | 
|Non-current assets      |  |                        | 258,270 |  |      |   | 231,649 | 
|Current liabilities     |  |                        | 171,269 |  |      |   | 227,400 | 
|Non-current liabilities |  |                        | 194,547 |  |      |   | 21,738  | 

|             |  |                        |           |  |      |   |           |      |  |   |           | 
|------------ |  | ---------------------- | --------- |  | ---- | - | --------- | ---- |  | - | --------- | 
|             |  | 2004                   |           |  | 2003 |   |           | 2002 | 
|             |  |                        |           |  |      |   |           |      | 
|             |  | (Dollars in thousands) |          
|Net sales    |  | $                      | 1,425,061 |  |      | $ | 1,165,823 |      |  | $ | 1,013,475 | 
|Gross profit |  |                        | 167,581   |  |      |   | 155,274   |      |  |   | 181,217   | 
|Net income   |  |                        | 44,696    |  |      |   | 42,837    |      |  |   | 75,368    | 



F-11



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##### Table of Contents



CHS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|                        |  |                        |           |  |      |   |           | 
|----------------------- |  | ---------------------- | --------- |  | ---- | - | --------- | 
|                        |  | 2004                   |           |  | 2003 |  
|                        |  |                        |           |  |      |  
|                        |  | (Dollars in thousands) |          
|Current assets          |  | $                      | 1,123,671 |  |      | $ | 1,249,891 | 
|Non-current assets      |  |                        | 123,106   |  |      |   | 119,615   | 
|Current liabilities     |  |                        | 878,814   |  |      |   | 1,083,693 | 
|Non-current liabilities |  |                        | 128,780   |  |      |   | 27,061    | 

|                         |  |                        |           |  |      |   |           |      |  |   |           | 
|------------------------ |  | ---------------------- | --------- |  | ---- | - | --------- | ---- |  | - | --------- | 
|                         |  | 2004                   |           |  | 2003 |   |           | 2002 | 
|                         |  |                        |           |  |      |   |           |      | 
|                         |  | (Dollars in thousands) |          
|Net sales                |  | $                      | 3,477,528 |  |      | $ | 3,485,623 |      |  | $ | 3,625,849 | 
|Earnings from operations |  |                        | 82,221    |  |      |   | 67,239    |      |  |   | 57,604    | 
|Net income               |  |                        | 71,278    |  |      |   | 60,741    |      |  |   | 47,044    | 







F-12



---



##### Table of Contents



CHS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|   |                               
|-- | ------------------------------
|5. | Property, Plant and Equipment:



|                                               |  |                        |           |  |      |   |           | 
|---------------------------------------------- |  | ---------------------- | --------- |  | ---- | - | --------- | 
|                                               |  | 2004                   |           |  | 2003 |  
|                                               |  |                        |           |  |      |  
|                                               |  | (Dollars in thousands) |          
|Land and land improvements                     |  | $                      | 64,709    |  |      | $ | 60,453    | 
|Buildings                                      |  |                        | 422,545   |  |      |   | 380,940   | 
|Machinery and equipment                        |  |                        | 1,618,428 |  |      |   | 1,515,976 | 
|Office and other                               |  |                        | 65,296    |  |      |   | 61,356    | 
|Construction in progress                       |  |                        | 214,988   |  |      |   | 159,555   | 
|                                               |  |                        |           |  |      |  
|                                               |  |                        | 2,385,966 |  |      |   | 2,178,280 | 
|Less accumulated depreciation and amortization |  |                        | 1,136,311 |  |      |   | 1,055,298 | 
|                                               |  |                        |           |  |      |  
|                                               |  | $                      | 1,249,655 |  |      | $ | 1,122,982 | 
|                                               |  |                        |           |  |      |  







F-13



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##### Table of Contents



CHS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|   |              
|-- | -------------
|6. | Other Assets:



|                                                                                              |  |                        |         |  |      |   |         | 
|--------------------------------------------------------------------------------------------- |  | ---------------------- | ------- |  | ---- | - | ------- | 
|                                                                                              |  | 2004                   |         |  | 2003 |  
|                                                                                              |  |                        |         |  |      |  
|                                                                                              |  | (Dollars in thousands) |        
|Goodwill                                                                                      |  | $                      | 26,896  |  |      | $ | 27,052  | 
|Customer lists, less accumulated amortization of $7,445 and
    $5,112, respectively          |  |                        | 7,087   |  |      |   | 9,414   | 
|Non-compete covenants, less accumulated amortization of $2,115
    and $11,774, respectively  |  |                        | 1,638   |  |      |   | 1,766   | 
|Other intangible assets, less accumulated amortization of $3,113
    and $1,986, respectively |  |                        | 13,498  |  |      |   | 14,607  | 
|Prepaid pension and other benefit assets                                                      |  |                        | 182,773 |  |      |   | 151,389 | 
|Deferred tax asset                                                                            |  |                        |         |  |      |   | 28,689  | 
|Notes receivable                                                                              |  |                        | 1,186   |  |      |   | 1,991   | 
|Other                                                                                         |  |                        | 4,039   |  |      |   | 4,612   | 
|                                                                                              |  |                        |         |  |      |  
|                                                                                              |  | $                      | 237,117 |  |      | $ | 239,520 | 
|                                                                                              |  |                        |         |  |      |  





F-14



---



##### Table of Contents



CHS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|   |                                  
|-- | ---------------------------------
|7. | Notes Payable and Long-Term Debt:



|                     |                                                                                                                                |                   |                |                        |      |   |         |         |  |   |         |         | 
|-------------------- | ------------------------------------------------------------------------------------------------------------------------------ | ----------------- | -------------- | ---------------------- | ---- | - | ------- | ------- |  | - | ------- | ------- | 
|                     |                                                                                                                                | Interest Rates at |                |                        |      |   |        
|                     |                                                                                                                                | August 31, 2004   |                |                        | 2004 |   |         | 2003    | 
|                     |                                                                                                                                |                   |                |                        |      |   |         |         | 
|                     |                                                                                                                                |                   |                | (Dollars in thousands) |     
|Notes payable(a)(h)  |                                                                                                                                |                   | 2.01% to 2.23% |                        |      | $ | 116,115 |         |  | $ | 251,131 |        
|                     |                                                                                                                                |                   |                |                        |      |   |         |         | 
|Long-term debt:      |                                                                                                                                |                   |                |                        |      |   |         |         |  |   |         |        
|                     | Revolving term loans from cooperative and other banks, payable
    in installments through 2009, when the balance is due(b)(h) |                   |                | 2.27% to 13.00%        |      |   | $       | 155,784 |  |   | $       | 168,032 | 
|                     | Private placement, payable in equal installments beginning in
    2008 through 2013(c)(h)                                      |                   |                | 6.81%                  |      |   |         | 225,000 |  |   |         | 225,000 | 
|                     | Private placement, payable in installments beginning in 2007
    through 2018(d)(h)                                            |                   |                | 4.96% to 5.60%         |      |   |         | 175,000 |  |   |         | 175,000 | 
|                     | Private placement, payable in equal installments beginning in
    2005 through 2011(e)(h)                                      |                   |                | 7.43% to 7.90%         |      |   |         | 80,000  |  |   |         | 80,000  | 
|                     | Private placement, payable in its entirety in 2010(f)(h)                                                                       |                   |                | 4.08%                  |      |   |         | 15,000  |  |   |         |         | 
|                     | Private placement, payable in its entirety in 2011(f)(h)                                                                       |                   |                | 4.39%                  |      |   |         | 15,000  |  |   |         |         | 
|                     | Industrial revenue bonds, payable in its entirety in 2011                                                                      |                   |                | 5.23%                  |      |   |         | 3,925   |  |   |         | 5,831   | 
|                     | Other notes and contracts(g)                                                                                                   |                   |                | 5.70% to 12.17%        |      |   |         | 14,109  |  |   |         | 9,310   | 
|                     |                                                                                                                                |                   |                |                        |      |   |         |         | 
|Total long-term debt |                                                                                                                                |                   |                |                        |      |   | 683,818 |         |  |   | 663,173 |        
|Less current portion |                                                                                                                                |                   |                |                        |      |   | 35,117  |         |  |   | 14,951  |        
|                     |                                                                                                                                |                   |                |                        |      |   |         |         | 
|Long-term portion    |                                                                                                                                |                   |                |                        |      | $ | 648,701 |         |  | $ | 648,222 |        
|                     |                                                                                                                                |                   |                |                        |      |   |         |         | 

|                                              |                 |      |  |       |      |  |  |       | 
|--------------------------------------------- | --------------- | ---- |  | ----- | ---- |  |  | ----- | 
|                                              |                 | 2004 |  |       | 2003 | 
|                                              |                 |      |  |       |      | 
|Weighted-average interest rates at August 31: |                 |      |  |       |      |  |  |      
|                                              | Short-term debt |      |  | 2.16% |      |  |  | 1.83% | 
|                                              | Long-term debt  |      |  | 6.35% |      |  |  | 6.52% | 






|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | The Company finances its working capital needs through
    short-term lines of credit with a syndication of domestic and
    international banks. These revolving lines of credit include
    a 364-day facility of $750.0 million, and a three-year
    facility of $150.0 million, both of which are committed. On
    August 31, 2004, $115.0 million was outstanding on the
    364-day facility. In addition to these short-term lines of
    credit, the Company has a two-year credit facility dedicated to
    NCRA, with a syndication of banks in the amount of
    $15.0 million, all of which is committed, with no amounts
    outstanding on August 31, 2004. Other miscellaneous
    notes payable totaled $1.1 million on
    August 31, 2004.
|   
|(b) |  | The Company established a long-term credit agreement, which
    committed $200.0 million of long-term borrowing capacity to
    the Company through May 31, 1999, of which
    $164.0 million was drawn before the expiration date of that
    commitment. On August 31, 2004, $131.2 million was
    outstanding. NCRA term loans of $12.0 million are
    collateralized by NCRAs investment in CoBank.                                                                                                                                                                                                                                                                                                                                                    

F-15



---



##### Table of Contents



CHS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|    |  |                                                                                                                                                                                                                                                     
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(c) |  | In June 1998, the Company entered into a private placement with
    several insurance companies for long-term debt in the amount of
    $225.0 million.                                                                                             
|   
|(d) |  | In October 2002, the Company entered into a private placement
    with several insurance companies for long-term debt in the
    amount of $175.0 million.                                                                                          
|   
|(e) |  | In January 2001, the Company entered into a note purchase and
    private shelf agreement with Prudential Insurance Company. A
    long-term note was issued for $25.0 million and a
    subsequent note for $55.0 million was issued in March 2001.
|   
|(f) |  | In March 2004, the Company entered into a note purchase and
    private shelf agreement with Prudential Capital Group. In April
    2004, two long-term notes were issued for $15.0 million
    each.                                               
|   
|(g) |  | Other notes payable of $10.0 million are collateralized by
    property, plant and equipment, with a cost of approximately
    $16.9 million, less accumulated depreciation of
    approximately $1.4 million on August 31, 2004.                   
|   
|(h) |  | The debt is unsecured, however restrictive covenants under
    various agreements have requirements for maintenance of minimum
    working capital levels and other financial ratios.                                                               





|           |  |             |         | 
|---------- |  | ----------- | ------- | 
|           |  | (Dollars in |        
|           |  | thousands)  |        
|2005       |  | $           | 35,117  | 
|2006       |  |             | 35,582  | 
|2007       |  |             | 60,122  | 
|2008       |  |             | 98,626  | 
|2009       |  |             | 117,285 | 
|Thereafter |  |             | 337,086 | 
|           |  |             |        
|           |  | $           | 683,818 | 
|           |  |             |        







|   |              
|-- | -------------
|8. | Income Taxes:



F-16



---



##### Table of Contents



CHS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|                    |  |                        |        |  |      |   |        |      |  |   |         |  
|------------------- |  | ---------------------- | ------ |  | ---- | - | ------ | ---- |  | - | ------- | -
|                    |  | 2004                   |        |  | 2003 |   |        | 2002 | 
|                    |  |                        |        |  |      |   |        |      | 
|                    |  | (Dollars in thousands) |       
|Current             |  | $                      | 17,200 |  |      | $ | 3,700  |      |  | $ | 14,300  |  
|Deferred            |  |                        | 7,900  |  |      |   | 7,300  |      |  |   | (12,700 | )
|Valuation allowance |  |                        | 600    |  |      |   | 1,700  |      |  |   | 17,100  |  
|                    |  |                        |        |  |      |   |        |      | 
|Income taxes        |  | $                      | 25,700 |  |      | $ | 12,700 |      |  | $ | 18,700  |  
|                    |  |                        |        |  |      |   |        |      | 



|                                      |                                                      |                        |         |        |      |   |         |        | 
|------------------------------------- | ---------------------------------------------------- | ---------------------- | ------- | ------ | ---- | - | ------- | ------ | 
|                                      |                                                      | 2004                   |         |        | 2003 |  
|                                      |                                                      |                        |         |        |      |  
|                                      |                                                      | (Dollars in thousands) |        
|Deferred tax assets:                  |                                                      |                        |         |        |      |   |         |       
|                                      | Accrued expenses and valuation reserves              |                        | $       | 49,151 |      |   | $       | 53,521 | 
|                                      | Postretirement health care and deferred compensation |                        |         | 37,067 |      |   |         | 29,153 | 
|                                      | Property, plant and equipment                        |                        |         |        |      |   |         | 9,369  | 
|                                      | Alternative minimum tax credit and loss carryforward |                        |         | 28,268 |      |   |         | 8,948  | 
|                                      | Other                                                |                        |         | 21,464 |      |   |         | 19,316 | 
|                                      |                                                      |                        |         |        |      |  
|Total deferred tax assets             |                                                      |                        | 135,950 |        |      |   | 120,307 |       
|                                      |                                                      |                        |         |        |      |  
|Deferred tax liabilities:             |                                                      |                        |         |        |      |   |         |       
|                                      | Pension, including minimum liability                 |                        |         | 47,155 |      |   |         | 34,531 | 
|                                      | Equity method investments                            |                        |         | 7,407  |      |   |         | 23,310 | 
|                                      | Property, plant and equipment                        |                        |         | 35,737 |      |   |         |        | 
|                                      | Other                                                |                        |         | 1,184  |      |   |         |        | 
|                                      |                                                      |                        |         |        |      |  
|Total deferred tax liabilities        |                                                      |                        | 91,483  |        |      |   | 57,841  |       
|                                      |                                                      |                        |         |        |      |  
|Deferred tax assets valuation reserve |                                                      |                        | (11,212 | )      |      |   | (11,765 | )     
|                                      |                                                      |                        |         |        |      |  
|Net deferred tax assets               |                                                      | $                      | 33,255  |        |      | $ | 50,701  |       
|                                      |                                                      |                        |         |        |      |  



F-17



---



##### Table of Contents



CHS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                                                    |  |      |       |   |      |  |       |      |  |  |       |  
|------------------------------------------------------------------- |  | ---- | ----- | - | ---- |  | ----- | ---- |  |  | ----- | -
|                                                                    |  | 2004 |       |   | 2003 |  |       | 2002 | 
|                                                                    |  |      |       |   |      |  |       |      | 
|Statutory federal income tax rate                                   |  |      | 35.0  | % |      |  | 35.0  | %    |  |  | 35.0  | %
|State and local income taxes, net of federal income
    tax benefit |  |      | 3.9   |   |      |  | 3.9   |      |  |  | 3.9   |  
|Patronage earnings                                                  |  |      | (25.8 | ) |      |  | (25.7 | )    |  |  | (25.0 | )
|Change in patronage determination                                   |  |      |       |   |      |  |       |      |  |  | (7.5  | )
|Export activities at rates other than the U.S.
    statutory rate   |  |      | (4.5  | ) |      |  | (3.2  | )    |  |  | (1.9  | )
|Deferred tax asset valuation allowance                              |  |      | 0.2   |   |      |  | 1.3   |      |  |  | 11.8  |  
|Other                                                               |  |      | 1.6   |   |      |  | (2.0  | )    |  |  | (3.4  | )
|                                                                    |  |      |       |   |      |  |       |      | 
|Effective tax rate                                                  |  |      | 10.4  | % |      |  | 9.3   | %    |  |  | 12.9  | %
|                                                                    |  |      |       |   |      |  |       |      | 



|   |          
|-- | ---------
|9. | Equities:











F-18



---



##### Table of Contents



CHS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)












|    |                        
|--- | -----------------------
|10. | Employee Benefit Plans:





|                                    |                                           |                        |         |         |                  |   |         |                |   |   |        |        |   |      |        |        |      |   |        |        |   |   |        |        |  
|----------------------------------- | ----------------------------------------- | ---------------------- | ------- | ------- | ---------------- | - | ------- | -------------- | - | - | ------ | ------ | - | ---- | ------ | ------ | ---- | - | ------ | ------ | - | - | ------ | ------ | -
|                                    |                                           | Qualified              |         |         | Non-Qualified    |   |         |               
|                                    |                                           | Pension Benefits       |         |         | Pension Benefits |   |         | Other Benefits |  
|                                    |                                           |                        |         |         |                  |   |         |                |  
|                                    |                                           | 2004                   |         |         | 2003             |   |         | 2004           |   |   | 2003   |        |   | 2004 |        |        | 2003 |  
|                                    |                                           |                        |         |         |                  |   |         |                |   |   |        |        |   |      |        |        |      |  
|                                    |                                           | (Dollars in thousands) |        
|Change in benefit obligation:       |                                           |                        |         |         |                  |   |         |                |   |   |        |        |   |      |        |        |      |   |        |        |   |   |        |       
|                                    | Benefit obligation at beginning of period |                        | $       | 289,906 |                  |   | $       | 253,868        |   |   | $      | 13,834 |   |      | $      | 14,543 |      |   | $      | 29,255 |   |   | $      | 24,915 |  
|                                    | Service cost                              |                        |         | 11,548  |                  |   |         | 10,840         |   |   |        | 601    |   |      |        | 800    |      |   |        | 754    |   |   |        | 648    |  
|                                    | Interest cost                             |                        |         | 17,203  |                  |   |         | 17,503         |   |   |        | 822    |   |      |        | 1,033  |      |   |        | 1,758  |   |   |        | 1,722  |  
|                                    | Plan participants contributions           |                        |         |         |                  |   |         | 1,771          |   |   |        |        |   |      |        |        |      |   |        |        |   |   |        | 215    |  
|                                    | Plan amendments                           |                        |         | 105     |                  |   |         |                |   |   |        |        |   |      |        |        |      |   |        | (839   | ) |   |        | 88     |  
|                                    | Transfers                                 |                        |         |         |                  |   |         |                |   |   |        |        |   |      |        |        |      |   |        | 1,206  |   |   |        |        |  
|                                    | Actuarial loss (gain)                     |                        |         | 4,539   |                  |   |         | 22,049         |   |   |        | 77     |   |      |        | (766   | )    |   |        | (2,162 | ) |   |        | 2,527  |  
|                                    | Special agreement                         |                        |         |         |                  |   |         |                |   |   |        | 1,003  |   |      |        |        |      |   |        |        |   |   |        |        |  
|                                    | Assumption change                         |                        |         |         |                  |   |         | 4,659          |   |   |        |        |   |      |        |        |      |   |        | 502    |   |   |        | 1,469  |  
|                                    | Benefits paid                             |                        |         | (22,865 | )                |   |         | (20,784        | ) |   |        | (2,211 | ) |      |        | (1,776 | )    |   |        | (2,147 | ) |   |        | (2,329 | )
|                                    |                                           |                        |         |         |                  |   |         |                |   |   |        |        |   |      |        |        |      |  
|Benefit obligation at end of period |                                           | $                      | 300,436 |         |                  | $ | 289,906 |                |   | $ | 14,126 |        |   | $    | 13,834 |        |      | $ | 28,327 |        |   | $ | 29,255 |       
|                                    |                                           |                        |         |         |                  |   |         |                |   |   |        |        |   |      |        |        |      |  

F-19



---



##### Table of Contents



CHS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


|                                                 |                                                  |                        |         |         |                  |   |         |                |   |   |         |         |   |      |         |         |      |   |         |         |   |   |         |         |  
|------------------------------------------------ | ------------------------------------------------ | ---------------------- | ------- | ------- | ---------------- | - | ------- | -------------- | - | - | ------- | ------- | - | ---- | ------- | ------- | ---- | - | ------- | ------- | - | - | ------- | ------- | -
|                                                 |                                                  | Qualified              |         |         | Non-Qualified    |   |         |               
|                                                 |                                                  | Pension Benefits       |         |         | Pension Benefits |   |         | Other Benefits |  
|                                                 |                                                  |                        |         |         |                  |   |         |                |  
|                                                 |                                                  | 2004                   |         |         | 2003             |   |         | 2004           |   |   | 2003    |         |   | 2004 |         |         | 2003 |  
|                                                 |                                                  |                        |         |         |                  |   |         |                |   |   |         |         |   |      |         |         |      |  
|                                                 |                                                  | (Dollars in thousands) |        
|Change in plan assets:                           |                                                  |                        |         |         |                  |   |         |                |   |   |         |         |   |      |         |         |      |   |         |         |   |   |         |        
|                                                 | Fair value of plan assets at beginning of period |                        | $       | 280,217 |                  |   | $       | 201,563        |   |   |         |         |   |      |         |         |      |   |         |         |   |   |         |         |  
|                                                 | Actual income on plan assets                     |                        |         | 31,500  |                  |   |         | 14,915         |   |   |         |         |   |      |         |         |      |   |         |         |   |   |         |         |  
|                                                 | Company contributions                            |                        |         | 10,700  |                  |   |         | 84,523         |   |   | $       | 2,211   |   |      | $       | 1,776   |      |   | $       | 2,147   |   |   | $       | 2,114   |  
|                                                 | Participants contributions                       |                        |         |         |                  |   |         |                |   |   |         |         |   |      |         |         |      |   |         |         |   |   |         | 215     |  
|                                                 | Benefits paid                                    |                        |         | (22,865 | )                |   |         | (20,784        | ) |   |         | (2,211  | ) |      |         | (1,776  | )    |   |         | (2,147  | ) |   |         | (2,329  | )
|                                                 |                                                  |                        |         |         |                  |   |         |                |   |   |         |         |   |      |         |         |      |  
|Fair value of plan assets at end of period       |                                                  | $                      | 299,552 |         |                  | $ | 280,217 |                |   | $ |        |         |   | $    |        |         |      | $ |        |         |   | $ |        |        
|                                                 |                                                  |                        |         |         |                  |   |         |                |   |   |         |         |   |      |         |         |      |  
|Funded status                                    |                                                  | $                      | (884    | )       |                  | $ | (9,689  | )              |   | $ | (14,126 | )       |   | $    | (13,834 | )       |      | $ | (28,327 | )       |   | $ | (29,255 | )      
|Employer contributions after measurement date    |                                                  |                        |         |         |                  |   |         |                |   |   | 32      |         |   |      | 84      |         |      |   | 222     |         |   |   | 247     |        
|Unrecognized actuarial loss (gain)               |                                                  |                        | 114,401 |         |                  |   | 118,025 |                |   |   | 130     |         |   |      | (899    | )       |      |   | (1,061  | )       |   |   | 707     |        
|Unrecognized transition obligation               |                                                  |                        |         |         |                  |   |         |                |   |   |         |         |   |      |         |         |      |   | 8,325   |         |   |   | 9,261   |        
|Unrecognized prior service cost                  |                                                  |                        | 6,730   |         |                  |   | 7,467   |                |   |   | 2,977   |         |   |      | 3,503   |         |      |   | (1,742  | )       |   |   | (1,076  | )      
|Special agreement                                |                                                  |                        |         |         |                  |   |         |                |   |   | (1,003  | )       |   |      |         |         |      |   |         |         |   |   |         |        
|                                                 |                                                  |                        |         |         |                  |   |         |                |   |   |         |         |   |      |         |         |      |  
|Prepaid benefit cost (accrued)                   |                                                  | $                      | 120,247 |         |                  | $ | 115,803 |                |   | $ | (11,990 | )       |   | $    | (11,146 | )       |      | $ | (22,583 | )       |   | $ | (20,116 | )      
|                                                 |                                                  |                        |         |         |                  |   |         |                |   |   |         |         |   |      |         |         |      |  
|Amounts recognized on balance sheets consist of: |                                                  |                        |         |         |                  |   |         |                |   |   |         |         |   |      |         |         |      |   |         |         |   |   |         |        
|                                                 | Accrued benefit liability                        |                        | $       | 120,247 |                  |   | $       | 95,917         |   |   | $       | (11,990 | ) |      | $       | (12,125 | )    |   | $       | (22,583 | ) |   | $       | (20,116 | )
|                                                 | Intangible assets                                |                        |         |         |                  |   |         | 2,425          |   |   |         |         |   |      |         | 253     |      |   |         |         |   |   |         |         |  
|                                                 | Accumulated other comprehensive loss             |                        |         |         |                  |   |         | 17,461         |   |   |         |         |   |      |         | 726     |      |   |         |         |   |   |         |         |  
|                                                 |                                                  |                        |         |         |                  |   |         |                |   |   |         |         |   |      |         |         |      |  
|Net amounts recognized                           |                                                  | $                      | 120,247 |         |                  | $ | 115,803 |                |   | $ | (11,990 | )       |   | $    | (11,146 | )       |      | $ | (22,583 | )       |   | $ | (20,116 | )      
|                                                 |                                                  |                        |         |         |                  |   |         |                |   |   |         |         |   |      |         |         |      |  

F-20



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##### Table of Contents



CHS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                         |                                    |                            |       |               |                  |   |       |                |   |   |       |         |   |      |       |       |      |   |       |       |  |   |       |       |  |      |       |       |   |   |       |       |   |   |       |       |  
|---------------------------------------- | ---------------------------------- | -------------------------- | ----- | ------------- | ---------------- | - | ----- | -------------- | - | - | ----- | ------- | - | ---- | ----- | ----- | ---- | - | ----- | ----- |  | - | ----- | ----- |  | ---- | ----- | ----- | - | - | ----- | ----- | - | - | ----- | ----- | -
|                                         |                                    |                            |       | Non-Qualified |                  |   |      
|                                         |                                    | Qualified Pension Benefits |       |               | Pension Benefits |   |       | Other Benefits |  
|                                         |                                    |                            |       |               |                  |   |       |                |  
|                                         |                                    | 2004                       |       |               | 2003             |   |       | 2002           |   |   | 2004  |         |   | 2003 |       |       | 2002 |   |       | 2004  |  |   | 2003  |       |  | 2002 |      
|                                         |                                    |                            |       |               |                  |   |       |                |   |   |       |         |   |      |       |       |      |   |       |       |  |   |       |       |  |      |      
|                                         |                                    | (Dollars in thousands)     |      
|Components of net periodic benefit cost: |                                    |                            |       |               |                  |   |       |                |   |   |       |         |   |      |       |       |      |   |       |       |  |   |       |       |  |      |       |       |   |   |       |       |   |   |       |      
|                                         | Service cost                       |                            | $     | 11,548        |                  |   | $     | 10,840         |   |   | $     | 9,275   |   |      | $     | 601   |      |   | $     | 800   |  |   | $     | 1,168 |  |      | $     | 754   |   |   | $     | 648   |   |   | $     | 557   |  
|                                         | Interest cost                      |                            |       | 17,203        |                  |   |       | 17,503         |   |   |       | 17,673  |   |      |       | 822   |      |   |       | 1,033 |  |   |       | 886   |  |      |       | 1,758 |   |   |       | 1,722 |   |   |       | 1,586 |  
|                                         | Expected return on assets          |                            |       | (27,489       | )                |   |       | (23,788        | ) |   |       | (21,386 | ) |      |       |       |      |   |       |       |  |   |       |       |  |      |       |       |   |   |       |       |   |   |       |       |  
|                                         | Prior service cost amortization    |                            |       | 843           |                  |   |       | 806            |   |   |       | 740     |   |      |       | 526   |      |   |       | 564   |  |   |       | 574   |  |      |       | (174  | ) |   |       | (172  | ) |   |       | (197  | )
|                                         | Actuarial loss (gain) amortization |                            |       | 4,149         |                  |   |       | 2,623          |   |   |       | 1,369   |   |      |       | 103   |      |   |       | 159   |  |   |       | 18    |  |      |       | 108   |   |   |       | (215  | ) |   |       | (505  | )
|                                         | Transition amount amortization     |                            |       |               |                  |   |       |                |   |   |       | (708    | ) |      |       |       |      |   |       |       |  |   |       |       |  |      |       | 936   |   |   |       | 936   |   |   |       | 936   |  
|                                         |                                    |                            |       |               |                  |   |       |                |   |   |       |         |   |      |       |       |      |   |       |       |  |   |       |       |  |      |      
|Net periodic benefit cost                |                                    | $                          | 6,254 |               |                  | $ | 7,984 |                |   | $ | 6,963 |         |   | $    | 2,052 |       |      | $ | 2,556 |       |  | $ | 2,646 |       |  | $    | 3,382 |       |   | $ | 2,919 |       |   | $ | 2,377 |      
|                                         |                                    |                            |       |               |                  |   |       |                |   |   |       |         |   |      |       |       |      |   |       |       |  |   |       |       |  |      |      
|Average assumptions:                     |                                    |                            |       |               |                  |   |       |                |   |   |       |         |   |      |       |       |      |   |       |       |  |   |       |       |  |      |       |       |   |   |       |       |   |   |       |      
|                                         | Discount rate                      |                            |       | 6.40%         |                  |   |       | 6.30%          |   |   |       | 7.10%   |   |      |       | 6.25% |      |   |       | 6.00% |  |   |       | 7.25% |  |      |       | 6.40% |   |   |       | 6.30% |   |   |       | 7.10% |  
|                                         | Expected return on plan assets     |                            |       | 9.00%         |                  |   |       | 9.00%          |   |   |       | 9.00%   |   |      |       | N/A   |      |   |       | N/A   |  |   |       | N/A   |  |      |       | N/A   |   |   |       | N/A   |   |   |       | N/A   |  
|                                         | Rate of compensation increase      |                            |       | 4.30%         |                  |   |       | 5.00%          |   |   |       | 5.00%   |   |      |       | 5.00% |      |   |       | 5.00% |  |   |       | 5.00% |  |      |       | 4.30% |   |   |       | 5.00% |   |   |       | 5.00% |  



|                               |  |                        |   |      |                  |   |         |  |  |      |        |  |  |   |        | 
|------------------------------ |  | ---------------------- | - | ---- | ---------------- | - | ------- |  |  | ---- | ------ |  |  | - | ------ | 
|                               |  | Qualified Pension      |   |      | Non-Qualified    |  
|                               |  | Benefits               |   |      | Pension Benefits |  
|                               |  |                        |   |      |                  |  
|                               |  | 2004                   |   | 2003 |                  |   | 2004    |  |  | 2003 |       
|                               |  |                        |   |      |                  |   |         |  |  |      |       
|                               |  | (Dollars in thousands) |  
|Projected benefit obligation   |  | $                      |  |      |                  | $ | 120,068 |  |  | $    | 14,126 |  |  | $ | 13,834 | 
|Accumulated benefit obligation |  |                        |  |      |                  |   | 107,760 |  |  |      | 12,463 |  |  |   | 12,209 | 
|Fair value of plan assets      |  |                        |  |      |                  |   | 104,560 |  |  |      |        |  |  |   |        | 



|                                                        |  |                        |       |  |             |   |        |  
|------------------------------------------------------- |  | ---------------------- | ----- |  | ----------- | - | ------ | -
|                                                        |  | 1% Increase            |       |  | 1% Decrease |  
|                                                        |  |                        |       |  |             |  
|                                                        |  | (Dollars in thousands) |      
|Effect on total of service and interest cost components |  | $                      | 254   |  |             | $ | (229   | )
|Effect on postretirement benefit obligation             |  |                        | 2,418 |  |             |   | (2,190 | )





F-21



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##### Table of Contents



CHS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|          |  |                        |         |  |                  |   |       |          |  |   |        | 
|--------- |  | ---------------------- | ------- |  | ---------------- | - | ----- | -------- |  | - | ------ | 
|          |  | Qualified              |         |  | Non-Qualified    |   |       | Other    | 
|          |  | Pension Benefits       |         |  | Pension Benefits |   |       | Benefits | 
|          |  |                        |         |  |                  |   |       |          | 
|          |  | (Dollars in thousands) |        
|2005      |  | $                      | 30,586  |  |                  | $ | 241   |          |  | $ | 2,166  | 
|2006      |  |                        | 22,738  |  |                  |   | 240   |          |  |   | 2,278  | 
|2007      |  |                        | 26,394  |  |                  |   | 244   |          |  |   | 2,658  | 
|2008      |  |                        | 24,977  |  |                  |   | 237   |          |  |   | 2,882  | 
|2009      |  |                        | 26,950  |  |                  |   | 235   |          |  |   | 3,298  | 
|2010-2014 |  |                        | 150,883 |  |                  |   | 1,134 |          |  |   | 23,716 | 





| |   |                                                                                           
| | - | ------------------------------------------------------------------------------------------
| |  | Optimize the long-term returns on plan assets at an acceptable
    level of risk, and     
|
| |  | Maintain broad diversification across asset classes and among
    investment managers, and
|
| |  | Focus on long-term return objectives.                                                     









|            |  |      |        |  |      |  |        | 
|----------- |  | ---- | ------ |  | ---- |  | ------ | 
|            |  | 2004 |        |  | 2003 | 
|            |  |      |        |  |      | 
|Cash        |  |      | 2.7%   |  |      |  | 1.8%   | 
|Debt        |  |      | 29.9%  |  |      |  | 29.5%  | 
|Equities    |  |      | 62.0%  |  |      |  | 63.2%  | 
|Real estate |  |      | 3.8%   |  |      |  | 3.8%   | 
|Other       |  |      | 1.6%   |  |      |  | 1.7%   | 
|            |  |      |        |  |      | 
|Total       |  |      | 100.0% |  |      |  | 100.0% | 
|            |  |      |        |  |      | 

F-22



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##### Table of Contents



CHS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


11.     Segment Reporting:










F-23



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##### Table of Contents



CHS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                             |  |                        |         |   |        |            |           |          |       |   |           |     |  |           |           |   |       |             |         |         |  |   |         |   |  |   |            |   |  |   |            |  
|-------------------------------------------- |  | ---------------------- | ------- | - | ------ | ---------- | --------- | -------- | ----- | - | --------- | --- |  | --------- | --------- | - | ----- | ----------- | ------- | ------- |  | - | ------- | - |  | - | ---------- | - |  | - | ---------- | -
|                                             |  |                        |         |   |        | Country    |           |          |       |   | Processed |     |  |           |           |   |       |            
|                                             |  |                        |         |   |        | Operations |           |          |       |   | Grains    |     |  | Corporate |           |   |       |             |        
|                                             |  |                        |         |   |        | and        |           |          | Grain |   |           | and |  |           | and       |   |       | Reconciling |         |         | 
|                                             |  | Agronomy               |         |   | Energy |            |           | Services |       |   | Marketing |     |  | Foods     |           |   | Other |             |         | Amounts |  |   | Total   |  
|                                             |  |                        |         |   |        |            |           |          |       |   |           |     |  |           |           |   |       |             |         |         |  |   |         |  
|                                             |  | (Dollars in thousands) |        
|For the year ended August 31, 2004:          |  |                        |         |   |        |            |           |          |       |   |           |     |  |           |           |   |       |             |         |         |  |   |         |   |  |   |            |   |  |   |            |  
|Net sales                                    |  |                        |         |   |        | $          | 4,028,248 |          |       | $ | 2,227,764 |     |  | $         | 5,006,029 |   |       | $           | 802,102 |         |  |   |         |   |  | $ | (1,154,810 | ) |  | $ | 10,909,333 |  
|Other revenues                               |  | $                      | (15     | ) |        |            | 9,193     |          |       |   | 94,381    |     |  |           | 28,710    |   |       |             | 2,836   |         |  | $ | 6,198   |   |  |   |            |   |  |   | 141,303    |  
|                                             |  |                        |         |   |        |            |           |          |       |   |           |     |  |           |           |   |       |             |         |         |  |   |         |  
|                                             |  |                        | (15     | ) |        |            | 4,037,441 |          |       |   | 2,322,145 |     |  |           | 5,034,739 |   |       |             | 804,938 |         |  |   | 6,198   |   |  |   | (1,154,810 | ) |  |   | 11,050,636 |  
|Cost of goods sold                           |  |                        |         |   |        |            | 3,784,260 |          |       |   | 2,199,700 |     |  |           | 5,006,704 |   |       |             | 768,391 |         |  |   |         |   |  |   | (1,154,810 | ) |  |   | 10,604,245 |  
|Marketing, general and administrative        |  |                        | 8,482   |   |        |            | 66,493    |          |       |   | 70,196    |     |  |           | 25,071    |   |       |             | 31,811  |         |  |   | 6,231   |   |  |   |            |   |  |   | 208,284    |  
|                                             |  |                        |         |   |        |            |           |          |       |   |           |     |  |           |           |   |       |             |         |         |  |   |         |  
|Operating (losses) earnings                  |  |                        | (8,497  | ) |        |            | 186,688   |          |       |   | 52,249    |     |  |           | 2,964     |   |       |             | 4,736   |         |  |   | (33     | ) |  |   |           |   |  |   | 238,107    |  
|Gain on sale of investment                   |  |                        |         |   |        |            | (14,666   | )        |       |   |           |     |  |           |           |   |       |             |         |         |  |   |         |   |  |   |            |   |  |   | (14,666    | )
|Gain on legal settlements                    |  |                        |         |   |        |            |           |          |       |   | (692      | )   |  |           |           |   |       |             |         |         |  |   |         |   |  |   |            |   |  |   | (692       | )
|Interest                                     |  |                        | (352    | ) |        |            | 13,819    |          |       |   | 16,019    |     |  |           | 5,874     |   |       |             | 15,307  |         |  |   | 958     |   |  |   |            |   |  |   | 51,625     |  
|Equity (income) from investments             |  |                        | (35,725 | ) |        |            | (1,399    | )        |       |   | (519      | )   |  |           | (11,413   | ) |       |             | (29,966 | )       |  |   |         |   |  |   |            |   |  |   | (79,022    | )
|Minority interests                           |  |                        |         |   |        |            | 32,507    |          |       |   | 1,323     |     |  |           |           |   |       |             |         |         |  |   |         |   |  |   |            |   |  |   | 33,830     |  
|                                             |  |                        |         |   |        |            |           |          |       |   |           |     |  |           |           |   |       |             |         |         |  |   |         |  
|Income (loss) before income taxes            |  | $                      | 27,580  |   |        | $          | 156,427   |          |       | $ | 36,118    |     |  | $         | 8,503     |   |       | $           | 19,395  |         |  | $ | (991    | ) |  | $ |           |   |  | $ | 247,032    |  
|                                             |  |                        |         |   |        |            |           |          |       |   |           |     |  |           |           |   |       |             |         |         |  |   |         |  
|Intersegment sales                           |  |                        |         |   |        | $          | (121,199  | )        |       | $ | (987,145  | )   |  | $         | (45,103   | ) |       | $           | (1,363  | )       |  |   |         |   |  | $ | 1,154,810  |   |  | $ |           |  
|                                             |  |                        |         |   |        |            |           |          |       |   |           |     |  |           |           |   |       |             |         |         |  |   |         |  
|Goodwill                                     |  |                        |         |   |        | $          | 3,041     |          |       | $ | 250       |     |  |           |           |   |       | $           | 23,605  |         |  |   |         |   |  |   |            |   |  | $ | 26,896     |  
|                                             |  |                        |         |   |        |            |           |          |       |   |           |     |  |           |           |   |       |             |         |         |  |   |         |  
|Capital expenditures                         |  |                        |         |   |        | $          | 187,937   |          |       | $ | 28,537    |     |  | $         | 6,835     |   |       | $           | 18,783  |         |  | $ | 3,056   |   |  |   |            |   |  | $ | 245,148    |  
|                                             |  |                        |         |   |        |            |           |          |       |   |           |     |  |           |           |   |       |             |         |         |  |   |         |  
|Depreciation and amortization                |  | $                      | 1,247   |   |        | $          | 57,195    |          |       | $ | 22,087    |     |  | $         | 8,040     |   |       | $           | 15,789  |         |  | $ | 4,041   |   |  |   |            |   |  | $ | 108,399    |  
|                                             |  |                        |         |   |        |            |           |          |       |   |           |     |  |           |           |   |       |             |         |         |  |   |         |  
|Total identifiable assets at August 31, 2004 |  | $                      | 327,448 |   |        | $          | 1,591,254 |          |       | $ | 862,645   |     |  | $         | 487,807   |   |       | $           | 475,004 |         |  | $ | 287,134 |   |  |   |            |   |  | $ | 4,031,292  |  
|                                             |  |                        |         |   |        |            |           |          |       |   |           |     |  |           |           |   |       |             |         |         |  |   |         |  

F-24



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##### Table of Contents



CHS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


|                                             |  |                        |         |   |        |            |           |          |       |   |           |     |  |           |           |   |       |             |         |         |  |   |         |   |  |   |          |   |  |   |           |  
|-------------------------------------------- |  | ---------------------- | ------- | - | ------ | ---------- | --------- | -------- | ----- | - | --------- | --- |  | --------- | --------- | - | ----- | ----------- | ------- | ------- |  | - | ------- | - |  | - | -------- | - |  | - | --------- | -
|                                             |  |                        |         |   |        | Country    |           |          |       |   | Processed |     |  |           |           |   |       |            
|                                             |  |                        |         |   |        | Operations |           |          |       |   | Grains    |     |  | Corporate |           |   |       |             |        
|                                             |  |                        |         |   |        | and        |           |          | Grain |   |           | and |  |           | and       |   |       | Reconciling |         |         | 
|                                             |  | Agronomy               |         |   | Energy |            |           | Services |       |   | Marketing |     |  | Foods     |           |   | Other |             |         | Amounts |  |   | Total   |  
|                                             |  |                        |         |   |        |            |           |          |       |   |           |     |  |           |           |   |       |             |         |         |  |   |         |  
|                                             |  | (Dollars in thousands) |        
|For the year ended August 31, 2003:          |  |                        |         |   |        |            |           |          |       |   |           |     |  |           |           |   |       |             |         |         |  |   |         |   |  |   |          |   |  |   |           |  
|Net sales                                    |  |                        |         |   |        | $          | 3,648,093 |          |       | $ | 1,885,825 |     |  | $         | 4,139,226 |   |       | $           | 491,931 |         |  |   |         |   |  | $ | (894,341 | ) |  | $ | 9,270,734 |  
|Other revenues                               |  | $                      | (84     | ) |        |            | 5,655     |          |       |   | 84,206    |     |  |           | 25,676    |   |       |             | 2,411   |         |  | $ | 4,714   |   |  |   |          |   |  |   | 122,578   |  
|                                             |  |                        |         |   |        |            |           |          |       |   |           |     |  |           |           |   |       |             |         |         |  |   |         |  
|                                             |  |                        | (84     | ) |        |            | 3,653,748 |          |       |   | 1,970,031 |     |  |           | 4,164,902 |   |       |             | 494,342 |         |  |   | 4,714   |   |  |   | (894,341 | ) |  |   | 9,393,312 |  
|Cost of goods sold                           |  |                        |         |   |        |            | 3,470,726 |          |       |   | 1,876,811 |     |  |           | 4,133,677 |   |       |             | 473,682 |         |  |   |         |   |  |   | (894,341 | ) |  |   | 9,060,555 |  
|Marketing, general and administrative        |  |                        | 8,138   |   |        |            | 63,740    |          |       |   | 55,887    |     |  |           | 21,072    |   |       |             | 29,715  |         |  |   | 5,205   |   |  |   |          |   |  |   | 183,757   |  
|                                             |  |                        |         |   |        |            |           |          |       |   |           |     |  |           |           |   |       |             |         |         |  |   |         |  
|Operating (losses) earnings                  |  |                        | (8,222  | ) |        |            | 119,282   |          |       |   | 37,333    |     |  |           | 10,153    |   |       |             | (9,055  | )       |  |   | (491    | ) |  |   |         |   |  |   | 149,000   |  
|Gain on legal settlements                    |  |                        |         |   |        |            |           |          |       |   | (10,867   | )   |  |           |           |   |       |             |         |         |  |   |         |   |  |   |          |   |  |   | (10,867   | )
|Interest                                     |  |                        | (974    | ) |        |            | 16,401    |          |       |   | 14,975    |     |  |           | 4,738     |   |       |             | 12,845  |         |  |   | 690     |   |  |   |          |   |  |   | 48,675    |  
|Equity (income) loss from investments        |  |                        | (20,773 | ) |        |            | (1,353    | )        |       |   | (788      | )   |  |           | 1,673     |   |       |             | (26,056 | )       |  |   | (2      | ) |  |   |          |   |  |   | (47,299   | )
|Minority interests                           |  |                        |         |   |        |            | 20,782    |          |       |   | 1,168     |     |  |           |           |   |       |             |         |         |  |   |         |   |  |   |          |   |  |   | 21,950    |  
|                                             |  |                        |         |   |        |            |           |          |       |   |           |     |  |           |           |   |       |             |         |         |  |   |         |  
|Income (loss) before income taxes            |  | $                      | 13,525  |   |        | $          | 83,452    |          |       | $ | 32,845    |     |  | $         | 3,742     |   |       | $           | 4,156   |         |  | $ | (1,179  | ) |  | $ |         |   |  | $ | 136,541   |  
|                                             |  |                        |         |   |        |            |           |          |       |   |           |     |  |           |           |   |       |             |         |         |  |   |         |  
|Intersegment sales                           |  |                        |         |   |        | $          | (94,209   | )        |       | $ | (796,999  | )   |  | $         | (2,435    | ) |       | $           | (698    | )       |  |   |         |   |  | $ | 894,341  |   |  | $ |          |  
|                                             |  |                        |         |   |        |            |           |          |       |   |           |     |  |           |           |   |       |             |         |         |  |   |         |  
|Goodwill                                     |  |                        |         |   |        | $          | 3,185     |          |       | $ | 262       |     |  |           |           |   |       | $           | 23,605  |         |  |   |         |   |  |   |          |   |  | $ | 27,052    |  
|                                             |  |                        |         |   |        |            |           |          |       |   |           |     |  |           |           |   |       |             |         |         |  |   |         |  
|Capital expenditures                         |  |                        |         |   |        | $          | 80,837    |          |       | $ | 26,738    |     |  | $         | 5,298     |   |       | $           | 60,576  |         |  | $ | 2,240   |   |  |   |          |   |  | $ | 175,689   |  
|                                             |  |                        |         |   |        |            |           |          |       |   |           |     |  |           |           |   |       |             |         |         |  |   |         |  
|Depreciation and amortization                |  | $                      | 1,247   |   |        | $          | 65,868    |          |       | $ | 21,039    |     |  | $         | 6,718     |   |       | $           | 13,321  |         |  | $ | 3,154   |   |  |   |          |   |  | $ | 111,347   |  
|                                             |  |                        |         |   |        |            |           |          |       |   |           |     |  |           |           |   |       |             |         |         |  |   |         |  
|Total identifiable assets at August 31, 2003 |  | $                      | 285,906 |   |        | $          | 1,449,652 |          |       | $ | 857,523   |     |  | $         | 450,415   |   |       | $           | 498,872 |         |  | $ | 265,600 |   |  |   |          |   |  | $ | 3,807,968 |  
|                                             |  |                        |         |   |        |            |           |          |       |   |           |     |  |           |           |   |       |             |         |         |  |   |         |  
|For the year ended August 31, 2002:          |  |                        |         |   |        |            |           |          |       |   |           |     |  |           |           |   |       |             |         |         |  |   |         |   |  |   |          |   |  |   |           |  
|Net sales                                    |  |                        |         |   |        | $          | 2,657,689 |          |       | $ | 1,474,553 |     |  | $         | 3,281,469 |   |       | $           | 496,084 |         |  |   |         |   |  | $ | (753,341 | ) |  | $ | 7,156,454 |  
|Other revenues                               |  | $                      | (89     | ) |        |            | 857       |          |       |   | 83,361    |     |  |           | 22,399    |   |       |             | (1,209  | )       |  | $ | 2,032   |   |  |   |          |   |  |   | 107,351   |  
|                                             |  |                        |         |   |        |            |           |          |       |   |           |     |  |           |           |   |       |             |         |         |  |   |         |  
|                                             |  |                        | (89     | ) |        |            | 2,658,546 |          |       |   | 1,557,914 |     |  |           | 3,303,868 |   |       |             | 494,875 |         |  |   | 2,032   |   |  |   | (753,341 | ) |  |   | 7,263,805 |  
|Cost of goods sold                           |  |                        |         |   |        |            | 2,483,359 |          |       |   | 1,474,392 |     |  |           | 3,272,985 |   |       |             | 462,655 |         |  |   |         |   |  |   | (753,341 | ) |  |   | 6,940,050 |  
|Marketing, general and administrative        |  |                        | 8,957   |   |        |            | 66,731    |          |       |   | 47,995    |     |  |           | 22,213    |   |       |             | 31,813  |         |  |   | 4,466   |   |  |   |          |   |  |   | 182,175   |  
|                                             |  |                        |         |   |        |            |           |          |       |   |           |     |  |           |           |   |       |             |         |         |  |   |         |  
|Operating (losses) earnings                  |  |                        | (9,046  | ) |        |            | 108,456   |          |       |   | 35,527    |     |  |           | 8,670     |   |       |             | 407     |         |  |   | (2,434  | ) |  |   |         |   |  |   | 141,580   |  
|Gain on legal settlements                    |  |                        |         |   |        |            |           |          |       |   | (2,970    | )   |  |           |           |   |       |             |         |         |  |   |         |   |  |   |          |   |  |   | (2,970    | )
|Interest                                     |  |                        | (1,403  | ) |        |            | 16,875    |          |       |   | 13,851    |     |  |           | 4,807     |   |       |             | 9,514   |         |  |   | (1,189  | ) |  |   |          |   |  |   | 42,455    |  
|Equity (income) loss from investments        |  |                        | (13,425 | ) |        |            | 1,166     |          |       |   | (283      | )   |  |           | (4,257    | ) |       |             | (41,331 | )       |  |   | (3      | ) |  |   |          |   |  |   | (58,133   | )
|Minority interests                           |  |                        |         |   |        |            | 14,604    |          |       |   | 786       |     |  |           |           |   |       |             |         |         |  |   |         |   |  |   |          |   |  |   | 15,390    |  
|                                             |  |                        |         |   |        |            |           |          |       |   |           |     |  |           |           |   |       |             |         |         |  |   |         |  
|Income (loss) before income taxes            |  | $                      | 5,782   |   |        | $          | 75,811    |          |       | $ | 24,143    |     |  | $         | 8,120     |   |       | $           | 32,224  |         |  | $ | (1,242  | ) |  | $ |         |   |  | $ | 144,838   |  
|                                             |  |                        |         |   |        |            |           |          |       |   |           |     |  |           |           |   |       |             |         |         |  |   |         |  
|Intersegment sales                           |  |                        |         |   |        | $          | (67,367   | )        |       | $ | (615,853  | )   |  | $         | (69,561   | ) |       | $           | (560    | )       |  |   |         |   |  | $ | 753,341  |   |  | $ |          |  
|                                             |  |                        |         |   |        |            |           |          |       |   |           |     |  |           |           |   |       |             |         |         |  |   |         |  
|Capital expenditures                         |  |                        |         |   |        | $          | 54,576    |          |       | $ | 34,305    |     |  | $         | 14,851    |   |       | $           | 35,144  |         |  | $ | 1,293   |   |  |   |          |   |  | $ | 140,169   |  
|                                             |  |                        |         |   |        |            |           |          |       |   |           |     |  |           |           |   |       |             |         |         |  |   |         |  
|Depreciation and amortization                |  | $                      | 1,247   |   |        | $          | 58,701    |          |       | $ | 21,214    |     |  | $         | 6,235     |   |       | $           | 13,436  |         |  | $ | 3,153   |   |  |   |          |   |  | $ | 103,986   |  
|                                             |  |                        |         |   |        |            |           |          |       |   |           |     |  |           |           |   |       |             |         |         |  |   |         |  

F-25



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##### Table of Contents



CHS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|    |                               
|--- | ------------------------------
|12. | Commitments and Contingencies:



| |               
| | --------------
| | Environmental:







| |                             
| | ----------------------------
| | Other Litigation and Claims:





| |               
| | --------------
| | Grain Storage:





| |            
| | -----------
| | Guarantees:





F-26



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##### Table of Contents



CHS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








|                                                                      |  |                        |        |  |             |   |        |           |  |                                                                                                                                                                                                                                     |  |                                                                                                                  |  |                                             |                     |                                          |               |                                                                                                                |  | 
|--------------------------------------------------------------------- |  | ---------------------- | ------ |  | ----------- | - | ------ | --------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------- | ------------------- | ---------------------------------------- | ------------- | -------------------------------------------------------------------------------------------------------------- |  | 
|                                                                      |  | Guarantee/             |        |  | Exposure on |   |        |           |  |                                                                                                                                                                                                                                     |  |                                                                                                                  |  |                                             |                     |                                         
|                                                                      |  | Maximum                |        |  | August 31,  |   |        | Nature of |  |                                                                                                                                                                                                                                     |  | Triggering                                                                                                       |  |                                             |                     |                                          | Assets Held  
|Entities                                                              |  | Exposure               |        |  | 2004        |   |        | Guarantee |  | Expiration Date                                                                                                                                                                                                                     |  | Event                                                                                                            |  |                                             | Recourse Provisions |                                          | as Collateral
|                                                                      |  |                        |        |  |             |   |        |           |  |                                                                                                                                                                                                                                     |  |                                                                                                                  |  |                                             |                     |                                          |              
|                                                                      |  | (Dollars in thousands) |        |  |             |   |        |           |  |                                                                                                                                                                                                                                     |  |                                                                                                                  | 
|The Companys financial services cooperative loans sold to
    CoBank |  |                        | *      |  |             | $ | 5,927  |           |  | 10% of the obligations of borrowers (agricultural cooperatives)
    under credit agreements for loans sold                                                                                                                          |  | None stated, but may be terminated by either party upon 60 days
    prior notice in regard to future obligations |  | Credit agreement default                    |                     | Subrogation against borrower             |               | Some or all assets of borrower are held as collateral and should
    be sufficient to cover guarantee exposure
|Fin-Ag, Inc. agricultural loans sold to CoBank                        |  |                        | *      |  |             |   | 25,076 |           |  | 15% of the obligations of borrowers under credit agreements for
    some of the loans sold, 50% of the obligations of borrowers for
    other loans sold, and 100% of the obligations of borrowers for
    the remaining loans sold |  | None stated, but may be terminated by either party upon 90 days
    prior notice in regard to future obligations |  | Credit agreement default                    |                     | Subrogation against borrower             |               | Some or all assets of borrower are held as collateral and should
    be sufficient to cover guarantee exposure
|Horizon Milling, LLC                                                  |  | $                      | 5,000  |  |             |   |        |           |  | Indemnification and reimbursement of 24% of damages related to
    Horizon Milling, LLCs performance under a flour sales
    agreement                                                                                             |  | None stated, but may be terminated by any party upon
    90 days prior notice in regard to future obligations    |  | Non- performance under flour sale agreement |                     | Subrogation against Horizon Milling, LLC |               | None                                                                                                          
|TEMCO, LLC                                                            |  | $                      | 15,000 |  |             |   |        |           |  | Obligations by TEMCO, LLC under credit agreement                                                                                                                                                                                    |  | None stated                                                                                                      |  | Credit agreement default                    |                     | Subrogation against TEMCO, LLC           |               | None                                                                                                          

F-27



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##### Table of Contents



CHS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


|              |  |                        |   |  |             |   |        |           |  |                                                                                                                                               |  |                                                                                                                                                                                        |  |  |                     |  |               |                                |  |                                                                                                                  
|------------- |  | ---------------------- | - |  | ----------- | - | ------ | --------- |  | --------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  | ------------------- |  | ------------- | ------------------------------ |  | -----------------------------------------------------------------------------------------------------------------
|              |  | Guarantee/             |   |  | Exposure on |   |        |           |  |                                                                                                                                               |  |                                                                                                                                                                                        |  |  |                     | 
|              |  | Maximum                |   |  | August 31,  |   |        | Nature of |  |                                                                                                                                               |  | Triggering                                                                                                                                                                             |  |  |                     |  | Assets Held  
|Entities      |  | Exposure               |   |  | 2004        |   |        | Guarantee |  | Expiration Date                                                                                                                               |  | Event                                                                                                                                                                                  |  |  | Recourse Provisions |  | as Collateral
|              |  |                        |   |  |             |   |        |           |  |                                                                                                                                               |  |                                                                                                                                                                                        |  |  |                     |  |              
|              |  | (Dollars in thousands) |   |  |             |   |        |           |  |                                                                                                                                               |  |                                                                                                                                                                                        | 
|Third parties |  |                        | * |  |             |   | 1,000  |           |  | Surety for, or indemnification of surety for sales contracts
    between affiliates and sellers of grain under deferred payment
    contracts |  | Annual renewal on December 1st in regard to surety for one third
    party, otherwise none stated and may be terminated by the
    Company at any time in regard to future obligations |  |  | Nonpayment          |  |               | Subrogation against affiliates |  | Some or all assets of borrower are held as collateral but might
    not be sufficient to cover guarantee exposure
|              |  |                        |   |  |             |   |        |           |  |                                                                                                                                               |  |                                                                                                                                                                                        |  |  |                     |  |              
|              |  |                        |   |  |             | $ | 32,003 |           |  |                                                                                                                                               |  |                                                                                                                                                                                        |  |  |                     |  |               |                                |  |                                                                                                                  
|              |  |                        |   |  |             |   |        |           |  |                                                                                                                                               |  |                                                                                                                                                                                        |  |  |                     |  |              






|  |                                                                                                                                                                                                                                                             
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* | The Companys bank covenants allow for guarantees of up to
    $150.0 million, but the Company is under no obligation to extend
    these guarantees. The maximum exposure on any given date is
    equal to the actual guarantees extended as of that date.



| |                   
| | ------------------
| | Lease Commitments:







|                                    |  |                        |        |  |          |   |           |           |  |   |        |  |  |   |         | 
|----------------------------------- |  | ---------------------- | ------ |  | -------- | - | --------- | --------- |  | - | ------ |  |  | - | ------- | 
|                                    |  | Rail                   |        |  |          |   | Equipment |           |  |  
|                                    |  | Cars                   |        |  | Vehicles |   |           | and Other |  |   | Total  | 
|                                    |  |                        |        |  |          |   |           |           |  |   |        | 
|                                    |  | (Dollars in thousands) |       
|2005                                |  | $                      | 8,539  |  |          | $ | 16,207    |           |  | $ | 5,676  |  |  | $ | 30,422  | 
|2006                                |  |                        | 6,090  |  |          |   | 13,233    |           |  |   | 5,180  |  |  |   | 24,503  | 
|2007                                |  |                        | 5,034  |  |          |   | 10,392    |           |  |   | 4,589  |  |  |   | 20,015  | 
|2008                                |  |                        | 4,179  |  |          |   | 9,133     |           |  |   | 3,241  |  |  |   | 16,553  | 
|2009                                |  |                        | 3,036  |  |          |   | 6,110     |           |  |   | 2,906  |  |  |   | 12,052  | 
|Thereafter                          |  |                        | 9,151  |  |          |   | 5,511     |           |  |   | 4,588  |  |  |   | 19,250  | 
|                                    |  |                        |        |  |          |   |           |           |  |   |        | 
|Total minimum future lease payments |  | $                      | 36,029 |  |          | $ | 60,586    |           |  | $ | 26,180 |  |  | $ | 122,795 | 
|                                    |  |                        |        |  |          |   |           |           |  |   |        | 

F-28



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##### Table of Contents



CHS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|    |                                              
|--- | ---------------------------------------------
|13. | Supplemental Cash Flow and Other Information:



|                                        |                                                                            |                        |   |         |      |  |   |         |   |  |   |         |  
|--------------------------------------- | -------------------------------------------------------------------------- | ---------------------- | - | ------- | ---- |  | - | ------- | - |  | - | ------- | -
|                                        |                                                                            | 2004                   |   |         | 2003 |  |   | 2002    |  
|                                        |                                                                            |                        |   |         |      |  |   |         |  
|                                        |                                                                            | (Dollars in thousands) |  
|Net cash paid during the period for:    |                                                                            |                        |   |         |      |  |   |         |   |  |   |        
|                                        | Interest                                                                   |                        | $ | 52,004  |      |  | $ | 45,239  |   |  | $ | 44,231  |  
|                                        | Income taxes                                                               |                        |   | 27,997  |      |  |   | 956     |   |  |   | 27,965  |  
|Other significant noncash transactions: |                                                                            |                        |   |         |      |  |   |         |   |  |   |        
|                                        | Capital equity certificates exchanged for preferred stock                  |                        |   | 12,990  |      |  |   |         |   |  |   |         |  
|                                        | Capital equity certificates issued in exchange for elevator
    properties |                        |   | 13,355  |      |  |   | 350     |   |  |   | 1,842   |  
|                                        | Exchange of preferred stock                                                |                        |   |         |      |  |   | 7,452   |   |  |   |         |  
|                                        | Accrual of dividends and equities payable                                  |                        |   | (83,569 | )    |  |   | (39,049 | ) |  |   | (56,510 | )
|                                        | Other comprehensive income (loss)                                          |                        |   | 11,178  |      |  |   | 33,584  |   |  |   | (49,982 | )



|    |                            
|--- | ---------------------------
|14. | Related Party Transactions:



|            |  |                        |           |  |      |   |         | 
|----------- |  | ---------------------- | --------- |  | ---- | - | ------- | 
|            |  | 2004                   |           |  | 2003 |  
|            |  |                        |           |  |      |  
|            |  | (Dollars in thousands) |          
|Sales       |  | $                      | 1,185,366 |  |      | $ | 779,857 | 
|Purchases   |  |                        | 632,993   |  |      |   | 637,357 | 
|Receivables |  |                        | 17,679    |  |      |   | 13,393  | 
|Payables    |  |                        | 28,118    |  |      |   | 29,113  | 





|    |                      
|--- | ---------------------
|15. | Comprehensive Income:



|                                        |  |                        |         |  |      |   |         |      |  |   |         |  
|--------------------------------------- |  | ---------------------- | ------- |  | ---- | - | ------- | ---- |  | - | ------- | -
|                                        |  | 2004                   |         |  | 2003 |   |         | 2002 | 
|                                        |  |                        |         |  |      |   |         |      | 
|                                        |  | (Dollars in thousands) |        
|Net income                              |  | $                      | 221,332 |  |      | $ | 123,841 |      |  | $ | 126,138 |  
|Additional minimum pension liability    |  |                        | 10,016  |  |      |   | 36,106  |      |  |   | (48,797 | )
|Financial instruments                   |  |                        | 698     |  |      |   | 1,045   |      |  |   | (548    | )
|Cash flow hedges                        |  |                        | 356     |  |      |   | (3,549  | )    |  |   | (637    | )
|Foreign currency translation adjustment |  |                        | 108     |  |      |   | (18     | )    |  |   |         |  
|                                        |  |                        |         |  |      |   |         |      | 
|Comprehensive income                    |  | $                      | 232,510 |  |      | $ | 157,425 |      |  | $ | 76,156  |  
|                                        |  |                        |         |  |      |   |         |      | 

F-29



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##### Table of Contents



CHS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                        |  |             |       |   |      |   |        | 
|--------------------------------------- |  | ----------- | ----- | - | ---- | - | ------ | 
|                                        |  | 2004        |       |   | 2003 |  
|                                        |  |             |       |   |      |  
|                                        |  | (Dollars in |      
|                                        |  | thousands)  |      
|Additional minimum pension liability    |  | $           | 3,930 |   |      | $ | 13,946 | 
|Financial instruments                   |  |             | (534  | ) |      |   | 164    | 
|Cash flow hedges                        |  |             | 3,829 |   |      |   | 4,185  | 
|Foreign currency translation adjustment |  |             | (90   | ) |      |   | 18     | 
|                                        |  |             |       |   |      |  
|Accumulated other comprehensive loss    |  | $           | 7,135 |   |      | $ | 18,313 | 
|                                        |  |             |       |   |      |  

F-30



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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM













F-31



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##### Table of Contents



VENTURA FOODS, LLC


Financial Statements as of March 31, 2005


and 2004 and for the Years Ended March 31,


2005, 2004, and 2003 and Independent


Auditors Report


F-32



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##### Table of Contents



INDEPENDENT AUDITORS REPORT














F-33



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##### Table of Contents



VENTURA FOODS, LLC


BALANCE SHEETS


|                                                                                              |                                                                                                                                               |                      |                           |             |             |             |             |             |             |             | 
|--------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------- | -------------------- | ------------------------- | ----------- | ----------- | ----------- | ----------- | ----------- | ----------- | ----------- | 
|                                                                                              |                                                                                                                                               | March 31,            |                          
|                                                                                              |                                                                                                                                               |                      |                          
|                                                                                              |                                                                                                                                               | 2005                 |                           |             | 2004        |            
|                                                                                              |                                                                                                                                               |                      |                           |             |             |            
|ASSETS                                                                                       
|CURRENT ASSETS:                                                                               |                                                                                                                                               |                      |                           |             |             |             |             |            
|                                                                                              | Cash and cash equivalents (Note 2)                                                                                                            |                      | $                         | 115,099,000 |             |             | $           | 117,783,000 |            
|                                                                                              | Trade receivables, net of allowance for doubtful accounts of
    $2,723,000 and $1,929,000 at 2005 and 2004, respectively
    (Notes 2 and 4) |                      |                           | 72,929,000  |             |             |             | 79,877,000  |            
|                                                                                              | Inventories (Notes 2 and 4)                                                                                                                   |                      |                           | 94,523,000  |             |             |             | 108,605,000 |            
|                                                                                              | Prepaid expenses and other current assets                                                                                                     |                      |                           | 5,184,000   |             |             |             | 4,609,000   |            
|                                                                                              | Derivative contract asset (Notes 2 and 4)                                                                                                     |                      |                           | 20,709,000  |             |             |             | 31,073,000  |            
|                                                                                              |                                                                                                                                               |                      |                           |             |             |            
|                                                                                              |                                                                                                                                               | Total current assets |                           |             | 308,444,000 |             |             |             | 341,947,000 |            
|                                                                                              |                                                                                                                                               |                      |                           |             |             |            
|PROPERTY (Note 2):                                                                            |                                                                                                                                               |                      |                           |             |             |             |             |            
|                                                                                              | Land, buildings, and improvements                                                                                                             |                      |                           | 118,732,000 |             |             |             | 103,903,000 |            
|                                                                                              | Machinery and equipment                                                                                                                       |                      |                           | 158,654,000 |             |             |             | 145,001,000 |            
|                                                                                              | Construction-in-progress                                                                                                                      |                      |                           | 6,823,000   |             |             |             | 13,692,000  |            
|                                                                                              | Other property                                                                                                                                |                      |                           | 13,916,000  |             |             |             | 13,856,000  |            
|                                                                                              |                                                                                                                                               |                      |                           |             |             |            
|                                                                                              |                                                                                                                                               |                      | Total                     |             |             | 298,125,000 |             |             |             | 276,452,000 | 
|                                                                                              | Less accumulated depreciation and amortization                                                                                                |                      |                           | 129,206,000 |             |             |             | 118,074,000 |            
|                                                                                              |                                                                                                                                               |                      |                           |             |             |            
|                                                                                              |                                                                                                                                               |                      | Property  net            |             |             | 168,919,000 |             |             |             | 158,378,000 | 
|GOODWILL (NOTE 2)                                                                             |                                                                                                                                               |                      | 43,156,000                |             |             |             | 43,156,000  |            
|TRADEMARKS (NOTE 2)                                                                           |                                                                                                                                               |                      | 19,318,000                |             |             |             | 19,318,000  |            
|DEFERRED COMPENSATION PLAN TRUST (Note 5)                                                     |                                                                                                                                               |                      | 23,307,000                |             |             |             | 15,626,000  |            
|OTHER ASSETS  Net of amortization of $3,775,000 and
    $3,670,000 at 2005 and 2004 (Note 2) |                                                                                                                                               |                      | 4,108,000                 |             |             |             | 4,319,000   |            
|                                                                                              |                                                                                                                                               |                      |                           |             |             |            
|TOTAL                                                                                         |                                                                                                                                               | $                    | 567,252,000               |             |             | $           | 582,744,000 |            
|                                                                                              |                                                                                                                                               |                      |                           |             |             |            
|                                                                                             
|LIABILITIES AND MEMBERS CAPITAL                                                             
|CURRENT LIABILITIES:                                                                          |                                                                                                                                               |                      |                           |             |             |             |             |            
|                                                                                              | Accounts payable (Note 4)                                                                                                                     |                      | $                         | 74,137,000  |             |             | $           | 81,199,000  |            
|                                                                                              | Accrued liabilities (Note 4)                                                                                                                  |                      |                           | 50,896,000  |             |             |             | 53,325,000  |            
|                                                                                              | Dividends payable                                                                                                                             |                      |                           | 14,571,000  |             |             |             | 16,091,000  |            
|                                                                                              | Current portion of long-term debt (Note 3)                                                                                                    |                      |                           | 2,987,000   |             |             |             | 2,804,000   |            
|                                                                                              | Derivative contract liability (Notes 2 and 4)                                                                                                 |                      |                           | 8,839,000   |             |             |             | 21,900,000  |            
|                                                                                              |                                                                                                                                               |                      | Total current liabilities |             |             | 151,430,000 |             |             |             | 175,319,000 | 
|LONG-TERM DEBT (Note 3)                                                                       |                                                                                                                                               |                      | 192,165,000               |             |             |             | 195,152,000 |            
|DEFERRED COMPENSATION OBLIGATIONS (Note 5)                                                    |                                                                                                                                               |                      | 27,653,000                |             |             |             | 26,513,000  |            
|                                                                                              |                                                                                                                                               |                      | Total liabilities         |             |             | 371,248,000 |             |             |             | 396,984,000 | 
|COMMITMENTS AND CONTINGENCIES (Notes 5 and 6)
    MEMBERS CAPITAL                            |                                                                                                                                               |                      | 196,004,000               |             |             |             | 185,760,000 |            
|                                                                                              |                                                                                                                                               |                      |                           |             |             |            
|TOTAL                                                                                         |                                                                                                                                               | $                    | 567,252,000               |             |             | $           | 582,744,000 |            
|                                                                                              |                                                                                                                                               |                      |                           |             |             |            



F-34



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##### Table of Contents



VENTURA FOODS, LLC


STATEMENTS OF INCOME


|                                |                                                      |                          |               |             |             |   |               |             |             |   |               |             |             | 
|------------------------------- | ---------------------------------------------------- | ------------------------ | ------------- | ----------- | ----------- | - | ------------- | ----------- | ----------- | - | ------------- | ----------- | ----------- | 
|                                |                                                      | Years Ended March 31,    |              
|                                |                                                      |                          |              
|                                |                                                      | 2005                     |               |             | 2004        |   |               | 2003        |            
|                                |                                                      |                          |               |             |             |   |               |             |            
|Net sales (note 2)              |                                                      | $                        | 1,453,661,000 |             |             | $ | 1,312,356,000 |             |             | $ | 1,096,425,000 |            
|Cost of goods sold (note 2)     |                                                      |                          | 1,292,803,000 |             |             |   | 1,126,761,000 |             |             |   | 915,432,000   |            
|                                |                                                      |                          |               |             |             |   |               |             |            
|Gross profit                    |                                                      |                          | 160,858,000   |             |             |   | 185,595,000   |             |             |   | 180,993,000   |            
|                                |                                                      |                          |               |             |             |   |               |             |            
|Operating expenses:             |                                                      |                          |               |             |             |   |               |             |             |   |               |            
|                                | Selling, general, and administrative (notes 2 and 5) |                          |               | 115,301,000 |             |   |               | 109,096,000 |             |   |               | 102,694,000 |            
|                                | Amortization of intangibles (note 2)                 |                          |               | 60,000      |             |   |               | 83,000      |             |   |               | 223,000     |            
|                                |                                                      |                          |               |             |             |   |               |             |            
|                                |                                                      | Total operating expenses |               |             | 115,361,000 |   |               |             | 109,179,000 |   |               |             | 102,917,000 | 
|                                |                                                      |                          |               |             |             |   |               |             |            
|Operating income                |                                                      |                          | 45,497,000    |             |             |   | 76,416,000    |             |             |   | 78,076,000    |            
|Interest expense  net (note 3) |                                                      |                          | 10,366,000    |             |             |   | 8,640,000     |             |             |   | 6,679,000     |            
|Other expense (income)          |                                                      |                          | 2,267,000     |             |             |   | (1,466,000    | )           |             |   | 839,000       |            
|                                |                                                      |                          |               |             |             |   |               |             |            
|Net income                      |                                                      | $                        | 32,864,000    |             |             | $ | 69,242,000    |             |             | $ | 70,558,000    |            
|                                |                                                      |                          |               |             |             |   |               |             |            



F-35



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##### Table of Contents



VENTURA FOODS, LLC


STATEMENTS OF MEMBERS CAPITAL


|                         |            |                                            |            |             |          |   |            |             |   |   |             |             |  
|------------------------ | ---------- | ------------------------------------------ | ---------- | ----------- | -------- | - | ---------- | ----------- | - | - | ----------- | ----------- | -
|                         |            | Years Ended March 31, 2005, 2004, and 2003 |           
|                         |            |                                            |           
|                         |            | Wilsey                                     |            |             |         
|                         |            | Foods, Inc.                                |            |             | CHS Inc. |   |            | Total       |  
|                         |            |                                            |            |             |          |   |            |             |  
|Balance  March 31, 2002 |            | $                                          | 75,358,000 |             |          | $ | 75,358,000 |             |   | $ | 150,716,000 |            
|                         | Net income |                                            |            | 35,279,000  |          |   |            | 35,279,000  |   |   |             | 70,558,000  |  
|                         | Dividends  |                                            |            | (27,391,000 | )        |   |            | (27,391,000 | ) |   |             | (54,782,000 | )
|                         |            |                                            |            |             |          |   |            |             |  
|Balance  March 31, 2003 |            |                                            | 83,246,000 |             |          |   | 83,246,000 |             |   |   | 166,492,000 |            
|                         | Net income |                                            |            | 34,621,000  |          |   |            | 34,621,000  |   |   |             | 69,242,000  |  
|                         | Dividends  |                                            |            | (24,987,000 | )        |   |            | (24,987,000 | ) |   |             | (49,974,000 | )
|                         |            |                                            |            |             |          |   |            |             |  
|Balance  March 31, 2004 |            |                                            | 92,880,000 |             |          |   | 92,880,000 |             |   |   | 185,760,000 |            
|                         | Net income |                                            |            | 16,432,000  |          |   |            | 16,432,000  |   |   |             | 32,864,000  |  
|                         | Dividends  |                                            |            | (11,310,000 | )        |   |            | (11,310,000 | ) |   |             | (22,620,000 | )
|                         |            |                                            |            |             |          |   |            |             |  
|Balance  March 31, 2005 |            | $                                          | 98,002,000 |             |          | $ | 98,002,000 |             |   | $ | 196,004,000 |            
|                         |            |                                            |            |             |          |   |            |             |  



F-36



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##### Table of Contents



VENTURA FOODS, LLC


STATEMENTS OF CASH FLOWS


|                                                                                                |                                                                                       |                                              |                                           |                                                     |            |            |             |             |            |             |             |             |            |             |             |  
|----------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------- | -------------------------------------------- | ----------------------------------------- | --------------------------------------------------- | ---------- | ---------- | ----------- | ----------- | ---------- | ----------- | ----------- | ----------- | ---------- | ----------- | ----------- | -
|                                                                                                |                                                                                       | Years Ended March 31,                        |                                          
|                                                                                                |                                                                                       |                                              |                                          
|                                                                                                |                                                                                       | 2005                                         |                                           |                                                     | 2004       |            |             | 2003        |           
|                                                                                                |                                                                                       |                                              |                                           |                                                     |            |            |             |             |           
|Cash flows from operating activities:                                                           |                                                                                       |                                              |                                           |                                                     |            |            |             |             |            |             |             |            
|                                                                                                | Net income                                                                            |                                              | $                                         | 32,864,000                                          |            |            | $           | 69,242,000  |            |             | $           | 70,558,000  |           
|                                                                                                | Adjustments to reconcile net income to net cash provided by
    operating activities: |                                              |                                           |                                                     |            |            |             |             |            |             |             |             |           
|                                                                                                |                                                                                       | Depreciation and amortization                |                                           |                                                     | 13,956,000 |            |             |             | 13,437,000 |             |             |             | 12,416,000 |            
|                                                                                                |                                                                                       | Amortization of intangibles                  |                                           |                                                     | 60,000     |            |             |             | 83,000     |             |             |             | 223,000    |            
|                                                                                                |                                                                                       | Long-term incentive expense (Note 5)         |                                           |                                                     | 802,000    |            |             |             | 3,621,000  |             |             |             | 4,263,000  |            
|                                                                                                |                                                                                       | Write-off of acquired assets                 |                                           |                                                     | 3,166,000  |            |             |             | 984,000    |             |             |             |            |            
|                                                                                                |                                                                                       | Deferred rent                                |                                           |                                                     | 69,000     |            |             |             | 1,095,000  |             |             |             | 515,000    |            
|                                                                                                |                                                                                       | Loss on disposal of assets                   |                                           |                                                     | 561,000    |            |             |             | 646,000    |             |             |             | 872,000    |            
|                                                                                                |                                                                                       | Derivative contract asset                    |                                           |                                                     | (2,697,000 | )          |             |             | (2,632,000 | )           |             |             | 2,637,000  |            
|                                                                                                |                                                                                       | Changes in operating assets and liabilities: |                                           |                                                     |            |            |             |             |            |             |             |             |            |            
|                                                                                                |                                                                                       |                                              | Trade receivables                         |                                                     |            | 7,984,000  |             |             |            | (15,564,000 | )           |             |            | (7,174,000  | )          
|                                                                                                |                                                                                       |                                              | Inventories                               |                                                     |            | 15,576,000 |             |             |            | (16,239,000 | )           |             |            | (29,567,000 | )          
|                                                                                                |                                                                                       |                                              | Prepaid expenses and other current assets |                                                     |            | (553,000   | )           |             |            | 1,169,000   |             |             |            | (3,639,000  | )          
|                                                                                                |                                                                                       |                                              | Accounts payable                          |                                                     |            | (7,408,000 | )           |             |            | 28,347,000  |             |             |            | 12,766,000  |            
|                                                                                                |                                                                                       |                                              | Accrued liabilities                       |                                                     |            | (4,945,000 | )           |             |            | 15,246,000  |             |             |            | 10,685,000  |            
|                                                                                                |                                                                                       |                                              | Deferred compensation obligations         |                                                     |            | 901,000    |             |             |            | 344,000     |             |             |            | 552,000     |            
|                                                                                                |                                                                                       |                                              | Due from (to) affiliates                  |                                                     |            |            |             |             |            | 309,000     |             |             |            | (309,000    | )          
|                                                                                                |                                                                                       |                                              |                                           |                                                     |            |            |             |             |           
|                                                                                                |                                                                                       |                                              |                                           | Net cash provided by operating activities           |            |            | 60,336,000  |             |            |             | 100,088,000 |             |            |             | 74,798,000  |  
|                                                                                                |                                                                                       |                                              |                                           |                                                     |            |            |             |             |           
|Cash flows from investing activities:                                                           |                                                                                       |                                              |                                           |                                                     |            |            |             |             |            |             |             |            
|                                                                                                | Business acquisition (net of cash of $152,000)                                        |                                              |                                           | (7,518,000                                          | )          |            |             |             |            |             |             |             |           
|                                                                                                | Acquisition of property                                                               |                                              |                                           | (20,606,000                                         | )          |            |             | (19,698,000 | )          |             |             | (16,062,000 | )         
|                                                                                                | Proceeds from sale of assets                                                          |                                              |                                           | 34,000                                              |            |            |             | 58,000      |            |             |             | 1,845,000   |           
|                                                                                                | Investment in rabbi trust                                                             |                                              |                                           | (8,243,000                                          | )          |            |             |             |            |             |             |             |           
|                                                                                                | Other assets                                                                          |                                              |                                           | (89,000                                             | )          |            |             | (569,000    | )          |             |             | (1,332,000  | )         
|                                                                                                |                                                                                       |                                              |                                           |                                                     |            |            |             |             |           
|                                                                                                |                                                                                       |                                              |                                           | Net cash used in investing activities               |            |            | (36,422,000 | )           |            |             | (20,209,000 | )           |            |             | (15,549,000 | )
|                                                                                                |                                                                                       |                                              |                                           |                                                     |            |            |             |             |           
|Cash flows from financing activities:                                                           |                                                                                       |                                              |                                           |                                                     |            |            |             |             |            |             |             |            
|                                                                                                | Borrowing of long-term debt                                                           |                                              |                                           |                                                     |            |            |             | 175,000,000 |            |             |             |             |           
|                                                                                                | Repayment of long-term debt                                                           |                                              |                                           | (2,804,000                                          | )          |            |             | (74,223,000 | )          |             |             | (12,758,000 | )         
|                                                                                                | Net (payments on) borrowings from line of credit                                      |                                              |                                           |                                                     |            |            |             | (20,500,000 | )          |             |             | 12,500,000  |           
|                                                                                                | Payment to Wilsey Foods, Inc. (Note 1)                                                |                                              |                                           |                                                     |            |            |             |             |            |             |             | (491,000    | )         
|                                                                                                | Bank overdraft (Note 2)                                                               |                                              |                                           | 346,000                                             |            |            |             | (5,543,000  | )          |             |             | (6,416,000  | )         
|                                                                                                | Dividends paid                                                                        |                                              |                                           | (24,140,000                                         | )          |            |             | (39,630,000 | )          |             |             | (58,584,000 | )         
|                                                                                                |                                                                                       |                                              |                                           |                                                     |            |            |             |             |           
|                                                                                                |                                                                                       |                                              |                                           | Net cash (used in) provided by financing activities |            |            | (26,598,000 | )           |            |             | 35,104,000  |             |            |             | (65,749,000 | )
|                                                                                                |                                                                                       |                                              |                                           |                                                     |            |            |             |             |           
|Net (decrease) increase in cash and cash equivalents                                            |                                                                                       |                                              | (2,684,000                                | )                                                   |            |            | 114,983,000 |             |            |             | (6,500,000  | )          
|Cash and cash equivalents  beginning of period                                                 |                                                                                       |                                              | 117,783,000                               |                                                     |            |            | 2,800,000   |             |            |             | 9,300,000   |            
|                                                                                                |                                                                                       |                                              |                                           |                                                     |            |            |             |             |           
|Cash and cash equivalents  end of period                                                       |                                                                                       | $                                            | 115,099,000                               |                                                     |            | $          | 117,783,000 |             |            | $           | 2,800,000   |            
|                                                                                                |                                                                                       |                                              |                                           |                                                     |            |            |             |             |           
|Supplemental disclosure of cash flow information 
    cash paid during the period for interest |                                                                                       | $                                            | 11,629,000                                |                                                     |            | $          | 6,250,000   |             |            | $           | 7,183,000   |            
|                                                                                                |                                                                                       |                                              |                                           |                                                     |            |            |             |             |           



F-37



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##### Table of Contents



VENTURA FOODS, LLC


NOTES TO FINANCIAL STATEMENTS


Years Ended March 31, 2005, 2004, and 2003




|   |                
|-- | ---------------
|1. | General Matters









|   |                    
|-- | -------------------
|2. | Accounting Policies

Cash and Cash Equivalents


Inventories


|                         |  |      |            |  |      |   |             | 
|------------------------ |  | ---- | ---------- |  | ---- | - | ----------- | 
|                         |  | 2005 |            |  | 2004 |  
|                         |  |      |            |  |      |  
|Bulk oil                 |  | $    | 30,364,000 |  |      | $ | 46,682,000  | 
|Finished goods           |  |      | 39,988,000 |  |      |   | 40,948,000  | 
|Ingredients and supplies |  |      | 24,171,000 |  |      |   | 20,975,000  | 
|                         |  |      |            |  |      |  
|Total                    |  | $    | 94,523,000 |  |      | $ | 108,605,000 | 
|                         |  |      |            |  |      |  



Derivative Financial Instruments




F-38



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##### Table of Contents



VENTURA FOODS, LLC


NOTES TO FINANCIAL STATEMENTS  (Continued)


Accounting for Derivative Instruments and Hedging
Activities,




|                                  |  |        |           |            |             |   |         |  
|--------------------------------- |  | ------ | --------- | ---------- | ----------- | - | ------- | -
|                                  |  |        |           | Net        |            
|                                  |  |        |           | Unrealized |            
|Forward Contracts and Commitments |  | Pounds |           |            | Gain (Loss) |  
|                                  |  |        |           |            |             |  
|March 31, 2005                    |  |        |           |            |             |   |         |  
|Forward purchases                 |  |        | 306,300   |            |             | $ | 11,154  |  
|Forward sales                     |  |        | 416,900   |            |             |   | (3,563  | )
|Basis purchase                    |  |        | 284,700   |            |             |   | 2,115   |  
|Basis sales                       |  |        | 32,100    |            |             |   | (22     | )
|Futures contracts                 |  |        | 152,600   |            |             |   | 2,186   |  
|                                  |  |        |           |            |             |  
|                                  |  |        | 1,192,600 |            |             | $ | 11,870  |  
|                                  |  |        |           |            |             |  
|                                 
|March 31, 2004                    |  |        |           |            |             |   |         |  
|Forward purchases                 |  |        | 412,000   |            |             | $ | 12,164  |  
|Forward sales                     |  |        | 630,000   |            |             |   | (19,493 | )
|Basis purchase                    |  |        | 810,600   |            |             |   | 6,462   |  
|Basis sales                       |  |        | 65,100    |            |             |   | (185    | )
|Futures contracts                 |  |        | 421,400   |            |             |   | 10,225  |  
|                                  |  |        |           |            |             |  
|                                  |  |        | 2,339,100 |            |             | $ | 9,173   |  
|                                  |  |        |           |            |             |  





Property and Depreciation


|                        |  |  |              | 
|----------------------- |  |  | ------------ | 
|Buildings               |  |  | 40 years     | 
|Leasehold improvements  |  |  | 3-19 years   | 
|Machinery and equipment |  |  | 10-25  years | 
|Other property          |  |  | 3-20 years   | 

Fair Value of Financial Instruments




| |                                                                                                                                                                                                        
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Accounts Receivable and Accounts Payable  The
    carrying amounts approximate fair value due to the short
    maturities of these instruments.                                                       
|
| | Long-Term Debt  The fair value of long-term
    fixed rate debt is estimated based upon prevailing market
    interest rates available to the Company. The Company estimates
    the fair value of the

F-39



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##### Table of Contents



VENTURA FOODS, LLC


NOTES TO FINANCIAL STATEMENTS  (Continued)




| |                                                                                                                                                                                                                                
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | $20,152,000 6.55% fixed rate debt as of March 31, 2005
    to be $19,247,000. The Company estimates the fair value of the
    $175,000,000 senior notes fixed rate debt as of March 31,
    2005 to approximate carrying value.
|
| | Futures Contracts  The fair value of futures
    contracts (used for hedging purposes) is determined from quotes
    listed principally on the Chicago Board of Trade.                                                        

Concentration of Credit Risk




Marketable Securities


Goodwill and Trademarks Goodwill and Other Intangible Assets.




Impairment of Long-Lived Assets


Advertising Costs


Income Taxes


Revenue Recognition


F-40



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##### Table of Contents



VENTURA FOODS, LLC


NOTES TO FINANCIAL STATEMENTS  (Continued)




Use of Estimates


Recent Accounting Pronouncements Inventory Costs,
an amendment of ARB No. 43, Chapter 4. Inventory Pricing,


Reclassifications




|   |                                  
|-- | ---------------------------------
|3. | Line of Credit and Long-Term Debt

Line of Credit


Long-Term Debt




F-41



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##### Table of Contents



VENTURA FOODS, LLC


NOTES TO FINANCIAL STATEMENTS  (Continued)








|                     |  |   |             | 
|-------------------- |  | - | ----------- | 
|2006                 |  | $ | 2,987,000   | 
|2007                 |  |   | 3,187,000   | 
|2008                 |  |   | 3,401,000   | 
|2009                 |  |   | 3,629,000   | 
|2010                 |  |   | 3,873,000   | 
|Thereafter           |  |   | 178,075,000 | 
|                     |  |   |            
|Total                |  |   | 195,152,000 | 
|Less current portion |  |   | 2,987,000   | 
|                     |  |   |            
|Long-term debt       |  | $ | 192,165,000 | 
|                     |  |   |            



|   |                             
|-- | ----------------------------
|4. | Transactions with Affiliates











|   |                       
|-- | ----------------------
|5. | Employee Benefit Plans



F-42



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##### Table of Contents



VENTURA FOODS, LLC


NOTES TO FINANCIAL STATEMENTS  (Continued)














|                              |  |          |      |   |      |  |     |      |  |  |     |  
|----------------------------- |  | -------- | ---- | - | ---- |  | --- | ---- |  |  | --- | -
|                              |  | March 31 |     
|                              |  |          |     
|                              |  | 2005     |      |   | 2004 |  |     | 2003 | 
|                              |  |          |      |   |      |  |     |      | 
|Discount rate                 |  |          | 5.75 | % |      |  | 6.0 | %    |  |  | 6.0 | %
|Rate of compensation increase |  |          | 3.0  |   |      |  | 3.0 |      |  |  | 3.0 |  



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##### Table of Contents



VENTURA FOODS, LLC


NOTES TO FINANCIAL STATEMENTS  (Continued)




|   |                              
|-- | -----------------------------
|6. | Commitments and Contingencies



| |                                                                                                                                                     
| | ----------------------------------------------------------------------------------------------------------------------------------------------------
| | Future minimum annual payments under noncancelable operating
    leases with lease terms in excess of one year are as follows at
    March 31, 2005:

|           |  |            |            |          |        |   |           |            |  |   |            | 
|---------- |  | ---------- | ---------- | -------- | ------ | - | --------- | ---------- |  | - | ---------- | 
|           |  |            |            | Sublease |        |   | Net Lease |           
|           |  | Gross Rent |            |          | Income |   |           | Commitment | 
|           |  |            |            |          |        |   |           |            | 
|2006       |  | $          | 7,338,000  |          |        | $ | 942,000   |            |  | $ | 6,396,000  | 
|2007       |  |            | 5,679,000  |          |        |   | 942,000   |            |  |   | 4,737,000  | 
|2008       |  |            | 4,603,000  |          |        |   | 707,000   |            |  |   | 3,896,000  | 
|2009       |  |            | 3,442,000  |          |        |   |           |            |  |   | 3,442,000  | 
|2010       |  |            | 3,234,000  |          |        |   |           |            |  |   | 3,234,000  | 
|Thereafter |  |            | 8,885,000  |          |        |   |           |            |  |   | 8,885,000  | 
|           |  |            |            |          |        |   |           |            | 
|Total      |  | $          | 33,181,000 |          |        | $ | 2,591,000 |            |  | $ | 30,590,000 | 
|           |  |            |            |          |        |   |           |            | 







|   |            
|-- | -----------
|7. | Acquisition





|                          |  |   |           | 
|------------------------- |  | - | --------- | 
|Cash                      |  | $ | 152,000   | 
|Accounts receivable       |  |   | 1,036,000 | 
|Inventory                 |  |   | 1,494,000 | 
|Other current assets      |  |   | 270,000   | 
|Property and equipment    |  |   | 4,487,000 | 
|                          |  |   |          
|Total assets acquired     |  |   | 7,439,000 | 
|Less: Accrued liabilities |  |   | 2,447,000 | 
|                          |  |   |          
|Net assets acquired       |  | $ | 4,992,000 | 
|                          |  |   |          



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