HEINZ HJ FINANCE CO - 10-K Annual Report

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the fiscal year ended April 30, 2003

or

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the transition period from ___________ to ___________

Commission File Number 333-85064

H. J. HEINZ FINANCE COMPANY
(Exact name of registrant as specified in its charter)

PENNSYLVANIA 82-0382406
(State of Incorporation) (I.R.S. Employer Identification No.)

600 GRANT STREET, PITTSBURGH, PENNSYLVANIA 15219
(Address of principal executive offices) (Zip Code)

412-456-5700
(Registrant's telephone number)

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

None.

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

None.

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

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

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). Yes _ No X

All of the outstanding shares of the registrant's common stock are owned by
H. J. Heinz Company.

DOCUMENTS INCORPORATED BY REFERENCE

None

PART I

ITEM 1. BUSINESS.

GENERAL

H. J. Heinz Finance Company has been a direct or indirect subsidiary of
H.J. Heinz Company ("Heinz") since 1983. H. J. Heinz Finance Company and its
subsidiaries, collectively referred to as "Heinz Finance," had no significant
operating history until Heinz completed a corporate reorganization in the United
States on May 3, 2001. The reorganization was designed to simplify Heinz's U.S.
corporate structure, consolidate operations and establish centers of excellence
for the management of the U.S. trademarks and for U.S. treasury functions. As a
result of the reorganization, all of the U.S. business operations that had
historically been conducted by Heinz through its Heinz USA division and eight
subsidiary corporations are now conducted by Heinz Finance.

Since May 3, 2001, we have been engaged in the business of acquiring,
holding and financing equity and debt investments in subsidiaries that own and
operate Heinz's historical U.S. businesses, which manufacture, market,
distribute and sell food in the United States. Our most significant asset is our
ownership interests in H. J. Heinz Company, L.P. ("Heinz LP"), a Delaware
limited partnership formed on October 9, 2000. Heinz LP has two classes of
limited partnership interests. Heinz directly owns the Class A interests in
Heinz LP. H. J. Heinz Finance Company, directly and through wholly-owned
subsidiaries, owns the Class B interests in Heinz LP. Heinz Management Company
("HMC") is the managing general partner of Heinz LP and employs its salaried
personnel. Heinz LP reimburses HMC for all its management costs.

DESCRIPTION OF THE BUSINESS

We conduct our food business through two segments, Heinz North America and
U.S. Frozen. Segment information is set forth in this report on pages 43 through
45 in Note 15, "Segment Data" in Item 8 -- "Financial Statements and
Supplementary Data."

PRODUCTS AND MARKETS

Our products are manufactured and packaged to provide safe, wholesome foods
for consumers, foodservice and institutional customers. Many products are
prepared from recipes developed in our research laboratories and experimental
kitchens. Ingredients are carefully selected, washed, trimmed, inspected and
passed on to modern factory kitchens where they are processed, after which the
finished product is filled automatically into containers of glass, metal,
plastic, paper or fiberboard which are then closed, processed, labeled and cased
for market. Finished products are processed by sterilization, homogenization,
chilling, freezing, pickling, drying, freeze drying, baking or extruding.
Certain finished products and seasonal raw materials are aseptically packed into
sterile containers after in-line sterilization. Although crops constituting some
of our raw food ingredients are harvested on a seasonal basis, most of our
products are produced throughout the year.

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The primary brands and products marketed and sold by us include, by
segment, the following:

Heinz North America....................... Heinz tomato ketchup, mustard and sauces
Heinz Easy Squeeze! and E-Z Squirt ketchup
Classico pasta sauce
Chef Francisco and Quality Chef soups
Yoshida sauces
Bell'Orto and Bella Rosa tomato products
Jack Daniels* sauces
Wyler's bouillon and soups
Dianne's desserts
U.S. Frozen............................... Ore-Ida potato products
Bagel Bites snacks
Boston Market* HomeStyle meals
Smart Ones meals
Rosetto frozen pasta
Weight Watchers*
Domani frozen pasta
Hot Bites snacks
Poppers appetizers
T.G.I. Friday's* appetizers
Delimex snacks

- ---------------

* Used under license from unrelated parties.

TRADEMARKS, PATENTS AND LICENSES

We own or license the trademarks used in connection with our products from
related and unrelated parties. Our most significant trademarks are "Heinz",
"Smart Ones" and "Ore-Ida" which we license from a related party. The trademarks
that we license from unrelated parties are under long-term contracts and are
important to our business although are individually immaterial.

We have participated in the development of certain food processing
equipment, some of which is patented. We regard these patents as important but
do not consider any one or group of them to be materially important to our
business as a whole.

COMPETITION

Our products are sold under highly competitive conditions, with many large
and small competitors. We regard our principal competition to be other
manufacturers of processed foods, including branded, retail products,
foodservice products and private label products, that compete with us for
consumer preference, distribution, shelf space and merchandising support. We
compete primarily on the basis of product quality, brand recognition, brand
loyalty and consumer value.

CUSTOMERS

Our products are sold through our own sales force and through independent
brokers, agents and distributors to chain, wholesale, cooperative and
independent grocery accounts, pharmacies, mass merchants, club stores,
foodservice distributors and institutions, including hotels, restaurants and
certain government agencies.

Our retail sales force consists of approximately 170 employees and seven
teams that are dedicated to our key customers. We use two national brokers in
connection with our retail sales efforts. In addition, we have a dedicated
direct sales force for most of our large foodservice customers and service
smaller ones through distributors.

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For Fiscal 2003, one customer, Wal-Mart Stores, Inc., represented more than
10% of our sales. We closely monitor the credit risk associated with our
customers and to date have never experienced significant losses.

PROPERTIES

We operate the following factories, distribution centers and other
properties involved in manufacturing our products:

We also own or lease office space, warehouses, distribution centers and
research and other facilities. Our food processing plants and principal
properties are in good condition and are satisfactory for the purposes for which
they are being utilized.

EMPLOYEES

On a full-time basis, as of December 21, 2002, approximately 9,900 people
were employed as part of our business.

REGULATORY

Compliance with the provisions of national, state and local environmental
laws and regulations has not had a material effect upon our capital
expenditures, earnings or competitive position. Our estimated capital
expenditures for environmental control facilities for the remainder of Fiscal
2004 and the succeeding fiscal year are not material and are not expected to
materially affect either our earnings or competitive position.

Our factories are subject to inspections by various governmental agencies,
including the United States Department of Agriculture and the Occupational
Safety and Health Administration, and our products must comply with all the
applicable laws, including food and drug laws, such as the Federal Food and
Cosmetic Act of 1938, as amended, and the Federal Fair Packaging or Labeling Act
of 1966, as amended, of the jurisdictions in which they are manufactured and
marketed.

LEGAL PROCEEDINGS

Certain suits and claims have been filed against Heinz Finance and have not
been finally adjudicated. These suits and claims when finally concluded and
determined, in the opinion of management, based upon the information that it
presently possesses, will not have a material adverse effect on Heinz Finance's
consolidated and combined financial position, results of operations or
liquidity.

CAUTIONARY STATEMENT RELEVANT TO FORWARD-LOOKING INFORMATION

The Private Securities Litigation Reform Act of 1995 (the "Act") provides a
safe harbor for forward-looking statements made by or on behalf of Heinz
Finance. Heinz Finance and its representatives may from time to time make
written or oral forward-looking statements, including statements contained in
Heinz Finance's filings with the Securities and Exchange Commission. These
forward-looking statements are based on management's views and assumptions of
future events and financial performance. The words or phrases "will likely
result," "are expected to," "will continue," "is anticipated," "should,"
"estimate," "project," "target," "goal," "outlook" or similar expressions
identify "forward-looking statements" within the meaning of the Act.

In order to comply with the terms of the safe harbor, Heinz Finance notes
that a variety of factors could cause Heinz Finance's actual results and
experience to differ materially from the anticipated results or other
expectations expressed in Heinz Finance's forward-looking statements. These
forward-looking statements are uncertain. The risks and uncertainties that may
affect operations and

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financial performance and other activities, some of which may be beyond the
control of Heinz Finance, include the following:

- Changes in laws and regulations, including changes in food and drug laws,
accounting standards, taxation requirements (including tax rate changes,
new tax laws and revised tax law interpretations) and environmental laws;

- Competitive product and pricing pressures and Heinz Finance's ability to
gain or maintain share of sales as a result of actions by competitors and
others;

- Fluctuations in the cost and availability of raw materials, and the
ability to maintain favorable supplier arrangements and relationships;

- The impact of higher energy costs and other factors affecting the cost of
producing, transporting and distributing Heinz Finance's products;

- Heinz Finance's ability to generate sufficient cash flows to support
capital expenditures, debt repayment and general operating activities;

- The inherent risks in the marketplace associated with new product or
packaging introductions, including uncertainties about trade and consumer
acceptance;

- Heinz Finance's ability to achieve sales and earnings forecasts, which
are based on assumptions about sales volume, product mix and other items;

- Heinz Finance's ability to integrate acquisitions and joint ventures into
its existing operations and the availability of new acquisition and joint
venture opportunities and the success of divestitures and other business
combinations;

- Heinz Finance's ability to achieve its cost savings objectives, including
any restructuring programs, SKU rationalization programs and its working
capital initiatives;

- The possibility of increased pension expense and contributions resulting
from continued decline in stock market returns;

- Changes in estimates in critical accounting judgements;

- Interest rate fluctuations and other capital market conditions;

- The effectiveness of Heinz Finance's advertising, marketing and
promotional programs;

- Weather conditions, which could impact demand for Heinz Finance's
products and the supply and cost of raw materials;

- The impact of e-commerce and e-procurement, supply chain efficiency and
cash flow initiatives;

- Heinz Finance's ability to maintain its profit margin in the face of a
consolidating retail environment;

- The impact of U.S. industry conditions, including the effect of the
economic downturn in the food industry and the foodservice business in
particular; and

- Heinz Finance's ability to offset the reduction in volume and revenue
resulting from participation in categories experiencing declining
consumption rates.

The foregoing list of important factors is not exclusive. The
forward-looking statements are and will be based on management's then current
views and assumptions regarding future events and operating performance and
speak only as of their dates. Heinz Finance undertakes no obligation to publicly
update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise.

ITEM 2. PROPERTIES.

See table in Item 1.

ITEM 3. LEGAL PROCEEDINGS.

None.

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

Heinz Finance did not submit any matters to a vote of security holders
during the fourth quarter of Fiscal 2003.

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DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Our Board of Directors is composed of four members, one of whom is an
Independent Director. An "Independent Director" is a director who is not a
current officer or employee of Heinz Finance, Heinz or any affiliate of Heinz or
of any other person or persons that, in the, aggregate, own or owns more than
50% of the outstanding common stock of Heinz Finance and who is elected by
holders of Heinz Finance's outstanding Series A Preferred Shares and the holders
of any Heinz Finance stock expressly being designated by us as being at parity
with the Series A Preferred Shares, "Parity Securities," with like voting
rights, collectively, the "Voting Parity Securities." Andrew L. Stidd, the
initial and current Independent Director, was named in the Certificate of
Designation for the Series A Preferred Shares.

Our directors will serve until resignation or removal. There is no current
intention to alter the number of directors comprising the Board of Directors,
and our Bylaws provide that the Board of Directors may not comprise more than
nine members.

Our directors and executive officers are:

Each director, other than the Independent Director, is an officer or
employee of Heinz or an affiliate of Heinz.

COMPENSATION OF DIRECTORS

We pay fees to our Independent Director for his service as a director. The
Independent Director (and any subsequent additional Independent Director) is
entitled to receive annual compensation of $3,500 plus reimbursement of expenses
for attendance at each meeting of the Board of Directors. We do not pay fees to
directors who are not Independent Directors.

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PART II

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

All of the outstanding common shares of Heinz Finance are owned by Heinz.

ITEM 6. SELECTED FINANCIAL DATA.

The following table presents selected consolidated and combined financial
data for Heinz Finance and its predecessor, which consisted of Heinz's U.S.
business operations, the ("U.S. Group"), for each of the five fiscal years 1999
through 2003. All amounts are in thousands.

Fiscal Year Ended
-----------------------------------------------------------------
April 30, May 1, May 2, May 3, April 28,
2003 2002 2001 2000 1999
(52 Weeks) (52 Weeks) (52 Weeks) (53 Weeks) (52 Weeks)(2)
---------- ---------- ---------- ---------- -------------

Sales(1)(2).......... $3,162,335 $2,833,517 $2,806,020 $2,526,238 $4,687,123
Interest
expense(2)......... 146,492 142,920 20,712 5,027 6,266
Income from
continuing
operations before
cumulative effect
of accounting
changes(2)......... 54,209 109,421 277,271 331,350 432,757
Short-term debt with
related parties and
current portion of
long-term debt..... 84,454 583,514 29,833 2,998 51,384
Long-term debt,
exclusive of
current
portion(3)......... 3,981,145 3,935,925 23,932 33,071 25,594
Preferred stock...... 325,000 325,000 -- -- --
Total assets......... 5,565,685 7,484,449 5,601,491 5,068,456 4,588,108

(1) Sales for 2003, 2002, 2001 and 2000 reflect the adoption of the new
Emerging Issues Task Force ("EITF") guidelines relating to the
classification of consideration from a vendor to a purchaser of a
vendor's products, including both customers and consumers. Sales for
1999 have not been adjusted to reflect the new EITF reclassification as
it is impracticable to do so.

(2) Amounts for 2003, 2002, 2001, and 2000 exclude the operating results
related to the businesses spun off to Del Monte which have been treated
as discontinued operations. See Item 7 -- "Management's Discussion and
Analysis of Financial Condition and Results of Operations" for further
discussion of the Del Monte Foods Company ("Del Monte") transaction.
These amounts for 1999 have not been adjusted to reflect discontinued
operations as it is impracticable to do so.

(3) Long-term debt, exclusive of current portion, includes $294.8 million
and $23.6 million of hedge accounting adjustments associated with
interest rate swaps at April 30, 2003 and May 1, 2002, respectively.
There were no interest rate swaps at May 2, 2001, May 3, 2000 and April
28, 1999.

Fiscal 2003 results from continuing operations include costs related to the
Del Monte transaction and costs to reduce overhead of the remaining businesses
totaling $89.5 million pretax, of which $34.2 million pretax was charged to
Heinz Finance by Heinz Management Company. These include employee termination
and severance costs, legal and other professional service costs and costs
related to the early extinguishment of debt.

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Fiscal 2002 results from continuing operations include a net restructuring
benefit of $1.1 million pretax related to the Streamline initiative.

Fiscal 2001 results from continuing operations include restructuring and
implementation costs of $15.3 million pretax relating to the Streamline
initiative and net restructuring and implementation costs of $37.1 million
pretax for Operation Excel. Results also include a loss of $94.6 million pretax
on the sale of The All American Gourmet business and acquisition costs of $18.5
million pretax.

Fiscal 2000 results from continuing operations include net restructuring
and implementation costs of $67.4 million pretax for Operation Excel.

Fiscal 1999 results include net restructuring and implementation costs of
$156.1 million pretax for Operation Excel and costs of $9.4 million pretax
related to the implementation of Project Millennia, offset by the reversal of
unutilized Project Millennia accruals for severance and exit costs of $16.6
million pretax.

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

You should read the following discussion in conjunction with the audited
consolidated and combined financial statements and the notes to our audited
consolidated and combined financial statements included elsewhere in this Form
10-K.

OVERVIEW

REORGANIZATION

On the first day of Fiscal 2002 (May 3, 2001), Heinz reorganized the
structure of its U.S. business. The reorganization of our operations, treasury
and trademark activities is summarized below.

- Operations. All of the U.S. treasury and business operations, formerly
conducted through eight subsidiaries and a division of Heinz were
consolidated into Heinz LP. Heinz Management Company, a wholly-owned
subsidiary of Heinz, is the general partner of Heinz LP and holds a 1%
interest. The limited partner interests in Heinz LP consist of "Class A"
and "Class B" interests. Heinz owns all of the Class A interests. H.J.
Heinz Finance Company owns all of the Class B interests.

- Treasury. U.S. cash management and treasury activities were transferred
to Heinz Finance. On the day of the reorganization, Heinz Finance assumed
all of the then outstanding term debt obligations of Heinz in the amount
of $2.57 billion and $258 million of the commercial paper obligations of
Heinz. Since the reorganization, Heinz Finance has issued term debt and
commercial paper in its own name. All of the debt of Heinz Finance is
unconditionally guaranteed by Heinz.

On July 6, 2001, Heinz Finance issued $325 million of preferred stock to
outside investors. The preferred shares are entitled to elect 25% of the
directors of Heinz Finance and, if declared, are entitled to receive
dividends at a rate of 6.226% per annum.

- Trademarks. Substantially all of the trademarks used in the U.S.
businesses (including "Heinz," "Ore-Ida" and "Smart Ones"), are owned by
Promark Brands, Inc., an indirect subsidiary of Heinz, and are licensed
to us.

FINANCIAL STATEMENT PRESENTATION

For all Heinz financial reporting and disclosure purposes, Heinz Finance
and its subsidiaries (including Heinz LP) are treated as fully consolidated
subsidiaries. All of the assets, liabilities, results of operations and cash
flows of these entities are included in the Heinz consolidated financial

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statements. All intercompany transactions and accounts are eliminated within the
Heinz consolidated financial statements. The preferred shares issued by Heinz
Finance are shown as minority interest in the Heinz consolidated financial
statements.

Heinz Finance's consolidated financial statements include the assets and
liabilities, results of operations and cash flows of Heinz LP, as under the
partnership agreement, Heinz Finance has the power to control the general
partner through majority membership on Heinz LP's management board and all other
subsidiaries of Heinz Finance. In the Heinz Finance consolidated statements, the
general partner and Class A interests in Heinz LP, that are held by Heinz, are
reflected as minority interest.

The financial statements and the related management's discussion and
analysis of financial condition and results of operations included herein for
periods ending on or before May 2, 2001 related to the U.S. businesses that were
contributed to Heinz Finance on May 3, 2001. Results of these periods have been
prepared using "carve-out" and "push-down" accounting methods. With respect to
periods ending on or before May 2, 2001, the corporations and businesses
described above are referred to as the "U.S. Group."

Substantially all assets and liabilities of the U.S. Group which are
included in the Fiscal 2001 "carve out" balance sheet, except finished goods
inventories of approximately $407 million, which were retained by Heinz, were
contributed to Heinz Finance. These retained inventories resulted in increased
sales in Fiscal 2003 when compared to Fiscal 2002 and reduced sales in Fiscal
2002 when compared to Fiscal 2001. The sales and operating results related to
the retained inventories were recorded on the consolidated financial statements
of Heinz.

SPECIAL ITEMS

DISCONTINUED OPERATIONS

On December 20, 2002, Heinz transferred to a wholly-owned subsidiary ("SKF
Foods") certain assets and liabilities, including our U.S. pet food and pet
snacks, U.S. tuna, U.S. retail private label soup and private label gravy,
College Inn broths and our U.S. infant feeding businesses, and distributed all
of the shares of SKF Foods common stock on a pro rata basis to its shareholders.
Immediately thereafter, SKF Foods merged with a wholly-owned subsidiary of Del
Monte resulting in SKF Foods becoming a wholly-owned subsidiary of Del Monte
("the Merger").

In accordance with accounting principles generally accepted in the United
States of America, the operating results and net assets related to these
businesses spun off to Del Monte have been included in discontinued operations
in Heinz Finance's consolidated and combined statements of income and
consolidated balance sheets. Discontinued operations for the fiscal year ended
April 30, 2003, represents the operating results for eight months. The net
assets of discontinued operations owned by Heinz Finance were distributed to
Heinz which reduced Heinz's Class A interest in Heinz LP thus reducing Heinz
Finance's minority interest balance on the consolidated balance sheet. In
connection with this distribution, the terms of the Heinz LP agreement were
amended such that the Class B partner will now receive an improved economic
interest in the partnership by giving it a higher priority with respect to
distributions and an increased share in residual income.

The discontinued operations generated sales of $1,052.6 million, $1,357.7
million and $1,744.4 million and a net loss of $23.3 million (net of $13.8
million of a tax benefit), a net loss of $35.7 million (net of $19.6 million of
a tax benefit) and net income of $33.2 million (net of $38.5 million of a tax
provision) for Fiscal 2003, 2002 and 2001, respectively.

DEL MONTE AND OTHER REORGANIZATION COSTS

In Fiscal 2003, Del Monte transaction costs and costs to reduce overhead of
the remaining business totaled $55.3 million pretax. In addition, during Fiscal
2003, Heinz Management Company recognized Del Monte transaction costs and costs
to reduce overhead of the remaining business totaling $34.2 million pretax.
These costs were then charged to Heinz Finance through the manage-

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ment fee charged to Heinz Finance by Heinz Management Company for all salaried
employee costs. These total charges of $89.5 million pretax were comprised of
$39.6 million related to the early retirement of debt, $24.4 million in employee
termination and severance costs, $14.7 million for legal, professional and other
related costs, and $10.8 million in non-cash asset write-downs. Of this amount,
$6.0 million was included in cost of products sold, $44.0 million in selling,
general and administrative expense ("SG&A"), and $39.6 million in other
expenses, net. To date, management estimates that these actions have impacted
approximately 200 employees, excluding those who were transferred to Del Monte.

STREAMLINE

In the fourth quarter of Fiscal 2001, Heinz announced a restructuring
initiative named "Streamline". This initiative included an organizational
restructuring aimed at reducing overhead costs and was completed in the first
half of Fiscal 2003.

During Fiscal 2003, Heinz Finance utilized $1.0 million of severance and
exit cost accruals, principally related to its overhead reduction plan. In
addition, as a result of the spin-off of SKF Foods, a $3.4 million restructuring
liability related to ceasing canned pet food production at Heinz Finance's
Terminal Island, California facility was transferred to Del Monte.

In the fourth quarter of Fiscal 2002, Heinz Finance recorded a benefit of
$1.1 million pretax, which was classified as SG&A, to reflect revisions in
original cost estimates. In addition, Heinz Management Company, a wholly-owned
subsidiary of Heinz, assumed a portion of Heinz Finance's restructuring
liability as a result of the realignment that occurred on May 3, 2001.

During Fiscal 2001, Heinz Finance recognized restructuring charges and
implementation costs totaling $15.3 million pretax, which primarily include
severance costs and were classified as SG&A. Implementation costs were
recognized as incurred in Fiscal 2001 ($0.6 million pretax) and consist of
incremental costs directly related to the implementation of the Streamline
initiative. The Streamline initiative resulted in a net reduction of Heinz
Finance's workforce of approximately 200 employees.

OPERATION EXCEL

In Fiscal 1999, Heinz announced a growth and restructuring initiative named
"Operation Excel." This initiative was a multi-year, multi-faceted program that
established manufacturing centers of excellence, focused the product portfolio,
realigned Heinz Finance's management teams and invested in growth initiatives.
Heinz Finance substantially completed Operation Excel in Fiscal 2002.

During Fiscal 2002, Heinz Management Company, a wholly-owned subsidiary of
Heinz, assumed a portion of the Heinz Finance's restructuring liability as a
result of the realignment that occurred on May 3, 2001.

During Fiscal 2001, Heinz Finance recognized restructuring charges of $1.7
million pretax in cost of products sold. This charge was offset by the reversals
of unutilized Operation Excel accruals and asset write-downs of $16.7 million
pretax. These reversals were recorded in cost of products sold ($4.1 million)
and SG&A ($12.6 million) and were primarily the result of revisions in estimates
of fair values of assets which were disposed of as part of Operation Excel.
Implementation costs of $52.1 million pretax were also recognized in Fiscal
2001. These costs were classified as cost of products sold ($21.6 million) and
SG&A ($30.5 million). Operation Excel resulted in a net reduction of the Heinz
Finance's workforce of approximately 1,400 employees.

RECENTLY ISSUED ACCOUNTING STANDARDS

In Fiscal 2001, Heinz Finance changed its method of accounting for revenue
recognition in accordance with Staff Accounting Bulletin ("SAB") No. 101,
"Revenue Recognition in Financial Statements." Under this new accounting method,
adopted retroactive to May 4, 2000, Heinz recognizes revenue upon the passage of
title, ownership and risk of loss to the customer. The
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cumulative effect of the change in prior years resulted in a charge to income in
Fiscal 2001 of $3.2 million (net of income taxes of $1.9 million). The change
did not have a significant effect on revenues or results of operations for the
fiscal year ended May 2, 2001.

Effective May 2, 2002, Heinz Finance adopted Statement of Financial
Accounting Standards ("SFAS") No. 142 "Goodwill and Other Intangible Assets."
Under this standard, goodwill and intangibles with indefinite useful lives are
no longer amortized. This standard also requires, at a minimum, an annual
assessment of the carrying value of goodwill and intangibles with indefinite
useful lives. The reassessment of intangible assets, including the ongoing
impact of amortization, was completed during the first quarter of Fiscal 2003.
Net income from continuing operations for Fiscal 2002 and 2001 would have been
$110.1 million and $288.1 million, respectively, had the provisions of the new
standards been applied as of May 4, 2000.

During the first half of Fiscal 2003, Heinz Finance completed its
transitional impairment review of goodwill and indefinite lived intangibles and
no impairment issues were identified as a result of completing this review.
Based upon current and forecasted operating results, Heinz Finance does not
anticipate any goodwill impairment charges in the near term.

Effective May 2, 2002, Heinz Finance adopted SFAS No. 144 "Accounting for
Impairment or Disposal of Long-lived Assets." This statement provides updated
guidance concerning the recognition and measurement of an impairment loss for
certain types of long-lived assets, expands the scope of a discontinued
operation to include a component of an entity and eliminates the current
exemption to consolidation when control over a subsidiary is likely to be
temporary. The adoption of this new standard did not have a material impact on
Heinz Finance's financial position, results of operations or cash flows for the
fiscal year ended April 30, 2003.

During Fiscal 2003, Heinz Finance adopted SFAS No. 146, "Accounting for
Costs Associated with Exit or Disposal Activities." SFAS No. 146 addresses
financial accounting and reporting for costs associated with exit or disposal
activities. This Statement requires that a liability for a cost associated with
an exit or disposal activity be recognized when the liability is incurred. This
Statement also establishes that fair value is the objective for the initial
measurement of the liability.

During Fiscal 2003, Heinz Finance adopted Financial Accounting Standards
Board ("FASB") Interpretation No. 45 ("FIN 45"), "Guarantor's Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others." FIN 45 elaborates on the disclosures to be made by a
guarantor about its obligations under certain guarantees that it has issued, and
it requires the recognition of a liability at fair value by a guarantor at the
inception of a guarantee. The initial recognition and measurement provisions of
FIN 45 are effective on a prospective basis for all guarantees issued or
modified after December 31, 2002. Heinz Finance has not issued or modified any
material guarantees since December 31, 2002.

In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity". This
statement affects the classification, measurement and disclosure requirements of
certain freestanding financial instruments, including manditorily redeemable
shares. SFAS No. 150 is effective for all financial instruments entered into or
modified after May 31, 2003, and otherwise is effective for Heinz Finance for
the second quarter of Fiscal 2004. The adoption of SFAS No. 150 will require the
reclassification of Heinz Finance's $325 million of manditorily redeemable
preferred shares to the liabilities section of the consolidated balance sheet
and the $20.2 million annual preferred dividend from retained earnings on the
consolidated balance sheet to interest expense on the consolidated statement of
income.

RESULTS OF CONTINUING OPERATIONS -- 2003 VERSUS 2002

Sales for Fiscal 2003 increased $328.8 million, or 11.6%, to $3.16 billion.
Sales were favorably impacted by acquisitions of 4.3%, pricing of 0.2% and
volumes of 7.9%. The volume increase is primarily due to the finished goods
inventories which were not contributed to Heinz Finance on May

12

3, 2001 (10.1%), partially offset by volume declines in the U.S. Frozen segment
related to Boston Market HomeStyle side dishes, Ore-Ida Funky Fries and Hot
Bites. Divestitures reduced sales by 0.7%.

Gross profit increased $97.9 million, or 9.4%, to $1.14 billion; however,
the gross profit margin decreased to 36.1% from 36.8%. The margin decrease was
primarily due to unfavorable sales mix and increased manufacturing costs. The
overall dollar increase in gross profit is due to the finished goods inventories
which were retained by Heinz, acquisitions, and the benefit of reduced
amortization of intangible assets. Fiscal 2003 gross profit was also unfavorably
impacted by $6.0 million for costs related to the Del Monte transaction and to
reduce overhead of the remaining business.

SG&A increased $146.2 million, or 32%, to $603.0 million, and increased as
a percentage of sales to 19.1% from 16.1%. This increase is primarily due to the
finished goods inventories which were retained by Heinz, costs related to the
Del Monte transaction and to reduce overhead of the remaining business of $44.0
million and increased marketing spend across both segments.

Total marketing support (recorded either as a reduction of revenue or as a
component of SG&A) increased $137.6 million, or 21.1%, to $789.8 million on a
sales increase of 11.6%.

Operating income decreased $68.6 million, or 15.3%, to $379.3 million and
decreased as a percentage of sales to 12.0% from 15.8%. This decrease is
primarily driven by costs related to the Del Monte transaction and to reduce
overhead of the remaining business of $50.0 million and the U.S. Frozen segment,
partially offset by the increase in sales discussed above.

Net interest expense increased $15.5 million to $122.8, driven primarily by
reduced interest income related to short-term notes receivable balances from
related parties partially offset by lower interest rates and lower average debt
over the past year. During Fiscal 2003, there was a non-cash currency loss of
$65.0 million compared to $3.8 million in Fiscal 2002 related to the
marked-to-market adjustment on Euro-denominated long-term debt. This debt
represents a net investment hedge at the Heinz level. Because Heinz Finance does
not have foreign assets, this marked-to-market adjustment does not qualify for
hedge accounting treatment at Heinz Finance. Other expenses, net, increased
$52.2 million to $57.1 million. The increase is primarily attributable to the
$39.6 million pretax charge related to early retirement of debt. The effective
tax rate for Fiscal 2003 was 10.9% compared to 14.2% in Fiscal 2002. Heinz
Finance's effective tax rate fluctuates depending on the proportion of its non
taxable minority interest in Heinz LP to total Heinz Finance income before tax.
Net income from continuing operations for Fiscal 2003 was $54.2 million compared
to $109.4 million in Fiscal 2002.

OPERATING RESULTS BY BUSINESS SEGMENT

HEINZ NORTH AMERICA

Sales of the Heinz North America segment increased $229.9 million, or
13.0%, to $2.00 billion. Acquisitions increased sales 2.3%, due primarily to the
Fiscal 2002 acquisitions of Classico and Aunt Millie's pasta sauce, Mrs. Grass
Recipe soups, Wyler's bouillons and soups and Dianne's frozen desserts. Higher
pricing increased sales 1.4% due mainly to retail ketchup, Jack Daniel's
marinades and grilling sauces and frozen soup. Sales volume increased 9.2% due
primarily to the finished goods inventories which were retained by Heinz and
increases in foodservice ketchup, specialty sauces and Dianne's frozen desserts
partially offset by decreases primarily in Heinz retail ketchup and vinegar.

Gross profit increased $66.0 million, or 10.1% to $721.4 million; however,
the gross profit margin decreased to 36.1% from 37.1% due primarily to
unfavorable sales mix and increased manufacturing costs, partially offset by
increases due to the finished goods inventories which were retained by Heinz,
reduced amortization expense on intangible assets with indefinite lives,
acquisitions and favorable pricing. Fiscal 2003 gross profit was also
unfavorably impacted by $6.0 million for costs related to the Del Monte
transaction and to reduce overhead of the remaining business. Operating income
decreased $43.4 million, or 15.2 % to $241.6 million due primarily to $50.0
million in costs related to the Del Monte transaction and to reduce overhead of
the remaining business, higher Selling & Distribution
13

("S&D") and General & Administrative ("G&A") expenses, and increased marketing
primarily behind Heinz Easy Squeeze! ketchup, Classico pasta sauce and the
foodservice ketchup "Insist on Heinz" campaign, partially offset by increases
due to the finished goods inventories retained by Heinz.

U.S. FROZEN

U.S. Frozen's sales increased $98.9 million, or 9.3%, to $1.16 billion.
Acquisitions, net of divestitures increased sales 5.6%, due primarily to the
Fiscal 2002 acquisitions of Delimex frozen Mexican foods, Anchor's Poppers
retail frozen appetizers and licensing rights to the T.G.I. Friday's brand of
frozen snacks and appetizers. Lower pricing decreased sales 2.1%, primarily due
to Boston Market HomeStyle meals and appetizers and SmartOnes frozen entrees,
partially offset by a reduction in trade promotions related to the launch of Hot
Bites in the prior year and in Ore-Ida frozen potatoes. Sales volume increased
5.8% primarily due to the finished goods inventories which were retained by
Heinz and SmartOnes frozen entrees, partially offset by declines in Boston
Market HomeStyle side dishes, Ore-Ida Funky Fries, and Hot Bites.

Gross profit increased $31.7 million or 8.1%, to $421.5 million; however,
the gross profit margin decreased to 36.2% from 36.6%. The increase in gross
profit is primarily due to finished goods inventories retained by Heinz and
acquisitions, partially offset by lower pricing, unfavorable sales mix,
increased trade promotions and costs to exit the Ore-Ida Funky Fries and Hot
Bites product lines. Operating income decreased $25.6 million, or 15.5%, to
$139.9 million due primarily to increased consumer marketing on SmartOnes frozen
entrees and Ore-Ida frozen potatoes and increased S&D partially offset by the
change in gross profit, reduced G&A expenses and the impact of the finished
goods inventories retained by Heinz.

RESULTS OF CONTINUING OPERATIONS -- 2002 VERSUS 2001

Sales for Fiscal 2002 increased $27.5 million, or 1.0%, to $2.83 billion.
Acquisitions increased sales by 18.3%. Offsetting this were decreases from lower
pricing of 2.7%, divestitures of 3.5%, and volume decreases of 11.1%. The
majority of the volume decrease (10.2%) is a result of the finished goods
inventories which were not contributed to Heinz Finance.

The favorable impact of acquisitions is primarily related to Classico and
Aunt Millie's pasta sauce, Mrs. Grass Recipe soups and Wyler's bouillons and
soups in the North America segment and Delimex frozen Mexican foods, Anchor's
Poppers retail frozen appetizers and licensing rights to the T.G.I. Friday's
brand of frozen snacks and appetizers in the U.S. Frozen segment.

Gross profit decreased $22.1 million, or 2.1%, to $1.04 billion, and the
gross profit margin decreased to 36.8% from 38.0%. Gross profit across both of
our segments was unfavorably impacted as a result of the retention of finished
goods inventories by Heinz, partially offset by the impact of acquisitions.
Fiscal 2001 operating income was also unfavorably impacted by Operation Excel
net restructuring and implementation costs of $19.2 million.

SG&A decreased $84.7 million, or 15.6%, to $456.8 million, and decreased as
a percentage of sales to 16.1% from 19.3%. This decrease is primarily
attributable to the finished goods inventories which were retained by Heinz
partially offset by acquisitions and increased S&D costs. Fiscal 2001 SG&A was
also impacted by $146.4 million due to net restructuring and implementation
costs related to Project Streamline and Operation Excel, acquisition costs and
the loss related to the sale of The All American Gourmet business.

Operating income increased $8.3 million, or 1.9%, to $447.8 million, and
increased slightly as a percentage of sales to 15.8% from 15.7% due primarily to
acquisitions, partially offset by the retention of finished good inventories by
Heinz. Fiscal 2001 operating income was also unfavorably impacted by $165.6
million for net restructuring and implementation costs related to Project
Streamline and Operation Excel, acquisition costs and the loss related to the
sale of The All American Gourmet business.

14

Interest expense increased $122.2 million to $142.9 million, due primarily
to the assumption of approximately $2.9 billion of Heinz's outstanding U.S. debt
by Heinz Finance on May 3, 2001 as well as increased borrowings partially offset
by lower interest rates. Interest income decreased $7.7 million to $35.7
million, due primarily to the exchange of related party notes receivable for
$1.9 billion of non-voting 6.5% cumulative participating preferred stock of PM
Holding during the fourth quarter of Fiscal 2001. This decrease was offset by an
increase due to Heinz Finance's new short-term notes receivables with related
parties in Fiscal 2002. Other expenses, net decreased $9.4 million to $8.6
million, primarily related to a reduction in accounts receivable factoring
discount expense partially offset by increased amortization of debt issuance
costs.

The effective tax rate for Fiscal 2002 was 14.2% compared to 37.6% in
Fiscal 2001. This decrease is primarily the result of Heinz Finance's nontaxable
minority interest in Heinz LP in Fiscal 2002.

Income from continuing operations decreased $167.9 million to $109.4
million. The majority of this decrease is due to the minority interest in Heinz
LP. In Fiscal 2001, the Company changed its method of accounting for revenue
recognition in accordance with SAB No. 101, "Revenue Recognition in Financial
Statements". The cumulative effect of adopting SAB No. 101 was $3.2 million in
Fiscal 2001.

HEINZ NORTH AMERICA

Sales of the Heinz North America segment decreased $68.4 million, or 3.7%,
to $1.77 billion. Acquisitions, net of divestitures, increased sales 12.8%.
Lower pricing decreased sales 3.6%, primarily related to increased marketing
spend across all major brands and to foodservice ketchup. Sales volume decreased
13.0%, primarily due to the finished goods inventories which were not
contributed to Heinz Finance as well as decreases in the foodservice business
and Heinz steak sauces, partially offset by volume increases in grilling sauces.

Gross profit decreased $73.2 million, or 10.1% to $655.4 million, due
primarily to inventories retained by Heinz, lower pricing and a decrease in the
foodservice business partially offset by the favorable impact of acquisitions.
Fiscal 2001 gross profit was also unfavorably impacted by $2.8 million related
to Operation Excel net restructuring and implementation costs. Operating income
decreased $132.8 million, or 31.8%, to $285.1 million, due primarily to the
decrease in gross profit driven by the foodservice business and higher S&D
costs, partially offset by the favorable impact of acquisitions. Fiscal 2001
operating income was also unfavorably impacted by $47.6 million by net
restructuring and implementation costs related to Operation Excel and Project
Streamline and by acquisition costs.

U.S. FROZEN

U.S. Frozen's sales increased $95.9 million, or 9.9%, to $1.07 billion.
Acquisitions increased sales 26.5%. Sales volume decreased 7.7% due primarily to
the finished goods inventories which were not contributed to Heinz Finance as
well as decreases in Ore-Ida frozen potatoes, partially offset by volume
increases in SmartOnes frozen entrees, Boston Market HomeStyle Meals and Bagel
Bites snacks. Lower pricing decreased sales 1.0%, primarily due to increased
marketing spend across all major brands and lower pricing in Boston Market
HomeStyle Meals, partially offset by higher pricing of SmartOnes frozen entrees
and frozen potatoes. Divestitures reduced sales by 7.9% due to the divestiture
of Budget Gourmet.

Gross profit increased $52.4 million, or 15.5%, to $389.8 million, due
primarily to acquisitions, partially offset by retained inventories by Heinz.
Fiscal 2001 gross profit was unfavorably impacted by $16.3 million for Operation
Excel net restructuring and implementation costs. Operating income increased
$142.2 million to $165.5 million as the favorable impact of acquisitions was
partially offset by the impact of retained inventories, lower pricing, increased
S&D costs and the divestiture of Budget Gourmet. Fiscal 2001 operating income
was also unfavorably impacted by $117.9 million for Operation

15

Excel net restructuring and implementation costs and the loss on the sale of The
All American Gourmet.

LIQUIDITY AND FINANCIAL POSITION

The following discussion of cash flows includes cash flows from
discontinued operations.

CASH FLOWS FROM OPERATING ACTIVITIES

Cash provided by operating activities increased to $734.8 million in Fiscal
2003, compared to cash required of $32.9 million in Fiscal 2002. The increase is
primarily due to improved working capital performance in accounts receivable and
inventory, as well as the building of inventory levels in Fiscal 2002 as a
result of all finished goods inventories being retained by Heinz on May 3, 2001.

CASH FLOWS FROM INVESTING ACTIVITIES

Cash used for investing activities was $55.2 million in Fiscal 2003
compared to $874.8 million in Fiscal 2002. Acquisitions in Fiscal 2002 required
$809.4 million, due primarily to the purchase of Borden Food Corporation's pasta
and dry bouillon and soup business, Delimex Holdings, Inc. and Anchor Food
Products branded retail business and licensing rights to the T.G.I. Friday's
brand of frozen snacks and appetizers. Capital expenditures totaled $59.6
million compared to $77.2 million in Fiscal 2002. Proceeds from disposals of
property, plant and equipment were $5.4 million in Fiscal 2003 compared to $3.3
million in Fiscal 2002.

CASH FLOWS FROM FINANCING ACTIVITIES

In Fiscal 2003, cash used for financing activities was $492.2 million
compared to providing $904.5 million in Fiscal 2002. There were no proceeds from
long-term debt in Fiscal 2003 compared to $1.99 billion in Fiscal 2002. Payments
on long-term debt required $651.1 million in Fiscal 2003 compared to $309.9
million in Fiscal 2002. Heinz Finance received $1,062.1 million of net proceeds
from Heinz related to the Del Monte transaction in Fiscal 2003. Payments on
commercial paper were $89.1 million compared to $168.9 million in Fiscal 2002.
Payments on short-term borrowings with related parties required $384.3 million
compared to $788.8 million in Fiscal 2002. In addition, $325.0 million was
provided during Fiscal 2002 via the issuance of preferred stock which is
discussed below. Dividend payments to preferred shareholders totaled $20.2
million compared to $15.7 million for Fiscal 2002. In addition, distributions to
minority partners were $412.9 million in the Fiscal 2003 and $108.9 million in
Fiscal 2002.

OTHER FINANCIAL AND LIQUIDITY MATTERS

Return on average shareholders' equity was 28.3% in Fiscal 2003, 4.5% in
Fiscal 2002 and 6.2% in Fiscal 2001. Pretax return on average invested capital
was 8.5% in Fiscal 2003, 12.1% in Fiscal 2002 and 9.4% in Fiscal 2001.

As noted above, during Fiscal 2003, Heinz Finance focused on improving the
efficiency of its working capital. The working capital improvements, reduced
capital expenditures and the proceeds from the Del Monte transaction allowed
Heinz Finance to reduce net debt (total debt net of interest rate swaps, less
cash and cash equivalents) by approximately $900 million to $3.6 billion in
Fiscal 2003 from $4.5 billion in Fiscal 2002. A portion of the Del Monte
proceeds was used to retire $650 million of long-term debt. Additional net debt
reductions are anticipated in Fiscal 2004.

In Fiscal 2002, Heinz Finance issued $325 million of 6.226% Voting
Cumulative Preferred Stock. The preferred stock is required to be redeemed in
July 2008. Also during Fiscal 2002, Heinz Finance privately placed $750 million
of 6.625% Notes due July 2011, $700 million of 6.00% Notes due March 2012 and
$550 million of 6.75% Notes due March 2032. All of these notes are guaranteed by
Heinz and they were exchanged in March 2003 for new notes, which were
substantially identical in all respects, except for being registered under the
Securities Act of 1933. The proceeds from the issuance of the preferred stock
and the notes were used to retire commercial paper borrowings and for other
general corporate purposes.

16

In September 2001, Heinz and Heinz Finance entered into a 364-Day Credit
Agreement, which was renewed in September 2002, and a Five-Year Credit
Agreement, expiring in September 2006. The 364-day agreement permits Heinz and
Heinz Finance to borrow up to $800 million. The five-year agreement permits
Heinz and Heinz Finance to borrow up to $1.5 billion. These agreements support
Heinz's and Heinz Finance's commercial paper borrowings and the remarketable
securities. As a result, these borrowings are classified as long-term debt based
upon Heinz's and Heinz Finance's ability to refinance these borrowings on a
long-term basis.

As of April 30, 2003, Heinz Finance had $800 million of remarketable
securities due November 2020. The securities are subject to an annual
remarketing on each November 15, and the interest rate will be reset on such
dates. If the securities are not remarketed, then Heinz Finance is required to
repurchase all of the securities on the remarketing date at 100% of the
principal amount plus accrued interest. On November 15, 2002, the securities
were remarketed at an effective yield to Heinz Finance of 6.56%. In January
2003, $200 million of the remarketable securities were retired with proceeds
from the Del Monte transaction as described above.

All of Heinz Finance's debt is guaranteed by Heinz. At April 30, 2003,
Heinz's long-term debt ratings were "A" at Standard & Poor's and Fitch and "A3"
at Moody's and Heinz's short-term debt ratings were "A1" at Standard & Poor's,
"F-1" at Fitch and "P2" at Moody's.

Since the beginning of Fiscal 2002, Heinz Finance has significantly
increased the proportion of long-term debt to total debt such that at April 30,
2003 long-term debt represented 97.8% of total debt as compared to a ratio of
87.0% at May 1, 2002. Through the use of interest rate swaps, Heinz Finance has
converted $2.55 billion of fixed rate debt to floating rates in order to
maintain our desired mix of fixed and floating rate debt, while continuing to
maintain long-term financing. The nature and amount of Heinz's long-term and
short-term debt as well as the proportionate amount of fixed-rate and
floating-rate debt can be expected to vary as a result of future business
requirements, market conditions and other factors.

In Fiscal 2003, the cash requirements of the Del Monte transaction and
costs to reduce overhead of the remaining businesses were approximately $35
million. Fiscal 2004 cash requirements related to these items are expected to be
approximately $14 million. In Fiscal 2003, the cash requirements of Streamline
were $1.0 million, relating to severance and exit costs.

COMMITMENTS AND CONTINGENCIES

Heinz Finance is obligated to make future payments under various contracts
such as debt agreements, lease agreements and unconditional purchase
obligations. The following table represents the significant contractual cash
obligations of Heinz Finance as of April 30, 2003.

- ---------------

* Includes the purchase option related to certain warehouses and equipment
currently utilized under synthetic leases.

Heinz Finance has purchase commitments for materials, supplies, services
and property, plant and equipment as part of the ordinary conduct of business. A
few of these commitments are long-term and are based on minimum purchase
requirements. In the aggregate, such commitments are not at prices in excess of
current markets. Due to the proprietary nature of some of Heinz Finance's
materials and processes, certain supply contracts contain penalty provisions for
early terminations.

17

Heinz Finance does not believe that a material amount of penalties is reasonably
likely to be incurred under these contracts based upon historical experience and
current expectations.

Heinz Finance does not have material financial guarantees or other
contractual commitments that are reasonably likely to adversely affect
liquidity. See Note 7 of the consolidated and combined financial statements for
disclosure of all significant related party items.

MARKET RISK FACTORS

Heinz Finance is exposed to market risks from adverse changes in interest
rates, commodity prices and production costs. As a policy, Heinz Finance does
not engage in speculative or leveraged transactions, nor does Heinz Finance hold
or issue financial instruments for trading purposes.

INTEREST RATE SENSITIVITY

Heinz Finance is exposed to changes in interest rates primarily as a result
of its borrowing and investing activities used to maintain liquidity and fund
business operations. The nature and amount of Heinz Finance's long-term and
short-term debt can be expected to vary as a result of future business
requirements, market conditions and other factors. Heinz Finance's net debt
obligations totaled $3.6 billion and $4.5 billion at April 30, 2003 and May 1,
2002, respectively. Heinz Finance's debt obligations are summarized in Note 9 to
the consolidated and combined financial statements.

In order to manage interest rate exposure, Heinz Finance utilizes certain
interest rate swaps under its fair value hedging strategy in order to convert
fixed-rate debt to floating. Accordingly, changes in the fair value of these
derivatives, along with changes in the fair value of the hedged debt obligations
that are attributable to the hedged risk are recognized in current period
earnings. Based on the amount of fixed-rate debt converted to floating as of
April 30, 2003, a variance of 1/8% in the related interest rate would cause
annual interest expense related to this debt to change by approximately $3.2
million. The following table presents additional information related to interest
rate contracts designated as fair value hedges by Heinz Finance:

At April 30, 2003, Heinz Finance also maintained interest rate swaps with a
total notional amount of $400 million that do not meet the criteria for hedge
accounting but effectively mitigate interest rate exposures. These swaps mature
within 12 months and are accounted for on a full mark-to-market basis through
current earnings. Net unrealized gains related to these swaps totaled $2.1
million at April 30, 2003.

COMMODITY PRICE SENSITIVITY

Heinz Finance is the purchaser of certain commodities such as corn, soybean
oil and soybean meal. Heinz Finance generally purchases these commodities based
upon market prices that are established with the vendor as part of the purchase
process. Heinz Finance may enter into commodity futures, swaps and option
contracts to reduce the effect of price fluctuations on forecasted purchases.
Heinz Finance held commodity contracts to hedge certain forecasted purchases
with a notional amount of $21 million and $30 million at April 30, 2003 and May
1, 2002, respectively. Such contracts generally have a term of less than one
year, and are accounted for as cash flow hedges if they meet certain qualifying
criteria. Accordingly, the effective portion of gains and losses is deferred as
a component of other comprehensive gain/loss and is recognized as part of cost
of products sold at the

18

time the hedged item affects earnings. Any gains and losses due to hedge
ineffectiveness or related to contracts which do not qualify for hedge
accounting are recorded in current period earnings in other expenses, net. Net
unrealized losses related to commodity contracts held by Heinz Finance were not
material at April 30, 2003 or May 1, 2002.

FOREIGN EXCHANGE RATE SENSITIVITY

Heinz Finance's cash flow and earnings are subject to fluctuations due to
exchange rate variation. Foreign currency risk exists due to Heinz Finance's
foreign currency denominated borrowings. Heinz Finance had Euro denominated
borrowings totaling $335.6 million and $272.1 million at April 30, 2003 and May
1, 2002, respectively. These debt obligations are due in January 2005. Losses of
$65.4 million and $3.8 million due to exchange rate variation were reported in
other expenses, net for the years ended April 30, 2003 and May 1, 2002,
respectively. These Euro denominated notes are designated as net investment
hedges of foreign operations at the Heinz level. Because Heinz Finance does not
have foreign operations, the changes in value due to exchange rate variation
does not qualify for hedge accounting treatment at Heinz Finance.

EFFECT OF HYPOTHETICAL 10% FLUCTUATION IN MARKET PRICES

As of April 30, 2003, the potential gain or loss in the fair value of Heinz
Finance's outstanding interest rate contracts, commodity contracts and foreign
currency denominated borrowings, assuming a hypothetical 10% fluctuation in swap
rates, market prices and currency rates, respectively, would be approximately:

In relation to interest rate contracts and commodity contracts, it should be
noted that any change in the fair value of the contracts, real or hypothetical,
would be significantly offset by an inverse change in the value of the
underlying hedged items.

INFLATION

In general, costs are affected by inflation and the effects of inflation
may be experienced by Heinz Finance in future periods. Management believes,
however, that such effect have not been material to us during the past three
years.

The impact of inflation on both Heinz Finance's financial position and
results of operations is not expected to adversely affect Fiscal 2004 results.
Heinz Finance's financial position continues to remain strong, enabling it to
meet cash requirements for operations.

DISCUSSION OF SIGNIFICANT ACCOUNTING ESTIMATES

In the ordinary course of business, Heinz Finance has a number of estimates
and assumptions relating to the reporting of results of operations and financial
condition in the preparation of its financial statements in conformity with
accounting principles generally accepted in the United States of America. Our
actual results could differ significantly from those estimates under different
assumptions and conditions. We believe the following discussion addresses our
most critical accounting policies, which are those that are most important to
the portrayal of our financial condition and results and require management's
most difficult, subjective and complex judgments, often as a result of the need
to make estimates about the effect of matters that are inherently uncertain.

19

MARKETING COSTS

Trade promotions are an important component of the sales and marketing of
Heinz Finance's products, and are critical to the support of its business. Trade
promotion costs include amounts paid to encourage retailers to offer temporary
price reductions for the sale of Heinz Finance's products to consumers, amounts
paid to obtain favorable display positions in retailers' stores, and amounts
paid to customers for shelf space in retail stores. Accruals for trade
promotions are recorded primarily at the time of sale of product to the customer
based on expected levels of performance. Settlement of these liabilities
typically occurs in subsequent periods primarily through an authorized process
for deductions taken by a customer from amounts otherwise due to Heinz Finance.
As a result, the ultimate cost of a trade promotion program is dependent on the
relative success of the events and the actions and level of deductions taken by
Heinz Finance's customers for amounts they consider due to them. Final
determination of the permissible deductions may take extended periods of time.

INVENTORIES

Inventories are stated at the lower of cost or market. Cost is determined
principally under the average cost method. We record adjustments to the carrying
value of inventory based upon our forecasted plans to sell our inventories. The
physical condition (e.g., age and quality) of the inventories is also considered
in establishing our valuation. These adjustments are estimates, which could vary
significantly, either favorably or unfavorably, from actual requirements if
future economic conditions, customer inventory levels or competitive conditions
differ from our expectations.

PROPERTY, PLANT AND EQUIPMENT

Land, buildings and equipment are recorded at cost and are depreciated on a
straight-line method over the estimated useful lives of such assets. Changes in
circumstances such as technological advances, changes to our business model or
changes in our capital strategy could result in the actual useful lives
differing from our estimates. In those cases where we determine that the useful
life of buildings and equipment should be shortened, we would depreciate the net
book value in excess of the salvage value over its revised remaining useful
life, thereby increasing depreciation expense. Factors such as changes in the
planned use of fixtures or software or closing of facilities could result in
shortened useful lives.

LONG-LIVED ASSETS

Long-lived assets including fixed assets and intangible assets with finite
useful lives are evaluated periodically by Heinz Finance for impairment whenever
events or changes in circumstances indicate that the carrying amount of any such
asset may not be recoverable. If the sum of the undiscounted cash flows is less
than the carrying value, Heinz Finance recognizes an impairment loss, measured
as the amount by which the carrying value exceeds the fair value of the asset.
The estimate of cash flow requires significant management judgment and requires,
among other things, certain assumptions about future volume, revenue and expense
growth rates, foreign exchange rates, devaluation and inflation, and as such may
differ from actual cash flows.

GOODWILL AND INDEFINITE LIVED INTANGIBLES

Carrying values of goodwill and intangible assets with indefinite lives are
reviewed periodically for possible impairment in accordance with SFAS No. 142,
"Goodwill and Other Intangible Assets". Heinz Finance's impairment review is
based on a discounted cash flow approach that requires significant management
judgments similar to those noted above for long-lived assets, and to the
selection of an appropriate discount rate. Impairment occurs when the carrying
value of the reporting unit exceeds the discounted present value of the cash
flows for that reporting unit. An impairment charge is recorded for the
difference between the carrying value and the net present value of estimated
future cash flows, which represents the estimated fair value of the asset. Heinz
Finance uses its judgment in assessing whether assets may have become impaired
between annual valuations. Indica-

20

tors such as unexpected adverse economic factors, unanticipated technological
change or competitive activities, loss of key personnel, acts by governments and
courts, may signal that an asset has become impaired.

INCOME TAXES

Heinz Finance accounts for income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes". Judgment is required in determining Heinz
Finance's provision for income taxes. In the ordinary course of Heinz Finance's
business, there are some transactions for which the ultimate tax outcome is
uncertain. Heinz Finance adjusts its income tax provision in the period it is
probable that actual results will differ from its estimates. Tax law and rate
changes are reflected in the income tax provision in the period in which such
changes are enacted.

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

This information is set forth in this report in Item 7 -- "Management's
Discussion and Analysis of Financial Condition and Results of Operations" on
pages 18 through 19.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

TABLE OF CONTENTS

Report of Independent Auditors.............................. 23
Consolidated and Combined Statements of Income.............. 24
Consolidated Balance Sheets................................. 25
Consolidated Statements of Shareholders' Equity............. 26
Consolidated and Combined Statements of Cash Flows.......... 27
Notes to Consolidated and Combined Financial Statements..... 28

22

REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and Shareholders of
H. J. Heinz Finance Company

In our opinion, the accompanying consolidated balance sheets and the
related consolidated and combined statements of income, shareholders' equity,
and cash flows present fairly, in all material respects, the financial position
of H. J. Heinz Finance Company ("the Company") and its subsidiaries at April 30,
2003 and May 1, 2002, and the results of their operations and their cash flows
for each of the three years in the period ended April 30, 2003 in conformity
with accounting principles generally accepted in the United States of America.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States of America, which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

As discussed in Note 3 to the consolidated and combined financial
statements, the Company changed its method of accounting for goodwill and other
intangible assets in conformity with Statement of Financial Accounting Standard
No. 142, "Goodwill and Other Intangible Assets" which was adopted as of May 2,
2002.

PRICEWATERHOUSECOOPERS LLP
Pittsburgh, Pennsylvania
July 1, 2003

23

H. J. HEINZ FINANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED AND COMBINED STATEMENTS OF INCOME

The accompanying notes are an integral part of these financial statements.
24

H. J. HEINZ FINANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

The accompanying notes are an integral part of these financial statements.
25

H. J. HEINZ FINANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

The accompanying notes are an integral part of these financial statements.
26

H. J. HEINZ FINANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS

The accompanying notes are an integral part of these financial statements.
27

H. J. HEINZ FINANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION

On May 3, 2001, H. J. Heinz Company ("Heinz") reorganized its U.S.
corporate structure and established centers of excellence for the management of
U.S. trademarks and for U.S. treasury functions. As a result, all of the U.S.
treasury and business operations of Heinz's domestic operations ("the U.S.
Group") are now being conducted by H. J. Heinz Finance Company and its
wholly-owned subsidiaries, and H. J. Heinz Company, L.P. ("Heinz LP")
collectively referred to as "Heinz Finance" in the accompanying notes. H. J.
Heinz Finance Company has limited partnership interests in Heinz LP. As part of
the reorganization, substantially all assets and liabilities of the U.S. Group,
except for finished goods inventories, which were retained by Heinz, were
contributed to Heinz LP by Heinz. In addition, certain assets and liabilities
that related to the U.S. Group were assumed by Heinz Finance during Fiscal 2002
and 2003. H. J. Heinz Finance Company also assumed primary liability for
approximately $2.9 billion of Heinz's outstanding senior unsecured debt and
accrued interest by becoming co-obligor with Heinz.

Heinz LP owns or leases the operating assets involved in manufacturing
throughout the United States which were contributed by Heinz and its
subsidiaries, together with other assets and liabilities, to Heinz LP and
manages the business. Heinz LP has two classes of limited partnership interests,
Class A and Class B, that are allocated varying income and cash distributions in
accordance with the Heinz LP agreement. H. J. Heinz Finance Company, directly
and through wholly-owned subsidiaries, owns the Class B interests. Heinz
directly owns the Class A interests. Heinz Management Company, a wholly-owned
subsidiary of Heinz, is the managing General Partner of Heinz LP and employs the
salaried personnel of the U.S. Group. Under the partnership agreement, Heinz
Finance has the power to control the general partner through majority membership
on Heinz LP's management board. The minority interest amounts on the April 30,
2003 and May 1, 2002 balance sheets represent the Class A and General Partner
limited partnership interest in Heinz LP, and have been adjusted for the
minority partners' share of income and cash distributions.

For all Heinz financial reporting and disclosure purposes, H. J. Heinz
Finance Company and its subsidiaries (including Heinz LP) are treated as fully
consolidated subsidiaries. All of the assets, liabilities, results of operations
and cash flows of these entities are included in the Heinz consolidated
financial statements. All of the intercompany transactions and accounts are
eliminated within the Heinz consolidated financial statements. The preferred
shares issued by Heinz Finance are shown as minority interest in the Heinz
consolidated financial statements.

The preparation of the May 2, 2001 combined financial statements include
the use of "carve out" and "push down" accounting procedures wherein assets,
liabilities and expenses historically recorded or incurred at the parent company
level or an affiliate of Heinz, which related to or were incurred on behalf of
the U.S. Group, have been identified and allocated or pushed down as appropriate
to reflect results of the U.S. Group for the periods presented. See Note (7),
for a further discussion regarding the allocation of Heinz parent company costs.

2. SIGNIFICANT ACCOUNTING POLICIES

FISCAL YEAR

Heinz Finance operates on a 52- or 53-week fiscal year ending the Wednesday
nearest April 30. Fiscal years for the financial statements included herein
ended April 30, 2003, May 1, 2002 and May 2, 2001.

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H. J. HEINZ FINANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

PRINCIPLES OF CONSOLIDATION AND COMBINATION

The consolidated and combined financial statements include the accounts of
Heinz Finance. All intercompany accounts and transactions have been eliminated.
Investments owned less than 50%, where significant influence exists, are
accounted for on an equity basis. Certain prior-year amounts have been
reclassified in order to conform with Fiscal 2003 presentation. The accounting
policies of Heinz Finance and the U.S. Group are the same.

USE OF ESTIMATES

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

CASH EQUIVALENTS

Cash equivalents are defined as highly liquid investments with original
maturities of 90 days or less.

INVENTORIES

Inventories are stated at the lower of cost or market. Cost is determined
principally under the average cost method.

PROPERTY, PLANT AND EQUIPMENT

Land, buildings and equipment are recorded at cost. For financial reporting
purposes, depreciation is provided on the straight-line method over the
estimated useful lives of the assets. Accelerated depreciation methods are
generally used for income tax purposes. Expenditures for new facilities and
improvements that substantially extend the capacity or useful life of an asset
are capitalized. Ordinary repairs and maintenance are expensed as incurred. When
property is retired or otherwise disposed, the cost and related depreciation are
removed from the accounts and any related gains or losses are included in
income. Property, plant and equipment are reviewed periodically for possible
impairment. Heinz Finance's impairment review is based on an undiscounted cash
flow analysis at the lowest level for which identifiable cash flows exist.
Impairment occurs when the carrying value of the asset exceeds its future
undiscounted cash flows. When an impairment is indicated, the asset is written
down to its fair value.

INTANGIBLES

Intangible assets with finite useful lives are amortized on a straight-line
basis over the estimated periods benefited, and are reviewed periodically for
possible impairment, similar to property, plant and equipment. Goodwill and
intangible assets with indefinite useful lives are not amortized. Prior to 2002,
goodwill and intangible assets with indefinite useful lives were amortized over
periods not exceeding 40 years. The carrying values of goodwill and other
intangible assets with indefinite useful lives are tested at least annually for
impairment.

29

H. J. HEINZ FINANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

PARENT COMPANY'S INVESTMENT

Heinz's investment for Fiscal 2001 represents the original investment by
Heinz plus accumulated net income, less dividends, capital contributions,
certain intercompany accounts and current federal and state income taxes
payable.

REVENUE RECOGNITION

Heinz Finance recognizes revenue when title, ownership and risk of loss
pass to the customer.

ADVERTISING EXPENSES

Advertising costs are expensed in the year in which the advertising first
takes place.

INCOME TAXES

Until July 6, 2001, Heinz Finance joined with Heinz in the filing of a
consolidated U.S. income tax return and state income tax returns. After July 6,
2001, H. J. Heinz Finance Company began filing its own consolidated U.S. income
tax return. U.S. tax expense for all periods prior to July 7, 2001, and state
tax expense for all years includes the effect of certain tax sharing agreements
Heinz Finance has with Heinz regarding these consolidated filings. Specifically,
Heinz charged (refunded) Heinz Finance at the U.S. statutory rate for its actual
taxable income (loss). In addition, Heinz charges Heinz Finance for its share of
consolidated state tax expense based on Heinz Finance's share of the state
allocation factors.

Deferred income taxes result primarily from temporary differences between
financial and tax reporting. If it is more likely than not that some portion or
all of a deferred tax asset will not be realized, a valuation allowance is
recognized.

FINANCIAL INSTRUMENTS

Heinz Finance's financial instruments consist primarily of cash and cash
equivalents, short-term and long-term notes receivable from related parties,
short-term debt with related parties, long-term debt, swaps, commodity futures,
and option contracts. The carrying values for Heinz Finance's financial
instruments approximate fair value with the exception at times of long-term
debt. As of April 30, 2003 and May 1, 2002, the fair value of debt obligations
approximated the recorded value. As a policy, Heinz Finance does not engage in
speculative or leveraged transactions, nor does Heinz Finance hold or issue
financial instruments for trading purposes.

Heinz Finance uses derivative financial instruments for the purpose of
hedging price and interest rate exposures, which exist as part of ongoing
business operations. Heinz Finance carries derivative instruments on the balance
sheet at fair value, determined by reference to quoted market prices. Interest
rate swaps designated as fair value hedges are presented as a component of other
non-current assets. All other derivatives are included in receivables or
accounts payable, based on the instrument's fair value. The accounting for
changes in the fair value of a derivative instrument depends on whether it has
been designated and qualifies as part of a hedging relationship and, if so, the
reason for holding it. The cash flows related to derivative instruments are
classified in the consolidated and combined statements of cash flows within
operating activities as a component of other items, net.

3. RECENTLY ISSUED ACCOUNTING STANDARDS

In Fiscal 2001, Heinz Finance changed its method of accounting for revenue
recognition in accordance with Staff Accounting Bulletin ("SAB") No. 101,
"Revenue Recognition in Financial Statements." Under the new accounting method,
adopted retroactive to May 4, 2000, Heinz Finance

30

H. J. HEINZ FINANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

recognizes revenue upon the passage of title, ownership and risk of loss to the
customer. The cumulative effect of the change on prior years resulted in a
charge to income in Fiscal 2001 of $3.2 million (net of income taxes of $1.9
million). The change did not have a significant effect on revenue or results of
operations for the year ended May 2, 2001.

Effective May 2, 2002, Heinz Finance adopted SFAS No. 142 "Goodwill and
Other Intangible Assets." Under this Standard, goodwill and intangibles with
indefinite useful lives are no longer amortized. This Standard also requires, at
a minimum, an annual assessment of the carrying value of goodwill and
intangibles with indefinite useful lives. The reassessment of intangible assets,
including the ongoing impact of amortization, and the assignment of goodwill to
reporting units was completed during the first quarter of Fiscal 2003.

Heinz Finance completed its transitional goodwill impairment tests during
the second quarter of Fiscal 2003. No impairment issues were identified as a
result of completing these transitional impairment tests.

The effects of adopting the new standards on net income are as follows:

Income from continuing operations for Fiscal 2002 and 2001 would have been
$110.1 million and $288.1 million, respectively, had the provisions of the new
standards been applied as of May 4, 2000.

Changes in the carrying amount of goodwill for the fiscal year ended April
30, 2003 by reportable segment are as follows:

Trademarks and other intangible assets at April 30, 2003 and May 1, 2002,
subject to amortization expense, are as follows:

31

H. J. HEINZ FINANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

Amortization expense for trademarks and other intangible assets subject to
amortization was $9.6 million for Fiscal 2003. Based upon the amortizable
intangible assets recorded on the balance sheet at April 30, 2003, amortization
expense for each of the next five years is estimated to be approximately $10.0
million.

Intangible assets not subject to amortization at April 30, 2003 and May 1,
2002, were $91.1 million and consisted solely of trademarks.

Effective May 2, 2002, Heinz Finance adopted SFAS No. 144, "Accounting for
the Impairment or Disposal of Long-Lived Assets." SFAS No. 144 provides updated
guidance concerning the recognition and measurement of an impairment loss for
certain types of long-lived assets, expands the scope of a discontinued
operation to include a component of an entity and eliminates the current
exemption to consolidation when control over a subsidiary is likely to be
temporary. The adoption of this new standard did not have a material impact on
Heinz Finance's financial position, results of operations or cash flows for the
fiscal year ended April 30, 2003.

During Fiscal 2003, Heinz Finance adopted SFAS No. 146, "Accounting for
Costs Associated with Exit or Disposal Activities." SFAS No. 146 addresses
financial accounting and reporting for costs associated with exit or disposal
activities. This Statement requires that a liability for a cost associated with
an exit or disposal activity be recognized when the liability is incurred. This
Statement also establishes that fair value is the objective for initial
measurement of the liability.

During Fiscal 2003, Heinz Finance adopted Financial Accounting Standards
Board ("FASB") Interpretation No. 45 ("FIN 45"), "Guarantor's Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others". FIN 45 elaborates on the disclosures to be made by a
guarantor about its obligations under certain guarantees that it has issued, and
it requires the recognition of a liability at fair value by a guarantor at the
inception of a guarantee. The disclosure requirements of FIN 45 were effective
as of January 29, 2003. The initial recognition and measurement provisions of
FIN 45 are effective on a prospective basis for all guarantees issued or
modified after December 31, 2002. Heinz Finance has not issued or modified any
material guarantees since December 31, 2002.

In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity." This
statement affects the classification, measurement and disclosure requirements of
certain freestanding financial instruments, including mandatorily redeemable
shares. SFAS No. 150 is effective for all financial instruments entered into or
modified after May 31, 2003, and otherwise is effective for Heinz Finance for
the second quarter of Fiscal 2004. The adoption of SFAS No. 150 will require the
reclassification of Heinz Finance's $325 million of mandatorily redeemable
preferred shares to the liabilities section of the consolidated balance sheet
and the $20.2 million annual preferred dividend from retained earnings on the
consolidated balance sheet to interest expense on the consolidated statement of
income.

4. DISCONTINUED OPERATIONS AND SPIN-OFF

On December 20, 2002, Heinz transferred to a wholly-owned subsidiary ("SKF
Foods") certain assets and liabilities, including Heinz Finance's U.S. pet food
and pet snacks, U.S. tuna, U.S. retail private label soup and private label
gravy, College Inn broths and U.S. infant feeding businesses, and distributed
all of the shares of SKF Foods common stock on a pro rata basis to its
shareholders. Immediately thereafter, SKF Foods merged with a wholly-owned
subsidiary of Del Monte Foods Company ("Del Monte") resulting in SKF Foods
becoming a wholly-owned subsidiary of Del Monte ("the Merger").

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H. J. HEINZ FINANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

In accordance with accounting principles generally accepted in the United
States of America, the operating results and net assets related to these
businesses spun off to Del Monte have been treated as discontinued operations in
Heinz Finance's consolidated and combined statements of income and consolidated
balance sheets. Discontinued operations for the fiscal year ended April 30, 2003
represents operating results for eight months. The net assets of discontinued
operations owned by Heinz Finance were distributed to Heinz which reduced
Heinz's Class A interest in Heinz LP thus reducing Heinz Finance's minority
interest balance on the consolidated balance sheet. In connection with this
distribution, the terms of the Heinz LP agreement were amended such that the
Class B partners will now receive an improved economic interest in the
partnership by giving them a higher priority with respect to distributions and
an increased share in residual income.

The discontinued operations generated sales of $1,052.6 million, $1,357.7
million and $1,744.4 million and a net loss of $23.3 million (net of $13.8
million of a tax benefit), a net loss of $35.7 million (net of $19.6 million of
a tax benefit) and net income of $33.2 million (net of $38.5 million of a tax
provision) for Fiscal 2003, 2002 and 2001, respectively.

Net assets related to discontinued operations of $1,311.0 million are
reported on the May 1, 2002 consolidated balance sheet. These net assets consist
of the following:

5. ACQUISITIONS/DIVESTITURES

All of the following acquisitions have been accounted for as purchases and,
accordingly, the respective purchase prices have been allocated to the
respective assets and liabilities based upon their estimated fair values as of
the acquisition date. Operating results of businesses acquired have been
included in the consolidated and combined statements of income from the
respective acquisition dates forward.

Pro forma results of Heinz Finance, assuming all of the following
acquisitions and divestitures had occurred at the beginning of each period
presented, would not be materially different from the results reported.

FISCAL 2003

There were no significant acquisitions or divestitures made by Heinz
Finance in Fiscal 2003.

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H. J. HEINZ FINANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

FISCAL 2002

Heinz Finance acquired the following businesses for a total of $813.9
million, which was paid primarily in cash, including obligations to sellers of
$2.5 million:

- In July 2001, Heinz Finance completed the acquisition of Borden Food
Corporation's pasta sauce, dry bouillon and soup businesses including
such brands as Classico pasta sauces, Aunt Millie's pasta sauce, Mrs.
Grass Recipe soups and Wyler's bouillons and soups.

- In August 2001, Heinz Finance completed the acquisition of Delimex
Holdings, Inc., a leading maker of frozen Mexican food products such as
taquitos, quesadillas, tamales and rice bowls.

- In September 2001, Heinz Finance completed the acquisition of Anchor Food
Products branded retail business, which includes the retail licensing
rights to the T.G.I. Friday's brand of frozen snacks and appetizers and
the Popper's brand of retail appetizer lines.

- Heinz Finance also made other smaller acquisitions.

The allocation of the purchase price resulted in goodwill of $578.3
million, which was assigned to the U.S. Frozen segment ($380.7 million) and
Heinz North America segment ($197.5 million). Of that amount, $367.8 million is
expected to be deductible for tax purposes. In addition, $186.0 million of
intangible assets were acquired, of which $91.1 million was assigned to brands
and trademarks that are not subject to amortization. The remaining $94.9 million
of acquired intangible assets has a weighted-average useful life of
approximately 27 years. The intangible assets that make up that amount include
brands and trademarks of $39.1 million (38-year weighted-average useful life),
licensing agreements of $45.8 million (20-year weighted-average useful life) and
patents of $10.0 million (18-year weighted-average useful life).

FISCAL 2001

Heinz Finance acquired businesses for a total of $234.0 million, including
obligations to sellers of $4.1 million. The allocations of the purchase price
resulted in goodwill of $186.5 million and trademarks and other intangible
assets of $0.1 million.

On March 1, 2001, Heinz Finance acquired two privately held U.S.
foodservice companies: Cornucopia, Inc. of Irvine, California, and Central
Commissary, Inc. of Phoenix, Arizona. Both companies make and market
refrigerated and frozen reciped food products. Also during Fiscal 2001, Heinz
Finance completed the acquisitions of IDF Holdings, Inc., the parent of
International DiverseFoods Inc., a leading manufacturer of customized dressings,
sauces, mixes and condiments for restaurant chains and foodservice distributors,
and Alden Merrell Corporation, a manufacturer of high-quality, premium-priced
frozen desserts for casual dining restaurants and foodservice distributors.

On June 19, 2000, Heinz Finance exercised its preemptive right to purchase
an additional 2,582,774 shares of The Hain Celestial Group, Inc. ("Hain") for
$79.7 million, or $30.88 per share. The transaction restored Heinz Finance's
ownership interest in Hain to 19.5%. Heinz Finance's ownership was diluted as a
result of Hain's stock-for-stock merger with Celestial Seasonings on May 30,
2000.

On February 9, 2001, Heinz Finance announced it had sold The All American
Gourmet business and it Budget Gourmet and Budget Gourmet Value Classics brands
of frozen entrees for $55.0 million. The transaction resulted in a pretax loss
of $94.6 million.

34

H. J. HEINZ FINANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

6. SPECIAL ITEMS

DEL MONTE AND OTHER REORGANIZATION COSTS

In Fiscal 2003, Del Monte transaction costs and costs to reduce overhead of
the remaining business totaled $55.3 million pretax. In addition, during Fiscal
2003, Heinz Management Company recognized Del Monte transaction costs and costs
to reduce overhead of the remaining business totaling $34.2 million pretax.
These costs were then charged to Heinz Finance through the management fee
charged to Heinz Finance by Heinz Management Company for all salaried employee
costs. These total charges of $89.5 million pretax were comprised of $39.6
million related to the early retirement of debt, $24.4 million in employee
termination and severance costs, $14.7 million for legal, professional and other
related costs, and $10.8 million in non-cash asset write-downs. Of this amount,
$6.0 million was included in cost of products sold, $44.0 million in selling,
general and administrative expense ("SG&A"), and $39.6 million in other
expenses, net. As of April 30, 2003, $14.1 million was included in accounts
payable to related parties and other accrued liabilities related to Del Monte
and other reorganization costs.

STREAMLINE

In the fourth quarter of Fiscal 2001, Heinz announced a restructuring
initiative named "Streamline" which includes an organizational restructuring
aimed at reducing overhead costs and was completed in the first half of Fiscal
2003.

During Fiscal 2003, Heinz Finance utilized $1.0 million of severance and
exit cost accruals, principally related to its overhead reduction plan. In
addition, as a result of the spin-off of SKF Foods, a $3.4 million restructuring
liability related to ceasing canned pet food production at the Company's
Terminal Island, California facility was transferred to Del Monte.

In the fourth quarter of Fiscal 2002, Heinz Finance recorded a benefit of
$1.1 million pretax, classified as SG&A, to reflect revisions in original cost
estimates. In addition, Heinz Management Company, a wholly-owned subsidiary of
Heinz, assumed a portion of the Heinz Finance's restructuring liability as a
result of the realignment that occurred on May 3, 2001.

During Fiscal 2001, Heinz Finance recognized restructuring charges and
implementation costs totaling $15.3 million pretax, which primarily include
severance costs and were classified as SG&A.

OPERATION EXCEL

In Fiscal 1999, Heinz announced a growth and restructuring initiative,
named "Operation Excel." This initiative was a multi-year, multi-faceted program
which established manufacturing centers of excellence, focused the product
portfolio, realigned Heinz Finance's management teams and invested in growth
initiatives. Heinz Finance substantially completed Operation Excel in Fiscal
2002.

During Fiscal 2002, Heinz Management Company, a wholly-owned subsidiary of
Heinz, assumed a portion of the Heinz Finance's restructuring liability as a
result of the realignment that occurred on May 3, 2001.

During Fiscal 2001, Heinz Finance recognized restructuring charges of $1.7
million pretax in cost of products sold. This charge was offset by reversals of
unutilized Operation Excel accruals and asset write-downs of $16.7 million
pretax. These reversals were recorded in cost of products sold ($4.1 million)
and SG&A ($12.6 million) and were primarily the result of revisions in estimates
of fair values of assets which were disposed of as part of Operation Excel.
Implementation costs of $52.1 million pretax were also recognized in Fiscal
2001. These costs were classified as costs of products sold ($21.6 million) and
SG&A ($30.5 million).

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H. J. HEINZ FINANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

7. RELATED PARTY TRANSACTIONS

EMPLOYEE COSTS

Certain of Heinz's general and administrative expenses are allocated to
Heinz Finance. In Fiscal 2001, total costs allocated, which included charges for
salaries of corporate officers and staff and other Heinz corporate overhead,
were based on a percent of revenue which represents a reasonable allocation in
the opinion of management. In Fiscal 2003 and 2002, these costs primarily
include a management charge of all salaried employee costs from the Heinz
Management Company. Total costs charged to Heinz Finance for these services,
including discontinued operations, were $333.1 million, $334.8 million and $28.4
million for Fiscal 2003, 2002 and 2001, respectively. These costs are recorded
as cost of products sold or SG&A expense in the accompanying consolidated and
combined statements of income depending on the nature of the cost.

Heinz charges Heinz Finance for its share of group health insurance costs
for eligible company employees based upon location-specific costs, overall
insurance costs and loss experience incurred during a calendar year. In
addition, various other insurance coverages are also provided to Heinz Finance
through Heinz's corporate programs. Workers compensation, auto, property,
product liability and other insurance coverages are charged directly based on
Heinz Finance's loss experience. Amounts charged to Heinz Finance for insurance
costs, including discontinued operations were $75.8 million, $65.2 million and
$80.3 million for Fiscal 2003, 2002 and 2001, respectively, and are recorded in
SG&A expense in the accompanying consolidated and combined statements of income.

Pension costs and postretirement costs are also charged to Heinz Finance
based upon eligible employees participating in the Plans. See Note (13).

CASH MANAGEMENT

In Fiscal 2001, the U.S. Group maintained a cash management arrangement
with Heinz. On a daily basis, all available cash was deposited and disbursements
were withdrawn. Heinz charged (credited) the U.S. Group interest on the average
daily balance maintained in the resulting intercompany account. Net interest
expense related to this arrangement, included in the combined statement of
income was $15.0 million in Fiscal 2001. The interest rate charged to or
received by the U.S. Group was 7.34% in Fiscal 2001.

Beginning in Fiscal 2002, Heinz Finance became the treasury center for cash
management and debt financing for all of Heinz's domestic operations. As a
result, $100.3 million and $788.9 million of net short-term notes receivable
with related parties are recorded on the consolidated balance sheets as of April
30, 2003 and May 1, 2002, respectively. In addition, in Fiscal 2003, Heinz
Finance entered into a number of short-term notes payable with foreign
wholly-owned subsidiaries of Heinz, which have a zero balance as of April 30,
2003. An average interest rate of 1.65% and 2.99% was charged on these combined
domestic and foreign notes resulting in $31.5 million and $34.2 million of net
interest income for Fiscal 2003 and 2002, respectively.

PRODUCT SALES AND PURCHASES

Heinz Finance sells and purchases products and services to and from other
Heinz affiliates. The result of related party transactions is the $24.6 million
and $44.7 million balances due from related parties in Fiscal 2003 and 2002,
respectively, and the $98.9 million and $121.9 million balances for accounts
payable to related parties in Fiscal 2003 and 2002, respectively. Product sales
to related parties were $48.3 million, $42.0 million and $38.1 million in Fiscal
2003, 2002 and 2001, respectively, and purchases from related parties were $28.0
million, $23.7 million and $4.5 million in Fiscal 2003, 2002 and 2001,
respectively.

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H. J. HEINZ FINANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

OTHER RELATED PARTY ITEMS

In Fiscal 2002 and 2001, Heinz Finance sold undivided interests in certain
accounts receivable to a fully consolidated subsidiary of Heinz, Receivables
Servicing Company ("RSC"). Heinz Finance sold $619.2 million and $1,291.0
million of receivables net of discount expense of $2.8 million and $9.4 million
in Fiscal 2002 and 2001, respectively, to RSC. At the fiscal years ending 2002
and 2001, respectively, Heinz Finance had $0 and $126.9 million of receivables
sold to RSC. These sales were reflected as reductions of trade accounts
receivable. Heinz Finance's contract with RSC terminated in December 2001.

Until the fourth quarter of Fiscal 2001, Heinz Finance had outstanding
notes receivable from Heinz affiliates which were used for working capital
purposes and to fund acquisitions. The short-term notes had an interest rate of
7.00%. The long-term notes had an interest rate of 6.75% with a maturity of May
2003. Interest income earned by Heinz Finance related to these receivables was
$38.2 million in Fiscal 2001. In the fourth quarter of Fiscal 2001, these notes
receivable from related parties were exchanged by Heinz Finance with a
subsidiary of Heinz, PM Holding, Inc. ("PM Holding"), for $1.9 billion of
non-voting, 6.5% cumulative non-participating preferred stock of PM Holding. In
the third quarter of Fiscal 2003, Heinz Finance's preferred stock investment in
PM Holding was converted to a preferred stock investment in Heinz as a result of
the merger of PM Holding with and into Heinz. The dividend amounted to $123.9
million and $130.7 million for Fiscal 2003 and 2002, respectively. This
preferred stock investment is recorded in the Investments in related parties
balance on the consolidated balance sheets as of April 30, 2003 and May 1, 2002.

Heinz Finance paid royalties of $159.5 million, $139.4 million and $85.0
million in Fiscal 2003, 2002 and 2001, respectively, to Promark International,
Inc. and Promark Brands, Inc., indirect subsidiaries of Heinz, for the use of
certain trademarks.

The $35.0 million long-term note receivable from related parties recorded
on the accompanying consolidated balance sheets as of May 1, 2002 relates to a
receivable from Heinz that was contributed to Heinz Finance in exchange for
common stock of Heinz Finance. The common stock balance on the statement of
shareholders' equity reflects a 4-for-1 common stock split which occurred in
Fiscal 2002. This note was classified as short-term as of April 30, 2003 given
its maturity of April 29, 2004.

Heinz Finance received an administrative fee from Heinz for acting as the
agent in the sale of the retained inventory discussed in Note (1). This fee was
$5.1 million for Fiscal 2002, which is recorded as income in SG&A expense in the
accompanying consolidated statement of income.

37

H. J. HEINZ FINANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

8. INCOME TAXES

The following table summarizes the provision for U.S. federal and state
taxes on income from continuing operations:

The differences between the U.S. federal statutory tax rate and Heinz
Finance's consolidated and combined effective tax rate from continuing
operations are as follows:

The effective tax rate for Heinz Finance in Fiscal 2003 and 2002 is a
result of Heinz Finance's nontaxable minority interest in Heinz LP. The
effective tax rate will fluctuate for Heinz Finance depending on the proportion
of this nontaxable minority interest to total Heinz Finance income before tax.

The deferred tax (assets) and deferred tax liabilities applicable to
continuing operations recorded on the balance sheet as of April 30, 2003 and May
1, 2002 are as follows:

38

H. J. HEINZ FINANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

The U.S. income tax returns of Heinz have been audited by the Internal
Revenue Service for all years through 1994. Heinz Finance has retained
responsibility for its pro rata portion of income tax matters related to the
spun-off businesses from the inception of Heinz LP up to December 20, 2002.

9. DEBT AND PREFERRED STOCK

In September 2001, Heinz and Heinz Finance entered into a 364-Day Credit
Agreement, which was renewed in September 2002, and a Five-Year Credit
Agreement, expiring in September 2006. The 364-day agreement permits Heinz and
Heinz Finance to borrow up to $800 million. The five-year agreement permits
Heinz and Heinz Finance to borrow up to $1.5 billion. These agreements support
Heinz's and Heinz Finance's commercial paper borrowings and the remarketable
securities. As a result these borrowings are classified as long-term debt based
upon Heinz Finance's ability to refinance these borrowings on a long-term basis.
Long-term debt was comprised of the following as of April 30, 2003 and May 1,
2002:

The fair value of the debt obligations approximated the recorded value as
of April 30, 2003 and May 1, 2002. Annual maturities of long-term debt during
the next five fiscal years are $1.7 million in 2004, $336.1 million in 2005,
$0.6 million in 2006, $0.4 million in 2007 and $299.5 million in 2008.

In Fiscal 2002, Heinz Finance issued $325 million of 6.226% Voting
Cumulative Preferred Stock, Series A with a liquidation preference of $100,000
per share. The preferred stock is required to be redeemed in July 2008.

In March 2002, Heinz Finance issued $700 million of 6% Notes due 2012 and
$550 million of 6.75% Notes due 2032. The notes are guaranteed by Heinz and the
proceeds were used to retire commercial paper. The notes together with Heinz
Finance's $750 million 6.625% Notes due 2011 were initially privately placed in
reliance on exemptions from registration under the Securities Act of 1933. In
March 2003, Heinz Finance exchanged new debt securities for these initial debt
securities, with the

39

H. J. HEINZ FINANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

new debt securities being substantially identical in all respects to the initial
debt securities, except for being registered under the Securities Act of 1933.

As of April 30, 2003, Heinz Finance had $800 million of remarketable
securities due November 2020. These securities are subject to an annual
remarketing on each November 15, and the interest rate is reset on such dates.
If the securities are not remarketed, then Heinz Finance is required to
repurchase all of the securities at 100% of the principal amount plus accrued
interest. On November 15, 2002, the securities were remarketed at an effective
yield to Heinz Finance of 6.56%.

In Fiscal 2003, Heinz Finance used part of the proceeds received from Heinz
from the Del Monte transaction to retire the following long-term debt:

In connection with the early retirement of a portion of the Remarketable
Securities due November 2020, Heinz Finance recorded a $39.6 million pretax
charge in other expenses, net in the consolidated statement of income.

10. PARENT COMPANY INVESTMENT/MINORITY INTEREST

The components of the investment by Heinz as of May 2, 2001 are as follows:

The components of Heinz Finance's minority interest balance as of April 30,
2003 and May 1, 2002 are as follows:

(In thousands)
Initial net asset contribution--May 3, 2001................. $ 1,490,564
Minority partners' share of Fiscal 2002 income.............. 445,707
Additional asset contribution/liability assumption.......... (68,939)
Distributions to minority partners--Fiscal 2002............. (108,856)
-----------
Balance as of May 1, 2002................................... 1,758,476
Minority partners' share of Fiscal 2003 income.............. 274,022
Additional liability assumption............................. (1,667)
Distributions to minority partners--Fiscal 2003............. (412,924)
Spin-off of SKF Foods....................................... (1,160,414)
-----------
Balance as of April 30, 2003................................ $ 457,493
===========

40

H. J. HEINZ FINANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

11. SUPPLEMENTAL CASH FLOW INFORMATION

Net cash paid during the year for:

Noncash activities:

Net assets spun-off............................. $1,159,000 $ -- $ --
========== ======== ========

- ---------------

(1) Includes obligations to sellers of $2.5 million and $4.1 million in 2002 and
2001, respectively.

12. MANAGEMENT INCENTIVE PLAN

Heinz's management incentive plan covers officers and other key employees.
Participants may elect to be paid on a current or deferred basis. The aggregate
amount of all awards may not exceed certain limits in any year. In Fiscal 2003
and 2002, all of Heinz Finance's compensation under the management incentive
plan was recorded on the Heinz Management Company and subsequently charged back
to Heinz Finance (see Note 7). Compensation under the management incentive plan
was $4.1 million in 2001.

13. EMPLOYEE RETIREMENT BENEFITS

Employees participate in certain defined benefit pension plans, certain
defined contribution plans, and certain stock option plans, all of which are
sponsored by Heinz. Heinz Finance also provides post-retirement health care and
life insurance benefits for employees who meet the eligibility requirements of
the Heinz plans. Retirees share in the cost of these benefits based on age and
years of service.

Heinz allocates costs for the defined benefit plans to Heinz Finance as
determined by actuarial valuations. Company contributions to the defined
contribution plans amount to a qualified age-related contribution, a matching of
employee's contributions up to a specified amount, and for certain employees,
supplemental contributions.

The following (income) expense was included in the Heinz Finance's
statements of income:

Employees also participate in the Employee Stock Ownership Plan ("ESOP")
and the Global Stock Purchase Plan ("GSPP"). Heinz established the ESOP in 1990
to replace in full or in part

41

H. J. HEINZ FINANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

Heinz Finance's cash-matching contributions to the H. J. Heinz Company Employees
Retirement and Saving Plan, a 401(k) plan for salaried employees. The GSPP gives
employees an option to acquire stock at the lower of 85% of the fair market
value of Heinz's stock on the first or last day of a purchase period.

14. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES

Heinz Finance utilizes certain derivative financial instruments to manage
its commodity price and interest rate exposures.

COMMODITY PRICE HEDGING

Heinz Finance uses commodity futures, swaps and option contracts in order
to reduce price risk associated with forecasted purchases of raw materials such
as corn, soybean oil and soybean meal. Commodity price risk arises due to
factors such as weather conditions, government regulations, economic climate and
other unforeseen circumstances. Derivatives used to hedge forecasted commodity
purchases that meet the criteria for hedge accounting are designated as cash
flow hedges. Consequently, the effective portion of changes in the fair value of
these derivatives is deferred as a component of accumulated other comprehensive
income and is recognized as part of cost of products sold at the time the hedged
item affects earnings.

INTEREST RATE HEDGING

Heinz Finance uses interest rate swaps to manage interest rate exposure.
These derivatives may be designated as cash flow hedges or fair value hedges
depending on the nature of the risk being hedged. Derivatives used to hedge risk
associated with changes in the fair value of certain fixed rate debt obligations
are designated as fair value hedges. Consequently, changes in the fair value of
these derivatives, along with changes in the fair value of the hedged debt
obligations that are attributable to the hedged risk, are recognized in current
period earnings.

HEDGE INEFFECTIVENESS

Hedge ineffectiveness related to cash flow hedges, which is reported in
current period earnings as other expenses, net was a net loss of $0.1 million
for the years ended April 30, 2003 and May 1, 2002. Heinz Finance excludes the
time value component of option contracts from the assessment of hedge
effectiveness.

DEFERRED HEDGING GAINS AND LOSSES

As of April 30, 2003, Heinz Finance is hedging forecasted transactions for
periods not exceeding 12 months. During the next 12 months, Heinz Finance
expects $0.1 million of net deferred gain reported in accumulated other
comprehensive income to be reclassified to earnings. Net deferred gains
reclassified to earnings because the hedged transaction was no longer expected
to occur were not significant.

OTHER ACTIVITIES

Heinz Finance enters into certain derivative contracts in accordance with
its risk management strategy that do not meet the criteria for hedge accounting.
Although these derivatives do not qualify as hedges, they have the economic
impact of largely mitigating commodity price or interest rate exposures. These
derivative financial instruments are accounted for on a full mark to market
basis through current earnings even though they were not acquired for trading
purposes.

42

H. J. HEINZ FINANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

At April 30, 2003, the notional amount outstanding of commodity and
interest rate derivative contracts was $21 million and $2.95 billion,
respectively. At May 1, 2002, the notional amount outstanding of commodity and
interest rate derivative contracts was $30 million and $2.05 billion,
respectively. The fair value of derivative financial instruments was a net asset
of $297 million and $23 million at April 30, 2003 and May 1, 2002, respectively.

CONCENTRATIONS OF CREDIT RISK

Counterparties to interest rate derivatives consist of large major
international financial institutions. Heinz Finance continually monitors its
positions and the credit ratings of the counterparties involved and, by policy,
limits the amount of credit exposure to any one party. While Heinz Finance may
be exposed to potential losses due to the credit risk of non-performance by
these counterparties, losses are not anticipated. For Fiscal 2003, Wal-Mart
Stores, Inc. represented more than 10% of Heinz Finance's sales and the top ten
customers represented more than 30% of Heinz Finance's sales. Heinz Finance
closely monitors the credit risk associated with these customers and has never
experienced significant losses.

15. SEGMENT DATA

The composition of segments and measure of segment profitability is
consistent with that used by Heinz Finance's management. The Heinz North America
segment now includes only those businesses that were retained by Heinz Finance
following the Del Monte transaction. Prior periods have been restated to conform
with current presentation.

Descriptions of Heinz Finance's reportable segments are as follows:

- Heinz North America -- This segment manufactures, markets and sells
ketchup, condiments, sauces and pasta meals to the U.S. grocery and
foodservice channels.

- U.S. Frozen -- This segment manufactures, markets and sells frozen
potatoes, entrees, snacks and appetizers.

Heinz Finance's management evaluates performance based on several factors
including net sales and the use of capital resources; however, the primary
measurement focus is operating income. Intersegment sales are accounted for at
current market values. Items below the operating income line of the consolidated
and combined statements of income are not presented by segment, since they are
excluded from the measure of segment profitability reviewed by Heinz Finance's
management.

43

H. J. HEINZ FINANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

The following table presents information about Heinz Finance's reportable
segments:

- ---------------

(a) Excludes property, plant and equipment obtained through acquisitions.

(b) Includes charges/assets not directly attributable to operating segments.

(c) Amounts include discontinued operations.

(d) FISCAL YEAR ENDED APRIL 30, 2003: Heinz North America includes Del Monte
transaction related costs and costs to reduce overhead of the remaining
business totaling $89.5 million, of which $34.2 million was charged back to
Heinz Finance by Heinz Management Company.

FISCAL YEAR ENDED MAY 1, 2002: Heinz North America includes a net
restructuring benefit related to the Streamline initiative totaling $1.1
million.

FISCAL YEAR ENDED MAY 2, 2001: Includes net restructuring and implementation
costs of Operation Excel as follows: Heinz North America $13.7 million and
U.S. Frozen $23.3 million. Includes restructuring and implementation costs
of the Streamline initiative in Heinz North America of $15.3 million.
Includes the loss on the sale of The All American Gourmet in U.S. Frozen of
$94.6 million. Includes acquisition costs in Heinz North America of $18.5
million.

44

H. J. HEINZ FINANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

Heinz Finance's revenues are generated via the sale of products in the
following categories:

16. QUARTERLY RESULTS
(UNAUDITED)

The first quarter of Fiscal 2003 includes costs related to the Del Monte
transaction and costs to reduce overhead of the remaining businesses of $6.1
million after tax.

The second quarter of Fiscal 2003 includes costs related to the Del Monte
transaction and costs to reduce overhead of the remaining businesses of $5.2
million after tax.

The third quarter of Fiscal 2003 includes costs related to the Del Monte
transaction and costs to reduce overhead of the remaining businesses of $30.9
million after tax.

The fourth quarter of Fiscal 2003 includes costs related to the Del Monte
transaction and costs to reduce overhead of the remaining businesses of $31.4
million after tax. The fourth quarter of Fiscal 2002 includes a benefit of $1.1
million after tax related to the Streamline initiative.

17. COMMITMENTS AND CONTINGENCIES

LEGAL MATTERS

Certain suits and claims have been filed against Heinz Finance and have not
been finally adjudicated. These suits and claims when finally concluded and
determined, in the opinion of management, based upon the information that it
presently possesses, will not have a material adverse effect on Heinz Finance's
consolidated and combined financial position, results of operations or
liquidity.

45

H. J. HEINZ FINANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

LEASE COMMITMENTS

Operating lease rentals for warehouses, production, office facilities and
equipment amounted to $20.5 million in 2003, $26.6 million in 2002 and $30.9
million in 2001. Future lease payments for noncancellable operating leases as of
April 30, 2003 totaled $118.0 million (2004 -- $15.6 million, 2005 -- $13.5
million, 2006 -- $9.6 million, 2007 -- $59.3 million, 2008 -- $0.5 million and
thereafter -- $19.6 million).

No significant credit guarantees existed between Heinz Finance and third
parties as of April 30, 2003.

18. ADVERTISING COSTS

Advertising costs for Fiscal 2003, 2002 and 2001 were $155.3 million,
$134.7 million and $141.4 million, respectively and are recorded either as a
reduction of revenue or as a component of SG&A.

46

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

There is nothing to be reported under this item.

ITEM 9A. CONTROLS AND PROCEDURES.

(a) Evaluation of Disclosure Controls and Procedures

Heinz Finance's management, with participation of Heinz Finance's Chief
Executive Officer and Chief Financial Officer, evaluated the effectiveness of
the design and operation of Heinz Finance's disclosure controls and procedures
as of the end of the period covered by this report. Based on that evaluation,
the Chief Executive Officer and Chief Financial Officer concluded that Heinz
Finance's disclosure controls and procedures as of the end of the period covered
by this report have been designed and are functioning effectively to provide
reasonable assurance that the information required to be disclosed by Heinz
Finance in reports filed under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported within the time periods specified in the
SEC's rules and forms. Heinz Finance believes that a controls system, no matter
how well designed and operated, cannot provide absolute assurance that the
objectives of the controls system are met, and no evaluation of controls can
provide absolute assurance that all control issues and instances of fraud, if
any, within a company have been detected.

(b) Changes in Internal Controls over Financial Reporting

No significant change in Heinz Finance's internal control over financial
reporting occurred during the fourth fiscal quarter that has materially
affected, or is reasonably likely to materially affect, Heinz Finance's control
over financial reporting.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
See table in Item 1.

ITEM 11. EXECUTIVE COMPENSATION.

Compensation of Directors

We paid fees to our Independent Director for his service as a director. The
Independent Director is entitled to receive annual compensation of $3,500 plus
reimbursement of expenses for attendance at each meeting of the Board of
Directors. We did not pay fees to directors who are not Independent Directors.

47

Executive Compensation

The following table sets forth information concerning the total
compensation paid by us (except as discussed below for executive officers Cullo,
Johnson, Winkleblack, Bertasso, Jimenez and Stein) to our executive officers for
the periods set forth below.

SUMMARY COMPENSATION TABLE

- ---------------

(1) Amounts reflect grants of restricted stock units, including a grant in lieu
of a portion of such officer's cash bonus for Fiscal 2003. The number of
units awarded in such grants and their value as of April 30, 2003 were as
follows: Mr. Cullo, 3,358, $100,337; Mr. Johnson, 98,142, $2,932,483; Mr.
Winkleblack, 25,081, $749,420; Mr. Bertasso, 23,865, $713,086; Mr. Jimenez,
24,173, $722,289; and Ms. Stein, 17,038, $509,095. The restricted stock
units vest on September 12, 2007, except one-third of the restricted stock
units will vest on September 12, 2003 because specific financial objectives
were met, and the remainder may vest during the following two years if
additional specific financial objectives are met. Dividend equivalents are
paid on the restricted stock units at the same rate as paid on Heinz's
common stock.

(2) All option awards and those restricted stock unit awards made prior to the
spin-off of certain businesses to Del Monte Corporation on December 20,
2002 have been adjusted to reflect the stock distribution made in
connection with such spin-off.

(3) Includes for Fiscal 2003 for Messrs. Cullo, Johnson, Winkleblack, Bertasso,
Jimenez and Ms. Stein, respectively, the following: (i) amounts contributed
by Heinz under Heinz's retirement and savings plans, $23,176, $209,804,
$74,549, $61,344, $61,921, and $48,090; (ii) amounts attributable to "split
dollar" life insurance previously provided by Heinz and since discontinued
for executive officers, $2,574, $60,165, $17,373, $11,380, $12,953, and
$5,882; and (iii) the portion of interest accrued (but not currently paid
or payable) on deferred compensation above 120% of the applicable federal
long-term rate, $0, $14,018, $0, $0, $0, and $0.

(4) Executive officer Cullo is also employed by Heinz and receives a portion of
his compensation from Heinz and the remainder from Heinz Finance.

(5) Mr. Johnson is not employed by Heinz Finance, but has been included because
of his position at Heinz, which pays all of his compensation. The annual
base salary, annual bonus opportunity and long-term compensation (including
stock options and restricted stock units) for

48

Mr. Johnson is determined by the Heinz Management Development and
Compensation Committee. Because Mr. Johnson is an executive officer of
Heinz and his compensation from Heinz was previously required to be
disclosed, his compensation received from Heinz is included for the Heinz
fiscal years ended May 1, 2002 and May 2, 2001.

(6) Includes $19,637 paid by Heinz on behalf of Mr. Johnson for a Heinz vehicle
and related costs.

(7) Mr. Winkleblack became an executive officer of Heinz and Heinz Finance in
January 2002. Executive officer Winkleblack is also employed by Heinz, and
receives no direct compensation from Heinz Finance. The annual base salary,
annual bonus opportunity and long-term compensation (including stock
options and restricted stock units) for Mr. Winkleblack was determined by
the Heinz Management Development and Compensation Committee. Because his
compensation received from Heinz was previously required to be disclosed,
his compensation received from Heinz is included for the Heinz fiscal year
ended May 1, 2002.

(8) Mr. Bertasso is not employed by Heinz Finance, but has been included
because of his position at Heinz, which pays all of his compensation. The
annual base salary, annual bonus opportunity and long-term compensation
(including stock options and restricted stock units) for Mr. Bertasso is
determined by the Heinz Management Development and Compensation Committee.
Because Mr. Bertasso is an executive officer of Heinz and his compensation
from Heinz was previously required to be disclosed, his compensation from
Heinz is included for the Heinz fiscal years ended May 1, 2002 and May 2,
2001.

(9) Mr. Jimenez is not employed by Heinz Finance, but has been included because
of his position at Heinz, which pays all of his compensation. The annual
base salary, annual bonus opportunity and long-term compensation (including
stock options and restricted stock units) for Mr. Jimenez was determined by
the Heinz Management Development and Compensation Committee. Mr. Jimenez
became an executive officer of Heinz in September 2001. Because his
compensation received from Heinz was previously required to be disclosed,
his compensation received from Heinz is included for the Heinz fiscal year
ended May 1, 2002.

(10) Executive officer Stein is also employed by Heinz, and Ms. Stein receives
no direct compensation from Heinz Finance. The annual base salary, annual
bonus opportunity and long-term compensation (including stock options and
restricted stock units) for Ms. Stein was determined by the Heinz
Management Development and Compensation Committee. Because Ms. Stein is an
executive officer of Heinz and her compensation from Heinz was previously
required to be disclosed, her compensation received from Heinz is included
for the Heinz fiscal years ended May 1, 2002 and May 2, 2001.

OPTION GRANTS BY HEINZ IN FISCAL YEAR 2003

- ---------------

(1) All options were granted on September 12, 2002, pursuant to the terms of
Heinz's stock option plans and have identical terms. All options vest on
September 12, 2005. All options were adjusted

49

to reflect the stock distribution resulting from the spin-off of certain
businesses to Del Monte Corporation on December 20, 2002.

(2) The estimated grant date present value reflected in the above table is
determined using the Black-Scholes model. The material assumptions and
adjustments incorporated in the Black-Scholes model in estimating the value
of the option grants reflected in the above table include the following: (i)
exercise price for the options ($32.0645) equal to the fair market value of
the underlying Heinz's common stock on the date of grant; (ii) expected
option term of 6.5 years; (iii) dividend yield of 4.3%; (iv) risk-free
interest rate of 4.0%; and (v) volatility of 25.2%. The ultimate values of
the options will depend on the future market price of Heinz's common stock,
which cannot be forecast with reasonable accuracy. The actual value, if any,
an optionee will realize upon exercise of an option will depend on the
excess of the market value of Heinz's common stock over the exercise price
on the date the option is exercised.

AGGREGATED OPTION/SAR EXERCISES IN FISCAL YEAR 2003 AND
FISCAL YEAR-END OPTION/SAR VALUE(1)

- ---------------

(1) All options are denominated in shares of Heinz.

(2) All options were adjusted to reflect the stock distribution resulting from
the spin-off of certain businesses to Del Monte Corporation on December 20,
2002.

(3) The "Value of Unexercised In-the-Money Options at Fiscal Year-End" is equal
to the fair market value of each share underlying the options at April 30,
2003, $29.88, less the exercise price, times the number of options.

(4) After the end of Fiscal 2003, Mr. Johnson and Mr. Bertasso exercised 554,974
and 55,497 options, respectively, which were expiring in the current fiscal
year, reducing their options exercisable to 1,387,438 and 269,163,
respectively, as reflected in the Security Ownership of Management Table,
footnote 2, below. As a result of Mr. Johnson's exercise of these stock
options, Mr. Johnson increased his shareholdings by 100,000 shares.

RETIREMENT BENEFITS

Most full-time salaried employees in the United States who were hired
before January 1, 1993 are entitled to retirement benefits from Plan A of the H.
J. Heinz Company Employees' Retirement System, "Plan A." Benefits are based on
credited service and five-year average eligible compensation through December
31, 1992, the date on which Plan A was frozen. Since January 1, 1993, retirement
benefits have been provided by Heinz through an age-related contribution account
within the Employees Retirement and Savings Plan.

Heinz has a Supplemental Executive Retirement Plan, the "SERP," which
provides additional retirement benefits for eligible executives, including the
executive officers Cullo, Bertasso, Jimenez, Johnson, Winkleblack and Ms. Stein.
The SERP was adopted in order to attract and retain executives, and to
compensate them for reductions in benefits due to limitations imposed by the

50

Internal Revenue Code. The SERP benefit is a lump sum equal to a multiple of the
employee's final average eligible compensation during any five of the last ten
years prior to retirement. It is reduced by (i) the lump sum value of the Plan A
benefit (if any), and (ii) the value of the employee's Age-Related Company
Contribution Account under the Heinz Employees Retirement and Savings Plan and
the Heinz Employees Retirement and Savings Excess Plan.

The following table entitled "Table I -- U.S. Retirement Plans" shows the
estimated maximum retirement benefit from all sources described above, at
various combinations of pay and service, stated as an annual pension equivalent
beginning at age 65. The pay included in the earnings base is the executive's
base salary, annual bonus and restricted stock units received in lieu of cash
bonus.

On May 6, 2002, the Board of Directors of Heinz approved an enhancement to
Mr. Johnson's SERP. This enhancement provides for an additional accrual equal to
3.85% of final average earnings per each additional year of service from the
date of the SERP enhancement. This benefit is subject to a maximum enhancement
of 26.95% at 7 additional years of service. The enhancement is further limited
to a total annual benefit (from all of Heinz's retirement arrangements) of 60%
of final average earnings (excluding any value received from stock options) at
retirement on or after the age of 60.

This enhanced benefit would vest 100% in five years subject to Mr.
Johnson's continued employment. If Mr. Johnson is involuntarily terminated from
his position for a reason other than for cause, the benefit will fully vest; his
accrual however, would be based on years served as of the date of termination.

The following table entitled "Table II -- Retirement Plans for Mr. Johnson"
shows the estimated maximum retirement benefit from all sources described above
for Mr. Johnson, at various combinations of pay and service, stated as an annual
pension equivalent beginning at age 65. The pay included in the earnings base is
Mr. Johnson's base salary, annual bonus, and restricted stock units received in
lieu of cash bonus.

As of April 30, 2003, the years of service for executive officers Cullo,
Bertasso, Jimenez, Winkleblack, Ms. Stein and Mr. Johnson were, as rounded to
the nearest full year, 12, 16, 5, 2, 3 and 21, respectively.

TABLE I -- U.S. RETIREMENT PLANS

51

TABLE II -- RETIREMENT PLANS FOR MR. JOHNSON

EXECUTIVE ESTATE LIFE INSURANCE PROGRAM

In December 2001, Heinz adopted an executive estate life insurance program
("EELIP") for certain eligible executives. Under the EELIP, eligible executives
relinquished compensation, including existing deferred compensation balances
under Heinz's Executive Deferred Compensation Plan, in exchange for Heinz's
funding of a split-dollar life insurance policy purchased by the executive's
family trust. The amount funded by Heinz was equal to approximately 150% of the
compensation relinquished by the executive, which was designed to achieve cost
neutrality for Heinz when compared to the cost to Heinz of the relinquished
deferred compensation benefit. Consistent with tax regulations, the premium
payments were accomplished through split-dollar insurance loans which will be
automatically repaid, with interest to Heinz upon payment under the policy. All
amounts paid to a trust were used by the trust to pay the premium on the life
insurance policy on the life of the executive (or a survivorship policy on the
life of the executive and the executive's spouse). Under the EELIP, Heinz will
recover all amounts so funded plus interest thereon from the proceeds of the
policy after the participant's and/or participant's spouse's death.

In January 2001, Heinz had purchased a split-dollar life insurance policy
for Mr. Johnson in exchange for Mr. Johnson relinquishing a deferred
compensation award (in the aggregate amount of $3,385,249, including interest)
originally granted to him in September 2000 under the Executive Deferred
Compensation Plan, with a three-year vesting date of September 2003. In December
2001, Mr. Johnson agreed to relinquish his entire interest in that split-dollar
policy and the previous deferred compensation award in exchange for Heinz
providing under the EELIP $5,080,000 to his insurance trust to purchase a
survivorship life insurance policy insuring Mr. Johnson and his spouse, with a
vesting date of September 2003. The new insurance arrangement was substituted
for the prior split-dollar policy for greater estate planning efficiency and in
order to participate in the EELIP. Mr. Johnson's life insurance loan accrues
interest at a rate of 2.46% per year.

In March 2003, the executive life insurance program of Heinz was amended to
convert a split-dollar life insurance program to a bonus life insurance policy
to eliminate the loan feature of that program. The above-referenced EELIP loan,
which will be automatically repaid, with interest, to Heinz upon payment under
the policy, is permitted to remain outstanding under the Sarbanes-Oxley Act of
2002 as its terms will not be modified.

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SEVERANCE ARRANGEMENTS

Heinz maintains severance agreements with Ms. Stein and Messrs. Johnson,
Winkleblack, Bertasso and Jimenez. If an executive's employment is terminated
involuntarily other than for cause, or voluntarily for good reason, within two
years after a change in control of Heinz, the agreements provide for the lifting
of restrictions on outstanding incentive awards, continuation of medical, life
insurance and disability coverage for a three-year period, and a lump sum
payment equal to three times the sum of the annual salary and bonus, including
restricted stock units granted in lieu of a portion of the cash bonus
opportunity (as determined under the severance agreements), of the executive
plus a benefit determined by taking into account an additional three years of
age and service for purposes of calculating retirement benefits. The agreements
also provide that Heinz will reimburse the executive for the impact of excise
taxes, if any, which may be imposed under the Internal Revenue Code with respect
to certain payments contingent on a change in control.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

The following table sets forth all equity securities of Heinz beneficially
owned as of June 30, 2003 by each director, director nominee, and executive
officer named in the Summary Compensation Table, and all directors, director
nominees and executive officers as a group, being 7 in number. No executive
officer or director holds any shares of Heinz Finance.

- ---------------
(1) Shares listed in this column include all shares in which the named
individuals and all directors, director nominees, and executive officers as
a group have a present beneficial economic interest, and also include all
shares allocated to the accounts of the named individuals and all directors,
director nominees, and executive officers as a group under Heinz's Employees
Retirement and Savings Plan (W.R. Johnson, 74,660; A.B. Winkleblack, 1,129;
M.J. Bertasso, 16,097; J. Jimenez, 11,096; L. Stein, 642; and L.A. Cullo,
2,912; and all directors, director nominees and executive officers as a
group, 106,536). Each person has both sole voting and sole investment power
with respect to the shares listed unless otherwise indicated.

(2) Shares listed include shares subject to stock options granted under Heinz's
stock option plans and exercisable within 60 days following June 30, 2003
(W.R. Johnson, 1,387,438; A.B. Winkleblack, 0; M.J. Bertasso, 269,163; J.
Jimenez, 194,241; L. Stein, 55,498; L.A. Cullo, 24,975; and all directors,
director nominees and executive officers as a group, 1,931,315.

(3) Shares listed include one-third of restricted stock units granted in Fiscal
2003 under the Fiscal Year 2003 Stock Incentive Plan, which restricted stock
units will vest on September 12, 2003 (W.R. Johnson, 32,714; A.B.
Winkleblack, 8,360; M.J. Bertasso, 7,955; J. Jimenez, 8,057; L. Stein,
5,679; L.A. Cullo, 1,119; and all directors, director nominees and executive
officers as a group, 63,884).

(4) The percentages represent the total of shares listed in the adjacent column
divided by the issued and outstanding shares of Heinz's common stock as of
June 30, 2003, plus, where applicable, all restricted stock units and stock
options granted to the individual or group, as appropriate, under

53

Heinz's stock option plans exercisable within 60 days following June 30,
2003. Percentages of less than 1 percent are omitted.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

Heinz Finance and Heinz have entered into agreements that provide for
financial support, administrative and other services, reimbursement for employee
services and intellectual property. This section describes those material
agreements between Heinz Finance and Heinz.

Operational Agreements

Heinz Finance has entered into a services agreement with Heinz pursuant to
which Heinz will provide certain accounting, legal, tax and other support
services and facilities to us. Under the services agreement, we will reimburse
Heinz for services provided by Heinz thereunder. In addition, some of the
officers and employees of Heinz Finance are officers or employees of Heinz or
its affiliates. In particular, Heinz Management Company employs the salaried
people who conduct the business of Heinz LP, and the costs and expenses of those
employees are reimbursed by Heinz LP. If any individual provides more than de
minimis services to both Heinz and Heinz Finance, the compensation of that
individual will be apportioned between the two groups on terms no less favorable
to us than we could obtain from unaffiliated entities. We pay a royalty to
Promark Brands, Inc., for use of trademarks historically used in Heinz's U.S.
business.

Guarantee Facility Agreement; Liquidity Agreement

Heinz Finance has a guarantee facility agreement with Heinz, pursuant to
which Heinz agrees to guarantee our payment of third-party obligations we have
issued or owe. We pay Heinz fees equal to 10 basis points per year of the sum of
the highest balance of the debt obligations with respect to which Heinz is a
guarantor and the highest balance of the debt obligations with respect to which
Heinz is a co-obligor. Under the terms of a liquidity agreement between Heinz
and Heinz Finance, Heinz agreed to provide or make available to us from time to
time loans in an aggregate principal amount of up to $400 million outstanding at
any one time, with normal and customary conditions to disbursement for each loan
made. Each loan under the liquidity agreement will bear interest at a floating
rate per annum equal to the then applicable LIBOR plus 100 basis points. We pay
Heinz a fee of 25 basis points per annum of the amount of loans available but
not drawn.

Other Agreements

In addition, Heinz Finance sells and purchases products from other Heinz
affiliates. Also, Heinz Finance sold certain accounts receivables to other Heinz
fully consolidated affiliates under a contract which was terminated in December
2001.

For further information regarding related party transactions, see Note 7 of
Heinz Finance's consolidated and combined financial statements for the fiscal
years ended April 30, 2003, May 1, 2002 and May 2, 2001 included in this Form
10-K.

ITEM 14. PRINCIPAL AUDITOR FEES AND SERVICES.

PricewaterhouseCoopers LLP has been the independent accounting firm and has
audited the financial statements of Heinz Finance since Fiscal 2002. In addition
to performing the audit of Heinz Finance's consolidated and combined financial
statements, PricewaterhouseCoopers provided various other services during Fiscal
2002 and 2003.

54

The aggregate fees billed for each of the past two fiscal years are set
forth below:

The audit fees relate to professional services rendered for the audit of
the consolidated and combined financial statements of Heinz Finance, the
issuance of comfort letters and consents, and assistance with the review of
documents filed with the SEC.

Heinz Finance's Board of Directors has adopted a revised policy effective
for Fiscal 2004 which prohibits Heinz Finance from entering into non-audit
related consulting agreements for financial information systems design and
implementation, for certain other services considered to have an impact on
independence, and for all services prohibited by the Sarbanes-Oxley Act of 2002
and new Securities and Exchange Commission regulations. The policy also contains
procedures requiring Heinz Finance's Board of Directors pre-approval of all
audit and permitted non-audit services provided by the external auditors.

PART IV

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

(a)(1) The following financial statements and report are filed as
part of this report under Item 8 -- "Financial Statements
and Supplementary Data":
Report of Independent Auditors of PricewaterhouseCoopers
LLP dated July 1, 2003, on Heinz Finance's consolidated and
combined financial statements for the fiscal years ended
April 30, 2003, May 1, 2002 and May 2, 2001
Consolidated and Combined Statements of Income for the
fiscal years ended April 30, 2003, May 1, 2002 and May
2, 2001
Consolidated Balance Sheets as of April 30, 2003 and May 1,
2002
Consolidated Statements of Shareholders' Equity for the
fiscal years ended April 30, 2003 and May 1, 2002
Consolidated and Combined Statements of Cash Flows for the
fiscal years ended April 30, 2003, May 1, 2002 and May
2, 2001
Notes to Consolidated and Combined Financial Statements
(2) The following report and schedule is filed herewith as a
part hereof:
Report of Independent Auditors of PricewaterhouseCoopers
LLP dated July 1, 2003 on the Heinz Finance's consolidated
and combined financial statement schedule filed as a
part hereof for the fiscal years ended April 30, 2003,
May 1, 2002 and May 2, 2001
Schedule II (Valuation and Qualifying Accounts and
Reserves) for the three fiscal years ended April 30, 2003,
May 1, 2002 and May 2, 2001
All other schedules are omitted because they are not
applicable or the required information is included herein or
is shown in the consolidated and combined financial
statements or notes thereto filed as part of this report.

55

(3) Exhibits required to be filed by Item 601 of Regulation S-K
are listed below. Documents not designated as being
incorporated herein by reference are filed herewith. The
paragraph numbers correspond to the exhibit numbers
designated in Item 601 of Regulation S-K.
3(i) Heinz Finance's Certificate of Incorporation is
incorporated herein by reference to Exhibit 3.1 to Heinz
Finance's Registration Statement on Form S-4 (Reg.
333-85064).
3(ii) Heinz Finance's By-Laws are incorporated herein by
reference to Exhibit 3.2 to Heinz Finance's Registration
Statement on Form S-4 (Reg. 333-85064).
4. Except as set forth below, there are no instruments
with respect to long-term debt of Heinz Finance that involve
indebtedness or securities authorized thereunder
exceeding 10 percent of the total assets of Heinz
Finance on a consolidated basis. Heinz Finance
agrees to file a copy of any instrument or agreement
defining the rights of holders of long-term debt of
Heinz Finance upon request of the Securities and
Exchange Commission.
(a) The Indenture between Heinz and The First National
Bank of Chicago dated as of July 15, 1992 is incorporated
herein by reference to Exhibit 4(a) to Heinz's
Registration Statement on Form S-3 (Reg. No.
333-48017) and the supplements to such Indenture are
incorporated herein by reference to Heinz's Form 8-Ks
dated March 25, 1998 and July 16, 1998 relating to
Heinz's $300,000,000 6% Notes due 2008 and
$250,000,000 6.375% Debentures due 2028,
respectively.
(i) The Supplement dated May 3, 2001 among Heinz,
Heinz Finance and Bank One, National Association to the
Indenture is incorporated herein by reference to
Exhibit 4(a)(i) of Heinz's Form 10-K for the
fiscal year ended May 2, 2001.
(b) The Indenture between Heinz and Bank One, National
Association dated November 6, 2000, is incorporated herein
by reference to Exhibit 4 to Heinz's Quarterly Report
on Form 10-Q for the nine months ended January 31,
2001.
(i) The Supplement dated May 3, 2001 among Heinz,
Heinz Finance and Bank One, National Association to the
Indenture is incorporated herein by reference to
Exhibit 4(b)(i) of Heinz's Annual Report on Form
10-K for the fiscal year ended May 2, 2001.
(ii) The second Supplement dated November 15, 2002
among Heinz, Heinz Finance and Bank One, National
Association to the Indenture is incorporated by
reference to Exhibit 4 of Heinz Finance's
Quarterly Report on Form 10-Q for the nine
months ended January 29, 2003.
(c) The Indenture among Heinz, Heinz Finance and Bank
One, National Association dated as of July 6, 2001 relating
to Heinz Finance's $750,000,000 6.625% Guaranteed
Notes due 2011, $700,000,000 6.00% Guaranteed Notes
due 2012 and $550,000,000 6.75% Guaranteed Notes due
2032 is incorporated herein by reference to Heinz's
Annual Report on Form 10-K for the fiscal year ended
May 1, 2002.
(d) The Certificate of Designations, Preferences and
Rights of Voting Cumulative Preferred Stock, Series A of
Heinz Finance is incorporated herein by reference to
Exhibit 4 of Heinz's Quarterly Report on Form 10-Q
for the three months ended August 1, 2001.
10(a) Liquidity Agreement dated as of June 26, 2001
between Heinz and Heinz Finance is incorporated herein by
reference to Exhibit 10.1 of Heinz Finance's
Registration Statement on Form S-4 (Reg.
333-85064).

56

(b) Administrative Services Agreement dated as of May 1,
2001 between Heinz and Heinz Finance is incorporated herein
by reference to Exhibit 10.2 of Heinz Finance's
Registration Statement on Form S-4 (Reg. 333-85064).
(c) Guarantee Facility Letter Agreement dated May 3, 2001
to Heinz Finance from Heinz is incorporated herein by
reference to Exhibit 10.3 of Heinz Finance's
Registration Statement on Form S-4 (Reg. 333-85064).
(d) Third Amended and Restated Partnership Agreement of
H. J. Heinz Company, L.P. is incorporated herein by
reference to Exhibit 10.6 of Heinz Finance's
Registration Statement on Amendment No. 2 to Form S-4
(Reg. 333-85064).
(e) Management contracts and compensatory plans:
(i) 1986 Deferred Compensation Program for H. J.
Heinz Company and affiliated companies, as amended and
restated in its entirety effective December 6,
1995, is incorporated herein by reference to
Exhibit 10(c)(i) to H. J. Heinz Company's Annual
Report on Form 10-K for the fiscal year ended
May 1, 1995.
(ii) H. J. Heinz Company 1984 Stock Option Plan, as
amended, is incorporated herein by reference to Exhibit
10(n) to H. J. Heinz Company's Annual Report on
Form 10-K for the fiscal year ended May 2, 1990.
(iii) H. J. Heinz Company 1987 Stock Option Plan, as
amended, is incorporated herein by reference to Exhibit
10(o) to H. J. Heinz Company's Annual Report on
Form 10-K for the fiscal year ended May 2, 1990.
(iv) H. J. Heinz Company 1990 Stock Option Plan is
incorporated herein by reference to Appendix A to H. J.
Heinz Company's Proxy Statement dated August 3,
1990.
(v) H. J. Heinz Company 1994 Stock Option Plan is
incorporated herein by reference to Appendix A to H. J.
Heinz Company's Proxy Statement dated August 5,
1994.
(vi) H. J. Heinz Company Supplemental Executive
Retirement Plan, as amended, is incorporated herein by
reference to Exhibit 10(c)(ix) to H. J. Heinz
Company's Annual Report on Form 10-K for the
fiscal year ended April 28, 1993.
(vii) H. J. Heinz Company Executive Deferred
Compensation Plan (as amended and restated on December 27,
2001) is incorporated herein by reference to
Exhibit 10(a)(vii) of H. J. Heinz Company's
Annual Report on Form 10-K for the fiscal year
ended May 1, 2002.
(viii) H. J. Heinz Company Incentive Compensation Plan
is incorporated herein by reference to Appendix B to H. J.
Heinz Company's Proxy Statement dated August 5,
1994.
(ix) H. J. Heinz Company Stock Compensation Plan for
Non-Employee Directors is incorporated herein by reference
to Appendix A to H. J. Heinz Proxy Statement
dated August 3, 1995.
(x) H. J. Heinz Company 1996 Stock Option Plan is
incorporated herein by reference to Appendix A to H. J.
Heinz Company's Proxy Statement dated August 2,
1996.

57

(xi) H. J. Heinz Company Deferred Compensation Plan
for Directors is incorporated herein by reference to Exhibit
10(a)(xiii) to H. J. Heinz Company's Annual
Report on Form 10-K for the fiscal year ended
April 29, 1998.
(xii) H. J. Heinz Company Global Stock Purchase Plan
is incorporated herein by reference to Appendix A to H. J.
Heinz Company's Proxy Statement dated August 3,
1999.
(xiii) Form of Severance Protection Agreement is
incorporated herein by reference to Exhibit 10(a)(xiv) to H.
J. Heinz Company's Annual Report on Form 10-K
for the fiscal year ended May 3, 2000.
(xiv) H. J. Heinz Company 2000 Stock Option Plan is
incorporated herein by reference to Appendix A to H. J.
Heinz Company's Proxy Statement dated August 4,
2000.
(xv) H. J. Heinz Company Executive Estate Life
Insurance Program is incorporated herein by reference to
Exhibit 10(a)(xv) to H. J. Heinz Company's Annual
Report on Form 10-K for the fiscal year ended May
1, 2002.
(xvi) H. J. Heinz Company Restricted Stock Recognition
Plan for Salaried Employees is incorporated herein by
reference to Exhibit 10(a)(xiv) to H. J. Heinz
Company's Annual Report on Form 10-K for the
fiscal year ended May 1, 2002.
(xvii) H. J. Heinz Company Fiscal Year 2003 Stock
Incentive Plan is incorporated herein by reference to H. J.
Heinz Company's Proxy Statement dated August 2,
2002.
(xviii) H. J. Heinz Company Senior Executive Incentive
Compensation Plan is incorporated herein by reference to H.
J. Heinz Company's Proxy Statement dated August
2, 2002.
(xix) Form of First Amendment to Severance Protection
Agreement is incorporated herein by reference to Exhibit
10(a)(xxi) to H.J. Heinz Company's Annual Report
on Form 10-K for the fiscal year ended April 30,
2003.
12. Computation of Ratios of Earnings to Fixed
Charges.
21. Subsidiaries of the Registrant.
24. Powers-of-attorney of Heinz Finance's directors.
31. Rule 13a-14(a)/15d-14(a) Certifications.
99(a) Certification by the President Relating to the
Annual Report Containing Financial Statements.
99(b) Certification by the Chief Financial and
Accounting Officer Relating to the Annual Report Containing
Financial Statements.
Copies of the exhibits listed above will be furnished upon
request, subject to payment in advance of the cost of
reproducing the exhibits requested.

(b) There have been no reports filed on Form 8-K during the last fiscal
quarter of the period covered by this Report.

58

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized, on July 24, 2003.

H. J. HEINZ FINANCE COMPANY
(Registrant)

By: /s/ ARTHUR B. WINKLEBLACK
.................................................
ARTHUR B. WINKLEBLACK
Director, Vice President and Chief
Financial and Accounting Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated, on July 24, 2003.

Laura Stein Director
Andrew L. Stidd Director

By: /s/ LEONARD A. CULLO, JR.
---------------------------------

LEONARD A. CULLO, JR.

Attorney-in-fact

59

REPORT OF INDEPENDENT AUDITORS ON
FINANCIAL STATEMENT SCHEDULE

To the Board of Directors and Shareholders of
H. J. Heinz Finance Company:

Our audits of the consolidated and combined financial statements referred
to in our report dated July 1, 2003, appearing as part of this report under Item
8 -- "Financial Statements and Supplementary Data" also included an audit of the
financial statement schedule listed in Item 15(a)(2) of this Form 10-K. In our
opinion, this financial statement schedule presents fairly, in all material
respects, the information set forth therein when read in conjunction with the
related consolidated and combined financial statements.

/s/ PRICEWATERHOUSECOOPERS LLP

PricewaterhouseCoopers LLP
Pittsburgh, Pennsylvania
July 1, 2003

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SCHEDULE II

H. J. HEINZ FINANCE COMPANY AND SUBSIDIARIES

VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FISCAL YEARS ENDED APRIL 30, 2003, MAY 1, 2002 AND MAY 2, 2001
(THOUSANDS OF DOLLARS)

NOTE:

(1) Principally reserves on assets sold, written-off or reclassified or spun
off.

EXHIBIT INDEX