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

FORM 10-Q

Commission File Number 001-16625

BUNGE LIMITED
(Exact name of registrant as specified in its charter)

(914) 684-2800
Registrant's telephone number, including area code

        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 ý    No o

        Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes ý    No o

        As of November 2, 2004, the number of common shares issued and outstanding of the registrant was:

Common shares, par value $.01: 110,344,172

BUNGE LIMITED

Table of Contents

1

PART I—FINANCIAL INFORMATION

Item 1.    Financial Statements

BUNGE LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(United States Dollars in Millions, except per share data)

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

2

BUNGE LIMITED AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)

(United States Dollars in Millions, except share data)

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

3

BUNGE LIMITED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

(United States Dollars in Millions)

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

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BUNGE LIMITED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.    BASIS OF PRESENTATION

        The accompanying unaudited condensed consolidated financial statements of Bunge Limited and its subsidiaries (Bunge) have been prepared in accordance with United States of America generally accepted accounting principles (U.S. GAAP) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities Exchange Act of 1934. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation have been included. The consolidated balance sheet at December 31, 2003 has been derived from Bunge's audited financial statements at that date. Operating results for the three and nine months ended September 30, 2004 are not necessarily indicative of the results to be expected for the year ending December 31, 2004. The financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2003 included in Bunge's 2003 Annual Report on Form 10-K filed with the Securities and Exchange Commission on July 27, 2004.

        Reclassifications—Certain reclassifications were made to the prior period condensed consolidated financial statements to conform to the current period presentation.

2.    NEW ACCOUNTING STANDARDS

        In October 2004, the Financial Accounting Standards Board (FASB) concluded that the proposed Statement of Financial Accounting Standards (SFAS) No. 123R, Share-Based Payment (SFAS No. 123R), would require all companies to measure compensation cost for all share-based payments (including stock options) at fair value. This would be effective for Bunge for the interim or annual periods beginning July 1, 2005. Retroactive application of the requirements of SFAS No. 123, Accounting for Stock-Based Compensation (SFAS No. 123) to the beginning of the fiscal year that includes the effective date would be permitted. Bunge has not yet determined whether it will adopt the proposed SFAS No. 123R upon its effective date or earlier as it awaits the issuance of the final rule by the FASB.

        In September 2004, the FASB Emerging Issues Task Force (EITF) reached a final consensus that contingently convertible instruments, which generally become convertible into common stock only if one or more specified events occur, such as the underlying common stock achieving a specified market price target, should be included in the diluted earnings per share computations (if dilutive) regardless of whether the market price target has been met. In the fourth quarter of 2004, the FASB plans to issue an amendment to SFAS No. 128, Earnings per Share (SFAS No. 128) and this consensus would have the same transition requirement as the amended SFAS No. 128. The amendment to SFAS No. 128 is expected to be effective for Bunge's December 2004 year end and the consensus must be applied by restating prior periods presented during which the instrument was outstanding. However, the consensus need not be applied to instruments that were repaid in cash prior to the end of the period of adoption. Further, the determination of the dilutive effect upon adoption is based on the form of the instrument as it exists at the end of the quarter of adoption. Upon the issuance of the amendment to SFAS No. 128, Bunge may be required to restate all prior period computations presented in its 2004 annual report, if the instrument is dilutive.

        In March 2004, the FASB Emerging Issues Task Force (EITF) reached a consensus on EITF Issue No. 04-2, Whether Mineral Rights Are Tangible or Intangible Assets (Issue No. 04-2), that mineral rights, as defined in Issue No. 04-2, are tangible assets. There is an inconsistency between this consensus that mineral rights are tangible assets and the characterization of mineral rights as intangible assets in Statement of Financial Accounting Standards (SFAS) No. 141 and No. 142. In April 2004, the FASB issued proposed Staff Position (FSP) No. FAS 141-a and 142-a, Interaction of FASB Statements No. 141, Business Combinations and No. 142, Goodwill and Other Intangible Assets and EITF Issue No. 04-2, Whether Mineral Rights Are Tangible or Intangible Assets to eliminate the inconsistency between EITF Issue No. 04-2 and SFAS No. 141 and No. 142. The guidance in this FSP would be effective for the first reporting

5

BUNGE LIMITED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

2.    NEW ACCOUNTING STANDARDS (Continued)

period beginning after the date that this FSP is finalized. Early application of this guidance is permitted in periods for which financial statements have not yet been issued. Bunge has applied the EITF and the proposed FSP to its consolidated balance sheet beginning as of March 31, 2004 and has reclassified the prior period consolidated balance sheet to conform to this presentation. The reclassification at December 31, 2003 was $208 million, resulting in an increase to property, plant and equipment, net and a corresponding decrease in other intangible assets in the condensed consolidated balance sheets.

        In January 2004, the FASB issued FSP No. FAS 106-1, Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the "Act"). The Act to which FSP No. FAS 106-1 relates, which was signed into law in December 2003, introduces a prescription drug benefit under Medicare as well as a federal subsidy, under certain conditions, to sponsors of retiree health care benefit plans. Bunge has elected a one-time deferral of the accounting for the effects of the Act, as permitted by FSP No. FAS 106-1. In May 2004, the FASB issued FSP No. FAS 106-2, which superceded FSP No. FAS 106-1. FSP No. FAS 106-2 is effective for interim periods beginning after June 15, 2004 and allows two alternate methods of transition, retroactive application to the date of enactment of the Act or prospective application from the date of adoption of this statement. FSP No. FAS 106-2 will require a remeasurement of the applicable Plans' assets and benefit obligations at the applicable date. Bunge has made a preliminary determination that the effects of the Act are not a significant event for Bunge and not material to its financial position or results of operations. Although final guidance on the definition of "actuarially equivalent" is not yet available, Bunge expects that the prescription drug benefits it provides will be actuarially equivalent. Based on this assumption, the estimated subsidy resulting from the Act will be incorporated prospectively into the Plan obligation as of the 2004 measurement date as an actuarial gain.

3.    INVENTORIES

        Inventories consist of the following:

(1)

Readily marketable inventories are agricultural commodities inventories that are readily convertible to cash because of their commodity characteristics, widely available markets and international pricing mechanisms.

(2)

Other consists of agribusiness inventories, other than readily marketable inventories, carried at lower of cost or market.

4.    BUSINESS COMBINATIONS

        Acquisition of Bunge Brasil Minority Interest—In September 2004, Bunge acquired an additional 15% of the outstanding capital stock of Bunge Brasil S.A. (Bunge Brasil) through a tender offer in Brazil. The acquisition was funded with the net proceeds of a public equity offering completed in June 2004. The total purchase price paid for these shares was approximately $282 million in cash. As a result of the acquisition, Bunge now owns directly 98% of Bunge Brasil and its subsidiaries Bunge Alimentos S.A.,

6

BUNGE LIMITED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

4.    BUSINESS COMBINATIONS (Continued)

Bunge's Brazilian agribusiness and food products subsidiary, and Bunge Fertilizantes S.A., Bunge's Brazilian fertilizer subsidiary. The excess of the cost to acquire the minority interest in Bunge Brasil over the historical book value was $113 million and has been preliminarily allocated to goodwill. The allocation is subject to adjustment as Bunge is in the process of obtaining third party valuations of the property, plant, equipment and intangible assets. Bunge intends to acquire the remaining shares of Bunge Brasil that it does not already own in the fourth quarter of 2004 for approximately $30 million.

        The following unaudited pro forma summary financial information reflects the results of Bunge's operations as if the acquisition of the Bunge Brasil minority interest and the June 2004 public offering of Bunge's common shares had occurred as of January 1, 2003.

        Polska Oil—In April 2004, Bunge acquired the remaining 40% of Polska Oil Investment B.V., a holding company for certain of Bunge's operations in Poland, from the European Bank for Reconstruction and Development, or EBRD, pursuant to the terms of an amended and restated shareholders agreement between the parties. The purchase price of the EBRD stake in Polska Oil was approximately $27 million.

        J. Macêdo Exchange Transaction—In the quarter ended March 31, 2004, Bunge completed an asset exchange transaction with J. Macêdo S.A., whereby Bunge exchanged its Brazilian domestic retail flour assets for J. Macêdo's industrial flour assets and approximately $7 million in cash. The assets exchanged were comprised primarily of brands. Bunge recognized a pre-tax gain of $5 million as a result of this transaction, which is included in other income (expense)—net in the condensed consolidated statement of income for the nine months ended September 30, 2004.

        Other Business Acquisitions—During the nine months ended September 30, 2004, Bunge completed additional acquisitions having an aggregate purchase price of approximately $21 million. In addition, Bunge invested approximately $23 million in existing joint ventures in South America and Europe. Bunge did not recognize any goodwill on these transactions.

        Acquisition Restructuring—In connection with the acquisition of Cereol S.A. in 2002, Bunge has accrued termination benefits and facility related realignment obligations as part of its integration plan (the Plan). The Plan is designed to streamline personnel and realign facilities acquired from Cereol. These obligations, which totaled $35 million, have been accrued as part of the purchase price and are included in other current liabilities in the condensed consolidated balance sheets. Bunge's integration process and the Plan regarding this acquisition, which included an evaluation of these issues, was finalized in 2003. Of the obligations accrued, $29 million relate to employee termination and $6 million relate to facility realignment.

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BUNGE LIMITED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

4.    BUSINESS COMBINATIONS (Continued)

        The following table summarizes activity related to the Plan.

        Payments related to employee termination and facility realignment obligations are expected to be substantially completed in 2005. The Plan has been funded by cash flows from operations. No significant unresolved issues exist related to the Plan. Any adjustments to the Plan will be reported as an adjustment to net income in the period in which they occur.

5.    OTHER CURRENT ASSETS

        Other current assets consist of the following:

6.    GOODWILL

        At September 30, 2004, the changes in the carrying value of goodwill by segment are as follows:

(1)

Reflects the preliminary allocation of the excess of the cost to acquire the minority interest in Bunge Brasil over the historical book value. The allocation is subject to adjustment as Bunge is in the process of obtaining third party valuations of the property, plant, equipment and intangible assets (see Note 4 of the notes to the condensed consolidated financial statements).

(2)

Bunge's Brazilian subsidiary's tax deductible goodwill is in excess of its book goodwill. For financial reporting purposes, the tax benefits attributable to the excess tax goodwill are first used to reduce goodwill and then intangible assets to zero, prior to recognizing any income tax benefit in the condensed consolidated statements of income.

8

BUNGE LIMITED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

7.    OTHER CURRENT LIABILITIES

        Other current liabilities consist of the following:

8.    LONG-TERM DEBT

        In September 2004, Bunge entered into treasury rate lock agreements with an aggregate notional amount of $500 million at a 10-year treasury yield of 4.15% with a settlement date of March 2005. The treasury rate lock agreements were not designated as hedging instruments, an election allowable under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities (SFAS No. 133). As of September 30, 2004, Bunge recorded a gain in other income (expense)—net in the consolidated income statement of approximately $5 million relating to these derivative agreements.

        In June 2004, Bunge entered into various interest rate swap agreements to manage its interest rate exposure on a portion of its fixed rate debt. These swap agreements had an aggregate notional amount of $1 billion at weighted average fixed rates receivable of 4.375% and 5.35% and weighted average variable rates payable of 2.23% and 2.17%, with maturity dates of 2008 and 2014. These interest rate swap agreements were accounted for as fair value hedges. In September 2004, Bunge terminated the June 2004 swap agreements and received $60 million in cash, which was comprised of $8 million of accrued interest and a $52 million gain on the net settlement of the June 2004 swap agreements. The $8 million of accrued interest was recorded as a reduction of interest expense in the condensed consolidated statement of income and the $52 million gain was recorded as an adjustment to the carrying amount of the related debt in the condensed consolidated balance sheet. The $52 million gain will be amortized to earnings over the remaining term of the debt, which ranges from four to nine years.

        Concurrent with the September termination of the June 2004 swap agreements, Bunge entered into various new interest rate swap agreements to manage its interest rate exposure on a portion of its fixed rate debt. Bunge has accounted for these new swap agreements as fair value hedges.

        The derivatives used by Bunge as hedging instruments have been recorded at fair value in other liabilities in the condensed consolidated balance sheet with changes in fair value recorded currently in earnings. Additionally, the carrying amount of the associated debt is adjusted through earnings for changes in the fair value due to changes in interest rates. Ineffectiveness is recognized to the extent that these two adjustments do not offset. As of September 30, 2004, Bunge recognized no ineffectiveness related to the hedging instruments. The derivatives Bunge entered into for hedge purposes are assumed to be perfectly effective under the shortcut method of SFAS No. 133. The differential to be paid or received on changes in interest rates is recorded as an adjustment to interest expense. The interest rate swaps settle every six months until expiration.

9

BUNGE LIMITED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

8.    LONG-TERM DEBT (Continued)

        The following table summarizes Bunge's outstanding interest rate swap agreements as of September 30, 2004.

(1)

Interest is payable in arrears based on a forecasted rate of six-month LIBOR plus a spread.

        In April 2004, Bunge completed the sale of $500 million aggregate principal amount of unsecured senior notes bearing interest at a rate of 5.35% per year that mature in April 2014. The senior notes were issued by Bunge's wholly owned finance subsidiary, Bunge Limited Finance Corp., and are fully and unconditionally guaranteed by Bunge. Interest on the senior notes is payable semi-annually in arrears in April and October of each year, commencing in October 2004. Bunge used the net proceeds of this offering of approximately $496 million for the repayment of other outstanding indebtedness.

9.    RELATED PARTY TRANSACTIONS

        In July 2004, Bunge purchased a wheat mill in Brazil from Mutual Investment Limited for approximately $2 million. No goodwill was recognized on this transaction by Bunge.

        Bunge sells soybean meal and fertilizer products to Seara Alimentos S.A. (Seara), a subsidiary of Mutual Investment Limited engaged in the business of meat and poultry production. These sales were $4 million and $9 million for the three and nine months ended September 30, 2004, respectively, and $1 million and $4 million for the three and nine months ended September 30, 2003, respectively. In the third quarter of 2004, Mutual Investment Limited signed an agreement to sell its interest in Seara to a third party. The sale is expected to close in the first quarter of 2005, subject to regulatory approvals.

        In addition, Bunge purchased soybeans and related soybean products from its unconsolidated joint ventures (primarily Solae and its other North American joint ventures), which totaled $225 million and $319 million for the three and nine months ended September 30, 2004, respectively, and $23 million and $36 million for the three and nine months ended September 30, 2003, respectively. Bunge also sold soybean meal and soybean oil to these joint ventures, which totaled $14 million and $42 million for the three and nine months ended September 30, 2004, respectively, and $27 million and $57 million for the three and nine months ended September 30, 2003, respectively. Bunge believes these transactions are recorded at values similar to those with third parties.

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BUNGE LIMITED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

10.    EMPLOYEE BENEFIT PLANS

        Bunge disclosed in its consolidated financial statements for the year ended December 31, 2003 that it expected to contribute $9 million to its defined benefit pension plans and $2 million to its postretirement benefit plans during 2004. As of September 30, 2004, Bunge made contributions to the defined benefit pension plans totaling $6 million for the 2004 plan year. In addition, during 2004 Bunge also made contributions to the defined benefit pension plans totaling $5 million for the 2003 plan year resulting from additional funding requirements related to investment performance. Approximately $1 million was paid to the postretirement benefit plans for the 2004 plan year. In addition, Bunge disclosed in its consolidated financial statements for the year ended December 31, 2003 that it expected to contribute $6 million to a non-qualified plan for a lump-sum distribution from this plan in 2004. As of September 30, 2004, Bunge has made the $6 million contribution and distribution from this non-qualified plan.

11.    COMMITMENTS AND CONTINGENCIES

        Bunge is party to a number of claims and lawsuits, primarily tax and labor claims in Brazil, arising out of the normal course of business. After taking into account liabilities recorded for all of the foregoing matters, management believes that the ultimate resolution of such matters will not have a material adverse effect on Bunge's financial condition, results of operations or liquidity. Included in other non-current liabilities as of September 30, 2004 and December 31, 2003 are the following accrued liabilities:

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BUNGE LIMITED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

11.    COMMITMENTS AND CONTINGENCIES (Continued)

        Tax Claims—The tax claims relate principally to claims against Bunge's Brazilian subsidiaries, including income tax claims, value added tax claims (ICMS and IPI) and sales tax claims (PIS and COFINS). The determination of the manner in which various Brazilian federal, state and municipal taxes apply to Bunge's operations is subject to varying interpretations arising from the complex nature of Brazilian tax law.

        Labor Claims—The labor claims relate principally to labor claims against Bunge's Brazilian subsidiaries. Court rulings under Brazilian laws have historically been in favor of the employee-plaintiff. The labor claims primarily relate to dismissals, severance, health and safety, salary adjustments and supplementary retirement benefits.

        Civil and Other—The civil and other claims primarily relate to various disputes with suppliers and customers.

        Oleina Holding Arbitration—Bunge is involved in arbitration proceedings at the ICC International Court of Arbitration with Cereol's former joint venture partner over the final purchase price of Oleina Holding S.A. and related issues. Cereol purchased the 49% of Oleina it did not already own from its joint venture partner for $27 million in February 2002, the final purchase price to be determined by arbitration. In April 2004, Bunge was notified that the arbitration tribunal had determined the purchase price to be approximately $73 million plus interest of approximately $5 million. Subsequently, Cereol's former joint venture partner submitted a request for rectification to increase the purchase price to approximately $108 million. In May 2004, Bunge filed a recourse for annulment of the arbitration decision with the Federal Court of Lausanne, Switzerland, and in July 2004 the Federal Court of Lausanne issued a decision suspending enforcement of the arbitration award pending its decision on the recourse for annulment.

        In July 2004, the arbitration tribunal issued its ruling with respect to the request for rectification and increased the purchase price to approximately $108 million. In addition, the Federal Court of Lausanne denied Bunge's recourse for annulment of the April 2004 arbitral award. Bunge has filed a new recourse for annulment of the rectified arbitral award issued in July 2004 and a request for suspension of enforcement with the Federal Court of Lausanne, both of which are currently pending. Bunge is entitled to be indemnified by Edison SpA, from whom it purchased Cereol in October 2002, for any portion of the final purchase price which exceeds $39 million. As of September 30, 2004, Bunge has recorded an obligation of $77 million to Cereol's former joint venture partner and a receivable in the same amount from Edison relating to its indemnity. Edison has informed Bunge that it is currently evaluating whether the conditions precedent to this indemnification have been satisfied. Bunge has assessed the collectibility of this receivable under the terms of its agreement with Edison and believes this amount is fully collectible under the agreement.

        Antitrust Approval of Manah Acquisition—In April 2000, Bunge acquired Manah S.A., a Brazilian fertilizer company that had an indirect participation in Fosfertil S.A. Fosfertil is the main Brazilian producer of phosphate used to produce NPK fertilizers. This acquisition was approved by the Brazilian antitrust commission in February 2004. The approval was conditioned on the formalization of an operational agreement between Bunge and the antitrust commission relating to the maintenance of existing competitive conditions in the fertilizer market. Although the terms of the operational agreement have not been finalized, Bunge does not expect them to have a material adverse impact on its business or financial results.

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BUNGE LIMITED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

11.    COMMITMENTS AND CONTINGENCIES (Continued)

 Guarantees

         Bunge has issued or was a party to the following guarantees at September 30, 2004:

(1)

Prior to January 1, 2003, Bunge entered into synthetic lease agreements for barges and railcars originally owned by Bunge and subsequently sold to third parties. The leases are classified as operating leases in accordance with SFAS No. 13, Accounting for Leases. Any gains on the sales were deferred and recognized ratably over the initial lease terms. Bunge has the option under each lease to purchase the barges or railcars at fixed amounts, based on estimated fair values or to sell the assets. If Bunge elects to sell, it will receive proceeds up to fixed amounts specified in the agreements. If the proceeds of such sales are less than the specified fixed amounts, Bunge would be obligated under a guarantee to pay supplemental rent for the deficiency in proceeds up to a maximum of approximately $69 million at September 30, 2004. The operating leases expire through 2007. There are no recourse provisions or collateral that would enable Bunge to recover any amounts paid under this guarantee.

(2)

Prior to January 1, 2003, Bunge issued a guarantee to a financial institution related to debt of its joint ventures in Argentina, its unconsolidated affiliates. The term of the guarantee is equal to the term of the related financing, which matures in 2009. There are no recourse provisions or collateral that would enable Bunge to recover any amounts paid under this guarantee.

(3)

Bunge issued guarantees to a financial institution in Brazil related to amounts owed the institution by certain of its customers. The terms of the guarantees are equal to the terms of the related financing arrangements, which can be as short as 120 days or as long as 360 days. In the event that the customers default on their payments to the institutions and Bunge would be required to perform under the guarantees, Bunge has obtained collateral from the customers. At September 30, 2004, $50 million of these financing arrangements were collateralized by tangible property. Bunge has determined the fair value of these guarantees to be immaterial at September 30, 2004.

        In addition, Bunge has provided parent level guarantees of the indebtedness outstanding under certain senior credit facilities and senior notes, which were entered into by its wholly owned subsidiaries. The debt under these guarantees had a carrying amount of $2,298 million at September 30, 2004. Debt related to these guarantees is included in the condensed consolidated balance sheet at September 30, 2004. There are no significant restrictions on the ability of any of Bunge's subsidiaries to transfer funds to Bunge.

        Also, certain of Bunge's subsidiaries have provided guarantees of indebtedness of certain of their subsidiaries under certain lines of credit with various institutions. The total borrowing capacity under these lines of credit was $280 million as of September 30, 2004, of which $6 million was outstanding as of such date.

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BUNGE LIMITED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

12.    COMPRESENSIVE INCOME (LOSS)

         The following table summarizes the components of comprehensive income (loss):

13.    STOCK-BASED COMPENSATION

        Bunge has an employee equity incentive plan and a non-employee directors' equity incentive plan. Awards under the employee equity incentive plan may be in the form of stock options, restricted stock units (including performance-based and regular time-vested restricted stock units) or other awards. The non-employee directors' equity incentive plan provides for awards of stock options to Bunge's non-employee directors. To date, Bunge has granted stock options, performance-based restricted stock unit awards and regular time-vested restricted stock unit awards under its employee equity incentive plan and stock options under its non-employee directors' plan. Under these equity incentive plans, during the nine months ended September 30, 2004, Bunge (1) issued 451,874 common shares upon the exercise of stock options, (2) issued 59,294 shares upon the vesting of certain performance-based restricted stock units and regular time-vested restricted stock units, which included dividend equivalents paid in common shares and (3) pursuant to an election made by participants, paid out 158,181 vested performance-based restricted stock units in cash, rather than common shares.

        In accordance with the provisions of SFAS No. 123, Accounting for Stock-Based Compensation (SFAS No. 123), Bunge has elected to continue to account for stock-based compensation using the intrinsic value method under Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (APB 25) and FASB Interpretation No. 28, Accounting for Stock Appreciation Rights and Other Variable Stock Option or Award Plans (FIN 28).

        In accordance with APB 25, Bunge accrues costs for its restricted stock awards granted over the vesting or performance period and adjusts costs related to its performance-based restricted stock unit awards for subsequent changes in the fair market value of the awards. There is no compensation cost recorded for stock options granted under either plan, since the exercise price is equal to the fair market value of the underlying common shares on the date of grant. Bunge recognized compensation expense of $5 million and $12 million for the three and nine months ended September 30, 2004, respectively, related to its restricted stock unit awards.

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BUNGE LIMITED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

13.    STOCK-BASED COMPENSATION (Continued)

        In accordance with SFAS No. 123, Bunge discloses the pro forma effect of accounting for stock-based awards under the fair value method. The following table sets forth pro forma information as if Bunge had applied the fair value recognition provisions of SFAS No. 123 to stock options granted to determine its stock-based compensation cost.

(1)

The numerator for the calculation of diluted as reported and pro forma earnings per share in the three and nine months ended September 30, 2004 was adjusted by $1 million and $3 million, respectively, for interest expense related to the Convertible Notes (see Note 15).

14.    INCOME TAXES

        Bunge's annual effective tax rate is affected by the geographic locations in which it does business, movements in foreign exchange rates and U.S. tax incentives on export sales.

        Bunge has obtained tax benefits under U.S. tax laws providing tax incentives on export sales from the use of a U.S. FSC (foreign sales corporation) through 2001. Beginning in 2002, due to the repeal of the FSC related legislation, Bunge was required to use the tax provisions of the Extraterritorial Income Act (ETI) legislation, which was substantially similar to the FSC. The U.S. Congress has recently passed and the President has signed legislation (American Jobs Creation Act of 2004) that ultimately repeals the ETI benefit. Under the new legislation, the ETI will be phased out with 100% of the otherwise available ETI benefit retained for 2004, 80% of the otherwise available ETI benefit retained for 2005, 60% of the otherwise available ETI benefit retained for 2006 and 0% for 2007 and beyond.

        The ETI benefit has been replaced with an income tax deduction intended to allocate benefits previously provided to U.S. exporters across all manufacturers when fully phased in. Although most of Bunge's U.S. operations qualify as "manufacturing," Bunge expects that this new tax legislation will be less beneficial to it than the prior one primarily due to Bunge's U.S. tax position.

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BUNGE LIMITED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

15.    EARNINGS PER SHARE

        Basic earnings per common share is computed by dividing net income by the weighted average number of common shares outstanding, excluding any dilutive effects of stock options and restricted stock unit awards during the reporting period. Diluted earnings per share is computed similar to basic earnings per share, except that the weighted average number of common shares outstanding is increased to include additional shares from the assumed exercise of stock options, restricted stock unit awards and convertible notes, if dilutive. The number of additional shares is calculated by assuming that outstanding stock options were exercised and that the proceeds from such exercises were used to acquire common shares at the average market price during the reporting period.

        The computation of diluted earnings per common share for the three and nine months ended September 30, 2004 includes the 7,778,425 common shares that would be issuable on conversion of Bunge's 3.75% convertible notes due 2022 (Convertible Notes). The Convertible Notes are convertible at the option of the holder into Bunge's common shares during, among other circumstances, any calendar quarter in which the closing price of Bunge's common shares for at least 20 of the last 30 trading days of the immediately preceding calendar quarter is more than 120% of the conversion price of $32.1402, or approximately $38.57 per share. The closing price condition was satisfied as of September 30, 2004. The Convertible Notes will remain convertible until December 31, 2004. The Convertible Notes will continue to be convertible after December 31, 2004, if the closing price condition is satisfied for the quarter ending on December 31, 2004. Bunge's diluted weighted average common shares outstanding for the three and nine months ended September 30, 2003 do not include the common shares that would be issuable upon conversion of the Convertible Notes because, in accordance with their terms, these Convertible Notes had not yet become convertible.

        The following table sets forth the computation of basic and diluted earnings per share for the three and nine months ended September 30, 2004 and 2003.

        In June 2004, Bunge completed a public offering of 9,775,000 of its common shares, including the underwriters' over-allotment option, for net proceeds of $330 million, after underwriting discounts, commissions and expenses. Bunge used the net proceeds of the offering, to acquire an additional 15% of the total outstanding shares of Bunge Brasil, its publicly traded Brazilian subsidiary, for $282 million in cash, through a tender offer in Brazil (see Note 4). Pending the completion of the tender offer, the net proceeds of the public offering were used to reduce indebtedness.

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BUNGE LIMITED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

16.    ARGENTINA

        In 2002, Bunge commenced recording, and continues to record, an allowance against certain recoverable taxes owed to it by the Argentine government due to delayed payment and uncertainty regarding the local economic environment. The balance of this allowance fluctuates depending on the sales activity of existing inventories, the purchase of new inventories, seasonality, changes in applicable tax rates, cash payment by the Argentine government and compensation of outstanding balances against income or certain other taxes owed to the Argentine government. At September 30, 2004 and December 31, 2003, this allowance for recoverable taxes was $26 million and $25 million, respectively. In the three months ended September 30, 2004, Bunge decreased this allowance in the amount of $9 million as a result of recoveries of these taxes. In the nine months ended September 30, 2004, Bunge increased this allowance in the amount of $1 million as a result of increased purchases of commodity inventories in the first half of the year. In the three and nine months ended September 30, 2003, Bunge decreased this allowance in the amount of $16 million and $25 million, respectively, as a result of recoveries of these taxes.

17.    SEGMENT INFORMATION

        During the nine months ended September 30, 2004, Bunge reclassified certain consumer product lines from the agribusiness segment to the edible oil products segment. As a result, amounts for the three and nine months ended September 30, 2003 have been reclassified to conform to the current presentation.

        In the fourth quarter of 2003, Bunge changed the name of its "milling and baking products" segment to "milling products" in connection with the sale of its U.S. bakery business. The operating results of the disposed U.S. bakery business have been reported as discontinued operations for the three and nine months ended September 30, 2003. Also in the fourth quarter of 2003, Bunge changed its presentation of segment information to include segment operating profit as a measure of segment profitability. Segment operating profit includes an allocation of the financial costs of carrying operating working capital, including foreign exchange gains and losses and interest expense on debt financing working capital and interest income earned on working capital items, which is consistent with how management views the results for operational purposes. This change is reflected for the three and nine months ended September 30, 2003.

        With the completion of the sale of the Brazilian soy ingredients business and the sale of its U.S. bakery business, Bunge has four reporting segments—agribusiness, fertilizer, edible oil products and milling products, which are organized based upon similar economic characteristics and are similar in nature of products and services offered, the nature of production processes, the type and class of customer and distribution methods. The agribusiness segment is characterized by both inputs and outputs being agricultural commodities and thus high volume and low margin. The activities of the fertilizer segment include raw material mining, mixing fertilizer components and marketing products. The edible oil products segment involves the manufacturing and marketing of products derived from vegetable oils. The milling products segment involves the manufacturing and marketing of products derived primarily from wheat and corn.

        The "Unallocated" column in the following table contains the reconciliation between the totals for reportable segments and Bunge's consolidated totals, which consists primarily of corporate items not allocated to the operating segments and inter-segment eliminations. Transfers between the segments are generally valued at market. The revenues generated from these transfers are shown in the following table as "Intersegment revenues."

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BUNGE LIMITED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

17.    SEGMENT INFORMATION (Continued)

Operating Segment Information