Lee Cole – BIOGRAPHY Chairman of the Board, President and CEO

It is great being green. Calavo green, that is! Fiscal 2006 proved to be a highly successful year for our company, as we pushed forth with our strategic agenda, ratcheting up the pace of progress across our various businesses. As I write this letter, it gives me considerable pleasure to report that Calavo is in a very strong position—operationally, financially and strategically—and well situated for further advances. Reflecting upon the past year, our notable accomplishments include:

• Posting sharply higher operating results when compared to fiscal 2005, with gains recorded in virtually all key metrics;

• Packing a record number of fresh avocado pounds, fueled by a bumper harvest of California fruit, while still delivering competitive returns to our growers;

• Increasing sharply net revenues and gross profit in our Processed-Products business segment, as distribution of Calavo’s fresh guacamole made using ultra-high-pressure technology continues to broaden in the retail and foodservice channels;

• Expanding nationwide our ProRipeVIP^® avocado pre-conditioning capabilities, with the opening of two additional Value Added Depots that came online just after the conclusion of fiscal 2006;

• Realizing record returns on our equity cross-investment in Limoneira Company—both in the form of fresh avocado pounds delivered to Calavo and common-stock dividend paid via our 15 percent ownership interest—while gaining a sizable stake in a promising future-profit engine; and in that vein,

• Renewing our focus on other, prospective strategic acquisitions that can be made on favorable terms and build value for shareholders.

For the fiscal year ended October 31, 2006, net income advanced 149 percent to $5.8 million, equal to $0.40 per diluted share, from $2.3 million, or $0.17 per diluted share, before giving effect to a $1.0 million after-tax gain ($1.7 million pre-tax) from the sale of the company’s former headquarters. After giving effect to this transaction, fiscal 2005 net income totaled $3.3 million, or $0.24 per diluted share. Revenues climbed six percent to $273.9 million—just slightly below the company’s historic high—from $258.8 million in the preceding year.

Gross profit margin jumped to $29.3 million, a 35 percent increase from $21.7 million posted in fiscal 2005, while operating income nearly tripled, rising to $9.3 million from $3.1 million a year earlier. Revenue and profit growth in the most recent year was propelled by higher sales in Calavo’s fresh and processed- products businesses, which advanced by three and 30 percent, respectively, and I elaborate upon below.

Our balance sheet is strong and flexible, with the company possessing ample capacity for leverage. At fiscal-year end, shareholder’s equity totaled $58.9 million and includes substantial unrealized stock gains from the aforementioned June 2005 investment in Limoneira and that company’s reciprocal investment in Calavo. In recognition of this rock-solid financial condition and the company’s robust operating results in fiscal 2006, our board of directors declared an annual cash dividend of $0.32 on Calavo’s common stock. As a point of note, the dividend has increased 60 percent since 2002, when our company became publicly traded.

Banner California Harvest Paces Fresh Avocados

As expected, the California avocado crop shaped up to be bountiful last year—a record 600 million pounds overall or twice the size of 2005—of which Calavo packed and distributed 218 million pounds, or 36 percent of the domestic market. In total, we marketed 288 million pounds of fresh avocados. The abundance of local fruit enabled us to moderate packing of principally Mexican-grown fruit, as well as avocados from Chile, which complement the U.S. supply and are sold internationally. To better put last year’s crop size in perspective, Calavo packed more pounds of California fruit alone than it did domestically AND internationally in fiscal 2005—218 million pounds versus 209 million pounds, respectively. Pointing to the robust demand for fresh avocados, we found a home for each one of those pounds. I mention this to underscore a significant point. Even during a year when quantities were downright enormous in an industry where pricing is largely dictated by supply, the company maintained very competitive returns to its growers, pulling more dollars from the marketplace than ever. As one of Calavo’s largest growers myself, I do not lose sight of that fact.

Processed Products: A Formidable Growth Engine

Enormously gratifying is the simply outstanding performance registered by our company’s Processed Products business unit. In a space of just over two years we completely remade this formerly poor-performing operation—building an efficient, state-of-the-art manufacturing facility, introducing a popular new product and unleashing sharply higher revenues and gross-profit margin as result. Sales in the segment climbed 30 percent last year, while gross-profit margin rose more than two-fold. On the strength of rising ultra-high-pressure guacamole sales, retail distribution continues to expand. We are experiencing a like effect on the food-service side, but are benefiting in that segment from higher sales of other processed products, namely frozen halves and pulp, as well. Call it the tag-along syndrome, as foodservice customers purchase more of Calavo’s other offerings along with the ultra-high-pressure guacamole orders. It has proven a door opener, to be sure. Regarding doors swung open, subsequent to fiscal-year end we wrested from a competitor a substantial portion of business from Taco Bell, the giant quick-service Mexican chain, further indicative of the accelerating performance in this division.

We have only just begun to fully mine the revenue- and profit-growth potential in our Processed Products unit, too. Our recently announced plan to double ultra-high-pressure manufacturing capacity to 25-30 million pounds annually is central to this initiative. The expansion allows for additional guacamole sales, of course, but also accelerates new-product development of other items suitable for ultra-high-pressure manufacturing. The possibilities for leveraging this technology are enormous—fresh salsa and mangos being just two products that come to mind.

ProRipeVIP^® For Those Who Can’t Wait

I like to think that patience is a virtue, EXCEPT when it comes to waiting for an avocado to ripen. In that case, my position is the faster the better. Research bears me out: Given their choice, consumers will reach for ready-to-eat ripe avocados 85 percent of the time. Couple that with increasing acceptance and demand for fresh avocados—thanks to industry awareness-building campaigns—as well as a growing Hispanic population and the national introduction of ProRipeVIP^® could not be more timely. This breakthrough technology enables Calavo to ship fresh avocados ripened to customers’ precise specifications—anywhere from slightly pre-conditioned to ready-to-eat. Acoustic firmness sensors (AFS) in ProRipeVIP^® use sound waves to pinpoint the internal pressure of avocados—there’s never been a more precise method. Our two new Value Added Depots outfit with ProRipeVIP^®—in Texas and New Jersey—join the initial location in California and enable us to cover the nation with pre-conditioned avocados. It’s a big step forward in shortening consumption cycles, a Holy Grail of the fresh avocado business.

Limoneira Company: A Model For Investment And Acquisition

To fully grasp the rationale behind Calavo and Limoneira Company’s reciprocal investments—and its implication on building shareholder value—look no further than fiscal 2006, our first full year of ownership in that enterprise. Limoneira added approximately 17 million pounds to our fresh avocado totals. We shared in a record dividend declared on its common shares. The Calavo balance sheet reflects millions of dollars in unrealized stock gains from our 15 percent ownership stake in Limoneira. Most significant of all, however, is the master-planned residential development of a portion of Limoneira’s vast land holdings, known as East Area 1, now in its early stages. The potential monetization of this acreage—representing just a small fraction of all Limoneira land—holds substantial benefits for Calavo and we watch this matter with keen interest.

The decision to transform Calavo to publicly held corporation from grower-owned cooperative five years ago occurred, in part, to unlock the underlying value of the company’s stock and provide a desirable currency for acquisitions and strategic investments. With the company performing well and our financial condition strong and flexible, we are actively seeking transactions to advance our business agenda and enhance shareholder value. Beyond the preceding criteria, we maintain strict parameters in evaluating transactions, including deals that can be completed on favorable terms and are immediately accretive to earnings. In place is the platform for a substantially larger Calavo that we envision building via both internal growth and judicious acquisition.

The View Ahead

Consequently, I am genuinely excited about Calavo’s prospects for the future, both in fiscal 2007 and the longer term. I believe this confidence and optimism is well founded. Our fresh avocado operations—in California and Mexico—serve as vital counterpoints, balancing out supply and ensuring that year-round demand for fruit is met. Pricing should be extremely solid during the current fiscal year, as a tighter supply of California fruit along with a larger amount of Mexican-sourced avocados fill the marketplace. With USDA avocado import-export limits now fully lifted, we are eyeing the prospect of sales within Mexico, a large and potentially lucrative new market. The importance of programs such as ProRipeVIP^® on the future of fresh avocado sales cannot be stressed enough, adding value and convenience for our customers while compressing consumption cycles.

Our Processed Products unit’s performance is a story only now unfolding and the outlook ahead just gets better and better. Sales will continue to rise principally on the strength of expanding ultra-high-pressure guacamole sales. Additionally, the aforementioned prospect of exciting new products coming online bodes well longer term. Stay tuned—the best is yet to come.

Challenges are inevitable in every industry and Calavo, of course, is not immune. Nonetheless, with our seasoned senior-management team, deep breadth of financial resources and focused business agenda, I have considerable confidence that we are well positioned to meet whatever demands that lie ahead and to prosper. We proceed with clarity of purpose: Creating value for you, our loyal shareowners. In closing, let me extend sincere appreciation to our dedicated managers and employees, who are tireless in their pursuit of this end. I want to offer thanks to our board of directors for their commitment and counsel, as well as to our 2,300 growers for their patronage. With enthusiasm, I look forward to reporting on the progress ahead.

Sincerely,

Lee E. Cole
Chairman, President and Chief Executive Officer
March 4, 2007

Lee Cole has been called a maverick, a risk-taker, a visionary and a savvy entrepreneur, and indeed, he is all these things. But first and foremost, he is a grower—whether he is tending his 400-acre avocado farm in Santa Paula, California or transforming a local, grower-owned cooperative into a publicly traded, diversified, world-class agribusiness.

Deep Roots in “Calavo Country”
Born to Oklahoma cattle ranchers, Lecil Edward Cole decided early in life that he would follow his father’s footsteps into ranching. At age 13, he moved with his parents to Santa Paula, and set his sights on owning his own ranch. After a stint in the U.S. Army, he went home to Santa Paula to put his plan into action.

Cole took a job with Safeway Stores to support himself, and quickly rose through the ranks. At age 21, he became the youngest store manager in Company history. Soon he was promoted to District Manager, overseeing all aspects of operations in 18 stores. All the while, Cole was purchasing land and water rights in Santa Paula. At age 33, with 80 acres of producing avocado trees and 100 head of cattle, Cole left his Safeway career to become a full-time rancher, avocado grower and entrepreneur. Before long, the avocado trees had taken over his ranch, eventually displacing the cattle.

Then, as now, Santa Paula was “Calavo Country,” and Cole was quickly recruited to join the growers’ cooperative. Seeing a need for improved customer service, he campaigned for the director’s seat and won. Next, he leveraged his 15 years of retailing experience to win election to the directorship in 1982. He has remained on Calavo's board ever since, becoming Chairman and CEO in 1998, and assuming the added role of president in 1999.

A Grower’s Perspective
Implementing an aggressive strategic agenda while also maintaining strong profitability is key to Cole’s leadership style. From the beginning, he applied his grower’s perspective to retool the Company to compete as an efficient, global enterprise in the 21st century. As a grower as well as a shareholder, he strives to maximize both corporate profit and returns to the farm. As a result, Calavo’s grower returns rank among the industry’s best.

Unlocking Value
To unlock the Company’s value and pave the way for future growth, Cole spearheaded the co-op’s conversion to a for-profit corporation in 2001 and its listing on the NASDAQ in 2002. This forward-thinking transaction created a currency to use for all-stock acquisitions without needing to leverage Calavo’s strong balance sheet.

In 2003, Cole led Calavo in its first strategic acquisition, Maui Fresh International, Inc., a multi-product distributor of specialty produce. The transaction extended Calavo’s brand equity and market stature into new perishable product categories and broadened Calavo’s product offerings to 20-plus items, ranging from tropical fruits to chilies.

Nurturing Grower Relationships
Understanding that packinghouses thrive on volume, Cole made grower recruitment and retention Calavo’s number one priority. Accordingly, he instituted a strategic grower recruitment plan that resulted in a record 38 to 40 percent of the domestic market share. In 2005, he piloted the Company through an equity cross-investment with Limoneira Company. Calavo now packs and distributes the crops of the number one and number two domestic producers of avocados—Irvine Company and Limoneira, respectively—and has forged alliances with growers in Mexico, Chile, New Zealand and the Dominican Republic.

To bring new operating efficiencies to its processed-products unit, Cole instituted a comprehensive restructuring of Calavo’s processed products unit, with a 90,000-square- foot production facility in Uruapan, Michaocan, Mexico, ending an inefficient two-step process of pulping and converting to finished product in separate plants.

A Family Business
More than 80 years after its founding as a grower-owned cooperative—and seven years after Cole assumed leadership of the Company—Calavo is growing and profitable. As he continues to move the Company ahead, Cole’s family business continues to blossom as well.

In addition to his Santa Paula avocado ranch, where he resides with his wife, Jeannette, Cole owns a papaya farm and papaya processing plant on Hawaii’s Big Island. Cole’s papayas are sold domestically under the label, "Calavo Gold", his own "Cole" label, and internationally under the "Jeanette" label. Cole’s son, Guy, manages the avocado farm and his daughter, Suzanne, manages the papaya processing plant, which sells papaya purée worldwide.

As he looks back over 80-plus years of history, Cole is characteristically humble about his stewardship. “I never forget that I am charged with the oversight of a formidable legacy, and I am proud, humbled and even awed to be at its reins,” he says. “I do not feel that I inherited this company from those who preceded me; instead, I am borrowing it from those who will follow me.”

Thanks to Cole’s leadership, those who follow will enjoy the fruits of a bigger, more broadly based Calavo, solidly positioned to lead the industry for the next 80 years and beyond.