the arab potash company · the arab potash company a public shareholding company forty-fourth...

THE ARAB POTASH COMPANYA Public Shareholding Company

Forty-Fourth Annual Report

This report is for the year ended December 31, 2000 and is Presented to the General Assembly in its annual meeting held in Amman on Sunday April 29, 2001

The Board of Directors

The Jordan Investment Corporation

Dr. Saleh Rusheidat Chairman (until 19 June 2000) Mr. Suleiman Hafez Chairman (from 1 Aug 2000) Mr. Abd Rahman Ajlouni Member Dr. Basem Awadallah Member Dr. Ahmad Mustafa Member Dr. Abd Al Rahim Hunaity Member Eng. Oadis Serbekian Member Dr. Yousef Mansour Member (until Aug 2000) Dr. Kamil Qaisi Member (until Aug 2000) Eng. Awni Masri Member (from 2 Aug 2000) Eng. Mohamad Arafeh Member (from 2 Aug 2000)

Arab Mining Company Eng. Talal Saadi Deputy Chairman

Mr. Saleh Mahmoudi Member Eng. Farouk Bandar Member

Islamic Development Bank/Jeddah

Mr. Hisham Cha'r Member Government of Iraq

Mr. M. Al-Nakshabandi Member Libyan Arab Company for Foreign Investments

Eng. Abd Al Aleem Shaeri Member Kuwaiti Investment Authority

Mr. Adbullah Mshari Bader Member General Manager

Eng. Abd Al Wahhab Kharabsheh (until 1/8/2000) Eng. Issa Ayyoub (from 2/8/2000)

Deputies of the General Manager

Dr. Wanas Hindawi Senior Deputy General Manager / Marketing Manager Mr. Younes Madadha Deputy General Manager for Technical Affairs. Mr. Anwar Masri Deputy General Manager / Finance Manager

Auditors

Allied Accountants Members of Arthur Andersen International

Letter from the Chairman Despite a slowdown in demand for potash during the last year, I am very pleased to report that the Arab Potash Company has registered progress in all fields of activity. World Potash Production increased marginally during the year. World demand was also slow especially during the last quarter when signals of inventory build-up in major markets began to surface. Arab Potash Company production increased by 7.5% and sales increased by 12.5% in the year 2000. These increases are considered very positive in the face of adverse market conditions and also considering the non-incorporation of a new salt pond due to the breach in part of Dike 19. The company will make every effort to maintain production & sales at similar levels in 2001. Consolidated company sales increased by 5.7% to reach (144.3) Million Dinars while total revenues increased by 4.9% to reach 153.5 Million Dinars. Net Profit for the year was 39.5 Million Dinars. This is a 25.5% increase over the previous year. The Board of Directors has therefore proposed to provide 10 Million USD as extraordinary reserves in order to guard against any losses, which may be incurred by the company due to the dike breach. The net profit after such provision was 29.5 Million Dinars. These results have prompted the Board to recommend to the General Assembly a dividend of 18% of the capital. The provision is in response to International Accounting Standards and does not reflect the Boards' convictions of the responsibility of third parties for the breach in the dike. The Company is in the process of completing its studies for expanding the solar ponds & debottlenecking the plants. The removal of the salt mushrooms in the ponds also proceeds according to plan. The feasibility of expanding capacity to 2.4 Million Tons of product is underway. The Company is also concentrating on product diversification and expanding its production of granular potash as well as improving the quality. There are plans to expand the stores in Aqaba to meet the increases in production & in the product mix. During the year, industrial grade potash was marketed in limited quantities. Red granular was also produced & marketed. There are plans to begin production of red standard potash in 2001. The first stage of restructuring the company was completed by Arthur Anderson. This aims to simplify procedures and increase efficiencies. The second & third stages, which involve information systems & computerisation of activities, will be implemented in 20 The company activities in terms of managing its investments, subsidiaries & affiliates were separated from Potash production & are now directly supervised by a board committee in order to achieve a focused approach. New Internal Audit Systems were introduced in line with International Audit Standards. This system will be supervised by the Chairman.

The Company purchased most of the shares of the Jordan Dead Sea Industries Company in order to streamline activities & to be able to directly relate to its subsidiaries & affiliates. It currently holds 99.9% of the shares. The capital structure of the Jordan Safi Salt Company was revised and Arab Potash ownership decreased to (24.2%) of the shares. It is worth noting that Arab Potash has direct financial support & involvement with the salt company totaling 11.9 Million Dinars. Construction work in both the KEMAPCO & JORMAG projects proceeds well with production expected in 2002. The Jordan Bromine Company is also expected to finalize designs & begin construction of its plants with production also expected by the end of 2002. I would like to seize this opportunity to thank his Majesty King Abdullah II for his continued support for our company. I would also like to thank the Government of Jordan and the other shareholders of the company & the international and local financing institutions for their cooperation & support. Our special thanks goes to our clients, buyers, customers, agents, and distributors in the fertilizer & industrial sectors for their confidence in our products & services. On behalf of the Board, I would like to register our thanks to the Company employees for their efforts. Chairman Suleiman Al Hafez

The Report of The Board of Directors

The board of directors is pleased to welcome you this annual general meeting & to present to you the forty fourth annual report and consolidated financial statements for the year ended 31 December, 2000 in accordance with article (169) of the Companies Law and articles (11 and 12) of the Company By Laws. 1) Production World potash production increased to 41.4 million tons of product in the year 2000. This is in line with the trend during the nineties and represents a small (1.5%) increase over the previous year.

World Production in millions of metric tons (KCL) Country 2000 1999 1998 1997 1996 CIS 12.0 12.8 11.6 11.2 9.0 Canada 15.0 13.7 15.3 15.0 13.5 Europe 6.9 7.0 7.6 7.9 8.1 U.S.A. 1.4 1.4 1.5 1.9 1.8 DSW 2.8 2.8 2.7 2.5 2.5 Jordan 1.9 1.8 1.5 1.4 1.8 Others 1.4 1.3 1.1 1.1 0.9 Total 41.4 40.8 41.3 41.0 37.6

The only notable change in production patterns during the year was the drop in production in the CIS. This was counter balanced by an increase in Canadian production, which surpassed the 15 Million-ton mark. Production in 2001 is not expected to witness any increase due to the relatively large inventory from previous year. 2) Demand World demand was almost stable at 40.4 million tons of Potassium Chloride,which is almost the same level as the year before. It is worth noting that Latin America exhibited an increase in off take of about 12% while small decreases were registered in Asia other regions. This increase was mainly attributed to a surge in Brazilian demand in the summer months. This was due to better forecasts for the economy in general and the agricultural sector in particular. The end of the year brought about a buildup in stocks which was the main factor effecting a healthy start for 2001.

World Consumption of Potash in million metric tons (KCL) Country 2000 1999 1998 1997 1996 Asia 12.7 13.0 11.3 11.2 8.4 North America 9.6 9.7 9.7 11.5 10.0 Europe 8.9 9.0 9.1 9.2 9.4 CIS 2.5 2.6 2.7 2.6 2.4 Latin America 5.5 4.9 5.2 5.5 4.2 Africa & The Middle East 1.2 1.2 1.1 1.0 0.9 Total 40.4 40.4 39.1 41.0 35.8 In China & India consumption levels were normal until the final weeks of the year when various factors caused some accumulation of product & warned of a slow beginning in 2001.

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CanadaCIS

OthersJordanDSWUSA

Europe

World Potash Production 2000

36.2%29%3.4%4.6%6.7%3.4%16.7%

World Consumption of KCL

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20001999199819971996

(million metric tons KCL)

The scene in 2001 will be the new marketing arrangements of Uralkali in Russia, which has chosen to conduct its sales outside the International Potash Company Group & to join forces with Canpotex. This is perhaps a historic transformation and signals the advent of true globalisation in the potash industry, but the process is not expected to be an easy task. 3) Prices The potash price came under pressure during the year 2000 mainly due to lower margins caused by the increase in oil prices, which effected production costs, and freight prices. The returns of producers were reduced by 2-3 dollars. The final quarter of the year also brought about a situation of increasing inventories and falling crop prices such as palm oil. There is optimism however that the weakness will not extend far into 2001 as markets in Brazil & China begin purchasing product Company Activities 1) Production The company produced (1.94) million tons during the year. This is a 7.5% increase over 1999. Standard grade production represented 60% of the total.

APC Production by Grade During The Year 2000 2000 1999

Grade Quantity Percentage Quantity Percentage Percent Change

Standard 1,160,473 59.9 1,128,329 62.7 2.8 Fine 633,656 33.9 614,342 34.1 6.7 Granular 103,600 5.4 53,245 3.0 94.6 Industrial Potash 16,260 0.8 4,274 0.2 280.4 Total 1,935,989 100.0 1,800,190 100.0 7.5

It is evident that granular & industrial production was increased during the year reflecting good demand for these grades.

Carnallite production exceeded the budget by 11% and was 3% over 1999 production. (Carnallite is the raw material for potash). The increase in Carnallite production was due to the improvement in evaporation rates and better flow of the brines in the solar evaporation

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Monthly KCL Production 2000

(Thousand Metric Tons)

World Production of KCL

APC Potash Productionfrom 1996 to present

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system after the salt mushroom removal. The increase in the density of Dead Sea brine was also a positive factor influencing Carnallite production. A total of 1.81 Million tons were transported from the production site in Safi to the Aqaba warehouses. This included 33 thousand tons to the Nippon Jordan facility in Aqaba. Local contractors transported 120 thousand tons while the remainder was handled by the Company in its 85 trucks.

2) Potash Sales & Marketing Sales of potash increased by (12.5%) during the year reaching a record of 1.92 Million tons due to strong demand in China and the resumption of APC's sales into Indonesia. The success of the white fine product in Chinese NPK manufacture was another factor propelling the sales of this grade. The breakdown per grade during the year was 61.2% for Standard, 34.2% for fines, 2.2% for red granular & 2.2% for white granular and 0.2% for industrial potash. Due to the increase in diversifying into various grades, APC is looking at increasing its handling & storage capacity. There is also emphasis on maximizing sales of Industrial Potash.

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Actual Planned

DecNovOctSepAugJulJunMayApr

Monthly Carnallite Production2000


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Monthly Production,Transport and Sales 2000


APC Sales distribution (Percent) Market 2000 1999 1998 1997 1996 Asia 82.90 79.10 73.60 72.30 72.20 Oceania 0.48 0.69 4.00 2.50 0.60 Arab Region 0.86 0.46 1.50 0.95 0.80 Europe 10.90 14.20 14.90 15.60 20.00 Africa 1.20 2.87 3.00 2.65 0.73 Americans 1.90 0.21 0.95 4.10 5.40 Other 1.76 2.47 2.05 1.90 0.27 Total 100.00 100.00 100.00 100.00 100.00 The concentration of around 80% of the sales to only ten countries is evident. This trend has increased in the past few years. India & China alone represented about 52% of APC's sales during the year, which was an increase from the pervious year when sales to these countries was (46.7)%. Sales to Korea dropped significantly during the past few years.

The Top Ten Importers of APC Potash (Percent) Country 2000 1999 1998 1997 1996 India 28.3 26.1 32.4 27.5 27.5 China 23.7 20.6 10.9 14.1 7.8 Malaysia & Singapore 8.3 12.0 11.1 6.8 9.0 Indonesia 5.3 0.8 0.9 2.4 7.6 Philippines 4.4 4.3 4.3 4.6 4.6 Korea 3.6 4.7 3.7 8.7 9.3 Spain 3.3 3.7 5.0 4.5 5.6 Taiwan 2.9 3.5 4.3 3.6 -- Thailand 2.0 0.6 -- 1.1 0.6 Japan 1.6 2.3 2.6 3.0 2.5 Total % 83.4 78.6 75.2 76.3 74.5 Grand Total (100) MT 1,919 1,706 1,517 1,447 1,754 Potash sales revenue was 142.1 Million JD's during the year, registering an 8.7% increase over the previous year. The mean unit price was 74.1 JD's compared to 76.6 JD's in 1999, which reflected some of the pressures on the netbacks due to the international market situation. The company began to market industrial & red granular potash during the year. The capacity output from each of these grades is about 100.000MT per year. The long term supply agreement with Sinochem , China was signed for the supply of 400 thousand tons per year. The company also resumed activities in the Indonesian market via an agreement with Mitsubishi Corporation. APC's share in the Indian market increased by 15% to reach around 21% of the total. The strategic partnership with the IPL Group in India was strengthened as APC continued to enjoy a good status with a number of Indian producers. The share of APC in China increased with the increase in demand for white product in NPK manufacturing to about 455 thousand tons. This share will be maintained in 2001. APC sold more than 100.000MT in Indonesia after its sales had stagnated in the past two years.

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IndiaChinaMalaysiaIndonesiaOther Asia CountriesEuropeSouth Africa & BrazilJordanRegional Sales

APC Sales by Country

APC's sales in Malaysia dropped to 163 thousand tons compared to 204 thousand in the previous year. This level is expected to be maintained in 2001. APC increased its sales to the growing Vietnam market where 3 vessels were loaded during the year. The company plans to concentrate efforts of promoting sales to Pakistan & Iran where the potential is promising. APC sales into Italy dropped during

the year due to a fall in demand and an associated fall in prices. The difficulties in Europe were compounded by the scarcity in availability of vessels and the low exchange rate of the Euro. APC is trying to counter this with an increase in cargo sizes & flexibility in storage & grades. APC also lost its share in the Moroccan market due to difficulties in logistics. There also have been structural changes in the composition of the international potash market. A number of major importers were privatized such as TFC in Taiwan and Philphos in the Philippines, while others such as Kynoch in South Africa and Trevo in Brazil witnessed major changes in ownership & consequently in purchase patterns. The restructuring of APC's strategies and the reassessment of synergies will be a major task facing the company in the coming year in order to further develop partnerships and relations with these customers and others. APC made a new step during the year 2000 in actively participating with the International Potash Institute to initiate, finance and manage two promotion projects for potash use in Iran & Egypt. The target for the coming year will be the development of the Aqaba facilities to be able to handle the increase in the number of grades and the export of industrial grade in bulk. Consolidated sales revenue was 144.3 Million JD's compared to (136.5) Million in 1999. The increase was about 5.7%. It is worth noting that this represented about 11% of Jordan's total exports. APC's exports are around 98% of its total sales. The consolidated revenue is that of potash, mixed salts & table salts. 3) Safi Salt Company Sales The production of the Safi Salt Company for the year 2000 was (260) thousand tons of Industrial Salt. This is (1.8%) decline from 1999

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APC Sales from 1983-2000

0.0

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83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 2000

(Million Metric Tons KCL)

production. Table salt production was (24,946) MT compared to (24,869) MT in the previous year. Industrial Salt sales were (290) thousand MT and Table Salt sales were (28) thousand MT. This is a drop of 14.7% for Industrial and 3.9% for Table Salt from the previous year. Sales revenue to 30 June was 1.4 Million Dinars compared to (5.1) Million for the whole of 1999. The figures are distorted due to the decrease of APC's interest in the Safi Salt Company to (24.2%) from the second half of 2000. 4) Numeira Mixed Salts Company Total sales of Carnallite in 2000 reached (4,282) MT, which is a 44%, increase over 1999 sales of (2965) MT. Raw Mud sales were 142 Tons compared to 117 Tons in 1999. Sales revenue was 763 thousand Dinars compared to 640 thousand. This is a 19% increase. Total Company revenue increased to (153.5) Million Dinars from (146.4) Million Dinars in 1999. This is a 5.1% increase. Total costs witnessed a decrease to (107.6) Million Dinars down from (110.1) Million. This is a drop of 2%. The Company registered a net profit before the extra ordinary provisions of (39.5) Million Dinars, or an increase of 25.5% over the pervious year (31.4) Million JD's. The company made an extraordinary provision of 13.2 Million Dinars including 10 Million for extraordinary losses. The income tax for the year will be 7.1 Million Dinars. APC paid off 15.7 Million Dinars of its debts during the year thus reducing its debt burden to 62.2 Million Dinars at the end of the period. Fixed Assets increased to 420 Million Dinars from 412 Million, while the market value of these assets is far higher. The difference may be considered as invisible reserves supporting the company's financial position. Shareholder equity increased by 4.2% during the year to reach (275.1) Million Dinars placing it in the forefront of Jordanian companies in this regard. Company Projects 1) Salt Mushroom Removal The growth of Salt Mushrooms was due to the mixing of different concentrations of brine inside the Salt ponds. These obstacles to flow within the pond system first appeared in the beginning of the nineties & infected an area of 40 km2. The first removal project successfully cleared 10km2 in 1999. The second step of clearing the remaining area is expected to be completed in 2001. The full clearance of the system is expected to provide for the increase of 54000 MT of product annually at first & consequently the increase should be 125000 MT annually. 2) Industrial Potash This plant was completed in 1998 & began production in 1999 when 4 thousand tons were produced. Contractual complications with the original

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contractors caused some delays, but the plant became operational at the end of 2000 with the accepted specifications 3) Magnesium Metal The feasibility reports were evaluated and the high cost of electricity has now directed the focus to building this project as a joint venture with an oil producing country. These investigations will be conducted in 2001. 4) Potash Production Expansion (Stage 3) This project was designed to increase production by 100.000MT through adding a salt pond of an area of 11 km2. This required the building of two dikes surrounding the pond. The length of the dikes was 11.6km to a height of 14 meters. The British firm "Sir Alexander Gibb" designed the dikes & the construction contract was awarded to the Turkish firm "ATA". The first of the dikes (19) was completed in February 2000 in accordance with the contract. Pumping brine began in January 2000 to the pond, which had a capacity of 75 Million cubic meters. On 22 March 2000 and when the quantity of brine in the pond reached 56 Million cubic meters, a breach occurred in the dike which caused about 2.3km out of 8.3km to collapse & the brine flowed back to the Dead Sea. Both designer & contractor were immediately informed and instructed to carry out their contractual obligations. An International Engineering Firm was asked to study and report on the cause of the breach & a marine geology firm was engaged to conduct surveys. Both dikes 19 & 20 are completely insured against risks during construction and the maintenance period. Dike 19 was also locally insured as part of APC's assets. APC is currently taking all steps necessary with all the relevant parties and in accordance with their contractual & legal obligations in order to guarantee APC's rights. As an added precaution, APC made a provision of 10 Million Dinars in its statement of accounts as a provision against any losses of any kind. 5) Potash Production Expansion (Stage 4) This project aims to expand production to 2.4 Million Tons by converting two new Carnallite Ponds from the salt pond. Studies began in 1999 & an international consultant will be appointed in 2001 to complete a feasibility & technical study prior to a final decision. Subsidiaries & Affiliates 1) The Jordan Safi Salt This company was established in 1996 to produce 1.2 Million Tons of Industrial and 32,000MT of Table Salt annually. Its capital was 12 Million Dinars. APC played a major role in its inception & directly held 10% of its capital. The company faced marketing & financial difficulties from the start. APC assisted by writing off the fees of the salt dredger, which was used to provide

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raw salt to the company. It also rescheduled its debts, and continues to service a 10 Million Dollars loan from West Merchant Bank /London. Due to continued losses, the capital of the company was restated by writing off 6 Million Dinars of losses. On 7 November 2000, the company increased its registered capital to 10 Million Dinars & subsequently, APC ended up with 24.2% of its share capital. The Safi Salt Company has liabilities towards APC of 11.9 Million Dinars at the end of 2001. 2) Numeira Mixed Salts & Mud This company was established in 1997 to package & distribute mixed salts & mud for cosmetic purposes. It has been profitable since the beginning & has widened its scope of activities to include bagging & packaging for Potash. APC owns 52.7% of the 1.5 Million Dinars capital of Numeria while the employees fund owns (32.7%). 3) Jordan Magnesia (JORMAG) This company was established in 1997 & began construction of its plants in 1999. These plants are expected to witness mechanical completion by the end of 2001. The company will produce 50.000MT of refractory grade Magnesium Oxide annually in addition to 10.000MT of Magnesium Hydroxide and derivatives. The project is expected to cost 100 Million Dollars and APC holds 55% of the shares of this company. 4) Kemira Arab Potash This joint venture was established with Kemira- Finland in 1999. The plants in Aqaba will produce 150,000 MT annually of potassium nitrate fertilizer and 75,000 MT per year of dicalcium phosphate animal feed additive. The plants are expected to be mechanically completed by the second half of 2002. The total investment in this project is around 106 Million Dollars. 5) Jordan Bromine This joint venture with Albemarle of the US will be built in Safi to produce elemental Bromine and four Brominated derivatives in its first stage. At a later stage, Chlorine & Potassium Hydroxide may be added. Detailed engineering work is nearing completion & mechanical completion is expected by the end of 2002. This project has a total value of 143 Million USD and APC has a 50% stake. 6) Jordan Dead Sea Industries (JODICO) This Holding Company had a paid up capital of 60 Million Dinars. It was established by APC in 1994 to oversee the activities of investment & setting up of downstream industries from Dead Sea minerals. APC held 51% of the share capital. JODICO established both the Safi Salt Company in 1996 and JORMAG in 1997. The "Holding" status of the company was amended in 1998 to enable JODICO to become a shareholder in Jordan Bromine Company. With the establishment of the three companies, JODICO would have fulfilled its mission & to avoid duplication of authority & administrative costs, a decision was made to acquire the minority shareholdings in

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JODICO. This was done via a cash purchase of 50 of these shares while 50% was paid in shares of JORMAG. The Jordan Investment Authority chose to exchange their shares for those of Jordan Safi Salt instead. JODICO is currently a private shareholding company with a nominal capital of 100.000JD's after its assets & holdings were bought by APC.

Administration

1) Employees, Housing & Training The total number of employees was (2293) at the end of 2000. This is a drop of (23) from the previous year. There are 34 non-Jordanian technicians among them. A total of 1431 employees took part in training courses during the year.

Labor Force Distribution by Discipline & Education

Qualification University Community College Tawjihi High

School

Junior High

School Total Percentage

Doctors 7 0 0 0 0 7 0.31 Medical Assistance 4 7 7 5 5 28 1.22 Engineers 232 0 0 0 0 232 10.12 Chemists 20 11 0 1 0 32 1.40 Administrative 101 51 68 47 46 313 13.65 Accountants 49 11 1 0 0 61 2.66 Technical 20 365 122 160 190 848 36.98 Semi Skilled Technicians 1 5 15 66 108 195 8.50 Unskilled Technicians 0 3 6 32 70 111 4.84 Drivers 0 3 8 34 261 306 13.34 Firemen 0 0 4 6 17 27 1.18 Guards 2 1 3 5 41 52 2.27 Daily Labor 0 1 1 1 78 81 3.53 Total 436 449 235 357 816 2,293 100.00

The company continues to provide its employees with housing loans. The total loans extended increased to reach (14.2) Million Dinars during the year. The company also provides housing for (2831) employees and family members. There was an improvement in the safety levels in the company. Injuries at work went down by 32% and vehicle accidents were reduced by (27%). 2) Administrative Restructuring The company had entrusted Messrs Arthur Anderson to study the administrative structure of APC in 1999. The report recommended a number of steps towards reorganization. These will be implemented gradually from the beginning of 2001.

The study recommended amalgamation of the current 17 departments into (7) divisions; this included the Merger of Projects and Civil Works into one division.

It also recommended merging service departments such as Housing, Medical Services & Administration into one division.

There was a proposal to privatize housing, transport & medical services at a later date. The internal audit structure was to be revised & strengthened to include technical audits. The study also stressed the need for shortening procedures & automating activities as well as adopting modern information systems.

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Annual Accident Frequency &Severity Indicator (FSI) Variation

83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 2000

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Number of Participants of the Training Activities in the Training Center

96 97 98 99 2000

3) Investment Regulations The Board approved new regulations & procedures to govern the company investments. These will be in effect from February 2001. The regulations will set up an "Investment Committee" & an "Investment Department".

These are designed to oversee investments & follow them up. It is also entrusted with seeking new opportunities & macromanaging affiliates, subsidiaries and company representatives on the boards of these companies.

The Investment Department will provide technical support & necessary documentation to the committee. It will conduct financial & economic analysis for ongoing & proposed projects & investments, and will initiate new avenues for such investments.

4) The Internal Audit System The company internal audit division was modernized and administratively linked to the Chairman. Its scope has been broadened to include financial, administrative & operational controls & checks to ensure adherence to company policies & regulations. The division may also conduct special tests & specific studies as instructed by the Chairman.

5) The Local Community The company continued to provide direct cash support to the local community institutions. Scientific research and studies were also financed through universities and various scientific institutions. The youth were also provided with financial support to sport clubs and youth centers. Various charitable & women organizations were also supported. The company's health services provided emergency support to all cases, which requested the services. The company was also a major factor in the economy of its surrounding region through channeling local purchasing to these areas.

Donations During 2000 Name of Donee Amount (JD) Karak Municipality 100,000 Aqaba Municipality 25,000 Safi Municipality 25,000 Mazra Municipality 25,000 Other Municipalities 43,910 Islamic Assembly for Technology & Water Resources 5,000 Mosques & Churches 16,300 Lott Museum 50,000 Combating Poverty Pockets Program 64,573 Writers & Scientists 4,920 Charitable Organizations 142,057 Jordan Hashemite Fund 300,000 Jordanian Universities 12,565 Government Institutions 71,874 Jordan River Institution 26,550 Abdullah II Center for Development and Design 100,000 Other Governments 11,400 Cultural Centers and Social Institutions in Karak Government

116,750

Sport Clubs & Unions 113,750 Jordan Army Forces 11,860 Others 1,335 Total 1,267,844

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Board Of Directors Cash & Expenditures During 2000

Amount (JD) Board Of Directors Remuneration 75,000 Transportation Allowance 80,550 Per Diems 57,330 Traveling Tickets For Members 35,714 Amount (JD)

Amount Paid to Executive Officers During 2000 Amount (JD) Total Salaries 158,289 Travel Expenses 132,006 Total 290,295 Consolidated Financial Statements 1) Capital Arab Potash Company paid-up capital is (83,317,500) Dinar/Share distributed as follows: Shareholders Number of Shares Percentage Shareholders Number of Shares Percentage Jordan Government (Jordan Investment Corporation)

44,060,657 52.883

Arab Mining Company 17,251,993 20.706 Islamic Development Bank / Jeddah 4,300,000 5.161 Iraqi Government 3,920,707 4.706 Libyan Arab Company for Foreign Investment 3,386,250 4.064 Kuwaiti Investment Authority 3,286,095 3.944 Other Arab Governments 576,504 0.695 Private Sector 6,535,294 7.841 Total 83,317,500 100.00 2) Fixed Assets The cost of fixed assets, before depreciation amounted to JD (420.8) million compared with JD (412.7) million at the end of 1999 an increase of (2%). Fixed assets after depreciation amounted to JD (146) million compared with JD (156.9) million at the end of 1999 a decrease of (6.6%). The decrease was due to the elimination of the Safi salt fixed assets. 3) Inventories The potash and industrial salt inventories amounted to JD (6.4) million compared to JD (7) million at the end of 1999. The policy of the company is not to keep high inventories; this amount represents the production of the last month. The strategic inventory of spare parts amounted to JD (21) million, a decrease of (5%). These inventories are under thorough monitoring in order to decrease them to the minimum level as possible. 4) Investments The company's investments in affiliated companies and other companies amounted to JD (18.3) million compared to JD (10.7), an increase of (71%), due to the payment of the APC's share in the capital of Kemira Arab Potash.

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5) Loans The company paid the balance of the short-term loans which amounted to JD (13.5) million on due dates. The balance of the long term loans amounted to JD (57.1) million compared with JD (55.6) million at the end of 1999. The withdrawals during the year totaled to JD (7.8) million and the principal repayments amounted to JD (8.1) million, the increase was due to the withdrawal of the loan granted to the Company from the Islamic Development Bank to finance the Magnesium Oxide project. Debit/Equity ratio reached (20%) which is less far less than the acceptable international rate of (60%-70%). 6) Revenues The total consolidated revenues for 2000 reached JD (153.5) million, of which JD (144.3) million from Potash, Salt and Mixed Salts sales, and JD (9.2) million from the following sources: Details Amount in Million JD Details Amount in Million JD Interest 6.9 Others 2.7 Net (loss) from Investment in Affiliates (0.4) Total 9.2 The consolidated revenues for the year 2000 increased by (4.9%). Consolidated Sales revenue increased by (5.7%) over the year 1999. This increase in sales revenue was the result of the increase in volume of Potash sales by (12.5%). 7) Total Cost Total consolidated cost in 2000 amounted to JD. (107.6) million, a (2.3%) decrease over total consolidated cost of 1999, which was JD. (110.1) million. Total consolidated cost represented (74.6%) of consolidated sales revenue compared with (80.6%) for 1999. Consolidated Cost of goods sold of JD (77.2) million represented (53.5%) of consolidated sales revenue compared with JD (77.8) million and (57%) in 1999. This decrease was a direct result of the increase in sales volume. Consolidated selling and distribution cost remain at the same level of JD (9.3) million, consolidated selling and distribution cost represented (6.4%) of consolidated sales revenue compared with (6.8%) for 1999. Royalty amounted to JD (7.1) million, a decrease of (11%) over 1999 royalty of JD (8) million. The reason for this decrease was the decrease in the net profit, as royalty is calculated at (25%) of net profit in accordance with the Concession Law. Royalty represented (4.9%) of consolidated sales revenue compared with (5.9%) in 1999. Consolidated general and administrative expenses amounted to JD (7.8) million an increase of (40.3%) when compared with 1999 expenses of JD (5.2) million. This increase was due to the increase in wages and salaries and donations. Consolidated general and administrative expenses represented (5.7%) of consolidated sales revenue compared with (4.5%) in 1999.

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8) Profits The company realized consolidated net profit before income tax and other provisions of JD (36) million and Consolidated net profit after tax reached JD (29.5) million, income tax amounted to JD (7.1) million. A provision of JD (10) million was made for the unusual loss in the year 2000

Profits available for appropriation, after the addition of retained earnings of JD (2.632) million totaled to JD (39.992) million and appropriated as follows:

Details Amount in Million JD

Statutory Reserve (10%) 3.736 Voluntary Reserve (20%) 7.472 Jordanian Universities Fees (1%) 0.374 Provision for Vocational Training & Scientific Research (1%) 0.374 Directors Remuneration 0.075 Dividends (18%) of Share Capital 14.997 Provision for Income Tax 7.083 Retained Earnings 5.881 Total 39.992

9) Shareholder's Equity The shareholder's equity amounted to JD (275.1) million, an increase of (4.2%) over 1999, after the appropriation of (10% & 20%) of net income as statuary and voluntary reserves respectively.

10) Audit Fees The audit fees for the company and its subsidiaries amounted to JD (24.8) thousand.

Financial Indicators The following table summarizes the major financial indicators for the past five years, noting that all amounts except for the financial ratios, and per share data are in million Jordanian Dinars.

Details 2000 1999 1998 1997 1996

Potash Production (Tons) 1,935,989

1,800,190

1,526948

1,415,675

1,765,328

Potash Sales (Tons) 1,919,197

1,706,271

1,516,571

1,447,366

1,735,702

Potash Sales Revenue 142.1 130.8 116.0 103.0 131.2 Sales Revenue 144.3 136.5 119.4 104.6 131.2 Other Revenue 9.6 9.0 7.6 6.9 6.9 Financing Charges 4.3 6.4 5.1 5.0 4.4 Net Profit After Tax 29.5 31.4 24.1 16.9 33.7 Net Assets 146.1 156.9 159.4 128.5 117.4 Loans & Other Long Term Obligations 73.2 91.2 84.6 63.7 56.4

Shareholders Equity 275.1 264.0 232.6 225.1 202.6 Debt / Equity Ratio 20% 27% 27% 22% 22% Return on Assets 7% 8% 6% 5% 11% Return on Shareholders Equity 11% 12% 10% 8% 17% Debt Service Ratio 2.7 2.7 1.2 1.4 5.0 Current Ratio 4.0 3.3 2.7 2.1 2.2 Closing Share Price 3.050 4.300 2.800 6.210 5.700 Earning Per Share 0.354 0.377 0.288 0.212 0.423 Price Earning Ratio 9.0 11.0 9.7 29.3 13.5

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Details 2000 1999 1998 1997 1996 Future Plan The company is looking forward for the realization of the fourth production expansion project. The set goal is to reach a production capacity of (2.4) million tons per year after the year 2004, and a more progress in conducting studies and introducing the necessary modifications in the plants, to raise the efficiency and production quality and reduce the cost. 1- To proceed in the restructuring of the Company. 2- To privatize part of none core business in the company. 3- To continue establishing projects and industries based on the Dead Sea minerals and salts. 4- To speed up the removal of the salt mushrooms of the salt ponds, as planned by the end of 2001. 5- To improve the marketing strategies by entering new markets and strengthening APC's position in the existing 6- To employ all necessary means to secure the company's rights from all parties involved in the collapse of part of dike (19). Declaration of the Board of Directors The Board of Directors of the Arab potash Company hereby declares that according to the best of their information and knowledge there are no substantial matters, which may affect the company as a going concern during 2001. The company Board of Directors hereby declares its responsibility for the preparation of the financial statements and the installation an effective internal control system in the Company. Recommendations Your endorsement to the following will be appreciated: 1. The minutes of the previous General Assembly meeting. 2. The Board of Directors report regarding the company's business for the year 2001 and its future plan 3. The independent Auditor's Report vis--vis Its Consolidated Balance Sheet, the Consolidated Income Statement and Other Consolidated Financial Statements. 4. The consolidated Balance Sheet and the consolidated Income Statement. 5. The Distribution Statement and the recommendation for the distribution of (18%) of the Share Capital as dividends as per the Board of Directors resolution. 6. Electing the independent auditor for the fiscal year ending December 31,2001. 7. Any other matters. In conclusion, the Board of Directors extends its thanks to the Government of the Hashemite Kingdom of Jordan for its support and help extended to the Company. The Board also extends thanks to all the Arab and International Organizations who contributed to the financing of the Company projects, and hails the efforts exerted by the Company employees on all levels.

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The Arab Potash Company Limited A Public Shareholding Company

CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2000 AND 1999 Together wi th Audi tors ' Repor t

Forty-Fourth Annual Report And Financial Statement

1

To the Shareholders of Arab Potash Company Amman Jordan We have audited the accompanying consolidated balance sheets of ARAB POTASH COMPANY and SUBSIDIARIES as of December 31, 2000 and 1999 and the related consolidated statements of income, changes in shareholders' equity and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with International Auditing Standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of ARAB POTASH COMPANY and SUBSIDIARIES as of December 31, 2000 and 1999 and the consolidated results of the operations and the consolidated cash flows for the years then ended in conformity with International Accounting Standards. Amman Jordan February 8, 2001

Allied Accountants Certified Public Accountants Members of Andersen Worldwide


2

Arab Potash Company Consolidated Balance Sheets

As Of December 31, 2000 And 1999 (In Thousands Of Jordanian Dinars)

Notes 2000 1999 Assets Current Assets Cash on hand and at banks 57,795 98,104 Government of Jordan loan 4 - 271 Accounts receivable 5 47,824 44,199 Inventory 6 6,375 7,005 Spare parts 13,363 13,873 Other current assets 7 5,718 5,291 Total current assets 131,075 168,743 Strategic spare parts 21,054 22,504 Accounts receivables - Long term portion 5 9,980 4,354 Projects in progress 8 53,579 42,008 Investment in affiliates 9 16,280 8,763 Other investments 2,040 2,056 Other assets 10,693 9,361 Property, plant and equipment 10 146,001 156,935 Total Assets 390,702 414,724 LIABILITIES AND SHAREHOLDERS EQUITY Current liabilities Due to banks 39 3,118 Notes payable - 1,129 Short term loans 11 - 13,490 Current portion of long term loans 12 5,111 7,204 Accounts payable 7,959 5,653 Other current liabilities 13 19,561 20,975 Total current liabilities 32,670 51,569 Long term notes payable - 480 Long term loans 12 57,083 55,596 Other provisions 10,936 10,218 Minority interests 14,921 32,893 Shareholders Equity 14 Paid in capital 83,318 83,318 Additional paid in capital 54,854 54,854 Dividends 14,997 18,330 Retained earnings 121,923 107,466 Total Shareholders Equity 275,092 263,968 Total Liabilities and Shareholders Equity 390,702 414,724

The accompanying notes are an integral part of these financial statements


3

Arab Potash Company Consolidated Statements Of Income

For The Years Ended December 31, 2000 And 1999 (In Thousands Of Jordanian Dinars Except For Per Share Data)

Notes 2000 1999 Sales, Net 16 144,317 136,461 Cost of Sales 77,194 77,844 Gross Profit 15 67,123 58,617 Selling and Distribution Expenses 19 9,312 9,307 General and Administrative Expenses 18 7,548 6,711 Royalty to The Government of Jordan 7,122 8,000 Provision for Exceptional loses 20 10,000 - Income from Operations 33,141 34,599 Interest Income 6,851 8,719 Other Income 2,725 1,056 Other Expenses 21 (2,058) (1,901) Interest Expense and Bank Charges (4,345) (6,393) Net (Loss) Income from Investments in Affiliates 356 72 Income before Income Tax 35,958 36,152 Provision for Income Tax 17 (7,083) (5,859) Income after Income Tax 28,875 30,293 Minority Interests 579 1,079 Net Income 29,454 31,372 Earnings Per Share 0,354 0,377 Weighted Average Number of Shares (in Thousands of Shares) 83,318 83,318



4

Arab Potash Company Consolidated Statements Of Changes in Shareholders' Equity

For The Years Ended December 31, 2000 And 1999 (In Thousands Of Jordanian Dinars)

Additional Retained Earnings Paid in

Capital Paid in Capital Dividends

Statutory Reserve

Voluntary Reserve

Unappropriated Earnings

Total

Balance at December 31,1998 83,318 54,854 16,664 33,688 60,056 680 249,260 Dividends paid - - (16,664) - - - (16,664) Net income - - - - - 31,372 31,372 Appropriations - - - 3,697 7,393 (11,090) - Dividends proposed - - 18,330 - - (18,330) - Balance at December 31,1999 83,318 54,854 18,330 37,385 67,449 2,632 263,968 Dividends paid - - (18,330) - - - (18,330) Net income - - - - - 29,454 29,454 Appropriations - - - 3,736 7,472 (11,208) - Dividends proposed - - 14,997 - - (14,997) - Balance at December 31,2000 83,318 54,854 14,997 41,121 74,921 5,881 275,092



5

Arab Potash Company Consolidated Statements Of Cash Flows

For The Years Ended December 31, 2000 And 1999 (In Thousands Of Jordanian Dinars)

2000 1999 Cash Flows from Operating Activities Income Before Income Tax 35,958 36,152 Adjustment for Depreciation 23,637 24,493 Interest and Bank Charges Expenses 4,245 6,393 Losses (Income) from Investment in Affiliates 356 (72) Provision for Doubtful Debts 1,506 1,509 Provision for Exceptional Losses 10,000 - Others 1,774 2,000 (Increase) Decrease in Current Assets Accounts Receivable (469) (13,930) Inventory (398) (3,030) Spare Parts 788 1,623 Other Current Assets (900) 2,720 (Increase) Decrease in Current Liabilities Accounts Payable 3,405 (806) Notes Payable (526) 1,609 Other Current Liabilities (1,654) 2,104 77,722 62,765 Income Tax Paid (5,711) (4,825) Net Cash Flows from Operating Activities 72,011 57,940 Cash Flows from Investing Activities Purchase of Property, Plant and Equipment (2,473) (6,015) Sales of Property, Plant and Equipment 65 4 Amounts Paid for Project in Progress (46,595) (25,398) Purchase of Investment (7,520) (5,535) Sale of Investment - 45 Ministry of Finance Loan Payment 271 543 Other Assets (1,483) (1,815) Net Cash Flows Used in Investing Activities (57,735) (38,171) Cash Flows from Financing Activities Due to Banks (419) 588 Proceeds from Loans 7,839 19,025 Repayment of Loans (21,602) (14,958) Interest and Bank Charges Paid (4,680) (6,469) Dividends (18,330) (16,664) Minority Interests (17,393) 10,949 Net Cash Flows in Financing Activities (54,585) (7,529) Net (decrease) Increase in Cash (40,309) 12,240 Cash on Hand and at Banks, Beginning of Year 98,104 85,864 Cash on Hand and at Banks, End of Year 57,795 98,104



6

Arab Potash Company Notes To The Consolidated Financial Statements December 31, 2000 And 1999

(In Thousands Of Jordanian Dinars, Except For Per Share Data)

(1) GENERAL

The Arab Potash Company a public shareholding company was founded and registered on July 7, 1956. During 1958, the Company was granted a concession from the Government of Jordan, to exploit the minerals and salts of the Dead Sea brine. The concession expires after 100 years from the grant date, after which, the Company's factories and installations become the property of the Government of Jordan. Under the terms of the concession, the Government of Jordan is entitled to a royalty of JD 0.008 for each ton of potassium chloride, ("Potash"), exported by the Company. The maximum royalty payable is limited to 25% of the Company's net income. The Company has increased its paid in capital during December 1997 from JD 79,695 to JD 83,318. The increase was effected through the issue of Global Depository Receipts (GDRs) on the London Stock Exchange at a price of US$ 9.03 for each GDR. Each GDR represents one ordinary share with a nominal value of JD 1 per share. Currently, the Company produces and markets Potash only and trades it in the international market. The financial statements were authorised for issue by the Board of Directors subsequent to their meeting held on March 22, 2001. (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The consolidated financial statements have been prepared in accordance with international accounting standards ("IAS"). Principles of Consolidation The consolidated financial statements include the accounts of the Company and all of its subsidiaries. All significant inter-company accounts and transactions have been eliminated. Following are the subsidiaries of the Company: Percentage of Ownership Paid in Capital 2000 1999 Jordan Dead Sea Industries* 30,000 99.7 51.1 Jordan Magnesia Company** 30,000 55.3 20 Numeira Mixed Salts and Mud Company 1,500 52.7 52.7 * During 2000, the Company increased its ownership in Jordan Dead Sea Industries Company from 51% to 99.7% through acquiring the minority shares. ** The Company increased its ownership in Jordan Magnesia Company (previously a subsidiary of Jordan Dead Sea Industries) from 20% to 55.3% through acquiring some of the shares previously owned by Jordan Dead Sea Industries Company.


7

Revenue Recognition Revenue is recognized when it is probable that the economic benefits associated with the transaction will flow to the Company and the amount of the revenue can be measured reliably. Sales revenue is recognized upon delivery of potash to carrier, at which time the revenue process is completed. Inventory and Spare Parts Finished goods are valued at the lower of average cost or net realizable value. Cost includes all direct production costs plus a share of the indirect overheads. Work in progress for Potash is not recognized, since the production cycle spanning the pumping of carnallite, the essential raw material, to the refineries is less than one day. Spare parts and materials are valued at the lower of the moving average cost or market. Strategic spare parts are expected to be used after more than one year. The Company's policy is to maintain sufficient spare parts to maintain its plants, since the technology used in producing Potash is unique to the Dead Sea location and is not commonly used by other producers in other locations. Investments Affiliated companies where the Company has shareholdings between 20% to 50% of the paid in capital are accounted for using the equity method, while for those investees in which the Company's interest is less than 20%, the cost method is applied. A provision is made against these investments, when the financial position of these companies becomes permanently impaired. Property, Plant and Equipment Property, plant and equipment are stated at cost and are depreciated using the straight line method of depreciation over their estimated useful lives. The annual depreciation rates used are: % Buildings 2-10 Dikes 6 Machinery and Equipment 7-12 Vehicles 15-20 Furniture and Fixtures 9-20 Hospital Equipment 12 Tools 20


8

Foreign Currency Assets and liabilities denominated in foreign currencies are translated to Jordanian Dinars using the prevailing exchange rates at year end. Foreign currency transactions during the year are recorded using exchange rates that were in effect at the dates of the transactions. Foreign exchange gains or losses are reflected in the statement of income. Long Term Loan Interest on long term loans is recognized as an expense in the period in which it is incurred, which covers the grace period if any. Interest which is directly attributable to financing of projects in progress is capitalized as part of the projects costs. Interest capitalized during the year 2000 and 1999 amounted to JD 555 and JD 59 respectively. Employee Termination Indemnities The Company operates an employee termination indemnity scheme, where the benefit accrues to employees on pro-rata basis during their employment period and is based on each employee's current salary. Other provisions in the accompanying consolidated financial statements reflect the maximum amounts of the indemnities as of the balance sheets dates of JD 10,802 and JD 10,053 respectively, at December 31, 2000 and 1999. Income Taxes The Company provides for income taxes in accordance with IAS 12. Deferred taxation is brought to account under the liability method in accordance with IAS 12, for the difference between the book and the tax bases for assets and liabilities. Under IAS 12, timing differences on end of service indemnity and depreciation, give rise to a deferred tax asset, which due to its immateriality, has not been recognized in the financial statements. Financial Instruments International Accounting Standards IAS 32, "Financial Instruments: Disclosure and Presentation" prescribes certain requirements for presentation of a balance sheet financial instruments and identifies the information that should be disclosed about both on balance sheet (recognized) and off balance sheet (unrecognized) financial instruments. Among other items, the disclosure standards deals with information about factors that affect the amount, timing and certainty of cash flows relating to financial instruments and the risks associated with them. A financial instrument is defined as any contract that gives rise to both a financial asset of one enterprise and a financial liability or equity instrument of another enterprise.

(3) CHANGE IN GROUP'S ORGANIZATION

Effective July 1, 2000, Jordan Safi Salt Company accounts are no longer included in the consolidated financial statements since Jordan Dead Sea Industries Company disposed of its ownership of 52.7% by means of an equity exchange. The Company accounts for its investment in Jordan Safi Salt Company of 24% using the equity method. Jordan Safi Salt Company generated sales of JD 1,412 and had net loss of JD 1,705 up to June 30, 2000. During 1999, sales and net losses amounted to JD 5,061 and JD 3,468 respectively.


9

Jordan Safi Salt Company assets and liabilities as of June 30, 2000 were as follows: Cash on hand and at banks 239 Accounts receivable and checks under collection 1,129 Inventory and spare parts 2,200 Other current assets 473 Fixed assets, net 15,108 Other assets 325 Total Assets 19,474 Due to banks 2,660 Accounts payable 1,099 Notes payable 1,083 Due to affiliated companies 11,536 Other current liabilities 798 Total Liabilities 17,176 Net Shareholders Equity 2,298 (4) GOVERNMENT OF JORDAN LOAN

On December 25, 1992 the Company granted the Government of Jordan, represented by the Ministry of Finance, a loan amounting to JD 4,342 which bears interest at a rate of 6% per annum. The loan is repayable in 16 semi-annual installments, the last of which was due on July 1, 2000. (5) ACCOUNTS RECEIVABLE This item consists of the following: 2000 1999 Trade receivables 34,859 32,404 Due from affiliates 6,330 336 Advances to MgO project contractors 5,913 11,368 Other 722 148 47,824 44,256 Accounts Receivable Long Term Trade receivable 5,735 5,806 Due from affiliates 7,148 - 12,883 5,806 Less: Allowance for doubtful debts 2,903 1,509 57,804 48,553


10

(6) INVENTORY This item consists of the following: 2000 1999 Finished potash 6,070 5,871 Industrial salt, table salt and others 305 1,134 6,375 7,005 (7) OTHER CURRENT ASSETS This item consists of the following: 2000 1999 Prepayment 127 291 Payments on Letters of Credit 5,111 4,484 Other 480 516 5,718 5,291 (8) PROJECTS IN PROGRESS This item consists of the following: Beginning of 2000 Additions Transfers End of 2000 Magnesium oxide project 5,510 29,477 - 34,987 Salt Mushrooms Dredging* 6,852 15,856 22,708 - Construction of dikes 19 and 20 27,189 34 10,000** 17,223 Other projects 2,457 1,228 2,316 1,369 42,008 53,579 * As explained in the directors' report, the dredging of the salt mushrooms will increase the production capacity of the company's solar evaporation system. Salt dikes will be constructed using the dredged salt. In addition, the salt dikes will be constructed to such levels that will increase the useful life of the solar evaporation system. The increase in production capacity as a result of this project is estimated to be 54,000 tons of potash per annum initially, and it will rise to 125,000 tones per annum following the completion of the solar system conversion project. Based on the above, since the project will increase the production capacity and the useful life of the solar system, the company's management decided to capitalize the projects cost and depreciate it over the estimated useful life in accordance with international accounting standards. The project is expected to be completed by the end of year 2001 with an estimated cost of JD 35,000. Up to December 31, 2000 the Company paid JD 32,977 on this project which has been transferred to property, plant and equipment. ** This amount represents the provision for exceptional expected losses resulting from the collapse of dike 19 (Note 20).


11

(9) INVESTMENT IN AFFILIATES This item represents the Company's investment in the share capital of the following companies: Number of

shares Percentage

of ownership 2000 1999 Consulting Company for Construction and Maintenance * 200,000 38 - - Nippon Jordan Fertilizer Company 3,345,600 20 3,227 3,100 Jordan Investment and South Development Company ** 833,000 42 755 790 South Development Company for Industrial Equipment and Workshops 100,000 22 24 24 Kemira Arab Potash Company (paid 59.3%) 14,500,000 50 8,675 1,350 Jordan Bromine Company (paid 52.4%) 7,500,000 50 3,343 3,493 Jordan Safi Slat Company 1,452,803 24 143 - Jordan International Chartering Company 12,000 20 113 6 16,280 8,763 * The General Assembly of Consulting Company for Construction and Maintenance decided in its extraordinary meeting held on June 19, 1999 to liquidate the company. ** Jordan Investment and South Development owns 77.7% of South Development Company for Industrial Equipment and Workshops (10) PROPERTY, PLANT AND EQUIPMENT This item consists of the following: Beginning of 2000 Additions & Transfers Retirements End of 2000 Cost Land 2,931 6 - 2,937 Buildings 41,532 841 1,609 40,764 Dikes 75,369 22,792 - 98,161 Machinery and Equipment 262,762 1,397 15,262 278,897 Vehicles 22,373 514 534 22,353 Furniture and Fixtures 5,863 363 427 5,799 Hospital Equipment 441 10 - 451 Tools 1,435 90 108 1,417 412,706 26,013 17,940 420,779 Accumulated Depreciation Buildings 25,544 2,406 191 27,759 Dikes 31,141 5,534 - 36,675 Machinery and Equipment 175,432 13,910 3,937 185,405 Vehicles 18,402 1,293 280 19,415 Furniture and Fixtures 3,759 358 160 3,957 Hospital Equipment 421 4 - 425 Tools 1,072 132 62 1,142 255,771 23,637 4,630 274,778 Net Book Value 156,935 146,001


12

(11) SHORT TERM LOANS This item represents short term loans granted by the banks listed below in order to finance the Company's sales. Such sales are made through deferred letters of credit whereby the sales proceeds will be used to settle these loans. 2000 1999 Grindlays Bank - 4,970 Arab Bank - 3,550 Citibank - 4,970 - 13,490 (12) LONG TERM LOANS This item represents loans granted by the following: 2000 1999 International Bank for Reconstruction and Development 1,539 7,863 Islamic Development Bank / Jeddah 2,154 15,553 European Investment Bank - 33,667 West Merchant Bank 1,418 - 5,111 57,083 Details of the loans are as follows: • International Bank for Reconstruction & Development Loan (B) for an amount of US $ 12,000,000 to finance plant modification. The loan is repayable over 26 semi annual installments, the first of which was due on September 1, 1991 and the last installment will be due on March 1, 2004. The loan is guaranteed by the Government of Jordan. The loan agreement stipulates that " the borrower shall pay interest on the principal amount of the loan withdrawn and outstanding from time to time at a rate per annum for each interest period equal to one half per cent per annum above the cost of the bank's qualified borrowings for the last semester ending prior to the commencement of such interest period". The average interest incurred by the Company was approximately 7.2% per annum. The company pays a guarantee fee at 0.8% per annum. Loan (C) for an amount of US $ 15,000,000 to finance potash expansion project. The loan is repayable over 24 semi annual installments, the first of which was due on January 15, 1997 and the last installment will be due on July 15, 2008. The loan is guaranteed by the Government of Jordan. The loan agreement stipulates that " the borrower shall pay interest on the principal amount of the loan withdrawn and outstanding from time to time at a rate per annum for each interest period equal to one half per cent per annum above the cost of the bank's qualified borrowings for the last semester ending prior to the commencement of such interest period". The average interest incurred by the Company ranges between 7% to 7.5% per annum. The Company pays a guarantee fee at 0.8% per annum.


13

• Islamic Development Bank Jeddah Loan (B) for an amount of SDR 780,000 (JD 794) to finance the Dead Sea Complex studies. The loan is repayable over 24 semi annual installments, the first of which was due on June 30, 1993 and the last installment will be due on December 30, 2004. The loan is guaranteed by the Government of Jordan. The loan carries no interest but a service fee is charged at 1.5% per annum. Loan (C) for an amount of SDR 14,152,292 (JD 14,412) to finance the construction of the cold crystallization plant. The loan is repayable over 14 semi annual installments, the first of which was due on July 17, 1996 and the last installment will be due on January 17, 2003. The loan is guaranteed by the Government of Jordan. The cost of borrowing is approximately 9% per annum less 15% discount subject to repayments being made on the due dates. Jordan Dead Sea Industries Company signed an agreement with Islamic Bank for Development / Jeddah, in which the bank assigned the Company to buy machinery and equipment on behalf of Jordan Magnesia Company for an amount not exceeding $ 28,035,000 and to lease it to the company for 9 years after a preparation period of 3 years for an annual fee of 7.5%. The ownership of the machinery will be transferred to the company as a donation at the end of the agreement period. This agreement is guaranteed by Arab Potash Company. • United States Agency for International Development "US AID" The Company was granted a loan amounting to US $ 38,000,000 to finance the construction of dikes and purchase of machinery for the potash plant. The loan is repayable over 31 semi annual installments, the first of which was due on May 16, 1985 and the last installment was due on May 16, 2000. The loan is guaranteed by the Government of Jordan and bears interest at 8% per annum. • Government of Jordan The Company was also granted a loan for JD 2,314 representing the deferred interest on the US AID loan. The loan is repayable over 31 semi annual installments, the first of which was due on May 16, 1985 and the last installment was due on May 16, 2000. The loan bears interest at 8% per annum. • West Merchant Bank The Company was granted a loan amounting to US $ 10,000,000 to finance the construction of the industrial salt plant. The loan is repayable in ten semi annual installments, the first installment will be due on April 21, 1997 and the last installment will be due on October 21, 2001. The loan is guaranteed by the Arab Bank London and bears interest at 7.48% per annum. • European Investment Bank The Company was granted a loan amounting to US $ 47,485,760 to finance operations. The loan is repayable over 22 semi annual installments, the first of which will be due on October 10, 2002 and the last installment on April 10, 2013. The loan is guaranteed by the Government of Jordan and bears interest at 6.18% per annum.


14

The aggregate amounts of annual principal maturities of long term obligations are as follows: December 31

2002 4,972 2003 5,103 2004 3,728 2005 3,466 2006 3,629 Thereafter 36,185

(13) OTHER CURRENT LIABILITIES This item represents the following: 2000 1999 Royalty to the Government of Jordan 7,122 8,000 Provision for income tax 6,442 5,069 Contractors retentions 1,340 2,647 Accrued interest and expenses 2,804 3,217

374 369 Scientific research and vocational training 420 378 Payments on account from customers - 610 Other 1,059 685 19,561 20,975 (14) SHAREHOLDERS' EQUITY Statutory Reserve The Company is required by the Companies Law to appropriate 10 % of its net income before income tax and certain other provisions, to a statutory reserve. The Company has the option to cease such appropriations when the balance of this reserve reaches 25 % of the Company's authorized capital. The statutory reserve is not available for distribution to shareholders. Voluntary Reserve The accumulated amounts in this account represent cumulative appropriations not exceeding 20% of net income before income tax and certain other provisions. This reserve is available for distribution to shareholders. Dividends The Company's general assembly approved during April 2000, the proposal made by the Board of Directors to distribute JD 18,330 as dividends, representing 22 % of the Company's paid in capital. The Board of Directors will recommend to the Company's general assembly to distribute JD 14,997 as dividends, representing 18% of the Company's paid in capital. In accordance with the Income Tax Law No. 57 and its subsequent amendments, dividends are subject to a distribution tax.


15

(15) GROSS PROFIT Following is a breakdown of gross profit (loss) by company: Potash Co. Safi Salt Co. Numeira Co. Total 2000 1999 2000 1999 2000 1999 2000 1999 Sales 142,142 130,760 1,412 5,061 763 640 144,317 136,461 Cost of Sales 75,169 72,091 1,491 5,304 534 449 77,194 77,844 66,973 58,669 (79) (243) 229 191 67,123 58,617 * Up to June 30, 2000 (16) SALES ANALYSIS The Company operates predominantly in a single industry as a producer of potash through exploitation of the Dead Sea brine. The Company is currently investing in related industries through its subsidiaries. Following is a summary of its sales by product and customers' geographical location: Potash Co. Safi Salt Co. Numeira Co. Total 2000 1999 2000 1999 2000 1999 2000 1999 Far East 44,416 40,807 280 974 - - 44,696 41,781 India & China 74,766 52,384 - - - - 74,766 62,384 Europe 13,545 18,039 65 544 339 - 13,949 18,583 South America 2,393 - - - - - 2,393 - Middle East 4,322 6,016 939 2,956 424 640 5,685 9,612 Africa 2,700 3,514 128 587 - - 2,828 4,101 142,142 130,760 1,412 5,061 763 640 144,317 136,461 * Up to June 30, 2000 (17) INCOME TAX The provision for income tax was calculated in accordance with the Jordanian Income Tax Law No. 57 of 1985 and its subsequent amendments, the latest of which being Law No. 14 of 1995, which came into effect on January 1, 1996. The Company's effective tax rate was 21% and 16% for 2000 and 1999 respectively. The principal differences between these effective rates and the statutory tax rates of 15% are as follows: 2000 1999 Computed tax at statutory tax rates 5,394 5,423 Tax effect of expenses that are not allowable for tax purposes 1,483 82 Subsidiaries and affiliates losses not available for tax relief 63 249

143 105 7,083 5,859


16

(18) GENERAL AND ADMINISTRATIVE EXPENSES

This item consists of the following:

2000 1999 Salaries, wages and other benefits 1,537 1,910 Travel expenses 269 280 Depreciation 342 351

75 75 Maintenance and repairs 123 174 Electricity expenses 50 33 Fuel 36 32 Post, telephone and telex 66 88 Stationary and printing 55 103 Professional and consulting fees 252 251 Hospitality 71 71 Advertizing 116 204 Expansion expenses 618 - Letter of credit expenses 163 - License and other fees 9 16 Doubtful debts 1,506 1,509 Deterred expenses and projects written off 1,695 816 Other 565 798 7,548 6,711

(19) SELLING AND DISTRIBUTION EXPENSES

This item consists of the following:

2000 1999 Marketing Salaries, wages and other benefits 242 240 Sales commission 2,138 2,117 Travel expenses 255 270 Advertizing expenses 50 59 Sample testing 144 285 Periodicals 124 41 Post, telephone and telex 19 33 Others 58 69 3,030 3,114 Shipping Terminal (Aqaba) Handling expenses 3,405 2,979 Salaries, wages and other benefits 755 847 Depreciation 1,596 1,764 Electricity 247 206 Repair and maintenance 106 82 Fuel 35 20 Insurance 8 27 Rent 39 104 Others 91 164 6,282 6,193 9,312 9,307


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(20) PROVISION FOR EXCEPTIONAL LOSSES During March 2000, Dike (19) classified under projects in progress suffered from partial failure. A definitive quantification of the damages sustained has not been completed as of the date of these financial statements. The Company's management is currently involved in the preparation for the initiation of legal proceeding the subject matter of which is to claim for proper compensation. Management is also involved in taking the steps necessary to have Dike (19) re-designed and re-built in order to put it into operation and have it utilized for the purpose it was originally built. Management believes that the Company's financial position and its results of operations will not be materially affected as a result of the said failure of the Dike and the related litigation. Since the procedures needed for the re-design and the reconstruction of the dike will take a considerable period of time, the Company has provided the amount of JD 10,000. (21) OTHER EXPENSES This item consists of the following: 2000 1999 Donations and educational grants 1,310 1,163 Jordanian Universities fees 374 369 Scientific research and vocational training 374 369 2,058 1,901 (22) RELATED PARTY TRANSACTIONS The Company is involved in a number of transactions with the Government of Jordan, a majority shareholder. The principal transactions are as follows: • The concession to exploit the Dead Sea brine was granted by the Government of Jordan. In

return, the Company pays to the Government an annual royalty, which is computed as explained in Note 1.

• As outlined in Note 4, the Company has granted the Government a loan for JD 4,342. • As outlined in Note 12, the Government has guaranteed certain loans granted to the

Company, and has also granted the Company a loan for JD 2,314. The Company has obtained a number of loans from the Islamic Development Bank Jeddah, which owns 5.2 % of the Company's share capital and is represented on its board of directors. On July 7, 1992, the Company and Jordan Phosphate Mines Company signed a supply agreement with Nippon Jordan Fertilizer Company ("NJFC"). Under this agreement the Company undertook to supply NJFC with all of its Potash requirements, and NJFC, undertook to purchase all of its Potash requirements from the Company. The price of Potash will be based on pricing formulas contained in the agreement, whereby the resulting price will be substantially similar to the international market price of Potash. The Company owns 20% of NJFC which commenced production during 1997.


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On October 10, 1996, the Company signed a cooperation and supply agreement with Jordan Safi Salt Company ("JOSSC"). Under this agreement, the Company agreed to grant JOSSC exclusive rights to produce industrial and table salt from within the Company's concession area. The Company also undertook to provide JOSSC with raw salt at cost plus 5% of JOSSC's net income during its first three years of production, after which, the percentage increases to 10% of JOSSC's net income. The agreement runs for a period of 20 years. On June 2, 1997, the Company signed a cooperation and supply agreement with Numeira Mixed Salts and Mud Company (Numeira). Under this agreement, the Company agreed to grant Numeira exclusive rights to produce, dry and sell Carnalite salts and Dead Sea mud within the Company's concession area. In addition, The Company undertook to provide Numeira with salts and mud at JD 0.07 and JD 0.035 per ton respectively. The agreement runs for a period of 15 years. During 1998, the Company signed an agreement with Albermale Holding Company (AH) and Jordan Dead Sea Industries Company (Jodico) to establish a company, Jordan Bromine Company (JBC). Under this agreement, the Company granted JBC the right to construct and operate an integrated manufacturing facility to produce, sell and market bromine and bromine derivatives within the Company concession area for at least 7 years, after which JBC has the right of first refusal on any new projects for production of bromine in Jordan. The Company undertook to provide JBC with potassium chloride. During the year, the Company acquired Jodico's share in JBC. On June 22,1999, the Company signed an agreement with Kemira Agro to establish a company, Kemira Arab Potash Company (KEMAPCO), to design, construct and operate a Potassium Nitrate, Decalcium Phosphate and Nitric Acid plant using the technology provided by Kemira Agro and potash provided by the Company. The Company agreed to sublease KEMAPCO two plots of land in Aqaba and to supply the new project with muriate of potash. The Company guaranteed Jordan Dead Sea Industries Company obligations to Islamic Development Bank - Jeddah which resulted from the agreement to purchase and lease Jordan Magnesia Company machinery and equipment for an amount of US $ 28,035,000. The Company guaranteed 50% of the loans obtained by Jordan Bromine Company from the European Investment Bank and the Islamic Development Bank Jeddah for Euro 50,000,000 and US $ 29,000,000 respectively. The Company guaranteed 50% of the loan obtained by Kemira Arab Potash Company from the European Investment Bank for Euro 30,000,000. The Company guaranteed Kemira Arab Potash Company's obligation to the Islamic Development Bank Jeddah which resulted from the agreement to purchase and Lease the equipment of the project for an amount of US $ 27,000,000. (23) CONTINGENT LIABILITIES AND COMMITMENTS As of December 31, 2000, the Company had the following contingent liabilities and commitments: § Letters of credit amounting to JD 3,287.


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§ Guarantees for an amount of JD 2,118. § The Company's committed and contracted for capital expenditure amounted to JD 59,647. § The Company's committed but not contracted for capital expenditure amounted to JD

17,518. (24) FINANCIAL INSTRUMENTS A) Fair Value The following table presents the fair values of balance sheet financial instruments as required by IAS 32 for 1999: Value Book Fair Assets Cash on hand and at banks 57,795 57,795 Accounts receivable Net 57,804 57,804 Other current assets 5,718 5,718 Investment s 2,040 2,040 Liabilities Due to banks 39 39 Bank Loans 62,194 57,716 Accounts payable 7,959 7,959 Other current liabilities 19,561 19,561 The following methods and assumptions were used to estimate the fair value of the financial instruments: General The book values of the Company's financial instruments except for loans, notes payable and investments were deemed to approximate fair value due to the immediate or short-term maturity of these financial instruments. Investments The fair value of common stock of listed companies and other investments, where applicable is based on quoted market prices. For certain other investments which are not listed, a reasonable estimate of fair value has been made. Loans The fair value of loans is based on the discounted future cash flows of repayment schedules using thecurrent market interest rates. Interest Rate Risk This standard requires the disclosure of interest rate risks. Most of the financial instruments on the balance sheet are not subject to interest rate risk except for loans and notes payable which are taken at rates ranging between 7.75% - 8.25% for the Jordanian Dinars and 4.25%-6.13% for the loans in US Dollars.


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Credit Risk The Company maintains its bank accounts and deposits in leading financial institutions, and the majority of its sales are executed through bank L/Cs. Currency Risk Most of the Company's revenues are in US Dollars and most of its operating expenses are in Jordanian Dinars. Deposits at banks and loans according to currency are as follows: Deposits Loans Jordanian Dinars 37,069 - US Dollars 19,516 56,360 Special Drawing Right (SDR) - 5,834 Deutsche Marks 1,210 - The Jordanian Dinar exchange rate of the Jordanian Dinars is fixed against the US Dollar (US$ 1.41 for 1 JD).

the arab potash company · the arab potash company a public shareholding company forty-fourth...

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