the arab potash company · the arab potash company a public shareholding company forty-third annual...

THE ARAB POTASH COMPANYA Public Shareholding Company

Forty-Third Annual Report

This report is for the year ended December 31, 1999 and is Presented to the General Assembly in its annual

meeting held in Amman on Wednesday April 26, 2000

Jordan Investment Corporation Dr. S. Rusheidat Mr. A. AI-Ajlouni Dr. D. Mahasneh Dr. S. Aloush Dr. A. Hunaity Dr. B. Awadallah Dr. Y Mansour Dr. A. Mustafa Dr. O. Serbekian Dr. K. Qaisi

Arab Mining Company Eng. T. AI-Saadi Mr. S. AI Mahmoudi Eng. F. AI-Bandar

Islamic Development Bank/Jeddah Mr. H. AI-Cha'ar

Chairman Member Member until 30/6/1999 Member until 30/6/1999 Member Member Member Member Member from 1/7/1999 Member from 1/7/1999

Deputy Chairman Member Member

Member

Iraqi Govenment Eng. M. AI-Nakshabandi Member

Libyan Arab Company for Foregin Investments Eng. A. AI-Shaeri Member

Kuwaiti Investment Authority Mr. A. AI-Bader Member

General Manager Eng. Nasser AI-Sadoun Eng. Abdel Wahhab El Kharabsheh

Until 31/7/1999 from 1/8/1999

Deputies of the General Manager Dr. Wanas Hindawi Mr. Anwar AI Masri Eng. Yunes Madadda

Senior Deputy General Manger/ Marketing Manager Deputy General Manager/Finance Manager Deputy General Manager for Technical Affair

Auditors Allied Accountants Members of Andersen Worldwide

Letter from the Chairman Dear Shareholders, It gives me pride and pleasure to present to you a summary of the activities of your Company during the year 1999. Potash Production in 1999 reached a record level and achieved the nameplate capacity of the refineries at (1,800,190) metric tons registering an increase of (17%) over 1998. This increase was achieved after the successful dredging of the Salt Pond and the introduction of new evaporation capacity. I can also report that despite heavy turbulence and competition on International markets, Arab Potash Co., was able to increase sales by (12.5%) and register a total sales of (1,706,271) metric tones of potassium chloride. Consolidated sales revenue was JD (136.5) million. This is an increase of (14.2%) over 1998 consolidated sales revenue of JD (119.5) million. The net consolidated income reached JD (31.4) million, which is an increase of (29.4%), over 1998 net consolidated income. The return on shareholders equity increased to (13%) from (10%) for 1998, and earnings per share for 1999 was JD (0.377) versus JD (0.289) for 1998 thus increasing by (30.45%). Its is our intention to recommend the distribution of (22%) of share capital as dividend for 1999.

contracts for the construction of all its plants and utilities during the year 2000 aiming to begin production of Potassium Nitrate and Dicalcium Phosphate by 2002. The Jordan Bromine Company also began its activities and was well on its way towards the completion of the engineering stage to produce Bromine, Chlorine, Potassium Hydroxide, and other Bromine Derivatives by the year 2003. The Arab Potash Company also decided to acquire the remaining shares of the Jordan Industries Company (JODICO) aiming to merge operations by the first half of the year 2000. As for the Safi Salt Company, which continued to face difficulties, there was a decision to restructure the company during the year 2000. The Contractors for Jordan Magnesia began construction activities and these are proceeding as planned where production is expected to start by the year 2002. The Industrial Potash Plant will be operated on a commercial basis during the year 2000, and it is expected to have new markets for this product.

The "Kemira Arab Potash" Company began activities and is expected to finalise

The dredging operations in the Salt Ponds proceeded very well and are expected to be completed by the end of the year 2001. The preliminarily result was the increase in 1999 production. The Arab Potash Company has also embarked on a plan to increase production capacity to (2.4) million metric tons, and to this end an additional salt evaporation pond is being filled bringing total salt production area to around (99.6) km2. I would like to extend on behalf of the entire Board of Directors our sincere thanks to the Government of the Hashemite Kingdom of Jordan, The International and Local Finance Agencies, to all the Company Employees and especially to Our Customers, Agents, Shippers and Partners.

The Report of the Board of Directors Dear Shareholders, The Board of Directors is pleased to welcome you to this Annual Meeting of the General Assembly and to present to you the forty-third Annual Report and Consolidated Financial Statements for the year ended December 31, 1999 in accordance with article (169) of the Companies Law and articles (11 and 12) of the Company Bylaws. Production Production totaled (1,800,190) metric tons during 1999. This was a (17%) increase over 1998.

Grade Tonnage Percent Standard 1,128,329

Fine 614,342Granular 53,245

Industrial 4,274 0.23

Total 1,800,190 100.00

Carnallite production for the year was (10.41) million metric tons, which is equivalent to (115.4%) of the annual plan and is a (17%) increase over 1998 production of (8.9) million metric tons.

Pumping Dead Sea Brine into the Salt Pond (SP-0B) began at the end of 1999 and is expected to be completed during the first quarter of 2000. This (11) km2 pond brings the total salt precipitation area to (99.6) km 2.

The production increase in 1999 resulted from these major factors: -

KCL Production in 1999 by Grade Total FineGranularStandard

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

180160140120100

806040200

(Thousand Metric Tons KCL)

2.9634.13

62.68

1

· The increase in evaporation rates due to lack of rain and a high temperature.

· The improvement of the brine flow in all ponds after dredging. · The increase in the salt ponds area after the introduction of (SP-0A)

into service.

During 1999, (1,718,234) metric tons of potash, including (36,430) metric tons to the Nippon Jordan Fertilizer Company plant in Aqaba, were transported from the company's warehouse in Safi to Aqaba, at a rate of (92.8) trips per day. The company owns and operates a fleet of (85) trucks. Jordan Safi Salt Company produced (266,461) metric tons of Industrial Salt in 1999, which is a (9.5%) increase over 1998 production of (243,365) metric tons. Table Salt production was (24,869) metric tons, an increase of (24.7%) over 1998 production of (19,949) metric tons.

Future Projects

Production Expansion Project Phase III

Construction of the additional salt pond (SP-0B) with an area of (11) km 2 was completed and expected to be integrated into the solar evaporation system early in the year 2000 season.

Apr May Jun Jul Aug Sep Oct Nov Dec

18001600140012001000800600400200

0

Monthly Carnallite Production in 1998 PlannedActual

(Thousand Metric Tons)

Monthly Production, Transportand Sales in 1999 Production Transport Sales

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

(Thousand Metric Tons KCL)250225200175150125100

75�50250

2

Production Expansion Project - Phase IV Studies for this project started in 1999. This project will result in increasing potash production capacity to (2.4) million metric tons per year, after the year 2004, by converting part of the Salt Pond into two carnallite ponds. This study is expected to be completed during the year 2000. Salt Mushroom Dredging Project This problem surfaced in the early nineties. The company embarked on a number of measures to eliminate these salt accumulations which may be caused by the flow of saturated brine on the salt pond beds, when these brines mix with the original solution of the pond, the salt precipitates in the form of solid salt accumulations and mushrooms and hinders the flow of the brine solution. This resulted in reducing the surface area exposed to evaporation. Elimination of these mushrooms began in early 1997 when a tender was awarded for cleaning an area of (10) km2 out of the original area of (40) km2 effected by these build ups. The Contractor for the first stage of the dredging operations for the elimination of the salt mushrooms in the main Salt Pond completed this part by the second half of the year 1999. This elimination improved the production capacity by (13) thousand metric tons for the year 1999. To expedite the salt mushroom removal from the remaining area of (30) km2, contracts for phase II were awarded during the first half of 1999. This phase is expected to be completed towards the end of 2001. The removal of the salt mushrooms will increase the production capacity and the useful life of the solar ponds. Using the dredged salt in building salt dikes in the main salt pond will increase the production capacity by about (54) thousand metric tons of Potash. This will be further increased to (125) thousand metric tons when completing stage four of production expansion. Based on the facts of the increase in production capacity and the extension of the useful life of the salt pond, it was decided to capitalize the cost of this project and depreciate it over the estimated useful life in accordance with the international accounting standards. Industrial Potash Project The Industrial Potash plant produced (4,274) metric tons during the year 1999, and commercial production is expected to commence during 2000. Magnesium Metal

3

A feasibility study was conducted jointly by The Arab Potash Company and a Qatari Company to study the feasibility of producing Magnesium Metal. This study is under final evaluation now. Subsidiaries and Affiliate Companies Kemira Arab Potash Company The joint venture agreements were signed on June 22nd, 1999 with Kemira Agro Company of Finland and a company named "Kemira Arab Potash Company" was registered. The joint venture company intends to build a plant in Aqaba to produce of (150) thousand metric tons of Potassium Nitrate (fertilizer) and (75) thousand metric tons of Dicalcium Phosphate (animal feed) annually. The project cost is estimated at U.S. Dollars (100) Million. The production is expected to commence during the year 2002. Arab Potash Company owns (50%) and Kemira Agro owns the other (50%) of this venture. Project financing was secured through long term loans. Numeira Company for Mixed Salts and Mud This Company was established in 1997 for the processing of raw material mixed salts and mud from the Dead Sea for the cosmetics industry. Arab Potash Company owns (52.7%) of the share capital of JD (1.5) million and the Arab Potash Company's Employees Saving Fund owns (32.7%) of the shares. Jordan Dead Sea Industries Company In 1999 Arab Potash Company decided to buy the minority shares in this Company as a first step of acquisition which is estimated to be completed by the first half of 2000. The Arab Potash Company owns (51.1%) of the capital of the Jordan Dead Sea Industries Company, which is JD (60) million. This company, in its turn, has established other companies for the exploitation of Dead Sea resources and is currently managing the following affiliates: Jordan Safi Salt Company This Company was established in 1996 to produce of (1.2) million metric tons of Industrial Salt, and (32) thousand metric tons of table salt per year. The commercial production of both products commenced during 1997. Marketing and distribution activities began in the same year. Jordan Dead Sea Industries holds (52.7%) of the share capital, which is JD (12) million, and the Arab Potash Company has a direct interest of (10%) of the shares.

4

Jordan Magnesia Company This company was established in 1997 to produce of (60) thousand metric tons of Magnesium Oxide and Hydroxide, which is used in refractory bricks and other chemical industries. The cost of the project is estimated to be U.S. Dollars (103) million. Jordan Dead Sea Industries Company owns (51%) of the share capital, which is JD (30) million, and Arab Potash Company directly owns (20%) of the shares. This project financing was secured by long term loans. Jordan Bromine Company Agreements have been signed with Albemarle Holdings of the United States of America on May 2nd, 1999 and a joint company named "Jordan Bromine" was registered. This company will build a plant in the Safi Area to produce Bromine, Tetra Bromo Bisphenol, Potassium Hydroxide and Chlorine the coast of this project is estimated to be U.S. Dollars (150) million. Jordan Dead Sea Industries owns (40%) of the equity of this company, where as Arab Potash Company owns (10%) directly, and Albemarle Corporation (50%). The required financing of this project was secured through long term loans. Marketing Supply The tight supply situation, which existed for potash at the beginning of 1999, was reversed by the middle of the year, as increased availability became evident. The Cleveland Mine that was facing water inflow problems was operational by the end of summer of the year 1999. Producers in the (CIS) increased their production significantly and ended the year with a million metric ton increase in production. They faced a difficult challenge when UralKali decided for a while to go alone and began selling through a trading company. This situation was controlled at the end of the year and all (CIS) exports will continue to be channeled via the official channel of (IPC). In Germany, (K&S) production was steady and most of its activities were hinged on streamlining marketing operations. The Producers in Canada, and particularly (PCS) began to cut production by the Autumn and according to estimates have ended the year 1999 with (13%) fall over the year 1998.

9 5 9 6 9 7 9 8 9 9World Production KCL

(Million Metric Tons KCL)50

40

30

20

10

0

5

It is evident from the figures that Canada and particularly (PCS) have held back production to balance the lull in US off take.

World Production Millions of Metric Tons (KCI)

Country 1998 1997 1996 1995 CIS 12.5 11.0 9.0 9.3 Canada 14.7 13.5 15.0 Europe 7.5 8.1 8.1 U.S.A. 1.9 1.8 2.0 DSW 2.5 2.5 2.1 Jordan 1.4 1.8 1.8 Others 1.1 0.9 0.7 Total 40.1 37.6 39.0

Demand

At the end of 1999, and after a review of 1998 consumption, it becomes clear that North American weakness in 1998 was the primary reason for the demand reduction that year.

This effect is thought to have stabilized and despite small changes in 1999, most regions showed stability

Europe continued to suffer from uncompetitive fertilizer units and companies searched for ways to cut costs. The agriculture sector was also under pressure to reform and to cut back in acreage, very poor demand and little prospects for improvement reflected this. Even giant (NPK) producers reverted to downsizing and tried to focus on narrow segments.

The success story during the year was the intake of China (including re-exports), that soared.

World Consumption of Potash in Millions of metric Tons (KCI)

Country 1997 1996 1995 Asia 11.2 8.4 11.3 North America 11.5 10.0 10.0 Europe 9.2 9.4 9.3 CIS 2.6 2.4 1.7 Latin America 5.5 4.2 4.0 Africa & The Middle East 1.0 0.9 0.9 Total 39.1 41.0 35.3 37.2

Price Developments The prices during 1999 were very stable despite pressures from disorganized Russian sales towards the end of the period.

9 5 9 6 9 7 9 8 9 9World Consumption of KCL


40

30

20

10

0

6

13.77.41.42.81.81.3

40.9

11.615.3

7.61.52.71.51.1

41.3

199913.09.79.02.64.91.2

40.4

199811.3

9.79.12.75.21.1

Most markets witnessed small price increases and the U.S. Dollars (125-135) CFR levels were uniform across the globe with the usual exceptions. This stability and opportunity for small incremental price increases will probably extend into the year 2000. Sales The marketing plan for 1999 had to be changed by midyear of 1999 due to the unexpected increase in production. Measures were taken to diversify and maximize quantities in areas, which were witnessing high growth. This proved to be successful. APC sales totaled (1,706,271) metric tons in 1999. This is an increase of (12.5%) over 1998, which was (1,516,571) metric tons. Sales to India, Taiwan, Japan, Philippines, and Europe did not witness major changes. Sales to China increased at the end of the year in tender with the growth in that market and in line with Arab Potash Company's productions increase. The situation in Indonesia was addressed by a new understanding with Mitsubishi Corporation and a fresh approach in 2000, which also comes at a good time for the market as it recovers and continues its growth. Material was shipped to Vietnam as that market showed increased growth.Sales to Iran increased at the beginning year but came to a halt towards theend of the year due to lower offtake.

A shipment to Kemira, Finland was made in the first half but the European prospects are not encouraging as most producers face restraints.

The Nippon Jordan Fertilizer Company plants in Aqaba increased its intake by (10.000) metric tons during the year 1999 to reach (36,430) metric tons.

Arab Potash Company's sales of Potash for oil drilling also grew slightly and are set to improve in the year 2000, with the increase in the price of crude oil.

Industrial potash was shipped to destinations in Asia and was very well received. Total sales amounted to (1,732) metric tons in 1999.

APC Potash Sales byGrade in 1999

FineGranular

60%37%3%

Standard

1 9 9 7 1 9 9 8 1 9 9 9World Potash Consumption


12

10

8

6

4

2

0

CISL. AmericaAfrica & ME

AsiaN. AmericaEurope

7

In 1999, Arab Potash Company sales achieved (3%) increase in the FOB average price. APC sales of raw salt in the local market were (5,795) metric tons, whereas total sales of carnallite amounted to (3,068) metric tons in 1999. During 1999 (1,665,234) metric tons of potash were transported from the company's warehouse in Safi to Aqaba, by (33.136) trips, an increase of (13.3%) over 1998. (1,635,375) Metric tons have been loaded on board (113) vessel to (29) countries around the world.

APC Sales by grade during the year 1999

Grade Quantity Percentage Standard 1,015,933 59.54Fine 637,157Granular 51,449Industrial Potash 1,732Total 1,706,271 100.00

The distributions of Arab Potash Company sales in the year 1999 were as follows:

1- Asia representing (78.1%) of total sales.

Country 1999 1998 1997 1996 1995 India 469,823 490,755 398,570 482,720 430,550 China 350,831 165,000 203,650 136,400 210,263 Malaysia & Singapore 204,230 168,900 99,075 158,300 176,700 Indonesia 14,400 13,200 35,400 132,450 169,700 Korea 79,700 56,250 125,800 163,145 112,400 Philippines 73,650 64,500 67,100 80,150 102,750 Taiwan 60,500 65,050 52,300 58,500 68,000 Japan 40,000 40,000 44,000 44,000 50,000 New Zealand 5,775 48,000 20,200 5,500 9,080 Thailand 11,000 15,700 11,000 5,000 Nepal 5,025 0 0 Australia 9,425 12,918 15,800 5,500 0 Vietnam 14,600 Sub Total 1,333,934 1,124,573 1,082,620 1,277,665 1,334,443

9 5 9 6 9 7 9 8 9 9APC Potash Production

from 1995 up to date

(Million Metric Tons KCL)

0.0

2.01.8

1.6

1.4

1.2

1.00.8

0.6

0.4

0.2

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

2.0

1.8

1.6

1.4

1.2

1.0

0.8

0.6

0.4

0.2

0.0

APC Sales in Tons (KCL) from 1983-1999

(Million Metric Tons)

World Potash Production 1999

34%31%3%4%7%3%18%

CanadaCISOthersJordanDSWUSAEurope

8

37.343.020.10

0 00 0

0 00

2- Western and Arab Markets representing (21.9%) of total sales.

Country 1999 1998 1997 1996 1995 Brazil 0 14,500 60,080 95,200 61,350 Italy 61,920 73,363 71,680 109,815 131,400 Spain 63,015 75,845 65,260 99,044 70,345 Benelux 29,540 37,150 45,000 49,000 53,050 Greece 17,855 17,000 0 15,260 26,550 Turkey 11,123 0 0 5,500 26,000 France 8,000 28,400 50,300 13,700 Portugal 36,300 14,350 15,400 18,050 13,500 Finland 23,000 0 0 0 Austria 0 4,900 1,000 Tanzania 0 0 1,000 S. Africa 11,000 10,000 15,750 2,100 0 U.S.A. 0 0 0 20,000 Indian Ocean 4,250 7,060 7,575 5,500 5,500 Mozambique 2,250 3, 740 0 0 Tajikistan 0 2,981 0 Morocco 18,800 26,500 11,350 0 0 Tunisia 0 5,250 2,480 Egypt 5,980 10,393 6,112 4,298 1,380 W. Africa 9,000 0 0 0 GCC 4,077 3,296 4,402 4,208 898 Angola 0 3,719 0 0 0Pakistan 539 508 Lebanon 550 592 799 684 Syria 400 100 200 Sudan 1,932 646 1,000 1,661 104 Saudi Arabia 0 3,000 0 0 0 Iran 31,500 52,250 0 0 0 Bahrain 0 22 0 0 0 Kuwait 0 Jordan 41,271 30,667 28,005 2,071 787 Yemen 160 0 0 0 0 Algeria 0 200 0 0 0 Other 255 0 0 0 0 Sub Total 372,337 391,998 364,746 476,037 429,928 Grand Total 1,706,271 1,516,571 1,447,366 1,753,702 1,764,371

In 1999 the Jordan Safi Salt Company sales of industrial salt totaled (334.750) metric tons with an increase of (105.2%) compared to 1998 sales of (163.094) metric tons. Table salt sales were (26.855) metric tons in 1999 compared to (16.902) metric tons sales in 1998, an increase of (58.9%). Sales revenue reached JD (5.1) million an increase of (80%) over 1998 sales revenue of JD (2.8) million. Carnallite sales of Numeira Company for Mixed Salts and Mud totaled (2.965) metric tons, a decrease of (36.9%) over 1998 sales of (4.700) metric tons. Sales revenue reached JD (0.640) million a decrease of (21.6%) over 1998 sales of JD (0.816) million.

0

00

0

00

525100295

00 0

00

427

0

0 0 0202

9

Administration Board of Directors Jordan Investment Corporation Representatives Dr. Saleh Rusheidat Chairman of the company since October 1997. He has Ph.D. in Civil Engineering from Leipzig University Germany 1975. Before 1990, he worked with different consulting and engineering companies. He was appointed as a minister in several Jordanian Governments. Mr. A. AI Ajlouni Has been a Board member since November 1996. He has M.Sc. in Public Administration from Missouri University USA 1978. He is currently the Director General of the Budget Department at the Ministry of Finance. Dr. D. Mahasneh Has been a board member from August 1996 until July 1999. He has a Ph.D. in Marine Biology from Nice University France 1977. He was the Secretary General of the Jordan Valley Authority. Eng. O. Serbekian Has been a board member from July 1999. He has a B.Sc. in Civil Engineering from Yerevan University/Polytechnic Armenia 1977 and a M.Sc. in Water and hydroelectric Generation. He is currently Secretary General of the Jordan Valley Authority. Dr. S. Aloush Has been a Board member from October 1997 until July 1999. He has Ph.D. in Chemistry from Darmashtadt Technical University Germany 1977. He is currently the Royal Scientific Society President. Dr. K. Qaisi Has been a Board member since July 1999. He has Ph.D. in Environmental Engineering from Michigan University USA. He is currently the President of the Environmental Engineering Program in University of Jordan. Dr. A. AI Hunaity Has been a board member since October 1997. He has a Ph.D. in Organic Chemistry from Washington State University USA 1983. He is currently the Vice President at Mu'tah University.

10

Dr. A. Mustafa Has been board member since October 1997. He has Ph.D. in Economics from Texas University USA 1983. He is currently the Deputy Governor of the Central Bank of Jordan. Dr. Y. Mansour Has been board member since October 1997. He has Ph.D. in Economics from Oklahoma University USA 1991. He is currently the Director of Telecommunications Regulatory Body. Dr. B. Awadallah Has been Board member since October 1997. He has a Ph.D. in Economics from the London School and Economics England 1988. He is currently the Chief of the Economic Department at the Royal Hashemite Court. Arab Mining Company Representatives Eng. Talal AI Sadi Vice Chairman of the Company since December 1993. He has a M.Sc. in Industrial Metals from Daram University England 1969, and M.Sc. in Mineral Process Design Engineering from London University England 1970. He is currently the General Manager of the Arab Mining Company. Mr. S. Mahmoudi Has been Board member since December 1982. He has B.Sc. in Geology. He is currently the Metal Department Manager at the Ministry of Petroleum and Mineral Resources in the United Arab Emirates. Eng. E Albandar Has been a Board Member since March 1997. He has a B.Sc. in Engineering. He is currently General Secretary at the Ministry of Trade and Minerals in Iraq. Islamic Development Bank/Jeddah Representative Mr. H. AI Cha'ar Has been a Board member since November 1997. He has a B.Sc. in Law and Economics from St. Joseph University Lebanon 1958. He is currently The General Secretary of the Council of Ministers in Lebanon, and the Lebanese Representative to the Scientific National Research Council and Alternate Governor of Lebanese Central Bank Governor to the Islamic Development Bank/Jeddah. Iraqi Government Representative Eng. M. Nakshabandi Has been a member since March 1997. He has B.Sc. in Mechanical Engineering. He is currently a General Manager at the Ministry of Trade and Minerals in Iraq.

11

Libyan Arab Company for Foreign Investment Representative Eng. A. AI Shaeri Has been a Board member since 1993. He has a M.Sc. in food engineering from Reading University England 1968. He is currently an Industrial consultant of the Industrial Executive Projects Council at the Ministry of Industries in Libya. Kuwaiti Investment Authority Representative

Mr. A. AI Bader Has been a board member since May 1998. He has a B.Sc. in Trade and a member in several professional societies. He is currently the Chief Internal Auditor for the Kuwaiti Investment Authority. Executive Officers Eng. Naser AI Sadoun General Manager of the Company from June 1997 until July 1999. He has B.Sc. in Mechanical Engineering. He was the Company's Deputy General Manager and Plants Manager since 1984. Eng. A. AI Kharabsheh General Manager since August 1999. He has a B.Sc. in Production Engineering from Alexandria University Egypt 1968, and M.Sc. in Contracts from Florida Institute USA 1988. He worked as Maintenance, Purchasing and Research and Development Manager at the Jordanian Arm Forces.

Dr. Wanas Hindawi Deputy General Manager and Marketing Manager. He has Ph.D. in Economcics. He has been appointed as Deputy General Manager since June 1997 and Marketing Manager since 1985. Eng. Y. Madadha Deputy Manager for Technical Affairs. He has B.Sc. in Civil Engineering. He has been in the position since June 1997. He was Civil Works Department Manager at the Company for 20 years.

Mr. A. AI Masri Deputy General Manager for Financial Affairs and Financial Manager. He has a M.Sc. in Business Administration and Accounting. He has worked for the Company since 1981.

12

The Board of Directors Remuneration for 1999

Details Remuneration IN JD

Transportation Allowance in JD

Jordan Investment Corporation 40,000 Dr. S. Rusheidat 3,600 Dr. A. Al-Ajlouni 5,400 Dr. D. Mahasneh 1,800 Dr. S. Aloush 1,800 Dr. a. Hunaity 5,400 Dr. B. Awadallah 5,400 Dr. Y. Mansour 5,400 Dr. A. Mustafa 5,400 Eng. O. Serbekian 2,700 Dr. K. Qaisi 2,700 Arab Mining Company 15,000 Eng. T. Al-Saadi 5,400 Mr. S. Al Mahmoudi 5,400 Eng. F. Al Bandar 5,400 Islamic Development Bank /Jeddah 5,000 Mr. H. Al-Cha'ar 5,400 Iraqi Government 5,000 Eng. M. Al-Nakshabandi 5,400 Libyan Arab Company for Foreign Investments 5,000 Eng. A. Al - Shaeri 5,400 Kuwaiti Investment Authority 5000 Mr. A. Al- Bader 5,400 Total 75,000 77,400 Per Diems 40,500 Travel Expenses 24,377

Amount Paid to Executive Officers during 1999 Name Position Salaries in

JD Dr. S. Rusheidat Chairman 49,390 Eng. N. Al - Sadoun General Manager 27,223 Eng. A. Al Kharabsheh General Manager 18,229 Dr. Wanas Hindawi Senior Deputy General Manager / Marketing

Manager 25,876

Eng. Y. Madadha Deputy General Manager for Technical Affairs 29,276 Mr. A. Al - Masri Deputy General Manager / Finance Manager 23,076 Total 173,070 Travel Expenses 63,567 The Organization Structure and Work forces The Total number of employees at the End of 1999 reached (2316), an increase of (29) employees or (1.25%) over 1998. The Company follows the competitive policy in recruiting. Further more, the national manpower has reach (99.99%) in the company. Around (51.9%) of total employees are of the south territory and Ghor areas.

13

14

Labour Force Distribution by Site Location Number of Employees Percentage Plant Safi 1,829 78.97 Housing / Safi 197 8.51 Medical Services/ Safi 54 2.33 Aqaba Terminal 90 3.89 Head Office / Amman 146 6.30 Total 2,316 100.00

Labor force Distribution by Discipline & Education

Qualification University Community College

Tawjihi High School

Junior High School

Total Percentage

Doctors 8 0 0 0 0 8 0.35 Medical Assistance

4 8 7 5 5 29 1.25

Engineers 228 0 0 0 0 228 9.84 Chemists 23 10 1 0 0 34 1.47 Administrative 92 57 64 46 51 310 13.39 Accountants 49 10 1 0 0 60 2.59 Technical 11 381 127 157 204 880 38.00 Semi Skilled Technicians

1 6 14 46 116 183 7.90

Unskilled Technicians

0 2 4 34 75 115 4.96

Drivers 0 3 11 31 264 309 13.34 Firemen 0 0 2 6 18 26 1.12 Guard 2 1 6 2 44 55 2.37 Daily Labour 0 0 0 0 79 79 3.42 Total 418 478 2316

Organization Chart

237 327 856 100.00

Chairman & Board Members

General Manager

Plants Manager

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LegalAdvisor

InternalAuditor

Finance & ComputerDepartment

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Prod

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Civ

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Res

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Dep

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Con

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Dep

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OperationsDepartment

Deputy G.M. TechnicalAffairs

Senior Deputy General Manager /Marketing Manager

Deputy General ManagerFinancial Affairs /Finance Manager

Mar

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t

The local Community The company continued to support the surrounding local community, providing financial support to a variety of projects for the Southern Region of Jordan, in addition, continued its policy of promoting scientific research by donating to universities and scientific institutions. The company, as well, maintained supporting youth activities through its donations to various sporting clubs and youth centers in addition to its ongoing support for women, social and charity institutions throughout the Karak Municipality. The company hospital and clinics continued to accept and treat emergency cases sent to it from surrounding areas. Moreover, the company contributed to activating the trade and economy of the area by buying all its food requirements from the local markets.

Donations during 1999 Name of Donee Amount in JD Karak Municipality 100,000 Aqaba Municipality 15,000 Safi Municipality 25,000 Mazra Municipality 25,000 Thira Municipality 5,000 Fifa Municipality 5,000 Joined Services Board 5,000 Charitable Association in Karak Governorate 30,150 The National Center for Diabetes 50,000 Mosques and Churches 17,140 Charitable Organizations 71,529 The Arab Youth Forum 18,000 The Special Olympiad 10,000 Karak Governorate Sports Clubs 42,750 Jordan Hashemite Fund 300,000 Karak Governorate 5,500 The Southern Area Military Command 7,350 Government Institutions 24,950 HRH the Crown Prince Award 4,500 Combating Poverty Pockets Program 28,767 Writers & Scientists 14,414 Medical & Scientific Conferences 40,976 Arab Thought Forum 30,000 Islamic Assembly for Technology & Water Resources

5,000

Islamic Academy for Science 10,000 Higher Board for Science and Technology 50,000 Arab Pan Games (King Hussein Championship) 120,951 Civil Defence Building (Aqaba) 100,000 Total 1,161,977

Participation at Different TrainingActivities During 1999

Lectures & Seminars

External Courses Seminars & Summits

Internal Courses Seminars & SummitsNew Recruits

Summer Trainees

Engineers Requalification

Vocational Training

5884535192311768

15

Housing and Facilities The number of residents in the Potash Township totaled (2,200) company employees and their families. There were facilities for (655) other employees within other housing sites. The company maintained the policy of granting individual housing loans to the employees. The amount of loans granted reached JD (11,5) million at the end of 1999. (554) Employees benefited from the company loans system. Medical Services The Company continued to offer medical service to its employees and their families via the hospital at the township and the clinic at the plant site. Outside medical services were also provided through the company's distinguish medical system. Safety and Environment The safety records decreased to a lower record in 1999. The frequency severity indicator for personnel accidents in 1999 has decreased by (24%), which is lower than the years 1982 to 1998 average by (55%). The same can be applied to the vehicle accident frequency rate, which has decreased by (27%), over the previous year. Training The training Center pursued its training programs particularly those related to efficiently upgrading courses and technical seminars.

1999 Training Courses and Programs

Details No. Of Training Activities No. Of Participants

Training Center Courses 25 242 Lectures 19 346 Newly Graduated Engineers - 17 Vocational Training - 68 Universities & Colleges Students - 31 New Employees - 92 Total 44 796 Local Training in Jordan Courses 61 175 Seminars 33 99 Conferences 17 77 Total 111 351 Abroad Training Courses 24 35 Seminars & Conferences 6 10 Total 30 45 Grand Total 185 1,192

9 5 9 6 9 7 9 8 9 9Number of Participants of the

Training Activities at the Training Center

0

1400

1200

1000800

600

400

200

82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99

Annual Accident Frequency &Severity Indicator (FSI) Variation

0,00

2,00

1,75

1,50

1,25

1,00

0,75

0,50

0,25

16

The Quality System (ISO) APC has obtained the (ISO-9002) certificate for the cold crystallization plant in 1998. Arrangements are underway to obtain the certificate for the hot crystallization plant A consultant company has been appointed during 1999 to prepare with the Quality Department the required arrangements for APC sites to obtain (ISO) Certificate for Environment (ISO-14001), (60%) of the work has been achieved Financial Review Capital APC paid in capital is (83,317,500) Dinar/ Share distributed as follows: 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 83,317,500 100.000 Revenues The total consolidated revenues for 1999 reached JD (145.46) million, of which were JD (136.5) million from Potash, Salt and Mixed Salts sales and JD (8.96) million from the following sources:

Details Amount In Million JD Interest Others 0.24 Total 8.96

This year total consolidated revenues increased by (14.5%) when compared to 1998 total consolidated revenues of JD (127) million. Total consolidated Sales revenue reached JD (136.5) million an increased by (14.2%) when compared with 1998 total consolidated sales of JD (119.5), this increase in sales revenue was the result of the increase in potash sales volume of (12.5%) and increase of potash sales price by

17

(12.9%) and also the increase in the industrial salt sales volume of (100.1%). Total Cost Total consolidated cost in 1999 amounted to JD (109.5) million an (11%) increase over 1998 consolidated total cost of JD (98.7) million. Total consolidated cost represented (80.2%) of sales revenue compared with (82.6%) for 1998. Consolidated cost of goods sold of JD (73.8) million represented (54.1%) of consolidated sales revenue compared with JD (69.7) million and (58.3%) in 1998. This decrease was a direct result of the increase in sales volume. Consolidated selling and distribution cost amounted to JD (9.3) million an increase of (14.8%) when compared with 1998 cost of JD (8.1) million. This increase was due to the increase in sales. Consolidated selling and distribution cost represented (6.8%) of sales revenue compared with (6.8%) for 1998. Royalty amounted to JD (8) million an increase of (29%) over 1998 royalty of JD (6.2) million. The reason for this increase was the increase in the net profit, as royalty is calculated at (25%) of net profit in accordance with the Concession Law. Royalty represented (5.9%) of consolidated sales revenue compared with (5.2%) in 1998. Consolidated general and administrative expenses amounted to JD (7.8) million an increase of (40.3%) when compared with 1998 expenses of JD (5.5) million. This increase was due to the increase in wages and salaries and provision for doubtful debts. Consolidated general and administrative expenses represented (5.7%) of consolidated sales revenue compared with (4.6%) in 1998. Profits

The company realized consolidated net profit before income tax, other provisions and minority interest of JD (37) million an increase of (27.6%) over 1998 consolidated net profit of JD (29) million. Consolidated net profit for 1999 reached JD (31.4) million an increase of (30.1%) over 1998 consolidated net profit of JD (24.1) million.

18

Profits available for appropriation, after the addition of retained earnings of JD (0.680) million, totaled to JD (38.724) million and appropriated as follows:

Details Amount in Million JD

Statutory Reserve (10%) 3.697

Voluntary Reserve (20%) 7.393

0.369

Provision for Vocational Training and Scientific Research (1%)

0.369

0.075

Dividends (22%) of Share Capital 18.330

Provision for Income Tax 5.859

Retained Earnings 2.632

Total 38.724 Fixed Assets The cost of fixed assets before depreciation amounted to JD (412.7) million compared with JD (390.9) million at the end of 1998. The increase was due to the capitalization of some projects, machinery, and vehicles. Loans Loans balance amounted to JD (81) million at the end of 1999 compared with JD (75) million at the end of 1998. The amount of JD (25) million will be repaid during the year 2000. The reason for the net increase in loans was due to the withdrawal of the loans granted to the Company from banks and the increase in notes payable. Debit/ Equity ratio reached (27%). Shareholder's Equity The shareholder's equity amounted to JD (245.6) million in 1999 compared with JD (232.6) million in 1998 an increase of JD (13) million. Audit Fees and Consultancy

Company Name Audit Fees Consultancy Arab Potash 16,000 165,408 Jordan Dead Sea Industries

2,500 5,282

Jordan Safi Salt 3,000 29,254 Jordan Magnesia 1,600 24,819 Numeira Mixed Salt & Mud

750 -

Isal for Dead Sea Products

750 -

Total 24,600 224,763

19

Jordanian Universities' Fees (1%)

Directors' Remuneration

Financial Highlights

*All figures are in thousand JD's except for the financial ratios. Future Plan 1- The company is looking forward to implement stage four of production expansion project, to set its goal to attain a production capacity of (2.4) million metric tons per year after the year 2004, and more progress m conducting studies and introducing the necessary modifications on the plants, to raise the efficiency and production quality and reduce the cost. 2- To complete acquisition of minority interest the Dead Sea Industries Company. 3- More progress in the Dead Sea Industries Projects. 4- Completion of the measures required for the construction of the Potassium Nitrate project in cooperation with Kemira Agro of Finland. 5- To speed up the removal of the salt mushroom in the salt ponds, as planned by the end of the year 2001. 6- To improve the marketing strategy by keeping the existing markets and creates new markets. 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

Details 1999 1998 1997 1996 1995 Potash Production (Tons) 1,800,190 1,526,948 1,415,675 1,765,328 1,780,004 Potash Sales (Tons) 1,706,271 1,447,366 1,753,702 1,764,371 Potash Sales Revenue 130,760 131,271 128,323 Sales Revenue 136,461 119,483 104,590 131,271 128,323 Other Revenue 8,959 7,557 6,953 6,863 4,209 Financing Charges 6,393 5,159 5,079 4,383 4,244 Net Profit After Taxes 31,372 24,105 16,923 33,707 26,852 Net Assets 156,935 159,384 128,534 117,397 116,625 Loans & Other Long Term Obligations

91,235 84,607 63,736 56,367 54,893

245,638 232,596 225,167 202,644 185,046 Debt/Equity Ratio 27% 27% 22% 22% 23% Return On Assets 8% 6% 5% 11% 10%

13% 10% 8% 17% 16%

Debt Service Ratio 2.6 1.2 1.4 5 3 .2 Current Ratio 2.7 2.1 2.2 2.1 Closing Share Price 2.800 6.210 5.700 5.800 Earning Per Share 0.288 0.212 0.423 0.337 Price\ Earning Ratio

20

Shareholders' Equity

Return on Shareholders' Equity

1,516,571115,855 102,922

2.54.3000.37711.4 17.213.529.39.7

substantial matters, which may affect the Company as a going concern during 2000. The Company Board of Directors hereby declares its responsibility for the preparation of the financial statements and the effectiveness of the 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 1999 and its plan. 3) The Independent Auditor's Report vis-a-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 distributing (22%) of the Share Capital as dividends as per the Board of Directors resolution.

6) Elects the Independent Auditor for the Fiscal Year ending December 31, 2000.

7) Any other matters,

In conclusion, the Board of Directors extends 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 the all levels.

21

Forty-Third Annual Report And Financial Statements

The Arab Potash Company Limited A Public Shareholding Company

CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 1999 AND 1998


1

To the Shareholders of Arab Potash Company Amman-Jordan We have audited the accompanying consolidated balance sheet of ARAB POTASH COMPANY and SUBSIDIARIES as of December 31,1999 and 1998 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' 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 misstatement. 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 position of ARAB POTASH COMPANY and SUBSIDIARIES as of December 31, 1999 and 1998 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 3, 2000

Allied Accountants Certified Public Accountants Members of Andersen Worldwide


2

Arab Potash Company Consolidated Balance Sheets As Of December 31, 1999 and 1998

(In Thousands of Jordanian Dinars)

Notes 1999 1998 Assets Current Assets Cash on Hand and at Banks 98,104 85,864 Government of Jordan Loan 3 271 543 Accounts Receivable 4 44,908 33,857 Inventory 5 7,005 3,975 Spare Parts 13,873 12,584 Other Current Assets 6 5,291 10,011 Total Current Assets 169,452 146,834 Strategic Spare Parts 22,504 25,416 Government of Jordan Loan - Long Term Portion 3 - 271 Accounts Receivables - Long Term Portion, Net of Provision for Doubtful Debts of JD 1,452 3,645 2,199

Projects in Progress 7 42,008 29,839 Investment in Affiliates 8 8,757 3,613 Other Investments 2,062 1,812 Other Assets 9,361 7,546 Property, Plant and Equipment 9 156,935 159,384 Total Assets 414,724 376,914 Liabilities and Shareholders Equity Current Liabilities Due to Banks 3,118 2,530 Notes Payable 1,129 - Short Term Loans 10 13,490 7,087 Current Portion of Long Term Loans 11 7,204 7,943 Accounts Payable 5,653 1,898 Proposed Dividends 12 18,330 16,664 Other Current Liabilities 13 20,975 18,117 Total Current Liabilities 69,899 54,239 Long Term Notes Payable 480 - Long Term Loans 55,596 57,489 Other Provisions 10,218 9,567 Minority Interests 32,893 23,023 Shareholders Equity 14 Paid in Capital 83,318 83,318 Additional Paid in Capital 54,854 54,854 Retained Earnings 107,466 94,424 Total Shareholders Equity 245,638 232,596 Total Liabilities and Shareholders Equity 414,724 376,914

The accompanying notes are an integral part of these financial statements


3

Arab Potash Company Consolidated Statement Of Income For The Years Ended December 31, 1999 And 1998

(In Thousands of Jordanian Dinars Except For Per Share Data)

Notes 1999 1998 Sales, Net 16 136,461 119,483 Cost of Sales 77,844 73,593 Gross Profit 15 58,617 45,890 Selling and Distribution Expenses 19 (9,307) (8,058) General and Administrative Expenses 18 (7,796) (5,529) Royalty to The Government of Jordan (8,000) (6,164) Income from Operations 33,514 26,139 Interest Income 8,719 5,532 Other Income 240 2,025 Interest Expense, and Bank Charges (6,393) (5,159) Net Income (Loss) from Investments in Affiliates 72 (198) Income Before Income Tax 36,152 28,339 Provision for Income Tax 17 (5,859) (4,641) Minority Interests 1,079 407 Net Income 31,372 24,105 Earnings Per Share 0,377 0,289 Weighted Average Number of Shares (in Thousands of Shares) 83,318 83,318



4

Arab Potash Company For The Years Ended December 31, 1999 and 1998

(In Thousands of Jordanian Dinars)

R e t a i n e d E a r n i n g s Paid in

Capital Additional

Paid in Capital

Statutory Reserve

Voluntary Reserve

Unappropriated Earnings

Total

Balance at December 31, 1997 83,318 54,866 30,789 55,707 487 225,167 Increase in Capital Expenses - ( 12) - - - ( 12) Net Income - - - - 24,105 24,105 Appropriations - - 2,899 4,349 (7,248) - Dividends - - - - (16,664) (16,664) Balance at December 31, 1998 83,318 54,854 33,688 60,056 680 232,596 Net Income - - - - 31,372 31,372 Appropriations - - 3,697 7,393 (11,090) - Dividends - - - - (18,330) (18,330) Balance at December 31, 1999 83,318 54,854 37,385 67,449 2,632 245,638



5

Arab Potash Company Consolidated Statements of Cash Flows

For The Years Ended December 31, 1999 and 1998 (In Thousands of Jordanian Dinars)

1999 1998 Cash Flows from Operating Activities Income Before Income Tax 36,152 28,339 Adjustments for Depreciation 24,493 21,386 Interest and Bank Charges 6,393 5,159 Income Tax Paid (4,825) (3,393) (Income) Losses from Investments in Affiliates (72) 198 Provision for Doubtful Debts 1,509 - Others 2,000 673 (Increase) Decrease in Current Assets Accounts Receivable (13,930) 679 Inventory (3,030) (918) Spare Parts 1,623 913 Other Current Assets 4,720 (466) Increase (Decrease) in Current Liabilities Accounts Payable (806) (1,851) Notes Payable 1,609 - Other Current Liabilities 2,104 2,616 Net Cash Flows from Operating Activities 57,940 53,335 Cash Flows from Investing Activities Purchase of Property, Plant and Equipment (6,015) (7,260) Sale of Property, Plant and Equipment 4 642 Amounts Paid for Projects in Progress (25,398) (26,665) Purchase of Investments (5,535) (437) Sale of Investments 45 - Government of Jordan Loan 543 543 Other Assets (1,815) (372) Net Cash Flows Used in Investing Activities (38,171) (33,549) Cash Flows from Financing Activities Due to Banks 588 1,432 Proceeds from Loans 19,025 54,937 Repayment of Loans (14,958) (35,026) Interest and Bank Charges (6,469) (4,902) Notes Payable - (1,109) Dividends (16,664) (16,664) Increase in Capital Expenses ( 12) Minority Interests 10,949 5,895 Net Cash Flows (Used in) from Financing Activities (7,529) 4,551 Net Increase in Cash 12,240 24,337 Cash on Hand and at Banks, Beginning of Year 85,864 61,527 Cash on Hand and at Banks, End of Year 98,104 85,864



6

Arab Potash Company Notes To the Consolidated Financial Statements

December 31, 1999 and 1998 (In Thousands of Jordanian Dinars Except For Share and 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 eight Jordanian Dinars for each ton of potassium chloridemaximum royalty payable is listed 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 CDR. Each, CDR 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. During 1997, its subsidiary Jordan Safi Salt Company commenced production of industrial salt and table salt. 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 intercompany accounts and transactions have been eliminated. Following are the subsidiaries of the Company:

Paid in Capital Percentage of Ownership

Jordan Dead Sea Industries 44,458 51.1 Jordan Safi Salt Company 12,000 * Jordan Magnesia Company 30,000 ** Numeria Mixed Salts and Mud Company 1,500 52.7 * The Jordan Dead Sea Industries Company has a (52.7%) interest in this company, and Arab Potash Company has a direct (10%) ownership interest. **The Jordan Dead Sea Industries Company has a (51%) interest in this company, and Arab Potash Company has a direct (20%) ownership Interest. Revenue Recognition Sales revenue is recognized upon delivery of potash to carrier, at which time the revenue process is completed.


7

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 carrnallite, 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: Percentage Buildings 2-10 Dikes 6 Machinery and Equipment 7-12 Vehicles 15-20 Furniture and Fixtures 9-20 Hospital Equipment 12 Tools 20 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 Loans 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 project costs. 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 (10,053) and JD (8,718) respectively, at December 31, 1999 and 1998.


8

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 affects 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. 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 becomes due on July 1, 2000. 4. Accounts Receivable This item consists of the following: 1999 1998 Trade Receivables 33,449 32,779 Advances to Contractors 11,368 842 Other 148 236 44,965 33,857 Provision for Doubtful Debts 57 - 44,908 33,857 5. Inventory This item consists of the following: 1999 1998 Finished Potash 5,871 2,686 Industrial Salt, Table Salt and Others 1,134 1,289 7,005 3,975


9

6. Other Current Assets This item consists of the following: 1999 1998 Prepayments 291 281 Payments on Letters of Credit 4,484 9,263 Other 516 467 5,291 10,011 7. Projects In Progress This item consists of the following: Beginning of 1999 Additions Transfers End of 1999 Construction of Dike (19) 11,070 10,502 - 21,572 Construction of New Hot Thickener 2,549 1,984 4,533 - Construction of Employees Housing 775 325 1,082 18 Salt Mushrooms Dredging * 4,737 11,964 9,849 6,852 Construction of Dike (20) 2,638 2,979 - 5,617 Magnesium Oxide Project 4,402 1,108 - 5,510 Other Projects 3,668 1,097 2,326 2,439 29,839 29,959 17,790 42,008 *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 project's 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, 1999, the Company paid JD (16,701) on this project, of which JD (9,849) has been transferred to property, plant, and equipment. 8. Investment in Affiliates This item represents the Company's investment in the share capital of the following companies:

Number of Shares

Percentage of Ownership 1999 1998

Consulting Company for Construction and Maintenance * 200,000 38 - 129 Nippon Jordan Fertilizer Company 3,345,600 20 3,100 2,683 Jordan Investment and South Development Company ** 833,000 42 790 801 South Development Company for Industrial Equipment and Workshops 100,000 22 24 - Kemira Arab Potash Company 2,700,000 50 1,350 - Jordan Bromine Company *** 7,500,000 10 3,493 - 8,757 3,613 * The General Assembly of Consulting Company for Construction and Maintenance decided in its extra ordinary meeting held on June 19, 1999 to liquidate the company.


10

** Jordan Investment and South Development owns (77.7%) of South Development Company for Industrial Equipment and Workshops. *** The Jordan Dead Sea Industries Company has a 40% interest in this company and Arab Potash Company has a direct (10%) ownership interest. 9. Property, Plant and Equipment This item consists of the following:

Beginning of 1999 Additions & Transfers Retirements End of

1999 Cost Land 2,113 818 - 2,931 Buildings 40,107 1,441 - 41,548 Dikes 65,500 9,869 - 75,369 Machinery and Equipment 254,325 8,397 8 262,714 Vehicles 21,785 735 147 22,373 Furniture and Fixtures 5,407 645 68 5,984 Hospital Equipment 425 16 - 441 Tools 1,219 127 - 1,346 390,881 22,048 223 412,706 Accumulated Depreciation Buildings 23,205 2,341 - 25,546 Dikes 26,736 4,404 - 31,140 Machinery and Equipment 160,000 15,424 8 175,416 Vehicles 16,780 1,769 147 18,402 Furniture and Fixtures 3,455 431 64 3,822 Hospital Equipment 418 3 - 421 Tools 903 121 - 1,024 231,497 24,493 219 255,771 Net Book Value 159,384 156,935 10. Short Term Loans This item represents short-term loans granted by the banks listed below in order to finance the Company' shareholders sales. Such sales are made through deferred letters of credit whereby the sales proceeds will be used to settle these loans. 1999 1998 ANZ Grindlays Bank 4,970 - Arab Bank 3,550 - Arab Jordan Investrnent Bank - 3,542 Citibank 4,970 3,545 13,490 7,087


11

11. Long Term Loans This item represents loans granted by the following:

Installments Short Term 1999 Long Term 1999 International Bank for Reconstruction and Development 1,539 9,401 Islamic Development Bank/Jeddah 2,085 10,173 United States Agency for International Development "US AID" 1,472 - Government of Jordan 126 - European Investment Bank - 33,667 West Merchant Bank 1,418 1,418 Bank of Jordan 564 937 7,204 55,596 Details of the loans are as follows: International Bank for Reconstruction and 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. 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) (ID 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 U.S $ (28,035,000) and to lease it to the Company


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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. § OPEC Fund The Company was granted a loan amounting to US $ (7,000,000) to finance the construction of dikes and purchase of machinery for the potash plant. The loan is repayable over (30) semi annual installments, the first of which was due on September 15, 1983 and the last installment was due on March 15,1998. The loan is guaranteed by the Government of Jordan and bears interest at (8%) per annum. § 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 will be 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 granted a loan for JD (233) representing the deferred interest on the OPEC Fund loan. The loan is repayable over (30) semi annual installments, the first of which was due on September 15, 1983 and the last installment was due on March 15, 1998. The: loan bears interest at (8%) per annum. 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 will be 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 was 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. § Bank of Jordan Jordan Safi Salt Company was granted a loan amounting to US $ (2,120). The loan is repayable over (8) quarterly installments the first of which is due on April 30, 2000 and the last installment due on January 30, 2002. The loan is guaranteed by a cash deposit and bears interest at (8%) per annum. The aggregate amounts of annual principal maturities of long term obligations are as follows:

December 31 2001 5,973 2002 5,282 2003 5,615 2004 4,180 2005 3,915

Thereafter 30,631


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12. Dividends The Company's General Assembly approved during April 1999; the proposal made by the Board of Directors to distribute JD (16,664) as dividends, representing (20 %) of the Company has paid in capital.

The Board of Directors will recommend to the Company's General Assembly to distribute JD (18,330) as dividends, representing (22%) of the Company's paid in capital. In accordance with the Income Tax Law No. (57) of 1985 and its subsequent amendments, dividends are subject to a distribution tax. 13. Other Current Liabilities This item represents the following: 1999 1998 Royalty to the Government of Jordan 8,000 6,164 Provision for Income Tax 5,069 4,035 Contractors Retentions 2,647 2,493 Accrued Interest and Expenses 3,217 3,464 Jordanian Universities' Fees 369 290 Scientific Research and Vocational Training 378 601 Prepayments 610 - Other 685 1,070 20,975 18,117

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.


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15. Gross Profit Following is a breakdown of gross profit (loss) by company:

Potash Co. Safi Salt Co. Numeira Co. Total 1999 1998 1999 1998 1999 1998 1999 1998 Sales 130,760 115,855 5,061 2,812 640 816 136,461 119,483 Cost of Sales 72,091 69,969 5,304 3,005 449 619 77,844 73,593 58,669 45,886 (243) (193) 191 197 58,617 45,890 16. Industry Segment and Geographic Area 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 geographical area:

Potash Co. Safi Salt Co. Numeira Co. Total 1999 1998 1999 1998 1999 1998 1999 1998 Far East 40,807 36,638 974 - - - 41,781 36,638 India & China 62,384 51,877 - - - - 62,384 51,877 Europe 18,039 16,943 544 648 - - 18,583 17,591 South America - 1,002 - - - - - 1,002 Middle East 6,016 5,465 2,956 1,524 640 816 9,612 7,805 Africa 3,514 3,930 587 640 - - 4,101 4,570 130,760 115,855 5,061 2,812 640 816 136,461 119,483

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 (16%) for 1999 and 1998. The principal differences between these effective rates and the statutory tax rates of (15%) are as follows: 1999 1998 Computed Tax at Statutory Tax Rates 5,423 4,251 Tax Effect of Expenses that are not allowable for Tax Purposes 82 179 Subsidiaries and Affiliates Losses 249 211 Prior Years' Income Tax 105 - 5,859 4,641


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18. General And Administrative Expenses This item consists of the following: 1999 1998 Salaries, Wages and Other Benefits 1,910 1,356 Travel Expenses 280 330 Depreciation 351 267 Jordanian Universities Fees 369 290 Scientific Research and Vocational Training 369 290 Board of Directors Remuneration 75 75 Maintenance and Repairs 174 88 Electricity Expenses 33 27 Fuel 32 26 Post, Telephone and Telex 88 55 Stationary and Printing 103 70 Professional and Consulting Fees 251 135 Hospitality 71 46 Advertising 204 102 Donations and Educational Grants 1,163 1,428 License and Other Fees 16 17 Doubtful Debts 1,509 - Other 798 927 7,796 5,529 19. Selling and Distribution Expenses This item consists of the following: 1999 1998 Marketing Salaries, Wages and Other Benefits 240 268 Sales Commission 2,117 1,458 Travel Expenses 270 178 Advertising Expenses 59 28 Sample Testing 285 212 Periodicals 41 26 Post, Telephone and Telex 33 16 Others 69 48 3,114 2,234 Aqaba Handling Expenses 2,979 2,661 Salaries, Wages and Other Benefits 847 854 Depreciation 1,764 1,760 Electricity 206 241 Repair and Maintenance 82 92 Fuel 20 45 Insurance 27 27 Rent 104 83 Others 164 61 6,193 5,824 9,307 8,058


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20. 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 (3), the Company has granted the Government a loan for JD (4,342). § As outlined in Note (11), the Government has guaranteed certain loans granted to the Company, and has

granted the Company two loans for JD (233) and JD (2,314) respectively. 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. 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). 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 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. "NJFC" commenced production during 1997. 21.Contingent Liabilities and Commitments As of December 31, 1998, the Company had the following contingent liabilities and commitments: § Letters of credit amounting to JD (5,142). § Guarantees for an amount of JD (3,501). § The Company's committed and contracted for capital expenditure amounted to JD (122,295). § The Company's committed but not contracted for capital expenditure amounted to JD (7,250).


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22. Financial Instruments A) Fair Value The following table presents the fair values of balance sheet financial instruments as required by "IAS 32" for 1999: Book Value Fair Value Assets Cash on Hand and at Banks 98,104 98,104 Jordan Government Loan 271 271 Accounts Receivable, Net 48,553 48,553 Other Current Assets 5,291 5,291 Investments 10,819 10,819 Other Assets 9,361 9,361 Liabilities Due to Banks 3.118 3.118 Notes Payable 1,609 1,522 Bank Loans 76,290 71,123 Accounts Payable 5,653 5,653 Other Current Liabilities 20,975 20,975 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 a based on quoted market price. For certain other investments, which are not listed, a reasonable estimate of fair value has been made. Loans and Notes Payable The fair value of loans and debentures is based on the discounted future cash flows of repayment schedules using the current market interest rates. B) 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% - 9.25%) for the Jordanian Dinars and (4.35%-5.91%) for the loans in US Dollars. C) 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.


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D) 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 72,641 126 US Dollars 20,984 67,940 Special Drawing Right (SDR) - 8,224 Deutsche Marks 1,274 - The Jordanian Dinar exchange rate of the Jordanian Dinars is fixed against the US Dollar (US$ 1.41 for 1 JD). 23. Reclassification Some of 1998 balances were reclassified to correspond to 1999 presentation.

the arab potash company · the arab potash company a public shareholding company forty-third annual...

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