This report is for the Year Ended December 31, 2002 and is presented to the General Assembly in its annual meeting held in Amman on Sunday April 27, 2003.

The Arab Potash Company LimitedA Public Shareholding Company

Contents

The Board of Directors

Letter from the Chairman

Board of Directors report

1- International Potash Consumption

2- World Production of Potash

3- International Potash Prices

The World Scene

1-Production

2-Sales

3-Marketing

Company Activities

Main Financial Indicators

1-Salt Mushroom Removal

2-Industrial Potash

3-Production Expansion (stage )

4-Production Expansion (stage )

5-Thermal Power Station

6-Rehabilitation of Dike (18)

7-Privatization

III

IV

The Company's Projects

1-Jordan Safi Salt Company

2-Numeira Mixed Salts & Mud Company

3-Jordan Magnesia Company

4-Kemira Arab Potash Company

5-Jordan Bromine Company

6-Jordan Dead Sea Industries Company (JODICO)

Subsidiaries & Affiliates

9

11

13

13

14

18

18

20

1-The Board of Directors

2-Executive Officers

3-Employees, Training and Housing

4-Administrative Restructuring of the Company

5-The Local Community

Administrative Affairs

1-Capital

2-Fixed Assets

3-Inventories

4-Investments

5-Loans

6-Revenues

7-Total Cost

8-Profits

9-Shareholders’ Equity

10-Audit Fees

Consolidated Financial Statements

Financial Indicators

Future Plan

Declaration of the Board of Directors

Recommendations

Contents

21

27

30

30

30

31

The Board of Directors Until January 31 st 2003

The Jordan Investment CorporationMr. Suleiman Hafez

Mr. Abdul Rahman Al-Ajlouni

Dr. Nabih Salameh

Dr. Ahmed Mustafa

Eng. Awni Masri

Eng. Mohamad Arafeh

Eng. Moh'd Zafer Al-Alem

Chairman

Member

Member

Member

Member

Member

Member

Arab Mining CompanyEng. Talal Saadi

Mr. Yousef Abed Al-Mula

Eng. Farouk Bandar

Eng. Mousa Abu Taleb

Deputy Chairman (until June 22nd, 2002)

Deputy Chairman (since June 23nd, 2002)

Member

Member

Islamic Development Bank/ JeddahMr. Hisham Sha'ar Member

Government Of Iraq

Eng. Munther Al-Nakshabandi

Eng. Abed Al-Satar Al-Safi

Member (until July 31 , 2002)

Member (since August 1 , 2002)

st

st

Libyan Arab Company For Foreign InvestmentsEng. Abd Al-Aleem Shaeri

Mr. Taher Al-Qurabi

Member (until January 2 , 2002)

Member (since January 3 , 2002)

nd

rd

Kuwaiti Investment Authority

Mr. Abdullah Hassan Al-Bader Member

General ManagerEng. Issa Ayyoub

AuditorsAllied Accountants Members of Ernst & Young International

Deputies Of The General Manager

Dr. Wanas Hindawi

Eng. Younes Madadha

Mr. Anwar Al-Masri

Senior Deputy General Manager

Marketing Manager

Deputy General Manager for

Technical Affairs

Deputy General Manager

Finance Manager

The Board of Directors Since February 1 , 2003st

The Jordan Investment CorporationEng. Issa Ayyoub

Mr. Hisham Al-Tall

Dr. Nabih Salameh

Dr. Abed Al-Razaq Bani Hani

Eng. Saeed Al-Bakri

Mr. Mohamad Nour Shrida

Mr. Eyad Qudah

Mr. Muhamed Saeed Shaheen

Chairman (since February 6 ,2003)

Member

Member

Member

Member

Member

Member

Member

th

Arab Mining CompanyMr. Yousef Abed Al-Mula

Eng. Farouk Bandar

Eng. Mousa Abu Taleb

Deputy Chairman

Member

Member

Islamic Development Bank/ JeddahMr. Hisham Sha'ar Member

Government Of IraqEng. Abed Al-Satar Al-Safi Member

Member

Libyan Arab Company For Foreign Investments

Mr. Taher Al-Qurabi

Member

Kuwaiti Investment AuthorityMr. Abdullah Hassan Al-Bader

General Manager

Dr. Wanas Hindawi General Manager (Since February 6 2003)th

Deputies Of The General Manager

Eng. Younes Madadha

Mr. Anwar Al-Masri

AuditorsAllied Accountants Members of Ernst & Young International

Deputy General Manager for

Technical Affairs

Deputy General Manager

Finance Manager

On behalf of myself and the Members of the Board of Directors, I would like to welcome you to the Annual General Meeting for the year 2002. We are pleased to present the forty sixth Annual Report which includes The Consolidated Financial Statements and details of the activities of the Company.

The International Potash scene witnessed a marked rise in demand during 2002. This was estimated at about (5.3%) due to better commodity and agricultural products. World Potash production increased by around (4%)mainly to plug the gap that was created by the rise in demand in Asia and Brazil. The increase in production came mainly from Canada, Russia, Belorussia, and Israel. Production costs also increased during the year due to higher energy costs. This also reflected on internal transport and ocean freight costs.

Despite these factors prices decreased during the year.

The Arab Potash Company maintained a production level of (1.956) million tons and sales of (1.960) million tons.

The after tax net profit was (15.4) million JDs after a provision of JD (11.9) million was made to offset the risks that may be associated with losses stemming from the acquisition of the assets of Jordan Safi Salt Company and a valuation of the slow moving spare parts inventories held. The Board of Directors has decided to recommend to you to distribute dividends totaling (14.997) million JDs to the shareholders which represent(18%) of the capital.

The Company is currently studying ways of maximizing production in cooperation with international consulting groups. The various options of expanding the Solar Evaporation System and the Production units will be carefully evaluated.

In addition, we intend to double the compaction capacity for potash through a tender to build a (150) Thousand Metric Tons per year new plant, and to increase Industrial Potash Sales to (30) Thousand Metric Tons during 2003 .

As for energy, and to satisfy our future steam requirements, a tender to qualify contractors for a new power plant has been announced. The new plant is expected to produce (230) tons of steam per hour and (45) megawatts of electricity. This project is expected to be completed in 2005.

Letter from the Chairman

As for corporate restructuring, a contract to computerize all activities of the Company is in effect and will be implemented during 2003. Additionally new guidelines, procedures, and organizational structures will be introduced during the year. A new Human Resources unit has also been formed to develop personnel skills and training.

In the field of privatization, The Government selected HSBC as an advisor to evaluate the Company and to assist in the process of choosing the best partner. This process is expected to be completed in the second half of 2003. The Government intends to sell half of its (53%) shareholding through this process which represents (26%) of Companies paid in capital. The Company also intends to undertake necessary studies to privatize some of the service activities such as Medical Services, Housing, Employee transport, and other activities which can be handled more efficiently by the private sector.

The progress of subsidiaries and allied companies are as planned. KemiraArab Potash Company and Jordan Bromine Company both began trial production in the latter part of 2002, and Jordan Magnesia Company is expected to begin producing in the second half of 2003 after employing an international construction management firm.

In consideration with Jordan Safi Salt Company, the Board of Directors is also discussing with the Government of Jordan and the Liquidation Committee the best means to guarantee our rights.

I would like to extend my thanks to the Government of Jordan, to the Arab Governments who are shareholders in the Company, to the Islamic Development Bank/Jeddah, to all the International and local financing institutions, and to the Company’s Staff at all locations for their support and efforts to achieve these results.

A special gratitude must be conveyed to our valued customers and partners for their trust in our products and services which we pledge to maintain at the highest levels of quality.

We salute the leadership and guidance of our beloved monarch and pray to God for his blessings and benevolence.

POTASH (KCL) WORLDCONSUMPTION

POTASH CONSUMPTIONIN BRAZIL

MILLION TONS KCL

MILLION TONS KCL

Board of Directors Report

The Board of Directors is pleased to welcome you in this annual general meeting and to present to you the

forty sixth annual report and the consolidated financial statements for the year ended 31 December ,2002

in accordance with article (169) of the Companies Law and articles (11 and 12 ) of APC by-laws.

The international potash market was more active in 2002 compared to 2001 in terms of production and

consumption. In 2002, APC increased its sales volume by (1%) compared to 2001.

Increase of world demand was registered in the following countries:-

The off take in 2002 was back to its normal level and it is speculated that consumption in 2003 would stabilize.

1- India

2- China

3- Malaysia

4- Brazil

1- Demand

The World Scene:

The International Potash Market

World Consumption of Potash (Million tons KCL)CountryAsiaNorth AmericaEuropeCISLatin AmericaAfrica & The Middle EastTotal

200214.0

9.58.62.46.11.2

41.8

200112.7

9.58.72.35.31.2

39.7

200012.9

9.68.92.35.31.1

40.1

199913.0

9.79.02.64.91.2

40.4

199811.3

9.79.12.75.21.1

39.1

2)Production

World potash demand was increased by (5.3%) during 2002. This demand totaled (41.8) Million tons compared to

(39.7) million tons in 2001. This significant increase was achieved despite of the difficulties the world economy is

facing. The increase came as a result of the improvement in the demand for raw materials and the agricultural

commodities which was in line with the world's population increase and as a result for the need to avoid any

shortages in the world's grain stocks.

Despite the fact that consumption in 2002 increased by (100,000) tons however it didn't reach 1999 and 2000

records. It is also expected that consumption in India will continue to grow during 2003.

The off-take was significantly increased during 2002. This increase was not attributed to factors related to the

internal potash consumption but to the change in the potash procurement pattern.

In 2002, Sinochem Corporation succeeded in signing exclusive contracts with all of the potash suppliers and

accordingly controlled the market. The contracts signed were sizable and resulted in building up stock in China.

The consumption level in 2003 is not expected to increase.

The increase in world prices of agricultural crops especially soyabeans improved the financial standing of the

Brazilian farmers. This attributed positively to the consumption levels of the fertilizers including potash which

increased by (8%). Market studies show that the growth in 2003 would further increase.

World Potash production registered a record in 2002. It totaled (42.7) million tons compared to (41.0) million tons in

2001 (4% increase). The production increase came from Canada, CIS, Belorussia and Israel as a response to the

increase in demand in Asia and Brazil. Production

1.1 1.2

WORLD POTASHPRODUCTION 2002 (Kcl)

WORLD POTASHPRODUCTION

MILLION TONS KCL

ISRAEL

CANADA

USA

JORDANOTHERS

CIS

EUROPE

POTASH PRICEDEVELOPMENTFROM 1998-2002

costs for all suppliers increased due to the increase in world fuel prices, which in return, was reflected as increases in the cost of inland transportation as well as marine freight.

Jordan represented (4.7%) of the total world potash production. Reports prepared by consultants showed that APC continues to enjoy a high competitive advantage compared to other suppliers because of the relatively lower production cost, especially for potash exported to Asian markets.

World Production of Potash (Million tons KCL)Country

CanadaCIS

EuropeUSADSWJordan Other Total

200213.814.3

6.01.13.42.02.1

42.7

200113.213.6

6.2

3.02.01.9

41.0

200011.815.3

6.5

2.91.91.6

41.2

199912.813.7

7.01.42.81.81.3

40.8

199811.615.3

7.61.52.71.51.1

41.3

3)Prices

Despite the high consumption records registered in 2002, world potash prices were under pressure until the end of the year. The factors behind this price deterioration was the ability of suppliers to compensate any increase in demand rapidly from unutilized capacity and also as a result of the severe competition among suppliers in their endeavor to increase their shares in areas which witnessed significant increase in consumption .

In general, it is expected that the world potash consumption woul d continue to grow in 2003, or at least to be in line with 2002 levels. Also, world potash prices are expected to achieve significant increase in many of the spot markets starting the second quarter of 2003.

The expected price increase will be a translation of the healthy potash consumption which is expected to prevail in 2003 and as a result of the increase in prices of the energy, marine transportation and agricultural crops.

Production

The company produced four potash grades: Standard, Fine, Granular (Red and White color) and the Industrial grade. The Standard grade accounts for more than half of the total quantity produced.

The company produced (1.956) million tons during the year compared to (1.964) million tons in 2001. This is only (0.4%) decrease over 2001.In 2002 the Standard grade made up (57.6%) of the total production compared to (56.4%) in the year 2001. The Fine grade represented (37.8%) of the total production compared to (38.4%) in 2001

Company Activities

Production by Grade (Tons)2002 2001

Grade Tonnage TonnagePercent PercentStandardFineGranularIndustrial Total

1,126,723739,635

86,1653,500

1,956,023

57.6037.81

4.410.18

100.00

1,106,485753,180

91,91010,960

1,962,535

56.3838.38

4.680.56

100.00

JAN FEB MAR APR. MAY JUN JULY AUG. SEP. OCT. NOV. DEC.

APR. MAY JUN JULY AUG. SEP. OCT. NOV. DEC.

GRAN. FINE STD. TOTAL

PLANNED

ACTUAL

TONS (KCL 2002) PRODUCTION-THREE GRADES

APC POTASH PRODUCTION

CARNALLITE PRODUCTION BY MONTH IN 2002ACTUAL AND PLANNED

while the produced carnallite (the raw material for Potassium Chloride) reached (9.5) million metric tons exceeding the targeted quantity by (4%) and a drop of (13.6%) from the year 2001, which was (11) million metric tons.

The Produced Potash is transported from the plant's site at Safi to the Company's warehouses at Aqaba. This year (1.961) Million metric tons were transported to Aqaba, (93%) of which were transported by the Company's fleet, while a local contractor handled the remaining quantities. The Nippon Jordan Fertilizer Company received (30)Thousand metric tons of Potash.

Potash Sales

Potash sales increased by an average of (1%) to reach (1.960) Million tons in the year 2002. The sales distributed according to the grades as follows: Standard (53.59%), Fine ( 41.5%), Granular (4.51%), Industrial (0.16%) and Grade B (0.24%).

SALES BY GRADE (TONS)

2002 2001Grade Tonnage TonnagePercent Percent

StandardFineGranularIndustrial Potash Grade-BTotal

1,050,308813,402

88,3803,0474,750

1,959,887

53.5941.50

4.510.160.24

100.00

1,189,181639,632

99,0207,151

0,001,934,984

61.4633.05

5.120.370.00

100.00

MILLION TONS KCL

STANDNRD

INDUSTIAL

FINE

GRADE B

GRANULAR

APC POTASH (KCL)SALES BY GRADE IN TONS 2002

It is noted that the percentage of Fine Potash sold has increased in comparison with Standard Potash up to (41.5%) in 2002, where in 2001 the share of Fine grade sales reached (33.1%). This can be explained through the increase of demand on Fine grade as it is used as raw material in producing NPK fertilizers especially in China. As for Granular Potash sales, it has decreased from (5.1%) in 2001 to (4.5%) in 2002.

The Asian market held the biggest share of sales, with an average of (78.5%) of the total sales, while the European market got (14.7%). The Arab and regional countries' share witnessed a minor increase from (4%) in 2001 to (4.1%) in 2002. It is worth mentioning that most of sold Potash is used in producing NPK fertilizers and in oil well drilling. It is expected that local sales will augment in the coming years especially after the beginning of production in the Chlorine plant in 2005 and Potassium Nitrate at Aqaba which has already began production.

APC SALES DISTRIBUTION (PERCENT)

Market 2002 2001 2000 1999 1998AsiaOceaniaArab Region EuropeAfricaAmericaOther Total (Percent)Total Sales (Thousand Tons)

78.510.104.10

14.720.630.001.94

100.001.960

84.700.104.008.201.401.600.00

100.001.935

82.900.480.86

10.901.201.901.76

100.001.919

79.100.960.46

14.202.870.212.20

100.001.706

73.604.001.50

14.903.000.952.05

100.001.517

India comes first on the list of Jordanian Potash consumers although its share decreased from (30.2%) in 2001 to (26.6%) in 2002. China increased its imports to reach (22.6%) in 2002 instead of (20.9%) in 2001 despite strong Russian competition and advantageous shipping terms.

It is clear that (80.9%) of the total exports of Jordanian Potash concentrated in ten major markets in 2002 against (86.5%) in 2001. This trend is expected to continue in the few coming years.

TOP TEN IMPORTERS OF APC POTASH (PERCENT)

IndiaChinaMalaysia & SingaporeIndonesiaPhilippinesSouth KoreaSpainTaiwan ThailandJapan Total (percent)Total Sales (Thousand Tons)

Country 200226.622.6

8.57.73.63.23.32.21.61.6

80.91.960

200130.220.910.6

6.15.52.84.33.01.41.7

86.51.935

200028.323.7

8.35.34.43.63.32.92.01.6

83.41.919

199926.120.612.0

0.84.34.73.73.50.62.3

78.61.706

199832.410.911.1

0.94.33.75.04.30.02.6

75.21.517

The consolidated sales (Potassium Chloride through APC and Carnallite through Numeira) have reached (142) million JD in 2002,compared to (144) million JD in 2001 with a slight drop of (1.4%). Numeira's sales from mud and Carnallite totaled (395) Thousand JD.

�

INDIA CHINA MALAYSIA INDONESIA EUROPE

Sales Development In The Major Markets

Marketing

In general, the structure of the international Potash markets did not change. However, Potash prices continued to drop in the European markets. Due to the fluctuation in Euro prices against the Dollar, APC increased its share thus allowing it to export to certain European countries such as the Netherlands, Belgium, Finland and France in addition to Croatia, which made up (1.7%) of these exports. While the Chinese market witnessed a stable consumption trend due to organizing the market by Sinochem (APC's sole importer in China). As for the Indian market it suffered from many complexities due to severe price competition.

APC sold (3,047) tons of Industrial Potash in 2002 against (7,151) in 2001. The Company will continue its strategy to produce Red Granular Potash according to the market demand and the development of Industrial Potash marketing. The Company retained its share in the Indones- ian market reaching an average of (20%) of the total Indonesian market.

APC has restructured its marketing strategy for the next years as follows:-

* Maintaining the relationship with Sinochem in China.

* Focusing on the Indian market by depending on three major consumers: IPL, Zuari, and Coromandel.

* Reorganizing APC 's position in the Indonesian market.

* Seizing the available opportunities in Thailand and Vietnam.

* Sustaining APC 's position in Malaysia, Taiwan, Japan, and Korea. In the Philippines the Company became the biggest provider through its alliance with the Philphos group.

* Reorganizing APC 's sales to Europe and providing Kemira group with part of its demand in Finland.

* Executing experimental selling of Red Standard and Bulk Industrial Potash.

* Constructing the Industrial Potash warehouses in Aqaba.

* Computerizing the local sales system totally.

* Achieving a comprehensive plan for warehouses and handling systems.

* Concluding the computerized sales system.

* Developing means of transporting Industrial Potash in bulk from Aqaba.

* Stud ying the possibilities of storing and managing activities through distribution centers in Egypt, the Gulf and the Mediterranean countries.

* Developing the packaging operations.

APC is looking forward to achieving the following during this year:

000

MT

(Kcl

)

Main Financial IndicatorsThe Company's total consolidated revenue decreased from JD (147.9) Million in the year 2001 to JD (144.7) Million in the year 2002 meaning by (2.2%). The decrease of income generated from bank interest by around JD (1.1) Million, as a result of decline of the rate of interest on deposits, participated in the occurrence of such decrease. However, the total consolidated costs witnessed an increase, as they increased by (11.3%) to reach JD (127) Million. When compared to JD (114.1) Million in the year 2001. The Company business in the year 2002 resulted in a net profit after tax and provisions, amounted to JD (15.4) Million against JD (28.2) Million in the year 2001, although provisions for an amount of JD (11.9) Million were set aside to face potential losses at Jordan Safi Salt Company liquidation and the provision for slow moving spare parts inventories. In view of this the shareholders' equity decreased by around (1%) to reach JD (285.4) Million.

The Company's consolidated fixed assets increased from JD (437.2) Million at the end of the year 2001 to JD (456) Million at the end of the year 2002. However, these assets are evaluated, as it is known, at cost, which is much less than their market value. Accordingly, the large difference represents invisible reserves for the Potash Company, and consolidates its capital base. The balance of long term loans at the end of the year 2002 increased to JD (82.9) Million, compared to JD (76.1) Million at the end of the year 2001, due to the drawing of the granted loans to Jordan Magnesia Company, although the Company was able to repay JD (5.7) Million during the year 2002, and is expected to repay JD (8) Million during the year 2003.

The Company's ProjectsPresently, there are six projects occupying the Company’s interest which reached various stages of execution. These projects are as follow:

The work in this project has started in the year 1997, and the completion is expected to be in the year 2003. in this project, (45)Km of the salt mushroom were removed at a cost of around JD (60) Million.

Salt mushroom are hard deposits of salt accumulated at the ponds ground, which weaken the productivity of the brine, as they decrease the area of the surface exposed to evaporation, and also impeded the flow of brine. It is, however, estimated that their elimination will result in increasing the production by around (54) thousand tons annually, which will rise up to (125) Thousand tons per year after executing the fourth expansion project.

The production of the Industrial potash plant reached (3.500) Metric tons in the year 2002, due to the market needs and unavailability of special store to keep its purity. The store was ready in October 2002. The production was low and for short period of time. A marketing plan for this production is under preparation in order to run the plan at its full production capacity of (100) Thousand metric tons annually. However, (3.047) Metric tons had been marketed during the year 2002, and it is expected to market (33) Thousand metric tons during the year 2003.

2

This project aimed at increasing the potash production capacity by around (100) Thousand metric tons annually by adding a new pond with an area of (11) Km . The work on the project has started in the year 1998, but its execution was impeded due to the collapse of parts of the dike surrounding the salt pond with a length of (2.3)km in March of the year 2000. The Company took all the necessary actions of follow up with the contractor, designer and insurance companies in order to recover the Company rights. However, it is expected to issue the arbitration panel's award in respect of the arbitration case filed against the contractor during first half of the year 2003. and the Company is still pursuing the lawsuit filed against the designer and the insurance companies before Jordanian Courts. The Company is currently studying the various means for repairing the said dike.

2

1- Salt Mushroom Removal

2- Industrial Potash

3- Production Expansion (Stage III)

4- Production Expansion (Stage IV)

5- Thermal Power Station

6- Rehabilitation of Dike (18)

7- Privatization

The expansion of production project included in its fourth stage the increase of potash production capacity to around (2.4) Million metric tons by adding Two new carnalite ponds. The initial studies on this project were started by the company staff in the year 1999 and continued through the year 2000. To make an integrated feasibility study for this project, with respect to the areas of the salt ponds and carnalite ponds, the expansions required for the refineries and increasing the production by making certain modifications which might be necessary to the refineries equipment before starting the expansion stage.

Specifications and tender documents for the construction of a new thermal power station with a capacity of (230) ton steam/hour, together with an electricity generation unit with a capacity of (45) megawatt, as well as the necessary auxiliary equipment, were set by an international consultant, aim at responding to the increasing demand for steam in the coming year, it is expe cted to award this tender during the first half of the year 2003.

It was obvious that there were subversive holes in the dike floor, since it has been filled with seawater in the year 1997. The company took measures in due time and treated this situation. In May 2001, the increase of the artesian pressure at the bottom of the dike was noted, a fact which was considered as an indicator of the decline of the safety factor. This necessitated the lowering of the water level in the pond by around two meters, to raise the safety co-efficiency and put the pond temporarily out of operation. In preparation to conduct the necessary studies and tests for the dike foundations in order to handle the matters.

However, the studies were completed at the beginning of the year 2002, with recommendations for remedial actions which are necessary to restore the dike to its proper condition, and which requires about (18) months of work for its execution. It is also worth to mention that the cessation of work at the dike's pond during the said period will not have any negative impact on production, for the year 2003 due to the existence of good inventories of carnalite.

In addition, the company will claim from any party concerned with the design and construction of the dike for the damages incurred by it as result. Based on the policy of prudence, the Board of Directors took a resolution to allocate an amount of JD (4) Million in the year 2001 from profits as a provision for dike (18) rehabilitation.

The Hashemite Kingdom of Jordan has decided to privatize the Company by selling half of its shares in the capital which is around(44.1) Million shares. Some parties working in the fertilize- rs production showed their interest.

The Government appointed (HSBC) bank as a financial advisor to valuate the company's fair value in order to facilitate the selection of one of the strategic investors, by the second half of the year 2003. In the other hand the company is preparing studies to privatize the none core servi- ces such as Medical Insurance, Employee Transportation and Housing, and other services whi- ch can be handled more efficiently by the private sector.

Subsidiaries & Affiliates

1- Jordan Safi Salt Company (under liquidation)

2- Numeira Mixed Salts & Mud Company

3- Jordan Magnesia Company

4- Kemira Arab Potash Company

5- Jordan Bromine Company

6- Jordan Dead Sea Industries Company (JODICO)

Due to restrucuting of the Jordan Dead Sea Industrial Company (JODICO), Arab Potash Company owns (24.2%) of the share capital of JOSSCO. This company has incurred losses despite the assistance provided indirect lending by Arab Potash or by guarantees against facilities granted thereto a voluntary liquidator resolution had been taken by the extra ordinary general assembly of the company at April 28 2002.

The dues for Arab Potash Company from this company amounted to around JD (15) Million at the end of the year 2002. The liquidation committee awarded the bid to acquire its assets for JD (8) Million to Arab Potash Company at December 3 2002, and after the transfer of the assets to APC, it will be operated and managed by Jordan Industrial Co. (JODICO) on behalf of APC by a management contract.

This company was established in the year 1997 aiming at packaging and distributing mixed salts and mud for cosmetic industries purposes. The Arab Potash Company owns (52.7%) of the company's share capital of JD (1.5) Million. Also, Arab Potash Company's employees saving fund owns (32.7%) of its shares.

This company was established in the year 1997 with a share capital of JD (30) milion, the construction of its plants at Ghor Al-Safi was started in the year 1999 and is expected to be completed in the second half of the year 2003, for the purpose of producing (50) Thousand tons annually of magnesium oxide used in the fire bricks industry, and around (10) thousand tons of magnesium derivatives and magnesium hydroxide. The Arab Potash Company owns (55.3%) of the shares of this company. The capital investment in this project expected to reach about (77) Million.

This joint venture was established with Kemira Company / Denmark in the year 1999 with a

annually of potassium nitrate ( fertilizer) and (75) Thousand metric tons of di-calcium phosphate (animal feed). The company commenced production in the last quarter of the year 2002. Thecapital investment is expect to reach JD (80) Million. The Arab Potash Company owns this company equaly with Kemira Copany/Denemark (50% each).

Jordan Bromine Company was established in the year 1999 with a share capital of JD (30) following the signing of the joint venture agreement with Albemarle Corporation/USA,

which owns the technical and the marketing know-how. The Jordan Bromine Company will construct a plant in Ghor Al-Safi for the production of bromine, calcium bromide, sodium bromide and hydrogen bromide., as well as to produce chlorine, hydrochloric acid, potassium hydroxide and tetrabromo besphenol. After the amendment of the joint venture agreement to construct a chlorine plant as well to purchase other assets, a resolution by the general assembly of the company had taken a decision at October 2002, to increases the share capital by JD (19.4) Million as additional paid in capital.

The company commenced production at the last quarter of the year 2002. The capital investment is expected to reach JD (89) Million. The Arab Potash Company owns this company

This company was established in the year 1994 as a holding company with a share capital of JD (60) Million at the initiative of the Arab Potash company, to oversee the activities of investments and setting up downstream industries from Dead Sea minerals, with the exception of potash

th

rd

share capital of JD (29) milion. The Plant at Aqaba will produce (150) Thousand metric tons

milion

equaly with Kemira Copany/Denemark (50% each).

There are six companies which their activities are related to the potash industry and its mining. The Arab Potash Company owns various shares therein ranging from (20%-55%). Following is a briefing of the said companies:

industries. The Arab Potash Company, participated with (51%) of the company's share capital. (JODICO) established both the Jordan Magnesia Company in the year 1997 and the Jordan Safi Salt Company in the year 1996. The holding status of the company was repealed in the year 1998, enabling (JODICO) to participate in the share capital of the Jordan Bromine Company.

By establishing these three companies, (JODICO) would have fulfilled its mission, and to avoid duplication of authority and administrative costs, a decision was made to acquire the minority shareholdings in (JODICO). It was converted to a limited liability company with a nominal capital of JD (100) Thousand following the purchase by the Arab Potash Company of its fixed assets, and all of its investments in Jordan Bromine Company, Jordan Magnesia Company and Jordan Safi Salt Company. It is expected that this company will manage the industrial salt plant and table salt by a management contract after the completion of the transfer of all assets of Safi Salt Company to Arab Potash Company.

Administrative AffairsThe Board of Directors

Mr. Suleiman Hafez:

Chairman since August 2000. He has B.A. in commerce in the year 1968 he held several positions, including : Minister of Finance, Minister of Post and Communications, Secretary General of the Ministry of Finance, Director ( Member of the Board of Directors) at each of Royal Jordanian Airlines, Jordan Electricity Authority, Social Security Corporation, Agricultural Credit Corp., Arab Engineering Industries, Civil Aviation Authority, Jordan Cement Factories Co., Deputy Governor of Islamic Development Bank/Jeddah for Jordan, Deputy Governor of Arab Monetary Fund for Jordan, and Governor at the International Monetary Fund for Jordan.

Also he held the position as a Chairman in Jordan Telecommunications Corporation, Free Zones Corporation and Jordan Investments Corporation. In addition to financial administrative and manag erial experience at several companies.

Board member since November 1995. He has M.Sc. in Public Administration from Missouri University/USA in 1978. He held the post as the Director General of the Audit and Inspection Bureau.

Board member since August 2000. He has diploma in Electrical Engineering from the University of Engineering and Technology Vienna/ Austria in the year 1966. He held the post of Director General of Irbid Governorate Electricity Company, and the Jordan Electricity Authority.

Board member since August 2000, he has M.Sc. in Civil Engineering from Perdue University, Indiana/USA, in the year 1961. He worked at several Jordanian companies, and held the post of Minister of Public Works and Minister of Planning.

Board member since March 2001. He has M.Sc. in Water Resources Mining Engineering from the University of London/England, in the year 1969, M.Sc. in Civil Engineering of Hydro-Construction from UTAH University / USA, in the year 1974, Diploma in Irrigation Systems fromthe University of Colorado/USA, and Diploma in Hydrology from the University of London/UK. He is currently the Secretary General of Jordan Valley Authority.

Mr. Abdul Rahman Al-Ajlouni

Eng. Mohammad Sa'eed Arafah

Eng.Awni Al-Masri

Eng. Mohammad Zafer Al-Alem

The current Board of Directors of the company consists of: Representatives of Jordan Investment Corporation until January 31 2003.

st

Dr. Ahmed Mustafa

Dr. Nabeeh Salameh

Eng. Issa Ayyoub

Mr. Hisham Al-Tal

Dr. Nabeeh Salameh

Dr. Abed Al-Razaq Bani Hani

Eng. Sa'eed Al-Bakri

Mr. Mouhamed Nour Shrida

Mr. Iyad Al-Quda

Eng. Mouhamed Saeed Shaheen

Board member since October 1997, he has PH.D. in Economics from Texas University 1983. He held the post of Deputy Governor of the Central Bank of Jordan.

Board member since March 2001, he has a B.Sc. in Economics from the University of Jordan in the year 1969, and M.Sc. in Economics from the University of Jordan in the year 1981, higher studies in Economics from Harvard University/USA in the year 1988, and Ph.D in Economics from Cairo. He is currently the General Manager of Jordan Investment Corporation.

General Manager from August 2000 until February 6 2003, when he was appointed as a Chairman of the Board. He has a B.Sc. in Civil Engineering from Warwick University /England in the year 1978. He is a member of the National Industrial Committee. He held several positions including: Ministry of Transportation, Secretary General of the Ministry of Transportation, Chairman of Arab Bridge Co., Jordan Iraqi Co., for Land Transportation, Aqaba Railway Corpor- ation, Hijaz Railway Corporation , Civil Aviation Authority, Public Transportation Corporation, and Aqaba port Authority. Also, as a board member at Royal Jordanian Airlines, Free Zone Corporation, Jordan Telecommunications Authority and the Privatization Committee.

Board member. He held several positions as Minister of Justice,Minister of Cabinet Affairs and a member of the Supreme Court and a Deputy Chairman to the Amman Stock Exchange. He is currently practicing law.

Board member since March 2001. he has a B.Sc. in Economics from the University of Jordan in the year 1969, and M.Sc. in Economics from the University of Jordan in the year 1981, higher studies in Economics from Harvard University/USA in the year 1988,Ph.D. in Economics from Cairo. He is currently the General Manager of Jordan Investment Corporation.

Board member. He has a PH.D. in Economics from California University/ USA in the year 1985. He is a Professor of Economics at Yarmouk University/Jordan since the year 1986. He held the positions of Secretary General at the Ministry of Planning. He is currently the Prime Minister’s Counselor.

Board member. He has a B.Sc. in Civil Engineering from Miami University/USA in the year 1982. He is currently the Secretary General of Ministry of Water and Irrigation.

Board member. He has M.Sc. in Business Administration from the University of Jordan in the year 1990. He is currently the Secretary General of the Jordanian Cabinet.

Board member. He has M.Sc. in Business Administration from Sul Ross State University/USA. He is currently theGeneral Manager of the Sales Tax Department.

Board member. He has M.Sc. In Public Administration from Harvard University/USA in the year 1978. He is currently The Deputy Governor of The Central Bank of Jordan.

th

Representatives of Jordan Investment Corporation from February 1 2003.

st

Arab Mining Company Representatives

Islamic Development Bank/ Jeddah Representative

Iraqi Government Representative

Libyan Arab Company for Foreign Investment Representative

Kuwaiti Investment Authority Representative

Eng. Talal Al-Sadi

Mr. Yousef Abed Al-Moula

Eng. Musa Abu-Taleb

Eng. Farouk Al-Bandar

Mr. Hisham Al-Sha'ar

Eng. Munther Nakshabandi

Eng. Abed Al-Satar Al-Safi

Eng. Abdel Alim Al-Shaeri

Mr. Taher Al-Qurabi

Mr. Abdullah Hassan Al-Bader

Vice Chairman of the Company since December 1993, until June 2002. He has a M.Sc. in Industrial Metals from Daram University/England in 1969 and M.Sc. in Mineral Process Design Engineering from London University/England in 1970. He is currently the General Manager of the Arab Mining Company.

Board member since June 2002, He has M.Sc in Business Administration. He is currently the General Manager of the Lybian Arab Company for Foreign Investment.

Board member since December 2001. he has a M.Sc. in Engineering. He is currently the Director of the Investment Department at the Kuwaiti Real Estate Investment Group.

Board member since March 1997. He has a B.Sc. in Engineering. He is currently General Secretary at the Ministry of Industry and Minerals in Iraq.

Board member since November 1997. He has a B.Sc. in Law and Economics from St. Joseph University/Lebanon in 1958. He is currently the General Secretary of the Council of Ministers in Lebanon and the Lebanon Representative to the Scientific National Research Council and Alternate Governor to the Islamic Development Bank/Jeddah.

Board member since March 1997 until July 2002. He has a B.Sc. in Mechanical Engineering. He held the post of General Manager at the Ministry of Industry and Minerals in Iraq. He is currently the Minister of Labour and Social Affairs.

Board member since August 2002. He has B.Sc. in Mechanical Engineering. He is currently the General Manager of Economics Department in the Ministry of Industry and Metal in Iraq.

Board member since April 1993 until January 2002. He has a M.Sc. in Food Engineering from Reading University/England. And B.Sc. in Chemistry in 1961. He is currently an Industrial Consultant at the Industrial Executive Projects Council to the Ministry of Industries in Libya.

Board member since January 2002, He has a B.Sc. in Accounting. He is currently the Deputy of the General Manager at the Finance Department at the Lybian Company for Foreign Investment in Lybia.

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.

th

Executive Officers

Eng. Issa Ayyoub

Dr. wanas Hindawi

Eng. Younis Madadha

Mr. Anwar Al-Masri

General Manager from August 2000 until February 6 2003, when he was appointed as a the Chairman of the Board. He has a B.Sc. in Civil Engineering from Warwick University /England in year 1978. He is a member of the National Industrial Committee. He held several positions including: Ministry of Transportation, Secretary General of the Ministry of Transportation, Chairman of Arab Bridge Co., Jordan Iraqi Co., for Land Transportation, Aqaba Railway Corporation, Hijaz Railway Corporation, Civil Aviation Authority, Public Transportation Corporation, and Aqaba port Authority. Also, as a board member at Royal Jordanian Airlines, Free Zone Corporation, Jordan Telecommunications Authority and the Privatization Committee.

General Manager since February 6 2003. He has Ph.D in Economics. He has been appointed as Deputy General Manager since June 1997, and Marketing Manager since 1985.

Deputy Manager for Technical Affairs. He has B.Sc. in Civil Engineering. He has been in this position since June 1997. He was the Manager of Civil Works Department in the company for 20 years.

Deputy General Manager and Finance Manager. He has M.Sc. in Business Administration and Accounting. He has worked for the Company since 1981.

th

The Board of Directors Remuneration for 2002 in JD

DetailsRemuner-

ation

Transport-ation

Allowance

Member-ship inOther

Companies

Com-mittees

Jordan Investment Corporation Mr. Suleiman HafezDr. A. Al-AjloniDr. A. MustafaEng. A. MasriEng. M. ArafehEng. M. Al-AlemDr. N. SalamehArab Mining Company Eng. T. Al-SaadiMr. Y. A. Al-moulaEng. F. Al-BanderEng. Musa Abu-Taleb

40,000

15,000

3,6003,6003,6003,6003,6003,6003,600

1,8001,8003,6003,600

7,2007,200

18,0007,2003,6001,200

3,600

6,3505,1501,4003,5505,2002,7004,500

1,600

Islamic Development Bank/JeddahMr. H. Al-Sha'arIraqi Government Eng. M. Al-NakshabandiEng. A. Al-SafiLibyan Arab company forForeign Investments

5,000

5,000

5,000

3,600

2,100

1,500

550

450

3,600

3,60050,400

Mr. T. Al-QurabiKuwaiti Investment AuthorityMr. A. Al-BaderTotal

Travel ExpensesPer Diem

5,000

75,000 48,000 31,45057,85123,204

5,15070,756

Amounts Paid to Executive Officers During 2002 in JD

Name Position Salaries

Mr. Sulieman HafezEng. Issa Ayyoub

Dr. Wanas Hindawi

Eng. Yunes Madadha

Mr. Anwar Al-Masri

Total Travel Expenses

Chairman General ManagerSenior Dep. Gen.Mgr.

Marketing Mgr.Dep. General. Mgr. Tech. AffairsDep. GenerFinancial Manager

al. Mgr.

28,00046,910

30,110

31,720

27,380

164,120

3,600

3,600

3,600

3,600

14,400

4,450

700

Employees, Training and Housing

The total number of employees is (2,195) at the end of the year 2002, including the employees, workers and trainees, and around (200-230) daily workers. The company provides its staff members with advanced medical services and is keen to train them and enhance their efficiency according to regular annual programs consisting of local and sometimes overseas training courses. The total participants in such courses were (1,695) employee during the year 2002.

Location Number of Employees Percentage

Plants/Safi

Housing/Safi

Medical Services/Safi

Aqaba Terminal

Head Office/Amman

Total

1,717

175

48

91

164

2,195

78.22

7.97

2.19

4.15

7.47

100.00* Daily Workers (200-230)

* Daily Workers (200-230)

Labor Force Distribution by Discipline & Education

Qualification University CommunityCollege

Tawjihi HighSchool

JuniorHigh

SchoolTotal Percentage

DoctorsMedical assistantsEngineersChemistsAdministrativeAccountantsTechnical Semi SkilledTechnicians

0.271.099.661.46

13.532.46

36.58

11.12

Unskilled Technicians 3.96

DriversFiremen GuardsDaily LaborTotal Total Percent

63

21219

1044624

1

0

1010

41719.00

070

1353

7342

4

3

3010

43319.73

0700

591

121

14

4

14440

22810.39

0500

460

141

91

26

50772

37517.08

0200

350

175

134

54

250174431

74233.80

624

21232

29754

803

244

87

318285733

2,195

14.491.282.601.5

100.00100.00

The Company continues to grant housing loans to its employees. The total granted increased by around JD (1.3) Million to reach JD (16.9) Million at the year end. At the same time, it provides accommodation to its employees directly. About (2.193) of the Company staff members and their families reside in the Company’s township and other housing facilities.

Membership inOther Companies

Com-mittees

����

����

8

8

7

5

Fina

nce

& C

ompu

ter D

epar

tmen

t.VOCATIONAL TRAINING

SEMINARS & SUMMITS

SEMINARS & SUMMITS

SUMMER TRAINEES

INTERNAL ACTIVITIES

NUMBER OF PARTICIPANTSFOR THE TRAINING ACTIVITIES

IN THE TRAINING CENTER

Administrative Restructuring

The Company continued during the year 2002 the implementation of the restructuring of program to improve both structural and operational efficiencies and in this respect the following has been done during the year 2002:1-Prepare the functional procedural manual.2-Permanently award of the enterprise resource planning (ERP).3-Employees teams to study some of the administrative policies such as (employees indemnities, postretirement medical insurances, salaries, advancements and bounces), it is exp ected to finish all these studies by the first half of the year 2003.

THE ARAB POTASH COMPANY

195

324

65

61

143

590

171

71

33

275

9

20

13

42

Number of Participants

21

78

102 1,378

51

33

92

ANNUAL ACCIDENTFREQUENCY &SEVERITY

INDICATOR (FSI) VARIATION

PARTICIPATION ATDIFFERENT TRAINING

ACTIVITIES DURING- 2002

The year witnessed noticeable improvement in the safety, security and environment levels inside the company projects, where work injuries declined by (56%), and the vehicle accidents declined by (31%).

Training Courses and Programs During the year 2002Details No. of Training Activities

Internal Training CenterCourses

Lectures

External Courses

Vocational TrainingUniversities & Colleges Students

Technical Trainees

Scientific Visits

Total Local Training In JordanCourses

Seminars

Conferences

Total Abroad TrainingCourses

Conferences

Seminars

Grand Total

Total 20

214 1,695

---

Internal Control Department

Investments Department

Advisors

Legal Advisor

Technical DeputyGeneral Manager/Plants Manager

Operations Departments

Financial DeputyGeneral Manager/Financial Manager

Pro

ject

s D

epar

tmen

t

Civ

il W

orks

Dep

artm

ent

Trai

ning

Cen

ter

Saf

ety

& E

nviro

nmen

t Dep

artm

ent

Pro

duct

ion

Dep

artm

ent

Mai

nten

ance

Dep

artm

ent

Tech

nica

l Dep

artm

ent

Hou

sing

& U

tiliti

es D

ept.

General Manager

Pro

cure

men

t Dep

artm

ent

Med

ical

Ser

vice

s

Adm

inis

tratio

n D

epar

tmen

t

Mar

ketin

g D

epar

tmen

t

Chairman &

Board Members

Plants Manager

Qua

lity

Dep

artm

ent

Aqa

ba S

ite

3

1800�

1600�

1400�

1200�

1000�

800�

600�

400�

200�

0

The Local Community

As the company believes in the necessity to sustain the local communities surrounding its location, it continued with the implementation of its policy to provide material support by allocating cash amounts to local organizations to spend on various projects, as well as to provide other sums to support scientific researches and studies by providing donations to the universities and various scientific institutions. In addition to this, the company sustained the youth movement by providing donations to sport clubs and various youth centers, and by participating in sport (athletic) activities at the level of the Kingdom. In addition, it supported the charitable, social and women activity organizations in the provinces by contributing cash amounts and offering donations. The company, however, provides health services through the hospital and clinics available at the company for all the emergency cases referred to it. The Company has also participated in activating the commercial and economic sector in the region through the purchase of foodstuffs and provisions from these markets according to its needs.

Donations During The Year 2002

Karak MunicipalityAqaba Municipality Southern Municipality Other Municipality Charitable Association Mosques and ChurchesUnions & Sport ClubsPalestinian Ministry of Health Karak Governorate Sports ClubsJordan Hashemite Fund Government Institutions/Amman & GhorCombating Poverty Pockets Program Writers & ScientistsScholarships

Total

Name of Donee55,00010,00045,00015,00040,75010,20022,97587,88087,980

125,00073,77417,800

3,12061,881

656,360

Amount in JD

Consolidated Financial Statement

Capital

Arab potash Company paid-up capital is (83,317,500) Dinar/Shares distributed as follows:

Shareholders Number of Shares PercentageJordan Government (Jordan Investment Corporation)Arab Mining Company Islamic Development Bank/JeddahIraqi GovernmentLibyan Arab Company for Foreign InvestmentKuwaiti Investment AuthorityOther Arab GovernmentsPrivate SectorTotal

44,060,53217,251,993

4,300,0003,920,7073,386,2503,286,095

575,7546,536,169

83,317,500

52.88320.706

5.1614.7064.0643.9440.6917.845

100.000

Fixed Assets

Inventories

Investments

Loans

Revenue

The cost of fixed assets, before depreciation amounted to JD (456) Million compared with JD (437.2) Million at the end of 2001, an increase of (4.3%). Fixed assets after depreciation amounted to JD (129.6) Million compared with JD (134.3) Million at the end of 2001, a decrease of (3.6%), due to the fact that the new additions to fixed assets during the year were less than the depreciation provisions.

The Potash and Carnalite inventories amounted to JD (6.6) Million, compared to JD (7) Million at the end of the year 2001 it is the company's policy not to maintain a large stock. This figure, however, constitutes the production of part of the last month of the year.

The spare parts and supplies inventories amounted to JD (33.7) Million at the year end. The said inventories were subjected to close control and follow up, for the purpose of decreasing some of their items aims at arriving to the optimum stock level. The provision for slow moving spare parts was increased by JD (4.2) Million to amount JD (6.1) Million at the year end.

The company's investments in affiliated companies and other companies, decreased from JD (31.3) Million in the year 2001 to JD (29.6) Million, a decrease of (5.6%) due to the selling of part of the shares in the Jordan Shipping Lines Company and to the losses of the affiliate companies as per International Financial Reporting Standards.

The balance of long term loans rose to JD (82.9) Million compared to JD (76.1) Million at the end of year 2001. The withdrawals during the year totaled to JD (9.1) Million, and the principal repayment amounted to JD (5.7) Million. The increase was due to the withdrawal of the loan granted by the Islamic Development Bank/Jeddah and the syndicated bank loans, to finance the magnesium oxide project.

At the year end, an amount of JD (8) Million of the long term loans was classified as short term loa ns. Debt Equity Ratio reached (25.1%) which is less far than the acceptable international ratio of (60%-70%).

The total consolidated revenues for the year 2002 reached to JD (144.7) Million, compared to JD (147.9) Million in the year 2001, a decrease of (2.2%), of which JD (142) Million from potash and mixed salt and carnalite sales, meaning (98.1%). The remaining balance of JD (2.7) Million was derived from the following sources:

InterestOthersNet (Loss) from Investments in Affiliates

Total

Details3,22,2

(2,7)2,7

Amount in Million JD

Total Cost

Total consolidated cost amounted to JD (127) Million in the year 2002, compared to JD (114.1) Million in the year 2001, an increase of (11.3%), which represents (89.4%) of the net consolida- ted sales, versus (79.3%) in the year 2001.

Consolidated cost of goods sold amounted to JD (85.6) Million, representing (60.3%) of the net consolidated sales, compared to JD (78.9) Million, and (54.8%) in the year 2001.

Selling and distribution expenses amounted to JD (9.138) Million, compared to JD (9.494) Million in the year 2001, a decrees (6.4%) representing of (3.8%) of the net consolidated sales, versus (6.6%) in the year 2001.

Royalty amounted to JD (4.8) Million compared to JD (7.1) Million a decrease of (32.4%) in the year 2001, representing (3.4%) of the net consolidated sales , versus (5%) in the year 2001.

Consolidated general and administration expenses amounted to JD (6) Million in the year 2002 compared to JD (5.5) Million in the year 2001, an increase of (9%) due to the increase in salaries and expenses for rehabilitation of dike (18), representing (4.3%) of the net consolidated sales versus (3.9%) in the year 2001.

The Company realized consolidated net profit before income tax and other provisions of JD (20.405) Million, after the deduction of income tax amount JD ( 5.934) Million, thus the net profit amounted to JD (15.392) Million compared to JD ( 28.242) Million in the year 2001, which is due to the JD (11.940) Million provisions as mentioned earlier.

Profits available for appropriation, after the addition of retained earnings of JD (5.064) Million, totaled to JD (27.038) Million and appropriated as follows:

Profits

Statutory reserve (10%)Voluntary Reserve (10%)Jordanian Universities' Fees (1%)Provision for Vocational Training and Scientific Research (1%)Training and Scientific FundDirectors Remuneration Dividends (18%) of Share CapitalProvision for Income TaxRetained Earnings

Total

Details2,1972,1970,2200,2200,1330,075

14,9975,9341,065

27,038

Amount in Million JD

Shareholders' Equity

Audit Fees

The shareholders equity at the end of the year 2002 amounted to JD (285.4) Million a decrease of (1%) over the year 2001, after the appropriation of (10%) of net income for both statutory and voluntary reserves. The book value of the company's share amounted to JD (3.425) at the end of the year 2002.

The audit fees for the company and its subsidiaries amounted to JD (25.820) Thousand.

Financial IndicatorsThe following table summarizes the major indicators for the past five years noting that all figures (except for the financial ratios and per share data) are in Million JD.

Potash production (Tons)Potash Sales (Tons)Potash Sales RevenueConsolidated Sales RevenueOther RevenueFinancing ChargesNet Profit After TaxesNet Fixed AssetsLong Terms Loans &Other Long Term Obligations

Shareholders' Equity Minority Interest

Debt /Equity RatioReturn on InvestmentsReturn on Shareholders Equity Debt Service RatioCurrent RatioClosing Share Price/JDEarning Per Share/JDMarket Price/Earning Ratio

Details 2002 2001 2000 1999 19981,9561,960141.6142.0

2.74.1

15.4129.6

87.8

13.5285.4

25.1%4%

5.4%6.53.6

3.7600.185

20.2

1,9621,935143.6144.0

3.93.1

28.2134.3

82.3

14.4288.3

23.3%7.0%

10.0%8.64.0

3.6800.339

11.0

1,9351,919142.1144.3

9.24.4

29.5146.0

68.0

14.9275.1

23.2%7.3%

11.0%2.74.0

3.0500.354

9.0

1,8001,706130.8136.5

9.06.4

31.4156.9

65.8

32.9264.0

25.0%7.9%

12.0%2.73.3

4.3000.377

11.0

1,5261,516116.0119.4

7.45.1

24.1159.4

67.1

23.0232.6

26.7%6.7%

10.0%1.22.7

2.8000.288

9.7

Future PlansThe Company is looking forward to:-1- Maintain the production level at not less than (1.9) Million metric tons for the period 2003- 2005.2- Complete the feasibility studies and prepare the infrastructure to increase production capacity to around (2.4) Million Metric tons. 3- Improve the marketing strategies by entering new markets and strengthening APC's position In the existing one's by improving its production in accordance with the market needs.4- Control production costs.5- Proceed in the restructuring of the Company and to implement the ERP project.6- Increase the revenues of its investment in other companies. 7- Employ all necessary means to secure the company's rights from all parties involved in the collapse of part of dike (19) and rehabilitation of dike (18).

Declaration of the Board of DirectorsThe 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 2003.

The Company Board of Directors hereby declares its responsibility for the preparation of the financial statements and an effective control system in the Company.

RecommendationsYour 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 2002 and its plan.3- The independent auditor's report vis-à-vis its Consolidated Balance Sheet, the Consolidated Income Statement and Other Consolidated Financial Statements.4- The Distribution Statement and the recommendation for distributing (18%) of the Share Capital as dividends according to the Board of Directors' resolution. 5- Electing the independent auditor for the fiscal year ending December 31, 2003. 6-Any other matters.

To conclude, the Board of Directors extends thanks to the Government of the Hashemite Kingdom of Jordan for its support and help provided 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’s employees at all levels.

33

Forty-Sixth Annual Report And Financial Statements

AARRAABB PPOOTTAASSHH CCOOMMPPAANNYY LLIIMMIITTEEDD

AA PPuubblliicc SShhaarreehhoollddiinngg CCoommppaannyy

CCOONNSSOOLLIIDDAATTEEDD FFIINNAANNCCIIAALL SSTTAATTEEMMEENNTTSS AASS OOFF DDEECCEEMMBBEERR 3311,, 22000022 aanndd 22000011

Together With

Auditors’ Report

34

Forty-Sixth Annual Report And Financial Statements

To The Shareholders of Arab Potash CompanyAmman – Jordan

We have audited the accompanying consolidated balance sheet of ARAB POTASHCOMPANY AND SUBSIDIARIES as of December 31, 2002 and the related consoli-dated statements of income, changes in shareholders’ equity and cash flows for theyear then ended. These consolidated financial statements are the responsibility ofthe Company’s management. Our responsibility is to express an opinion on theseconsolidated financial statements based on our audit.

We conducted our audit in accordance with International Auditing Standards.Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of material misstatements.An audit includes examining, on a test basis, evidence supporting the amounts anddisclosures in the financial statements. An audit also includes assessing the account-ing principles used and significant estimates made by management, as well as eval-uating the overall financial statement presentation. We believe that our audit pro-vides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fair-ly, in all material respects, the consolidated financial position of ARAB POTASHCOMPANY AND SUBSIDIARIES as of December 31, 2002 and the consolidatedresults of the operations and the consolidated cash flows for the year then ended inaccordance with International Financial Reporting Standards.

Amman – JordanMarch 1, 2003

The accompanying notes from 1 to 30 are an integral part of these consolidated financial statements

Forty-Sixth Annual Report And Financial Statements

35

Arab Potash CompanyConsolidated Balance Sheet as of December 31, 2002

(In Thousands of Jordanian Dinars)

ASSETSCurrent AssetsCash on Hand and at BanksAccounts Receivable, NetInventorySpare PartsOther Current AssetsTotal Current Assets

Strategic Spare Parts, NetDue Form Jordan Safi Salt Company (under liquidation), NetProjects in ProgressInvestment in AssociatesAvailable for Sale InvestmentsOther AssetsProperty, Plant and EquipmentTotal Assets

Liabilities and Shareholders’ EquityCurrent LiabilitiesCurrent Portion of Long Term Loans Accounts PayableCash Received under Letters of Guarantee Other Current LiabilitiesTotal Current Liabilities

Long Term LoansOther ReservesMinority Interests

Shareholders’ Equity Paid in CapitalAdditional Paid in CapitalDividendsStatutory ReserveVoluntary ReserveRetained EarningsTotal Shareholders’ EquityTotal Liabilities and Shareholders’ Equity

345

6

7

2589

10

11

1213

111415

16

90,63231,4256,630

12,3464,039

145,072

21,345

3,21186,33528,730

87511,429

129,600426,597

7,9917,0668,350

16,48939,896

74,93912,85513,508

83,31854,85414,99746,89484,2711,065

285,399426,597

66,41426,7767,015

11,2145,119

116,538

25,237

10,71585,36029,6881,565

11,184134,260414,547

5,6147,243

-16,62729,484

70,48311,82214,421

83,31854,85418,33044,69782,0745,064

288,337414,547

2002Notes 2001

2002Notes 2001

The accompanying notes from 1 to 30 are an integral part of these consolidated financial statements

Forty-Sixth Annual Report And Financial Statements

36

Arab Potash CompanyConsolidated Statement of Income

for the Year Ended December 31, 2002

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

141,96085,62356,337

9,1386,0414,8004,2271,384

30,747

3,1952,222

( 1,229)( 4,135)( 2,682)

28,118

( 7,713)-

20,405( 5,934)

14,471921

15,392

0,185

83,318

Sales, NetCost of SalesGross Profit

Less: Selling and Distribution ExpensesGeneral and Administrative ExpensesRoyalty to the Government of JordanProvision for Slow Moving Spare PartsProvision for Doubtful Debts

Income from Operations

Interest and Commission IncomeOther Income, NetOther ExpensesInterest Expense and Bank ChargesNet Loss from Investments in Associates

Income Before Income Tax, Provision for Jordan SafiSalt Company Losses and Provision for ExceptionalLosses

Provision for Jordan Safi Salt Company(under liquidation) LossesProvision for Exceptional Losses

Income Before Income TaxProvision for Income Tax

Income After Income TaxMinority Interests

Net Income

Earnings Per ShareWeighted Average Number of Shares (In Thousands of Shares)

18

17

2320

2122

24

2526

19

143,96778,94065,027

9,4945,5407,146

1711,451

41,225

4,245518

( 1,367)( 3,146)( 872)

40,603

( 2,000)( 4,000)

34,603( 6,731)

27,872370

28,242

0,339

83,318

The accompanying notes from 1 to 30 are an integral part of these consolidated financial statements

Forty-Sixth Annual Report And Financial Statements

37

Arab Potash CompanyConsolidated Statement of Changes in

Shareholders’ Equityfor the Year Ended December 31, 2002

(In Thousands of Jordanian Dinars)

Balance at January 1, 2001 Dividends PaidNet IncomeAppropriations toStatutory Reserve (10%) Appropriations toVoluntary Reserve (20%)Dividends ProposedBalance at January 1, 2002Dividends PaidNet IncomeAppropriations toStatutory Reserve (10%) Appropriations toVoluntary Reserve (10%) Dividends ProposedBalance at December 31, 2002

275,092(14,997)28,242

-

--

288,337(18,330)15,392

-

--

285,399

TotalRetainedEarnings

VoluntaryReserve

StatutoryReserve

DividendsAdditional

Paid inCapital

Paid inCapital

5,881-

28,242

( 3,576)

( 7,153)(18,330)

5,064-

15,392

( 2,197)

( 2,197)(14,997)

1,065

74,921--

-

7,153-

82,074--

-

2,197-

84,271

41,121--

3,576

--

44,697--

2,197

--

46,894

14,997(14,997)

-

-18,33018,330 (18,330)

-

-

- 14,99714,997

54,854--

-

--

54,854--

-

--

54,854

83,318--

-

--

83,318--

-

--

83,318

The accompanying notes from 1 to 30 are an integral part of these consolidated financial statements

Forty-Sixth Annual Report And Financial Statements

38

Arab Potash CompanyConsolidated Statement of Cash Flows

for the Year Ended December 31, 2002

(In Thousands of Jordanian Dinars)

Cash Flows from Operating ActivitiesIncome before Income TaxDepreciationInterest and Commission IncomeInterest and Bank Charges ExpenseLosses from Investments in AffiliatesProvision for Jordan Safi Salt Company (under liquidation) LossesProvision for Doubtful Debts Provision for Slow Moving Spare PartsProvision for Exceptional LossesOthersDecrease (Increase) in Current Assets Accounts ReceivableInventorySpare PartsOther Current Assets(Decrease) Increase in Current LiabilitiesAccounts PayableOther Current LiabilitiesCash Received under Letters of Guarantee

Income Tax PaidNet Cash Flows from Operating Activities

Cash Flows from Investing ActivitiesPurchase of Property, Plant and Equipment, NetAmounts Paid for Projects in ProgressPurchase of InvestmentsProceeds from Sale of InvestmentsInterest and Commission ReceivedOther AssetsNet Cash Flows Used in Investing Activities

Cash Flows from Financing ActivitiesProceeds from LoansRepayment of LoansInterest and Bank Charges PaidDividendsMinority InterestsNet Cash Flows Used in Financing ActivitiesNet Increase in CashCash and Cash Equivalents, Beginning of YearCash and Cash Equivalents, End of Year

34,60324,642

( 4,245)3,146

8722,0001,451

1714,000

557

16,862( 640)( 2,205)

599

( 716)1,465

-82,562

( 11,139)71,423

( 7,476)( 39,662)( 14,285)

4804,245

( 491)( 57,189)

17,900( 4,883)( 3,466)( 14,997)( 130)( 5,576)

8,65857,75666,414

2002 2001

20,40524,032

( 3,195)4,1352,6827,7131,3844,227

-1,182

( 6,242)385

( 1,467)1,080

( 177)( 1,049)

8,35063,445

( 5,151)58,294

( 1,763)(16,071)( 1,729)

6953,195

( 245) (15,918)

9,112( 5,678)( 3,270)(18,330)

8(18,158)24,21866,41490,632

Forty-Sixth Annual Report And Financial Statements

39

Arab Potash CompanyNotes to the Consolidated Financial Statements

December 31, 2002

(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 registeredon July 7, 1956. During 1958, the Company was granted a concession from theGovernment of Jordan, to exploit the minerals and salts of the Dead Sea brine. The con-cession expires after 100 years from the grant date, after which, the Company’s factoriesand installations become the property of the Government of Jordan. Under the terms ofthe concession, the Government of Jordan is entitled to a royalty of JD 0.008 for eachton of potassium chloride, (“Potash”), exported by the Company. The maximum royal-ty payable is limited to 25% of the Company’s net income.

The Company has increased its paid in capital during December 1997 from JD 79,695to 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 GDRrepresents one ordinary share with a nominal value of JD 1 per share. Currently, theCompany produces and markets Potash only and trades it in the international market.

The number of employees in the Company was 2,379 and 2,364 as of December 31,2002 and 2001, respectively.

The financial statements were authorised for issue by the Board of Directors subsequentto their meeting held on March 1, 2003. These financial statements require the approvalof the shareholders.

(2) SUMMARY OF SIGNIFICANT ACCOUNTINGPOLICIES

The consolidated financial statements have been prepared in accordance withInternational Financial Reporting Standards, as published by the InternationalAccounting Standards Board. They are prepared under the historical cost convention,except for available for sale investments which are stated at their fair value.

2.1 Principles of Consolidation

The consolidated financial statements include the accounts of the Company and all ofthe companies that it controls. This control is normally evidenced when the Companyowns, either directly or indirectly, more than 50% of the voting rights of a company'sshare capital and is able to govern the financial and operating policies of an enterprise

40

Forty-Sixth Annual Report And Financial Statements

so as to benefit from its activities. The equity and net income attributable to minorityshareholders' interests are shown separately in the balance sheets and income state-ments, respectively.

The following subsidiaries have been consolidated:

✽ During 2001, Jordan Dead Sea Industries reduced its share capital from JD 30,000to JD 100 and changed its status from a public shareholding company to a limitedliability company.

The purchase method of accounting is used for acquired businesses. Companiesacquired or disposed of during the year are included in the consolidated financial state-ments from the date of acquisition or to the date of disposal.

2.2 Cash and Cash Equivalents

Cash includes cash on hand and cash with banks. Cash equivalents are short-term, high-ly liquid investments that are readily convertible to known amounts of cash with origi-nal maturities of three months or less and that are subject to an insignificant risk ofchange in value.

2.3 Receivables

Receivables are stated at the fair value of the consideration given at the date of sale andare carried later at amortized cost, after provision for impairment.

2.4 Inventory and Spare Parts

Finished goods are valued at the lower of average cost or net realizable value. Costincludes all direct production costs plus a share of the indirect overheads. Work inprogress for Potash is not recognized, since the production cycle spanning the pumpingof 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 marketafter provision for slow moving items. Strategic spare parts are expected to be used aftermore than one year. The Company’s policy is to maintain sufficient spare parts to main-tain its plants, since the technology used in producing Potash is unique to the Dead Sealocation and is not commonly used by other producers in other locations.

Jordan Dead Sea Industries ✽Jordan Magnesia CompanyNumeira Mixed Salts and Mud Company

99.755.352.7

Paid in capitalThousands of Shares

Percentage ofOwnership

10030.0001.500

41

Forty-Sixth Annual Report And Financial Statements

2.5 Property, Plant and Equipment

Property, plant and equipment are stated at cost less accumulated depreciation andaccumulated impairment loss. When assets are sold or retired, their cost and accumu-lated depreciation are eliminated from the accounts and any gain or loss resulting fromtheir disposal is included in the income statement.

The initial cost of property, plant and equipment comprises its purchase price, includ-ing import duties and non-refundable purchase taxes and any directly attributable costsof bringing the asset to its working condition and location for its intended use.Expenditures incurred after the fixed assets have been put into operation, such as repairsand maintenance and overhaul costs, are normally charged to income in the period inthe costs are incurred. In situations where it can be clearly demonstrated that the expen-ditures have resulted in an increase in the future economic benefits expected to beobtained from the use of an item of property, plant and equipment beyond its original-ly assessed standard of performance, the expenditures are capitalised as an additionalcost of property, plant and equipment.

Depreciation is computed on a straight-line basis at annual rates between 2% to 20%.

The useful life and depreciation method are reviewed periodically to ensure that themethod and period of depreciation are consistent with the expected pattern of economicbenefits from items of property, plant and equipment.

Projects in progress represents plant and properties under construction and is stated atcost. This includes cost of construction, plant and equipment and other direct costs.Construction in progress is not depreciated until such time as the relevant assets arecompleted and put into operational use.

2.6 Investments in Associated Companies

Investments in associated companies (investments between 20% to 50% in a company’sequity) where significant influence is exercised by the Company are accounted for usingthe equity method. An assessment of investments in associates is performed when thereis an indication that the asset has been impaired or the impairment losses recognised inprior years no longer exist.

When the Company’s share of losses exceeds the carrying amount of the investment, theinvestment is reported at nil value and recognition of losses is discontinued except tothe extent of the Company’s commitment.

2.7 Available for Sale Investments

The company adopted IAS 39, Financial Instruments: Recognition and Measurement on1 January 2001. Accordingly, investments are classified as available for sale.

All purchases and sales of investments are recognised on the trade date.

Investments are initially measured at cost, which is the fair value of the considerationgiven for them, including transaction costs.

42

Forty-Sixth Annual Report And Financial Statements

Available for sale are subsequently carried at fair value without any deduction for trans-action costs by reference to their quoted market price at the balance sheet date.Investments that do not have a quoted market price in an active market and whose fairvalue cannot be reliably measured by alternative valuation methods are measured at cost.

Gains or losses on measurement to fair value of available-for-sale investments are recog-nised directly in the fair value reserve in shareholders equity, until the investment is soldor otherwise disposed of, or until it is determined to be impaired, at which time thecumulative gain or loss previously recognised in equity is included in net profit or lossfor the period.

2.8 Revenue Recognition

Revenue is recognised when it is probable that the economic benefits associated withthe transaction will flow to the enterprise and the amount of the revenue can be meas-ured reliably.

Revenue from sales of goods are recognised when delivery has taken place and transferof risks and rewards has been completed.

2.9 Foreign Currency

Assets and liabilities denominated in foreign currencies are translated to JordanianDinars using the prevailing exchange rates at year end. Foreign currency transactionsduring the year are recorded using exchange rates that were in effect at the dates of thetransactions. Foreign exchange gains or losses are reflected in the statement of income.

2.10 Employee Termination Indemnities

The Company operates an employee termination indemnity scheme, where the benefitaccrues to employees on pro-rata basis during their employment period and is based oneach employee’s current salary. Other liabilities in the accompanying consolidatedfinancial statements reflect the maximum amounts of the indemnities as of the balancesheets dates of JD 12,792 and JD 11,731 respectively, at December 31, 2002 and 2001.

2.11 Borrowings

Borrowing costs generally are expensed as incurred. Borrowing costs are capitalised if theyare directly attributable to the acquisition, construction or production of a qualifying asset.Capitalization of borrowing costs commences when the activities to prepare the asset arein progress and expenditures and borrowing costs are being incurred.

Borrowing costs are capitalised until the assets are substantially ready for their intendeduse. If the resulting carrying amount of the asset exceeds its recoverable amount, animpairment loss is recorded.

Interest capitalized on Magnesium Oxide project during the years 2002 and 2001amounted to JD 2,513 and JD 1,544 respectively. The company stopped to capitalizeinterest on Magnesium Oxide project on June 30, 2002.

43

Forty-Sixth Annual Report And Financial Statements

2.12 Income Taxes

The Company provides for income taxes in accordance with the Income Tax Law num-ber (57) of 1985 and its subsequent amendments, the latest of which being Law No. 25of 2001 which came into effect on January 1, 2001, and in accordance with IAS 12.Deferred taxation is brought to account under the liability method in accordance withIAS 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, maygive rise to a deferred tax asset, which due to its uncertainty has not been recognized inthe financial statements.

(3) CASH AT BANKS

This item consists of the following:

-Deposits in Jordanian Dinars at local banks that mature within one and 3 months bear-ing interest that ranges between 3.25% to 5.76%.

-Deposits in US Dollars at local banks that mature within one month bearing interestthat ranges between 0.7% to 1.89%.

-Deposits in Euro at local banks that mature within one month bearing interest thatranges between 2.30% to 2.61%.

-Deposits at banks with total amount of JD 4,233 represent the net balance of confis-cated guarantee from the contractor of Jordan Magnesia Company after deductingamounts spent on the project (note 12).

(4) ACCOUNTS RECEIVABLE

This item consists of the following:

(5) INVENTORY

This item consists of the following:

20012002

29,082487

1,402159

31,1304,354

26,776

36,108365557133

37,1635,738

31,425

Trade ReceivablesDue from Associates Advances to Magnesia Project Contractors Others

Less: Allowance for Doubtful Debts

Finished PotashOthers

6,466164

6,630

6,801214

7,015

2002 2001

44

Forty-Sixth Annual Report And Financial Statements

(6) OTHER CURRENT ASSETS

This item consists of the following:

(7) STRATEGIC SPARE PARTS

This item consists of the following:

(8) PROJECTS IN PROGRESS

This item consists of the following:

❈ The dredging of the salt mushrooms will increase the production capacity of the com-pany’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 usefullife of the solar evaporation system. The increase in production capacity as a result ofthis project is estimated to be 54,000 tons of potash per annum initially, and it will riseto 125,000 tones per annum following the completion of the solar system conversionproject.

Based on the above, since the project will increase the production capacity and the use-ful life of the solar system and since the original cost of the solar system has been fullydepreciated, the company’s management decided to capitalize the project’s cost anddepreciate it over the estimated useful life in accordance with International FinancialReporting Standards. The project is expected to be completed during 2003 at total esti-mated cost of JD 61,700. Up to December 31, 2002 the Company paid JD 56,200 onthis project which has been transferred to property, plant and equipment.

End of 2002TransfersAdditions

Magnesium Oxide ProjectSalt Mushrooms Dredging ❈

Construction of Dikes 19 and 20 (note 26)Other ProjectsTotal

-15,822

-1,787

17,609

8,2048,032

- 2,348

18,584

Beginning of 2002

59,8277,790

17,223520

85,360

68,031-

17,2231,081

86,335

20012002

Strategic Spare PartsLess: Allowance for Slow Moving Spare Parts

27,4526,107

21,345

27,3412,104

25,237

PrepaymentsPayments on Letters of CreditOther

3973,244

3984,039

934,759

2675,119

2002 2001

45

❈ This item represents fixed assets disposals at their net book value.

Forty-Sixth Annual Report And Financial Statements

(9) INVESTMENT IN ASSOCIATES

This item represents the Company’s investment in the share capital of the followingcompanies:

❈ Jordan Investment and South Development owns 77.6% of South DevelopmentCompany for Industrial Equipment and Workshops.❈❈ The General Assembly of Jordan Safi Salt Company decided in its extraordinary meet-ing held on April 28, 2002 to liquidate the company.❈❈❈ The General Assembly of Consulting Company for Construction and Maintenancedecided in its extraordinary meeting held on June 19, 1999 to liquidate the company.

(10) PROPERTY, PLANT AND EQUIPMENT

This item consists of the following:

20012002 Percentage

of ownership

Kemira Arab Potash CompanyJordan Bromine Company (paid 93.7%)Nippon Jordan Fertilizer Company Jordan Investment and SouthDevelopment Company ❈

Jordan International Chartering CompanyJordan Safi Salt Company ❈❈

Consulting Company for Construction and Maintenance ❈❈❈

South Development Company for IndustrialEquipment and Workshops

12,10011,7764,368

383103--

- 28,730

505020

45.4520

24.2138

22

Number of shares

14,500,00015,000,0003,345,600

833,00012,000

1,452,308200,000

100,000

14,22411,1833,771

402108--

-29,688

Total Tools Hospital

Equipment

Furnitureand

Fixture Vehicles

Machineryand

EquipmentDikesBuildingsLand

437,17919,410

580

456,009

302,919 24,032

542

326,409

129,600134,260

1,50147

-

1,548

1,214 106-

1,320

228287

5,774321136

5,959

4,296373121

4,548

1,4111,478

453--

453

4294

-

433

2024

2,937--

2,937

---

-

2,9372,937

41,08016728

41,219

30,1302,042

28

32,144

9,07510,950

106,46115,301

-

121,762

48,2207,594

-

55,814

65,94858,241

256,0643,035

42

259,057

198,32012,805

19

211,106

47,95157,744

22,909539374

23,074

20,3101,108

374

21,044

2,0302,599

Cost -Balance at January 1, 2002AdditionsDisposals ❈

Balance at December 31, 2002Accumulated Depreciation and Impairment Losses -Balance at January 1, 2002AdditionsDisposals *Balance at December 31, 2002Net Book Value as of –December 31, 2002December 31, 2001

46

Forty-Sixth Annual Report And Financial Statements

Total2002 2001

Shor Term2002

Long Term2002

International Bank for Reconstruction & DevelopmentIslamic Development Bank - JeddahSyndicated loanEuropean Investment Bank

Installments

7,86823,91210,65033,66776,097

6,32423,44020,59032,57682,930

4,78622,11217,75030,29174,939

1,5381,3282,8402,2857,991

(11) LONG TERM LOANS

This item represents loans granted by the following:

International Bank for Reconstruction & Development

Loan (B) for an amount of US $ 12,000,000 to finance plant modification. The loan isrepayable 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 bythe Government of Jordan. The loan agreement stipulates that “ the borrower shall payinterest on the principal amount of the loan withdrawn and outstanding from time totime at a rate per annum for each interest period equal to one half per cent per annumabove the cost of the bank’s qualified borrowings for the last semester ending prior tothe commencement of such interest period”. The average interest incurred by theCompany was approximately 7.1% per annum. The company pays a guarantee fee at0.8% per annum.

Loan (C) for an amount of US $ 15,000,000 to finance potash expansion project. Theloan is repayable over 24 semi annual installments, the first of which was due onJanuary 15, 1997 and the last installment will be due on July 15, 2008. The loan is guar-anteed by the Government of Jordan. The loan agreement stipulates that “ the borrow-er shall pay interest on the principal amount of the loan withdrawn and outstandingfrom time to time at a rate per annum for each interest period equal to one half per centper annum above the cost of the bank’s qualified borrowings for the last semester end-ing prior to the commencement of such interest period”. The average interest incurredby the Company was approximately 4.1% per annum. The Company pays a guaranteefee 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 stud-ies. The loan is repayable over 24 semi annual installments, the first of which was dueon June 30, 1993 and the last installment will be due on December 30, 2004. The loanis guaranteed by the Government of Jordan. The loan carries no interest but a servicefee is charged at 1.5% per annum.Loan (C) for an amount of SDR 14,152,292 (JD 14,412) to finance the construction ofthe 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

47

Forty-Sixth Annual Report And Financial Statements

January 17, 2003. The loan is guaranteed by the Government of Jordan. The cost ofborrowing is approximately 9% per annum less 15% discount subject to repaymentsbeing made on the due dates.

Jordan Dead Sea Industries Company signed an agreement with Islamic Bank forDevelopment / Jeddah, in which the bank assigned the Company to buy machinery andequipment on behalf of Jordan Magnesia Company for an amount not exceedingUS$ 28,035,000 and to lease it to the company for 9 years after a preparation period of3 years for an annual fee of 7.5%. The ownership of the machinery will be transferredto the company as a donation at the end of the agreement period. This agreement isguaranteed by Arab Potash Company. The loan agreement was modified at August 29,2002 for Jordan Magnesia Company to become the borrower instead of Jordan DeadSea Industries Company. Only US$ 26,550,465 (JD 18,824) has been utilized from thisloan up to December 31, 2002 which represents 95% of total loan amount.

West Merchant Bank

The Company was granted a loan amounting to US $ 10,000,000 to finance the con-struction of the industrial salt plant. The loan is repayable in ten semi annual install-ments, the first installment was due on April 21, 1997 and the last installment was dueon October 21, 2001. The loan is guaranteed by the Arab Bank – London and bearsinterest 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 dueon October 10, 2002 and the last installment on April 10, 2013. The loan is guaran-teed by the Government of Jordan and bears interest at 6.18% per annum.

Syndicated loan

Jordan Magnesia Company was granted a Syndicated loan amounting to US$30,000,000 managed by Arab Bank and Citi Bank to finance part of its project. Thisloan bears interest at six months LIBOR plus 1.75% and is repayable over ten unequalsemi annual installments, the first of US$ 1,000,000 was due on July 12, 2002 and thelast of US$ 5,000,000 will be due on January 12, 2007. Only US$ 29,000,000(JD 20,590) has been utilized from this loan which represents 96.6% of total loanamount. This loan is guaranteed by Arab Potash Company.

48

Forty-Sixth Annual Report And Financial Statements

The aggregate amounts of annual principal maturities of long term obligations are asfollows:

(12) CASH RECEIVED UNDER LETTERS OFGUARANTEE

These letters of guarantee were withdrawn during June 2002 due to the MagnesiumOxide project contractor (Atilla Dogan and Agra Monenco Companies Joint Venture) noncompliance with the terms and conditions of the contract agreement. Moreover, thecompany terminated the contract on July 22, 2002 in accordance with the terms of thecontract which indicates that the Company shall complete the project and charge thecontractor.

December 31

20042005200620072008Thereafter

13,09111,25911,2498,5637,901

22,87674,939

2001 2002

Royalty to The Government of JordanProvision for Income TaxContractors RetentionsAccrued Interest and ExpensesJordanian Universities’ FeesScientific Research and Vocational TrainingEducation, Vocational and Technical Training Support FundOther

4,8002,8171,4715,034

220652133

1,36216,489

7,1462,0341,3083,978

358617-

1,18616,627

2001 2002

Employees’ end of Service Indemnity ProvisionEmployees’ Vacation Provision

12,79263

12,855

11,73191

11,822

(13) OTHER CURRENT LIABILITIES

This item consists of the following

(14) OTHER RESERVES

This item consists of the following:

49

Forty-Sixth Annual Report And Financial Statements

(15) MINORITY INTERESTS

This item represents net shareholders’ partners’ equity in subsidiary companies afterdeducting Arab Potash Company’s share in these companies.

The details of minority interests in subsidiary companies are as follows:

(16) SHAREHOLDERS’ EQUITY

Statutory Reserve

The accumulated amounts in this account of total JD 46,894 represent 10% of theCompany’s net income before income tax according to the Companies Law. TheCompany has the option to cease such appropriations when the balance of this reservereaches 25 % of the Company’s authorized capital. The statutory reserve is not availablefor distribution to shareholders.

Voluntary Reserve

The accumulated amounts in this account of total JD 84,271 represent cumulative appro-priations not exceeding 20% of net income before income tax. This reserve is availablefor distribution to shareholders.

DIVIDENDS

The Company’s general assembly approved at April 21, 2002, the proposal made by theBoard of Directors to distribute JD 18,330 as dividends, representing 22% of theCompany’s paid in capital.

The Board of Directors will recommend to the Company’s general assembly during 2003to distribute JD 14,997 as dividends, representing 18% of the Company’s paid in capital.

2001 2002

Jordan Magnesia CompanyNumeira Mixed Salts and Mud CompanyJordan Dead Sea Industries Company

12,883 624

113,508

13,773647

114,421

50

Forty-Sixth Annual Report And Financial Statements

(17) GROSS PROFIT

Following is a breakdown of gross profit (loss) by company:

(18) SALES ANALYSIS

Following is a summary of sales by product and customers’ geographical location

(19) INCOME TAX

The provision for income tax was calculated in accordance with the Jordanian IncomeTax Law No. 57 of 1985 and its subsequent amendments, the latest of which being LawNo. 25 of 2001, which came into effect on January 1, 2001.

The Company’s effective tax rate was 29.1% and 19.5% for 2002 and 2001 respective-ly. The principal differences between these effective rates and the statutory tax rates of15% are as follows:

SalesCost of Sales

143,96778,94065,027

141,96085,62356,337

342365( 23)

39531283

143,62578,57565,050

141,56585,31156,254

TotalNumeira Co.Potash Co.200120022001200220012002

Far EastIndia & ChinaEuropeSouth AmericaMiddle EastAfrica

48,78274,31010,3891,9565,0133,517

143,967

41,03771,87017,456

56,3435,249

141,960

----

342-

342

186

365

330-

395

48,78274,31010,3891,9564,6713,517

143,625

41,01971,86417,420

-6,0135,249

141,565

TotalNumeira Co.Potash Co.200120022001200220012002

20012002

Computed tax at statutory tax ratesPrior years’ income taxTax effect of expenses that are not allowable for tax purposesSubsidiaries and affiliates losses not available for tax relief

3,061109

2,362402

5,934

5,190135

1,275131

6,731

51

Forty-Sixth Annual Report And Financial Statements

(20) GENERAL AND ADMINISTRATIVE EXPENSES

This item consists of the following:

(21) OTHER INCOME, NET

This item consists of the following

(22) OTHER EXPENSES

This item consists of the following:

20012002

Salaries, Wages and Other BenefitsTravel ExpensesDepreciationBoard of Directors’ RemunerationMaintenance and RepairsElectricity ExpensesFuelPost, Telephone and TelexStationery and PrintingProfessional and Consulting FeesHospitalityAdvertizingDike 18 ExpensesDike 19 ExpensesLicense and Other FeesOther

1,994 16130775

12445348141

55552

1071,116

7839

5576,041

1,60533332775

12238466646

3704395

7501,225

16383

5,540

20012002

Currency Difference of Exchange Gain (Loss)Dividends IncomeGain on Sale of InvestmentsServices IncomeUnutilized ProvisionsOthers, Net

57432316763047751

2,222

(199)54

328523

-(188)518

20012002

Donations and Educational GrantsJordanian Universities FeesScientific Research and Vocational Training FeesEducation, Vocational and Technical Training Fund

656220220133

1,229

651358358

-1,367

52

Forty-Sixth Annual Report And Financial Statements

(23) SELLING AND DISTRIBUTION EXPENSES

This item consists of the following:

(24) NET LOSS FROM INVESTMENTS INASSOCIATES

This item represents (loss) income from investments in associates as follows:

20012002

Marketing -Salaries, Wages and Other BenefitsSales CommissionDepreciationTravel ExpensesAdvertizing ExpensesSample TestingPeriodicalsPost, Telephone and TelexOthers

Shipping Terminal (Aqaba) -Handling ExpensesSalaries, Wages and Other BenefitsDepreciationElectricityRepair and MaintenanceFuelInsuranceRent Others

2652,185

1423843

2321412223

3,163

3,296847

1,16725823119382396

5,9759,138

2382,347

1527559

3841362210

3,486

3,250776

1,43125612830362477

6,0089,494

20012002

Kemira Arab Potash CompanyJordan Bromine CompanyNippon Jordan Fertilizer CompanyJordan Investment and South Development CompanyJordan Safi Salt Company (under liquidation)Other

(2,124)(1,157)

597( 19)

-21

(2,682)

(351)(532)544(353)(151)( 29)(872)

53

Forty-Sixth Annual Report And Financial Statements

(25) JORDAN SAFI SALT COMPANY (UNDERLIQUIDATION) LOSSES

Due to the substantial losses incurred by Jordan Safi Salt Company which affected itsability to settle its liabilities towards the Arab Potash Company and other creditors, thecompany has been put under liquidation. The total possible losses that might incur tothe company has been estimated to be JD 9,713. Accordingly, the Arab PotashCompany provided for possible losses by JD 2,000 in 2001 and increased the provisionin 2002 by JD 7,713 to become JD 9,713. This provision would be modified accordingto the actual losses that follow the liquidation process.

Due from Jordan Safi Salt Company (under liquidation) represents the following:

(26) PROVISION FOR EXCEPTIONAL LOSSES

2001

During 2001, several sinkholes have appeared in Dike (18). As a result, the Companystopped pumping water into the pan and reduced the water level to prevent the dikefrom collapsing.

Currently, the Company is conducting technical studies to rehabilitate the dike and toincrease its safety factor in order to put the dike back in operations. An impairment lossof JD 4,000 has been recognized in the 2001 income statement.

2000

During March 2000, Dike (19) – classified under projects in progress – suffered frompartial failure. A definitive quantification of the damages sustained has not been com-pleted as of the date of these financial statements. The Company’s management is cur-rently involved in the preparation for the initiation of legal proceeding the subject mat-ter of which is to claim for proper compensation. Management is also involved in tak-ing the steps necessary to have Dike (19) re-designed and re-built in order to put it intooperation and have it utilized for the purpose it was originally built. Managementbelieves that the Company’s financial position and its results of operations will not bematerially affected as a result of the said failure of the Dike and the related litigation.

20012002

Due from Jordan Safi Salt Company (under liquidation)Less: Allowance for Jordan Safi Salt Company (under liquidation) losses

12,9249,7133,211

12,7152,000

10,715

54

Forty-Sixth Annual Report And Financial Statements

Since the procedures needed for the re-design and the reconstruction of the dike willtake a considerable period of time, the Company has provided the amount of JD 10,000from the 2000 income statement.

(27) 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 ofJordan. In return, the Company pays to the Government an annual royalty, which iscomputed as explained in Note 1.

• As outlined in Note 11, the Government has guaranteed certain loans granted to theCompany.

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 itsboard of directors.

The Company guaranteed Jordan Dead Sea Industries Company obligations to IslamicDevelopment Bank - Jeddah which resulted from the agreement to purchase and leaseJordan Magnesia Company machinery and equipment for an amount ofUS$ 28,035,000. The loan agreement was modified at August 29, 2002 for JordanMagnesia Company to become the borrower instead of Jordan Dead Sea IndustriesCompany. Also, the company guaranteed the syndicated loan obtained by JordanMagnesia Company from local banks for US$ 30,000,000.

Jordan Dead Sea Industries guaranteed overdraft facilities granted by local banks toJordan Safi Salt Company with a ceiling of JD 2,200. This guarantee was transferred toArab Potash Company instead of Jordan Dead Sea Industries Company during 2002.On July 7, 1992, the Company and Jordan Phosphate Mines Company signed a supplyagreement with Nippon Jordan Fertilizer Company (“NJFC”). Under this agreement theCompany undertook to supply NJFC with all of its Potash requirements, and NJFC, under-took to purchase all of its Potash requirements from the Company. The price of Potashwill be based on pricing formulas contained in the agreement, whereby the resultingprice will be substantially similar to the international market price of Potash. TheCompany owns 20% of NJFC which commenced production during 1997. TotalCompany’s sales to NJFC during 2002 and 2001 were JD 2,154 and 2,422 respectively.

On October 10, 1996, the Company signed a cooperation and supply agreement withJordan Safi Salt Company (“JOSSC”). Under this agreement, the Company agreed togrant JOSSC exclusive rights to produce industrial and table salt from within theCompany’s concession area. The agreement has been modified during 2000 to reducethe cost of raw salt to 3% of JOSSC’s net income with a grace period of 3 years up toDecember 31, 2003. The agreement runs for a period of 20 years.

55

Forty-Sixth Annual Report And Financial Statements

On June 2, 1997, the Company signed a cooperation and supply agreement withNumeira Mixed Salts and Mud Company (Numeira). Under this agreement, theCompany agreed to grant Numeira exclusive rights to produce, dry and sell Carnalitesalts and Dead Sea mud within the Company’s concession area. In addition, TheCompany undertook to provide Numeira with salts and mud at JD 0.05 and JD 0.01 perton respectively. In addition, Numeira pays an amount of JD 4 in return of land annu-al rent. The agreement runs for a period of 15 years.

During 1998, the Company signed an agreement with Albamarle Holding Company(AH) and Jordan Dead Sea Industries Company (Jodico) to establish a company, JordanBromine Company (JBC). Under this agreement, the Company granted JBC the right toconstruct and operate an integrated manufacturing facility to produce, sell and marketbromine and bromine derivatives within the Company concession area for at least 7years, after which JBC has the right of first refusal on any new projects for production ofbromine in Jordan. The Company undertook to provide JBC with potassium chloride.During 2000, the Company acquired Jodico’s share in JBC.

On June 22,1999, the Company signed an agreement with Kemira Agro to establish acompany, Kemira Arab Potash Company (KEMAPCO), to design, construct and operatea Potassium Nitrate, Decalcium Phosphate and Nitric Acid plant using the technologyprovided by Kemira Agro and the potash provided by the Company. The Companyagreed to sublease KEMAPCO two plots of land in Aqaba and to supply the new proj-ect with muriate of potash.

The company guaranteed 50% of the syndicated loan obtained by Nippon JordanFertilizer Company from local banks for US$ 12,200,000 and JD 8,120.

The Company guaranteed 50% of the loans obtained by Jordan Bromine Company fromthe European Investment Bank and the Islamic Development Bank – Jeddah for Euro50,000,000 and US $ 29,000,000 respectively.

The Company guaranteed 50% of the loan obtained by Kemira Arab Potash Companyfrom the European Investment Bank for Euro 30,000,000.The Company guaranteed Kemira Arab Potash Company’s obligation to the IslamicDevelopment Bank – Jeddah which resulted from the agreement to purchase and Leasethe equipment of the project for an amount of US $ 27,000,000.

The Company guaranteed 50% of the loans obtained by Kemira Arab Potash Companyfrom Jordan Kuwaiti Bank for US$ 5,000,000 and JD 3,550.

The company guaranteed 50% of the loan and facilities obtained by Kemira Arab PotashCompany from Arab Banking Corporation Bank for US$ 4,000,000 and US$ 1,000,000respectively.

56

Forty-Sixth Annual Report And Financial Statements

(28) CONTINGENT LIABILITIES ANDCOMMITMENTS

As of December 31, 2002, the Company had the following additional contingent liabil-ities and commitments:

• Letters of credit and collection bills amounting to JD 3,107.• Guarantees for an amount of JD 520.• The Company’s committed and contracted for capital expenditure amounted to

JD 39,521.• The Company’s committed but not contracted for capital expenditure amounted to

JD 16,749.• There are counter claims with the contractor of Jordan Magnesia Company project

due to delay in project completion with no additional obligations on Jordan Magnesiatowards the contractor in the opinion of the Company’s management.

(29) FINANCIAL INSTRUMENTS

Financial risk management

The Company operates internationally, giving rise to exposure to market risks fromchanges in interest and foreign exchange rates.

(i) Credit risk

The Company has no significant concentration of credit risk with any single counter-party or group of counterparties having similar characteristics.

Company procedures are in force to ensure on a permanent basis that sales are made tocustomers with an appropriate credit history and do not exceed an acceptable creditexposure limit.

The Company does not guarantee obligations of other parties except where the grouphas entered into joint venture agreements or for associates (Note 27).

The maximum exposure to credit risk is represented by the carrying amount of eachfinancial asset, in the balance sheet.

(ii) Interest rate risk

Most of the financial instruments on the balance sheet are not subject to interest rate riskexcept for deposits and loans. Interest on deposits in Jordanian Dinars ranges between3.25% - 5.76% and on deposits in US Dollars are between 0.7% - 1.89%.

57

(iii) Liquidity risk

The Company policy is to maintain sufficient cash and cash equivalents or haveavailable funding through an adequate amount of committed credit facilities to meet itscommitments.

(iv) Foreign exchange risk

Most of the Company’s revenues are in US Dollars and most of its operating expenses arein Jordanian Dinars. Deposits at banks and loans according to currency are as follows:

The Jordanian Dinar exchange rate of the Jordanian Dinars is fixed against the US Dollar(US$ 1.41 for 1 JD).

Fair values

The fair value of securities included in available for sale investments is estimated by ref-erence to their quoted market price at the balance sheet date.

The Company’s principal financial instruments not carried at fair value are cash andcash equivalents, trade receivables, other current assets, other non current assets, tradeand other payables, bank overdrafts and long term borrowings.

The carrying amount of cash and cash equivalents approximates their fair value due tothe short term maturity of these financial instruments.

Similarly, the historical cost carrying amounts of receivables and payables which are allsubject to normal trade credit terms approximate their fair values.

The fair value of long-term borrowings is based on the quoted market price for the sameor similar issues, or on the current rates available for debt with the same maturity andcredit-rating risk profile and amounts to JD 74,687 as of December 31, 2002.

(30) CLASSIFICATION

Some of 2001 financial statements balances were reclassified to correspond to 2002presentation. This reclassification has not affected the results of the company orshareholders’ equity.

Forty-Sixth Annual Report And Financial Statements

LoansDeposits

Jordanian DinarsUS DollarsSpecial Drawing Right (SDR)Euro

48,40039,519

- 2,713

- 81,5401,390

-