ARAB POTASH COMPANY · ARAB POTASH COMPANY 7 Board of Directors and Top Management Government of the Hashemite Kingdom of Jordan (Jordan Investment Corporation) Eng. …

ARAB POTASH COMPANY

Annual Report

The Arab Potash CompanyA Public Shareholding Company

FIFTIETH ANNUAL REPORT

of the Board of Directors, the Consolidated Financial Statements for the Year Ended December 31, 2006 to be presented to the General Assembly

at the Ordinary Annual General Meeting in Amman at 12:00 noon on Thursday 22 Rabia II 1428H - May 10, 2007AD

His Majesty

King Abdullah Bin Al-Hussein II

Board of Directors and Top Management Board CommitteesLetter from the ChairmanBoard of Directors Report

A. The World Scene1. Production and Supply .2. Demand and Intake.3. Prices.4. Marine Shipments5. Developments in the Company’s Main Markets.6. Local and Regional Developments.7. Logistics.8. Company’s International Promotional Activities.

B. Company Activities1. Production2. Sales and Marketing

C. Main Financial Indicators

D. The Company’s Projects1. Rehabilitation of Dike 182. Production Expansion Project

E. Subsidiaries and Affiliates1. Jordan Safi Salt Company (Under Liquidation)2. Numeira Mixed Salts & Mud Company3. Jordan Magnesia Company4. Kemira Arab Potash Company5. Jordan Bromine Company

6. Jordan Dead Sea Industries Company (JODICO)7. Nippon Jordan Fertilizers Company

F. Administrative Affairs1. Employees, Training and Housing2. Administrative Reorganization 3. Computerization (ERP)4. The Local Community5. International Quality Standards (ISO)

G. Balance Sheet and Consolidated Financial Statements

1. Capital 2. Fixed Assets3. Inventories4. Investments5. Loans6. Revenues7. Costs8. Profits9. Shareholders’ Equity10.Audit Fees

H. Financial Indicators

I. Future Plan

J. Regulatory Affirmation

K. Declaration of the Board of Directors

L. Recommendations

CONTENTS

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Board of Directors and Top ManagementGovernment of the Hashemite Kingdom of Jordan (Jordan Investment Corporation)

Eng. Issa Ayyoub Chairman 1,2,3,4Dr. Nabih Salameh Member 1,2,3,4Mr. Mohammad Nour Al-Shriedeh Member 1,2,3,4,5Mr. Eyad Al-Qudah Member 1,2,3,4,5

Potash Corporation of Saskatchewan (PCS)Eng. James Dietz Member 1Eng. Garth Moore Member 2Mr. Thamer Obeidat Member 2

Arab Mining CompanyMr. Yousef Abed Al-Moula Deputy Chairman 5Eng. Mohammad Bin Abdullah Al-Shawi Member

Islamic Development Bank/JedahMr. Hisham Sha’ar Member 1

Government of IraqMr. Abdel-Wadoud Abdel-Sattar Member

Libyan Company for Foreign InvestmentsEng. Younis Kreikshi Member

Investment Authority/ KuwaitMr. Abdullah Hasan Al-Bader Member

General Manager

Eng. Brent Heimann until 14 January, 2007Eng. Michael Hogan from 15 January, 2007 1,2,3,4

Deputies of The General ManagerEng. Meroslav Davyduke Deputy General Manager - Technical Affairs

Mr. David Stuart Deputy General Manager - Finance until 30 June, 2006

Mr. William Flahr Deputy General Manager - Finance from 1 July, 2006

Eng. Jafar Salem Deputy General Manager - MarketingAuditors

Allied Accountants Member of Ernst & Young International

Board Committees

1- Investments Committee 2- Finance and Administrative Committee3- Tenders Committee 4- Dikes Committee5- Audit Committee

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Letter from the Chairman

Dear Shareholders:May Peace and Almighty’s Grace and Blessings be upon you,

The Members of the Board, Executive Management and I are delighted to have you at this Ordinary Annual Meeting of the General Assembly for the year 2006 and to present to you the Fiftieth Annual Report on the Company’s businesses which includes its Consolidated Financial Statements as at December 31, 2006 as well as a synopsis of the achievements realized during the year.

In 2006, world production of Potash dropped by approximately three million tons; (9.4%), in order to control inventories. This reduction in production was in reaction to a decline in shipments of (6%). The delay in negotiating price with China and India had a major impact on the drop of global shipments. However, it is expected that shipments shall regain upwards momentum in 2007.

Sales prices remained almost steady throughout the year and started rising in the third quarter of the year subsequent to implementation of new prices with China.

On the local side, production during 2006 declined by (130) thousand tons; or a rate of (7.2%) due to inefficiency of harvesting raw materials at solar ponds, as well as Dike 18 salt pond’s being out of service till the end of the third quarter of 2006 consequent to completing remediation of its dike.

Consolidated Gross Revenues of the Company dropped (4.5%) to reach about (226.6) million Dinars vis-à-vis (236.7) million Dinars for 2005. Consolidated Gross Cost of the Company for 2006 reached about (187.4) million Dinars against (193.6) million Dinars for 2005; i.e. a decrease of (3.3%).

Despite the decline in production and sales, Consolidated Profit before Tax and Minority Interests reached about (49.1) million Dinars. After deducting the Minority

Interests and Income Tax Provision, Consolidated Net Income for the year is about (39.1) million dinars vis-à-vis a Consolidated Net Income of (43.1) million Dinars for the year 2005; a decrease of (10%).

As was done before in terms of allocation of provisions during the year 2005 against Kemapco’s liabilities of (19.7) million Dinars, another provision of (4.5) million Dinars was allocated during 2006.

Also, Kemapco was provided with loans by the two shareholders APC and Kemira of Finland for the amount of (12.6) million Dinars, APC’s share of which was (6.3) million Dinars. Accordingly, a provision was incurred in the Company’s accounts against such loans.

On 1/2/2007, APC entered into a Share Transfer and Settlement Agreement with Kemira whereby all the shares of Kemapco owned by Kemira were sold to APC for one dinar. In addition, Kemira settled its share of Kemapco’s third party loans of approximately JD 52 million, waived payment of Kemapco’s loans to Kemira of approximately 29.6 million dollars, provided a cash payment to APC and Kemapco of 12.5 million dollars and extended other technical and commercial services. It is anticipated that this agreement will have a positive impact on the Company’s accounts in 2007.

The Company increased the provision pertaining to Voluntary Severance by an amount of (1.2) million Dinars. As for Magnesia company, the provision increased by (9.5) million Dinars for 2006.

As for the existing Arbitration cases, the Cassation Court passed a verdict on 16/1/2007 abolishing the Arbitration decision and withdrawing the Arbitration Agreement for the case pertaining to Dike (19) collapse. This is a good indication.

The Magnesia case is still before the Arbitration Committee.

As to projects, the Production Expansion Project is running smoothly and it is expected to be completed at the end of 2008, with cost less than budget.

At present, the Company is working on replacing fuel oil with natural gas in order to reduce production cost.

The Company continues to support the local community, in conviction of its role and role of the private sector in development of communities adjacent to Industries.

To conclude, I would like to seize this occasion to extend profound thanks to the Government of Jordan and neighbouring Arab Governments that are shareholders of the Company, Potash Corporation of Saskatchewan, Canada, Islamic Development Bank, Jeddah and local, regional and international financing institutions and Company’s staff at all locations for their continued sincere efforts and support which enabled achievement of these results. We also thank our valued clients for their trust in the Company and its products, which supports its distinguished reputation worldwide for high-level quality.

Praying to the Almighty to succeed in contributing more in service of our dear country under the leadership of the Country’s Monarch and its Keeper His Majesty King Abdullah Bin Al-Hussain II, May God Keep Him.

ChairmanEng. Issa Ayyoub

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The Board of Directors welcomes you to this Ordinary Annual General Meeting and presents to you The Fiftieth Annual Report and the Consolidated Financial Statements for the year ended December 31, 2006 in accordance with article (169) of the Companies Law and Articles (11) and (12) of APC by-laws.

Board of DirectorsReport 2006

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Another development on the supply side was the pronounced increase in the production of Silvinit Company in Russia. This was due to continued shipments by rail to China without any slowdown throughout the year. This was contrasted by a drop in production at Uralkali. The Uralkali reduction was primarily due to the prolonged negotiation process with China and flooding of one of its mines in October 2006 which took out 1.3 million tons of production on an annual basis.

Another on-going development was the increase in production in China. This is estimated to have topped 3.0 million tons and seems to be destined for more increases in the years to come.

There were prolonged periods of shutdown in Canada in the second and third quarters in order to control inventories. This was reversed sharply in the fourth quarter, however the annual total reflected a large drop.

The year did not see any announcements for new Potash expansions or projects, as previous projects in Thailand, Argentina and Africa were still being considered.

It is estimated that curtailment in 2006 production was commensurable with the reduction in shipments and therefore world Potash inventories remained relatively stable.

Potash Production By company 04/05/06 Million tons KCL

SQMCVRDUSAChinaAgriumAPCSilvinitUralkaliICLK+SMosaicBelaruskali

Potashcorp

0.70.61.23.01.51.75.34.24.86.05.57.57.02006

0.70.61.42.51.71.84.95.45.36.06.88.28.820050.70.61.52.01.71.94.25.15.36.06.97.68.02004

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A. The World Scene

1) Production & Supply

Projections indicate that global Potash production declined significantly in 2006, as a response by certain producers to reduced sales and shipments caused by delays in price negotiations. The decline in production was approximately 9.4%. Consequently production dropped to about 49 million tons; which is less than the year 2005, however it still remains the third highest year on record in terms of production. This reduction was expected as producers acted to control inventories.

The curtailment was more pronounced in Canada at about 19%, whereas in Russia/ Belarus it was less than 9%.

Global Potash Production in Million tons KCL

Potash Production in million tons KCL 2006 2005 2004 2003 2002

Canada 14.0 17.3 16.6 15.1 14.1Russia/Belarus 17.0 18.6 17.0 14.8 13.7Europe 7.3 7.7 7.8 7.8 7.5Israel 3.5 3.7 3.5 3.3 3.2Jordan 1.7 1.8 1.9 2.0 2.0USA 1.2 1.3 1.4 1.2 1.4China 3.0 2.5 2.0 1.0 0.7Brazil/Chile 1.3 1.2 1.3 1.2 1.2Total 49.0 54.1 51.5 46.4 43.8

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2) Demand & Intake

Total Potash intake witnessed a marked drop during 2006. The reasons were not uniform from one country to the other. However the long term trend of higher Potash demand remains intact and it is expected that this will be reflected in higher sales and deliveries from 2007 onwards.

The estimated total sales worldwide for 2006 were about 3.1 million tons less than the previous year, a reduction of approximately 6 %.

The major decline was in Asia. Nevertheless it was not an actual drop in demand but a reduction in supplies and freight for technical reasons; mainly the long process of price negotiations in China followed by delays in India. That resulted in a drop in inventories to near zero in both China and India in mid Summer.

The 4th quarter of 2006 was a world record for shipments which were expedited to major markets after reaching settlement on prices.

2006 2005 2004 2003 2002 2001Asia 19.5 22.0 19.0 16.0 14.0 12.7North America 8.7 9.6 10.4 9.7 9.5 9.5Europe 7.8 8.7 9.1 8.6 8.6 8.7Latin America 8.0 7.1 8.3 8.0 6.1 5.3ME & Africa 1.8 1.7 1.7 1.3 1.2 1.2CIS 2.6 2.4 2.0 2.1 2.4 2.3Total 48.4 51.5 50.5 45.7 41.8 39.7

During 2006, there was a decline in demand in North America and Europe. However the decline is expected to reverse significantly in the year 2007 in view of agricultural crop price hikes in late 2006 and increase in utilization of bio fuels of corn and other crops. The downward trend was reversed in Brazil as the fourth quarter witnessed heavy demand for Potash and expedited shipments.

Sales and shipments within the CIS countries increased during the year in an effort by producers to control inventories and not as a result of any increase in demand in those areas.

As for Jordan’s neighbouring countries and Africa, a number of small scale projects were initiated which utilize potassium chloride as feed. It is expected that these projects will boost fertilizer consumption and improve the balance of nutrition for plants and soils. A summit was held in Africa to strengthen agriculture and fertilizers in the continent. This approach was supported by APC in anticipation that it would lead to higher levels of Potash in the soils.

Potash Imports in Million Tons KCL 2001-2006

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Potash Intake Development

2001 2002 2003 2004 2005 2006Brazil 3.942 4.259 6.209 6.282 4.863 5.062India 2.396 2.614 2.797 2.953 4.953 3.439China 5.282 5.424 6.027 7.028 8.932 6.733

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5) Developments in the Company’s Main Markets

India: The long term growth in demand remains intact in this main market. Shipments declined in 2006 due to sales stoppages during the second quarter of the year subject to finalization of price negotiations.

Despite this stoppage, sales to India scored the second highest on record. APC strengthened its position there through its solid link with its main customers in India (IPL and Zuari) which was reinforced by logistic solutions and long term agreements.

China: Shipments dropped to half compared to 2005 due to delays in price negotiations. However APC’s strong relations and long term agreements with its Chinese customer (Sinochem) is expected to result in enhancement of APC’s share in this growing market in 2007 onwards.

Malaysia & Indonesia: APC’s sales to this region doubled from about 180,000 metric tons in 2005 into 360,000 metric tons in 2006. This was due to resuming supplies to one of the major Indonesian NPK producers and opening an additional sales channel in the Malaysian market. It is anticipated that APC’s office in Kuala Lumpur will play a major role in strengthening this strategic status in the future.

Indonesia2006

Malaysia2006

Indonesia2005

Malaysia2005

Indonesia2004

Malaysia2004

Total Market(000) tons 1,290 1,566 1,032 1,359 1,342 1,679

APC(000) tons 144 213 59 123 172 172

Market Share 11.16٪ 13.60٪ 5.72٪ 9.05٪ 12.82٪ 10.24٪

Europe: 2006 was a difficult period for APC’s market in Europe as prices deteriorated, demand declined and competition increased as FSU suppliers re-entered the market

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3) Prices

Contract pricing negotiations in China took place for over a period from January till end of July. During that time, contract prices remained stable worldwide. These negotiations yielded in a price increase which was reflected on all new contract pricing. In India, contract prices remained stable throughout the year.

Spot prices experienced fluctuations that increased with the unusually long period of negotiating new contract prices. The spot levels recovered as soon as the contract negotiations were concluded and headed for higher levels as the year drew to a close, in view of the increase in demand and expectations of shortages in supply following the loss of the mine in Russia in October.

4) Marine Shipments

Availability of vessels in the 5,000 – 10,000 metric tons range was extremely limited and hence freight rates for smaller sizes continued to increase. In general, freight rates went up gradually throughout the year and by the end of the year were approximately 10% higher than that at the beginning of the year. Some freight for panamax sized vessels is reported to have witnessed larger magnitude increases. There is no clear indication in terms of future freight prices as new vessels will be delivered during 2007 that will meet the accelerating demand in conjunction with the economic growth, particularly in China.

India 29%

Malaysia 13%

Jordan 11%

Indonesia 9%

China 7%

Belgium 4%

Spain 4%

Egypt 2%

Iran 2%

Finland 2%

Others 17%

The top ten buyers of APC Potash in 2006

Malaysian & Indonesian Markets

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CFR cargoTotal Sales

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SOPProduction

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after exclusion for a period of time. This led to a decrease in Company sales in Spain, Italy, Portugal, Belgium and Turkey. The decline in demand appears to be long term due to steep NPK production reductions and demand being focused in short seasons.

6) Local & Regional Developments

This segment of the market continued to grow and is expected to expand further due to the requirement for balanced fertilization. This market witnessed progress in the area of oil drilling operations subsequent to the increase of oil prices globally and as higher Potash fertilizers were applied to conform with scientific recommendations in some areas, in addition to the increase in activities relating to production of Potassium Sulphate and Potassium Nitrate fertilizers.

The sale of industrial grade Potash was restricted to Jordan Bromine Company for production of Chlorine.

A development expected to materialize in 2007 is the operation of two new Potassium Sulphate plants in Egypt, where the government is supporting efforts to improve balanced fertilization and also promote the use of compound fertilizer NPK. These new plants are expected to be supplied by the Company. Sustainable growth is also anticipated in the oil drilling markets.

Company 2006 2005 2004 2003JBC 38,727 35,087 4,225 0SOP production 12,027 9,841 11,849 8,150NPK mixtures 1,961 4,083 15,716 7,610NJFC 36,301 37,011 32,248 37,315Kemapco 97,839 88,322 50,270 29,250

7) Logistics

APC logistics efforts improved during the year. The Company increased CFR sales to about 71% of total sales.

APC chartered 68 vessels compared to 91 in the previous year; mainly due to the shift to larger vessels whenever possible which is expected to continue as smaller ships have become uneconomical. APC has started preliminary trials on loading bulk containers in anticipation of a positive outcome from this method of shipment.

Local Sales (tons)

APC Sales on a delivered basis (tons)

2006 2005200420031,155,2401,261,205979,5401,040,000CFR cargo1,636,3731,805,8571,934,0512,051,644Total Sales

Local Sales (tons)

ARAB POTASH COMPANY ARAB POTASH COMPAARAB POTASH COMASH COMASH COMASH COMASH COMASH COMASH COMPA

8) Company’s International Promotional Activities

APC continues to play a major role on the global side through its membership and active participation in most Arab and International fertilizer associations and bodies; mainly:

A. The Arab Fertilizer Association (AFA) APC is a representative on the Technical and Economic committees and participates regularly in the Association’s various training activities, conferences, and meetings where participants are informed on the latest developments in respect of agricultural fertilizers. B. International Fertilizer Industry Association (IFA) APC is a representative on the Association’s council, Technical, Production and International Trade and Agricultural Committees of IFA.

IFA, being one of the major associations that carry out agricultural and fertilizers activities, APC participates in most of its events and participates in the conferences, meetings and seminars organized by IFA.

C. IPI/ IPNI (International Potash Institute)APC was an active member of the International Potash Institute until the end of 2006. It ran a number of promotional programmes and agricultural experiments projects in Egypt, Iran and Jordan. At the end of 2006, APC became a founding member of the International Plant Nutrition Institute which promotes fertilizers and scientific uses thereof across the world through experiments and field activities.

StandardFinesGranularIndustrial

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B. Company Activities

1) Production The Company produces Potash in four grades, standard, fine, granular and industrial. The standard grade constitutes more than half of the total quantity produced.

The Company’s total production of these grades was about 1.699 million tons during the year 2006 compared to about 1.830 million tons in 2005; a decrease of 7.2%.

APC Production by Grade (Tons)

2006 2005Grade Tons Percent Tons PercentStandard 1,002,211 58.98 989,575 54.09Fine 577,333 33.97 690,380 37.73Granular 78,020 4.59 115,800 6.33Industrial 41,850 2.46 33,898 1.85Total 1,699,414 100% 1,829,653 100%

APC Production by Grade for 2006

The Potash produced is transported from the plant’s site at Safi to the Company’s warehouses at Aqaba. This year 1.403 million tons were transported.

2002 2003 2004 2005 2006 Total Vessels 116 121 126 121 104APC Charter 46 45 77 91 68

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2) Sales and Marketing

Sales were 1.636 million tons to match with quantities produced, a decrease of 9.4% compared to 2005 sales of 1.806 million tons.

APC sales by grade in 2006

2006 2005Grade Quantity % Quantity %Standard 1,011,794 61.83 968,145 53.61Fine 525,124 32.09 691,232 38.28Granular 59,729 3.65 108,578 6.01Industrial 39,765 2.43 36,368 2.01Potash second hand 0 0 1,534 0.09

Total 1,636,412 100 1,805,857 100

APC Sales Distribution by Country in 2006

Country MT Product 06 MT Product 05India 477,003 592,184Malaysia 213,250 123,100Jordan 186,856 174,345Indonesia 144,625 59,200China 112,200 225,000Belgium 60,520 75,525Spain 57,580 87,830Egypt 40,585 30,827Iran 31,500 0Finland 30,000 0South Africa 28,700 14,850Japan 28,300 46,200Philippines 25,940 44,220Thailand 25,500 30,100Korea 24,020 52,700Italy 22,105 55,453Taiwan 21,200 44,050Saudi Arabia 20,482 13,937Sudan 18,448 21,393Portugal 13,800 20,900Pakistan 13,700 33,987Mauritius 7,560 9,725UAE 6,100 3,317Kenya 4,075 322Azerbaijan 3,304 2,726Kuwait 3,063 400Tanzania 3,017 2,730Syria 2,716 841Mozambique 2,500 3,900Qatar 2,100 0Yemen 2,091 2,300Reunion 1,425 4,100Algeria 662 200Libya 430 1,140Turkmenistan 207 800Djibouti 200 0Australia 132 2,052Bahrain 122 420Mauritania 120 0Lebanon 100 199Croatia 50 0Venezuela 40 0Turkey 22 19,000Bangladesh 22 0Tunisia 20 40Netherlands 20 80Singapore 0 5,500Brazil 0 264Total 1,636,412 1,805,857

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Sales by month in 2006 and 2005 (tons)

Month 2006 2005January 95,008 160,407February 145,882 84,016 March 114,728 174,407April 89,477 169,603May 96,881 172,679June 106,111 34,362July 87,129 162,288

August 216,439 212,122September 206,931 134,088

October 207,785 97,628November 108,408 203,211December 161,633 201,047

Total 1,636,412 1,805,857

C. Main Financial Indicators

The Company’s Consolidated Gross Revenues decreased from JD 236.7 million in 2005 to JD 226.6 million in 2006; a decrease of 4.5 %. Consolidated Gross Costs decreased by 3.3 % to JD 187.4 million in 2006.

The Company’s Consolidated Net Income for 2006 was JD 39.1 million compared to JD 43.1 million for 2005. Provisions were allocated for the amount of JD 20.3 million to face potential losses being the Extraordinary Loss of Kemapco and Jormag. Shareholders’ Equity increased by JD 9.8 million to reach JD 267.7 million.

The Company’s Consolidated Fixed Assets increased from JD 451.9 million as at the end of 2005 to JD 472.5 million as at the end of 2006. Long term loans decreased in 2006 to JD 48.9 million compared to JD 59.5 million as at the end of 2005.

D. The Company’s Projects

At present, the Company is focusing on two projects and they have reached different phases of implementation. They are as follows:

1. Rehabilitation of Dike 18On November 9, 2004 an agreement was signed with a Contractor to rehabilitate Dike 18 for an amount approximating JD 11.4 million. As a tender condition, the contractor contracted with a local contractor to execute 30% of the tender’s works. The Project was supervised by the Dutch consultant Royal Haskoning and was insured by a local insurance company.

Impounding of salt pan SP-OA (filling with Dead Sea brine) started on March 14, 2006 and successfully completed its operation level on October 1st 2006. During impounding, more than 87M m3 of brine was pumped into SP-OA. A Taking-Over-Certificate was issued by Royal Haskoning on December 6, 2006 and the Project was considered substantially completed on November 23, 2006. The Defects Liability Period commenced on November 23, 2006 and shall expire on November 22, 2007. The Project cost at completion reached about JD 11.183 million.

Sales volumes by month (tons)

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2. Production Expansion ProjectThis project aims at increasing the annual Potash production capacity by 450,000 tons. Work on this project started at the beginning of 2005 subsequent to studies which showed that this project was feasible.

The design work and preparation of tender documents by Hatch-Dar Al-Handasah for this project commenced during March 2005 and included the following major tenders:

a. Modification of the Solar Ponds System and Construction of New Carnallite Ponds:

During 2006 a number of international companies were invited to participate in the pre-qualification for this bid in order to carry out the required work which included civil, electromechanical and instrumentation. This tender was awarded to the Chinese Company “China International Water and Electrical Corporation” during the last quarter of 2006.

b. New Safi Warehouse Project:

This project will increase the Potash storage capacity at Safi Site by about 60,000 tons. The work under this tender was awarded during the first quarter of 2006 to a local joint venture contracting company.

c. Extension of Aqaba Warehouse:

This project will increase the Potash storage capacity of the Aqaba Warehouse by about 70,000 tons. It is expected that this tender will be awarded to an international contractor during 2007.

d. Construction of a New Cold Crystallization Plant:

Procurement of major equipment for this plant has been completed. A number of international companies were pre-qualified to carry out the plant construction. Implementation of the project is being supervised by a team of consultants from Hatch-Dar Al-Handasah. It is anticipated that the project will be completed and commencement of production will take place during the last quarter of 2008.

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E. Subsidiaries & Affiliates

The Arab Potash Company owns various interests ranging from 20% to 100% in seven companies with activities related to the Potash industry. A synopsis of these companies is as follows:

1. Jordan Safi Salt Company (under liquidation) – (JOSSCO)On August 23, 2004, APC received the Assets of JOSSCO subsequent to signing a contract for sale of assets in favour of APC on May 7, 2003 for an amount of JD 8.0 million. These assets were qualified for production at APC through establishment of the Salt Unit with effect from April 17, 2006. Losses incurred by APC as a result of liquidation of JOSSCO amounted about JD 13.865 million which were recorded in the Company’s accounts in the years 2001 - 2005.

2. Numeira Mixed Salts & Mud CompanyThe company was established in 1997 for the purpose of purchasing Carnallite from APC and extraction of mud from its concession area as well as implementation of projects that are based on mixed salts and Dead Sea mud. The Company owns 100% of the Numeira’s share capital of JD 0.8 million following the former’s purchase of 32.8% shareholding of Arab Potash Company Employees’ Saving Fund.

3. Jordan Magnesia Company (JORMAG)The company was established in 1997 with a share capital of JD 30 million for the purpose of production of 50,000 tons annually of Magnesium Oxide used in the fire bricks industry and around 10,000 tons of Magnesium derivatives and Magnesium Hydroxide. The Company owns 55.3% of the shares of the company. The capital investment in this project reached JD 100 million.

In 2003, APC allocated an amount of JD 70.3 million as provision for extraordinary losses of Jormag estimated based on technical, marketing and financial studies in accordance with international accounting standards and the same was increased to JD 85 million in 2004 and then to JD 87.6 million as at December 31, 2005. In 2006, an amount of JD 8.1 million was expensed, which represented the amounts paid by the Company on behalf of Jordan Magnesia Company during the year. In addition, the estimated losses were increased by an amount of JD 1.4 million as costs of revaluation of the Islamic Development Bank’s loan. Accordingly, the balance as at end December 2006 was JD 97.1 million. This amount represents the loss of APC of its investments in the share capital of the company and liabilities borne consequent to its guaranteeing the company’s loans which APC is currently paying on behalf of Jormag, in addition to APC’s financing of costs relating to the arbitration case between the contractor and the company.

At present, an Arbitration case is filed in accordance with the arbitration rules of ICC in Paris between Jordan Magnesia Company and the conglomeration of contractors concerning construction of Jormag’s plant. Claims of the conglomeration of contractors amounted USD 102 million, and counter claims of Jormag exceed the contractor’s. It is expected that the final judgment on the case shall be passed by the end of May 2007.

4. Kemira Arab Potash Company (KEMAPCO)The company commenced commercial production in the first quarter of 2003 and capital investment of the project reached about JD 100 million. Losses incurred for the year 2003 amounted JD 13.14 million in 2003, and about JD 17.4 million in 2004, JD 5.6 million in 2005 and JD 8.7 million in 2006.

Kemapco was granted about JD 42 million as financial support from the partners during period from 2003 to 2006, APC’s share thereof was about JD 21 million.

On 1/2/2007, APC entered into a Share Transfer and Settlement Agreement with Kemira whereby all the shares of Kemapco owned by Kemira were sold to APC for one dinar. In addition, Kemira settled its share of Kemapco’s third party loans of approximately JD 52 million, waived payment of Kemapco’s loans to Kemira of approximately 29.6 million dollars, provided a cash payment to APC and Kemapco of 12.5 million dollars, and extended other technical and commercial services.

5. Jordan Bromine Company (JBC)The company commenced commercial production in the first quarter of 2003. The total capital investment reached about JD 102 million. The company’s production is being marketed through Albemarle Corporation, based on a marketing agreement signed with the latter. The company’s share capital is JD 30 million in addition to a paid in capital of JD 24.7 million equally divided between the partners. In 2006, the company realized a profit of JD 21.6 million.

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ARAB POTASH COMPANY

6. Jordan Dead Sea Industries Company (JODICO)This company was established in 1994 as a holding company with a share capital of JD 60 million in order to set up downstream companies for handling, processing and investment of Dead Sea minerals, with the exception of Potash. APC’s share of the company’s capital being 51%. JODICO established Jordan Safi Salt Company in 1996, Jordan Magnesia Company in 1997, and Jordan Bromine Company in 1999.

By establishing these three companies, JODICO fulfilled the objective of its incorporation, and in 2001 it was converted into a limited liability company with a capital of JD 100,000 following APC’s purchase of its Fixed Assets and all of its investments in Jordan Bromine Company, Jordan Magnesia Company, and Jordan Safi Salt Company.

On December 10, 2005 the Board of the Directors of APC resolved to purchase the share of Arab Potash Company Employees Saving Fund in JODICO. Legal procedures were taken with the Controller of Companies on February 19, 2006 and thereby JODICO became wholly owned by APC.

7. Nippon Jordan Fertilizers Company (NJFC)The company was established in 1999 to produce NPK and phosphate ammonium fertilizer and market the production in the Japanese Market. APC and JPMC’s share in the company’s capital being 20% each, four Japanese companies; namely Zen-oh, Mitsubishi Corporation, Mitsubishi Chemicals and Asahi Industries jointly hold 60% of company’s capital of JD 16.7 million.

F. Administrative Affairs

The Board of Directors comprises the following:

Jordan Investment Corporation Representatives

Eng. Issa AyyoubChairman of the Board since February 2003. Holding B.Sc. degree in Civil Engineering from Warwick University, England with honors. He held the position of General Manager of the Company from August 2000 till February 2003. He held the positions of Minister of Transportation and Secretary General of Ministry of Transportation. He also served as Chairman of the Board of Arab Bridge Company, Jordan Iraqi Company for Land Transport, Aqaba Railway Corporation, Hijaz Railway Corporation, Civil Aviation Authority, Public Transportation Corporation and Aqaba Ports Authority, and as a member on the Board of Directors of Royal Jordanian, Free Zones Corporation, Jordan Telecom, Higher Committee for Privatization and National Industrial Committee.

Dr. Nabeeh SalamehBoard member since March 2001. Holding B.Sc in Economics from the University of Jordan since 1969 and M.Sc. degree in Economics from the University of Jordan since 1981, higher studies in Economics from Harvard University, USA and PhD in Economics from Cairo University. He currently holds the position of the Director General of Jordan Investment Corporation.

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ARAB POTASH COMPANY

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ARAB POTASH COMPANY

Mr. Eyad AI-QudahBoard member since February 2003. Holding M.Sc. degree in Business Administration from Sul Ross State University. He currently holds the position of the Director General of Income and Sales Tax Department.

Mr. Mohammed Nour Al-ShreidehBoard member since February 2003. Holding M.Sc. degree in Business Administration from the University of Jordan since 1990. He currently holds the position of the Secretary General at the Prime Ministry.

Potash Corporation of Saskatchewan Representatives

Eng. James DietzBoard member since October 2003. Holding M.Sc. degree in Chemical Engineering from Ohio State University, USA. He currently holds the position of Executive Vice President & Chief Operation Officer of PotashCorp.

Eng. Garth MooreBoard member since October 2003. Holding B.Sc. degree in Mining Engineering from University of Saskatchewan. He heads the Mining Association in Saskatchewan, Canada and Canadian Association for Environmental and Technical Development. He has thirty years experience in the Potash industry, twenty years thereof with PotashCorp. He is currently the President of PCS Potash.

Mr. Thamer Obeidat Board member since October 2003. Holding M.Sc. degree in Law from Harvard University, USA. He is a licensed practitioner at the courts of Jordan and courts of State of New York.

Arab Mining Company Representatives

Mr. Yousef Abed Al-MoulaDeputy Chairman since June 2002. Holding M.Sc degree in Business Administration. He is currently the Vice Chairman of the Libyan Bank for Foreign Investments.

Eng. Moh’d Bin Abdullah Al-ShawiBoard member since October 2003. Holding M.Sc. degree in Electrical Engineering from New-Mexico University, USA since 1977. Currently holds the position of Acting Assistant Member at the Saudi Fund for Development.

Islamic Development Bank -Jeddah Representative

Mr. Hisham AI-Sha’arBoard member since November 1997. Holding B.Sc. degree in Law and Economics from St. Joseph University, Lebanon since 1958, Higher studies Diploma & Diploma of Public Administration from University of Washington. He is currently the Adviser of Lebanese Cabinet, and an Alternate Governor to the Islamic Development Bank, Jeddah.

Iraqi Government Representative

Eng. Abdel Wadoud Abdel Sattar Board member since December 2003. Holding B.Sc. degree in Electrical Engineering from University of Baghdad since 1977. He held the position of Director General of Iraqi Phosphate Public Company and is currently the Chairman of the Board of Directors and General Manager of Diala Company for Electrical Industries.

Libyan Company for Foreign Investments Representative

Eng. Younis Siddiq KreikshiBoard member since March 2004. Holding B.Sc. degree in Mechanical Engineering from Arizona, USA since 1982. He currently holds the position of Consultant for the General Administration of the center for renewable resources and water distillation studies in Libya.

Investment Authority - Kuwait Representative

Mr. Abdullah Hasan Mshari AI-BaderBoard member since May 1998. Holding B.Sc.degree in Commerce, and Member in several professional societies. He is currently the Chief Internal Auditor for the Investment Authority, Kuwait.

Executive Officers of the Company are as follows:

Eng. Brent HeimannGeneral Manager from October 2003 up to January 2007. Holding B.Sc. degree in Chemical Engineering from the University of Cincinnati, USA. Held the position of PotashCorp Vice President for Marketing, and Plant Manager for several Nitrogen Plants.

Eng. Michael HoganGeneral Manager since January 2007. Holding B.Sc. degree in Mining Engineering from Queen’s University, in Ontario, Canada. He has worked for PotashCorp for seventeen years and latest position held was the General Manager for PotashCorp’s New Brunswick Division.

Eng. Mersolav Davyduke Deputy General Manager for Technical Affairs since June 2005. Holding B.Sc. degree in Mechanical Engineering from University of Saskatchewan, Canada. Worked with PotashCorp for thirty years, the last position was General Manager of various Potash mines.

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ARAB POTASH COMPANY

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ARAB POTASH COMPANY

35

Administrative Affairs

Mr. David Stuart Deputy General Manager for Financial Affairs from October 2003 until June 2006. Worked for PotashCorp for twenty four years in different financial positions, the last position as Senior Director for Corporate Development at the said company.

Mr. William FlahrDeputy General Manager for Financial Affairs since July 2006. Holding the Chartered Accountant and Certified Public Accountant (Illinois) designations. Worked for an international public accounting firm for sixteen years and then at PotashCorp for eleven years. The last position being Senior Director, Taxation at the said company.

Eng. Jafar SalemDeputy General Manager for Marketing since October 2003. Holding B.Sc. degree in Chemical Engineering from Aston University, Birmingham, UK. Has been working with Arab Potash Company since 1984 at the Marketing Department. He represents the Company in several committees including the International Fertilizers Association and The Arab Fertilizer Association.

The Board of Directors Remuneration for 2006

Details RemunerationJD

Transportation JD

Jordan Investment Corporation 20,000Eng. Issa Ayyoub 3,600Dr. Nabeeh Salameh 3,600Mr. Mohammed Nour Al-Shreideh 3,600Mr. Eyad AL-Qudah 3,600Potash Corporation of Saskatchewan (PCS) 15,000Eng. James Dietz 3,600Eng. Garth Moore 3,600Mr. Thamer Obeidat 3,600Arab Mining Company 10,000Mr. Yousef A. Al-Moula 3,600Eng. Mohammed Al-Shawi 3,600Islamic Development Bank/Jeddah 5,000Mr. Hisham Al-Sha’ar 3,600Iraqi Government 5,000Eng. Abdel Wadoud Abdel Star 3,600Investment Authority/Kwait 5,000Mr. Abdullah Hasan Al-Bader 3,600Libyan Company for Foreign Investments 5,000Eng. Younis Kreikshi 3,600Total 65,000 46,800Per Diem 71,621Ticketing Expenses 90,147

Amounts Paid To Executive Officers during 2006

Name Position SalariesJD

CommitteesJD

Eng. Issa Ayyoub Chairman 46,230 7,200

Eng. Brent Heimann General Manageruntil 14 January, 2007 93,396

Mr. David StuartDeputy General Manager -Financial Affairsuntil June 30, 2006

32,326

Mr. William FlahrDeputy General Manager -Financial Affairs Since July 1, 2006

32,856

Eng. Moe Davyduke Deputy General Manager -Technical Affairs 65,249

Eng. Jafar Salem Deputy General Manager -Marketing 43,953 3,600

Total 314,010 10,800Travel Expenses 171,900


1- Employees, Training and Housing:

The Company follows a policy of equal opportunity employment and the average employee turnover rate is 5.64 %.

The total number of Employees was 1,986 at the end of the year 2006 in addition to 389 casual workers (approximately 190 full time equivalents). The Company provides its staff members with advanced medical services and is keen on training them and enhancing their efficiency according to regular annual programmes consisting of local training courses and sometimes foreign ones. The total participants in such courses were 1,900 employees during 2006. This year witnessed a significant improvement in terms of safety, security and environment throughout the Company’s projects, as work accidents decreased and also vehicles and Potash carriers accidents dropped by 38% .

Labor Force Distribution by Work LocationLocation Number of Employees PercentagePlants - Safi 1,562 78.65Aqaba Terminal 78 3.93Township - Safi 134 6.75Medical Services - Safi 44 2.22Head Office - Amman 168 8.46Total 1,986 100.0%

Labor Force Distribution by Discipline & Education

Qualification University Community College Tawjihi High

School

Junior High

SchoolTotal Percentage

Doctors 3 0 0 0 0 3 0.15Medical Assistants 4 8 6 4 0 22 1.11

Engineers 170 0 0 0 0 170 8.56Chemists 10 1 0 0 0 11 0.55Administrative 119 42 38 45 28 272 13.70Accountants 28 1 0 0 0 29 1.46Skilled Technical 51 288 91 166 195 791 39.83

Semi Skilled Technicians 0 3 14 60 76 153 7.70

Unskilled Technicians 0 1 6 36 75 118 5.94

Drivers 1 4 19 68 245 337 16.97Firemen 1 0 2 6 13 22 1.11Guards 1 1 4 4 37 47 2.37Daily Labor 0 0 0 1 10 11 0.55Total 388 349 180 390 679 1,986 100.0%Total Percent 19.54 17.57 9.06 19.64 34.19 100 100.0%

Training Activities and Programs during 2006

Details No. of Training Activities

Number of Participants

Internal Training Intensive Courses 51 833Lectures 16 200Universities & Colleges Students 8 25Technical Trainees 8 144New Staff Orientation 5 22Optional Classification Program 3 39New Engineers 4 10Scientific Visits 16 392Total 111 1,665Local Training in JordanTraining Courses 196Seminars 16Conferences 11Total 223Abroad TrainingTraining Courses 11Conferences 0Seminars 1Total 12Grand Total 111 1,900

36 37


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The Company continues to grant housing loans to its employees. The number of employees who have benefited from such loans totaled 1,094. The total granted loans increased by around JD 1.9 million to reach JD 24 million at the year end. At the same time, the Company provides accommodation to its employees directly. About 1,077 of the Company staff, in addition to their families, reside at the Company’s housing facilities.

2. Administrative Reorganization:Human Resources Department is still in the process of reorganizing the Company through engagement of specialized consultants for the purpose of updating and organizing in accordance with the latest international practices, and is currently carrying out the following tasks:

- Reviewing the Company’s departmental structure.- Reviewing and finalizing the job description for all positions.- Job weighting of all positions based on international standards.- Developing a new salary scale based on the job weighting process.

At the beginning of 2006, management increased the wages of casual workers and included them under the umbrella of Social Security.

3. Computerization - Enterprise Resources Planning (ERP)The Company initiated operation of the Oracle (ERP) system at the beginning of the month of May 2006.

4. The Local Community As the Company believes in the necessity of supporting local communities surrounding its locations, it maintained its policy of providing financial support by allocating cash amounts for various local organizations, as well as providing other sums to support scientific research and studies through donations to universities and various scientific institutions. In addition, the Company contributed to the youth movement by granting donations to sports clubs and various youth centers, and participating in sports activities representing the Kingdom. Also, the Company supported charitable, social and women activity organizations in the provinces through cash contributions and in-kind donations. The Company also provides health services through its hospital and clinics for all the emergency cases referred to it.

The Company has also contributed to the commercial and economic sectors in the region through purchase of food items and supplies from these markets.

Donations during 2006

Name of Donee Amount in JDMunicipalities 127,500Mosque and Churches 7,175Combating Poverty Pockets Program 40,456Writers & Scientists 1,673Charitable Associations 111,137Jordan Hashemite Fund 150,000Government Institutions - Amman & Ghor 2,155,930Karak Government Sport & Social Clubs 130,894Unions & Sport Clubs 26,700His Majesty King Abdullah II initiative for Teachers Housing 200,000Scholarships 177,243Total 3,128,708

5. International Quality Standards (ISO)Arab Potash Company obtained numerous accreditation in respect of Quality Assurance Systems, Environment and Safety in accordance with International Standards Organization; viz. ISO-9001; 2000 issue in December 2001, ISO-14001:2004 for Environment Assurance in June 2000, OHSAS-18001 for Occupational Health and Safety Assurance in May 2004, and the Jordanian Quality Certificate.

The Company also obtained ISO certificate for joining the Golden List Programme adopted by Jordan Customs pertaining to imports in October 2006.

Organization Structure

Chairman and Members ofThe Board of Directors

Internal Audit

Board CommitteesGeneral Manager

Legal AdvisorInternal Consultants

DGM Finance DGMMarketing

DGMTechnical

Sr. DirectorHuman

Resources

Sr. DirectorQuality

Assurance

Sr. DirectorExpansionProjects

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ARAB POTASH COMPANY

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ARAB POTASH COMPANY

41

G. Balance Sheet & Consolidated Financial Statements

1. Capital Arab Potash Company paid-in capital is 83,317,500 Dinars/Shares distributed as follows:

Shareholders Number of Shares Percentage

Potash Corporation of Saskatchewan 23,294,614 27.96Jordan Government (Jordan Investment Corporation) 22,397,882 26.88

Arab Mining Company 16,730,603 20.08Islamic Development Bank/Jeddah 4,300,000 5.16Iraqi Government 3,920,707 4.71Libyan Arab Company For Foreign Investment 3,386,250 4.06Kuwait Investment Authority 3,286,095 3.94Other Arab Governments 523,593 0.63Private Sector 5,477,756 6.57Total 83,317,500 100.00

2. Fixed AssetsThe cost of consolidated Fixed assets amounted to JD 472.5 million compared with JD 451.9 million at the end of 2005; an increase of 4.6%. Fixed assets after depreciation amounted to JD 98.4 million compared with JD 98.1 million at the end of 2005, an increase of 0.3 %, due to the fact that the new additions to fixed assets during the year were more than the depreciation provision.

3. InventoriesPotash inventories amounted to JD 6.9 million compared to JD 4.4 million as at the end of 2005. This number constitutes production of a part of the last month of the year. As for spare parts and supplies inventories, they amounted to JD 34.6 million compared to JD 34.7 million at the end of 2005. These inventories have been subjected to close control and follow up, for the purpose of reducing some of the items in an aim to reach the optimum stock level.

4.InvestmentsThe Company’s investments in affiliates and other companies increased from JD 29.7 million in 2005 to JD 33.6 million in 2006, an increase of 13.1% due to accounting of the Company’s share of Income of the associated companies as per International Financial Reporting Standards.

5.LoansThe balance of consolidated long term loans declined to JD 48.9 million from JD 59.5 million as at the end of 2005.

At the year end, JD 10.3 million was classified as current portion of long term loans. The Company’s debt/equity ratio was 15.4 % which is far less than rates applicable world wide.

6.RevenuesTotal consolidated revenues for 2006 were JD 226.6 million compared to 236.7 million in 2005, a decrease of 4.5 %. Sales Revenues of Potash, Mixed Salts and Carnallite amounted JD 210.2 million. The balance of JD 16.4 million was derived from the following sources:

Details Amount in Million (JD)Interest 8.3Net gain from investment in associates 5.6Others 2.5Total 16.4

7.Costs Total Consolidated Gross Cost amounted to JD 187.4 million in 2006 including losses of associated companies and exceptional losses of Kemapco and Jormag, compared to JD 193.6 million in 2005, a decrease of 3.3 % which is equivalent to 89.2% of Net Consolidated Revenues against 86.2% for 2005. Consolidated Cost of Goods Sold was JD 124.9 million; an increase of 12.4% equivalent to 59.4% of Net Consolidated Sales, against JD 111.2 million and a percentage of 49.4% for 2005.

Selling and Distribution Expenses reached JD 6.4 million for 2006 against JD 8.3 million for 2005; a decline of 30.1% and it constituted 3% of Net Consolidated Sales against 3.7% for 2005.


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The Royalty to the Government of Jordan amounted JD 12.4 million compared to JD 14.4 million in 2005, a decrease of 16.4 %, representing 5.9% of Net Consolidated Sales for the year 2006 against 6.4% for 2005.

Consolidated Administrative Expenses were JD 5.3 million in 2006 compared to JD 4.1 million in 2005, an increase of 30.5%. These expenses represented 2.5% of Consolidated Sales Revenue compared to 1.8% in 2005.

8- ProfitsThe Company realized Consolidated Net Income before Income Tax and Minority Interest of JD 49.1 million. After deduction of Minority Interest and Income Tax the Net Income was JD 39.1 million compared to JD 43.1 million for 2005. Extraordinary Provisions were allocated totaling JD 21.5 million to meet extraordinary losses of Kemapco and Jormag as well as compensation for employees under the Voluntary Severance Scheme.

Profits available for appropriation totaled JD 50.553 million appropriated as follows:

Details Amount in Million JDJordanian University’s Fees 0.506Provision of Vocational Training and Scientific Research 0.395

Training and Scientific Fund 0.506Directors Remuneration 0.065Provision for Income Tax 9.942Retained Earnings 39.139Total 50.553

9- Shareholders’ EquityThe Shareholders’ Equity as at the end of the year amounted to JD 267.7 million; an increase of 3.8 % over the year 2005. The book value of the Company’s shares amounted to JD 3.213 as at the end of 2006.

10- Audit FeesThe Audit Fees for the Company and its subsidiaries amounted to JD 33.7 Thousand.

H. Financial Indicators

The 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.

Details 2006 2005 2004 2003 2002Potash Production (Million Tons) 1,699 1,830 1,929 1,961 1,956Potash Sales (Million Tons) 1,636 1,806 1,937 2,051 1,960Potash Sales Revenue 206.7 223.8 185.5 154.3 141.6Consolidated Sales Revenue 210.2 224.4 186.0 154.6 142.0Gross Profit 85.3 113.4 86.0 62.7 56.3Profit from Operations 61.3 86.6 58.8 40.4 30.7Financing Charges 2.3 2.2 2.6 5.4 4.1Other Revenue 16.4 12.3 17.1 5.6 5.4Extraordinary loss 20.3 25.9 28.8 89.3 7.7Net Profit (Loss) After Taxes 39.1 43.1 26.7 (55.9) 15.4Net Fixed Assets 84.6 98.1 101 118.2 129.6Long Term Loans & Other Long Term Obligations 55.5 59.5 76.4 81.4 87.8

Minority Interest 0.0 0.0 0.3 0.5 13.5Shareholders’ Equity 267.7 257.9 231.4 214.6 285.4Debt / Equity Ratio 15.4% 18.7% 24.8% 27.5% 25.1%Return On Assets 9.6% 11% 7.5% (14.5%) 4%Return On Shareholders’ Equity 14.9% 17.6% 12% (22.4%) 5.4%Times Interest Earned 3.9 26.1 14.5 (9.7) 5.9Current Ratio 3.2 3.7 3.6 3.1 3.6Closing Share Price/JD 11.00 13.00 10.99 4.63 3.76Earning Per Share/JD 0.470 0.517 0.321 (0.671) 0.185Market Price/Earning Ratio 23.4 25.1 34.3 (6.9) 20.2

I. Future Plan

The Company is looking forward to:

1. Maintaining the production level at the minimum 1.9 million tons for the year 2007.2. Selling all the production by the end of 2007.3. Proceeding with the production expansion project to increase production capacity to around 2.5 million tons.4. Development of the Company’s organization structure and re-designing of its operations in accordance with the Organization Chart adopted by the Company.5. Strengthening and developing the strategic status of the Company in the global markets and marketing of all of the Company’s products, while maintaining the quality of the product and improving the same in accordance with the market’s needs.

J. Regulatory Affirmation

There are no new regulations issued by the Government of Jordan or other International regulatory parties that have monetary effect on the Company’s work, products, or its competitiveness ability.

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K. Declaration of the Board of Directors

The Board of Directors of the Arab Potash Company hereby declares that according to the best of their information and knowledge there are no substantial matters which may affect the Company as a going concern during 2007.

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

The Chairman of the Board declares, along with the General Manager, and the Deputy General Manager For Financial Affairs that all the information and data in the Annual Report 2006 are correct, accurate and complete.

Chairman of the board General Manager Deputy General Manager For Financial Affairs

Eng. Issa Ayyoub Eng. Michael Hogan Mr. William Flahr

L. Recommendations

The Board appreciates the General Assembly’s ratification of the following:

1. The Minutes of the previous General Assembly Meeting.2. The Board of Directors report regarding the company’s business for 2006 and its future plan.3. The independent Auditor’s Report vis-à-vis Consolidated Balance Sheet, the Consolidated Income Statement and Other Consolidated Financial Statements.4. The consolidated Balance Sheet and Consolidated Income and Loss Statements. 5. The rate of dividends distribution. 6. Electing the independent Auditor for the fiscal year ending December 31st 2007 and determining their fees.7. Any other matters.

To conclude, the Board of Directors extends thanks the Government of the Hashemite Kingdom of Jordan, the neighbouring Arab Governments shareholders, Islamic Development Bank - Jeddah and Potash Corporation of Saskatchewan, for their support and assistance.

The Board also extends thanks to all Arab and International financing institutions and organizations which contributed in financing the Company’s projects. We especially thank the Company’s clients for their trust in our product and services and we commend the efforts exerted by Company employees at their different locations.

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Arab Potash Company

Consolidated Financial Statements 31 December 2006

Fiftieth Annual ReportARAB POTASH COMPANY

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47

To the Shareholders of Arab Potash CompanyAmman – Jordan

We have audited the accompanying financial statements of Arab Potash Company (a public shareholding company) and its subsidiaries (“the Company”), which comprise the consolidated balance sheet as at December 31, 2006 and the consolidated income statement, consolidated statement of changes in equity and consolidated cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory notes.

Directors’ Responsibility for the Financial Statements

The Directors are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditors’ Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate for the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

OpinionIn our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2006 and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards.

Amman – Jordan25 March 2007

Arab Potash CompanyConsolidated Balance Sheet

as at 31 December 2006

Assets Notes 2006 2005 JD “000” JD “000”

Non-current assetsProperty, plant and equipment 3 98,393 98,091Projects in progress 4 36,138 17,308Strategic spare parts 5 18,275 17,594Loan granted to Jordan Bromine Company 6 4,254 4,254Investments in associates 7 33,575 29,712Available-for-sale investments 885 1,002Deferred tax assets 19 2,190 4,635Other assets 13,653 12,859

207,363 185,455Current assets Accounts receivable 8 61,190 59,336Inventories 9 6,934 4,359Spare parts 16,298 17,072Other assets 10 16,562 11,498Cash and short-term deposits 11 92,074 136,828

193,058 229,093Total Assets 400,421 414,548Equity and LiabilitiesEquity attributable to equity holders of the parentIssued capital 12 83,318 83,318Statutory reserve 12 50,464 50,464Voluntary reserve 12 80,699 80,699Cumulative change in fair value 147 260Retained earnings 53,089 43,111

267,717 257,852Minority interests - 1Total equity 267,717 257,853Non-current liabilitiesInterest-bearing loans and borrowings 13 38,503 47,768Contingent liability reserve 29 27,526 24,387Other reserves 14 6,802 22,567

72,831 94,722Current liabilities Due to bank 15 172 172Interest-bearing loans and borrowings 13 10,232 11,510Trade and other payables 16,610 11,729Other liabilities 16 32,859 38,562

59,873 61,973Total liabilities 132,704 156,695Total Equity and Liabilities 400,421 414,548


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49

Arab Potash CompanyConsolidated Income Statement

for the year ended 31 December 2006

Notes 2006 2005 JD “000” JD “000”

Sales 18 210,195 224,576Cost of sales 124,942 111,154Gross profit 17 85,253 113,422

Selling and distribution costs 23 (6,351) (8,263)Administrative expenses 20 (5,287) (4,051)Royalty to the Government of Jordan (12,364) (14,392)Operating profit 61,251 86,716Finance revenue 6,271 4,650Finance costs (2,259) (2,197)Other income 21 2,516 645Other expenses 22 (4,795) (2,465)Net foreign currency exchange differences 1,947 (4,513)End of service indemnity 24 (1,225) (8,617)

Profit before gain (losses) from associates and tax 63,706 74,219Share of profit of associates 25 5,630 4,193

Provision for losses of Jordan Safi Salt Company (under liquidation) - (930)

Provision for losses of Jordan Magnesia Company 27 (8,092) (5,227)(Loss) gain from revaluation of Islamic Development Bank loan for Jordan Magnesia Company

27 (1,379) 2,621

Provision for losses of Kemira Arab Potash Company 28 (10,784) (19,700)

Profit before tax 49,081 55,176Income tax expense 19 (9,942) (12,122)Profit for the year 39,139 43,054Attributable to:Equity holders of the parent 39,139 43,053Minority interests - 1

39,139 43,054Earnings per shareBasic and diluted, for profit for the year attributable to ordinary equity holders of the parent 30 JD 0.470 JD 0.517

Arab Potash CompanyConsolidated Statement of Changes in Equity

for the year ended 31 December 2006

Attributable to equity holders of the parent

IssuedCapital

StatutoryReserve

VoluntaryReserve

CumulativeChange inFair Value

RetainedEarnings Total Minority

InterestsTotal

Equity

JD “000” JD “000” JD “000” JD “000” JD “000” JD “000” JD “000” JD “000”Balance at 1 January 2006 83,318 50,464 80,699 260 43,111 257,852 1 257,853

Change in fair value - - - (113) - (113) - (113)Total income and expense for the year recognised directly in equity

- - - (113) - (113) - (113)

Profit for the year - - - - 39,139 39,139 - 39,139Total income and expense for the year - - - (113) 39,139 39,026 - 39,026

Dividends paid (Note 12) - - - - (29,161) (29,161) - (29,161)

Increase in investment in subsidiaries, net - - - - - - (1) (1)

Balance at 31 December 2006 83,318 50,464 80,699 147 53,089 267,717 - 267,717

Balance at 1 January 2005 83,318 50,464 80,699 172 16,722 231,375 302 231,677

Change in fair value - - - 88 - 88 - 88Total income and expense for the year recognised directly in equity

- - - 88 - 88 - 88

Profit for the year - - - - 43,053 43,053 1 43,054Total income and expense for the year - - - 88 43,053 43,141 1 43,142

Dividends paid - - - - (16,664) (16,664) - (16,664)Increase in investment in subsidiaries, net - - - - - - (302) (302)

Balance at 31 December 2005 83,318 50,464 80,699 260 43,111 257,852 1 257,853


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51

Arab Potash CompanyConsolidated Statement of Cash Flows for the year ended 31 December 2006

2006 2005 JD “000” JD “000”

Operating ActivitiesProfit before tax 49,081 55,176Adjustment to reconcile profit before tax to net cash flowsNon-cash:Depreciation 22,885 22,424Interest income (6,271) (4,650) Interest expense 2,259 2,197Gain from investments in associates ( 5,630) (4,193)Provision for losses of Jordan Safi Salt Company (under liquidation) - 930

Provision for losses of Kemira Arab Potash Company 10,784 19,700Provision for losses of Jordan Magnesia Company 8,092 5,227Loss/(gain) from revaluation of Islamic Development Bank loan for Jordan Magnesia Company 1,379 (2,621)

End of service indemnity provision - 8,617Other provisions - (309) Working capital adjustments:Increase in trade receivables ( 1,854) (32,987)Increase in inventories ( 2,575) (1,947)Decrease/(increase) in spare parts 94 (1,159)(Increase)/decrease in other assets (4,734) 343Increase in trade and other payables 4,881 2,211Decrease in other liabilities (24,282) (4,135)Income tax paid (12,681) (4,553)Net cash flows from operating activities 41,428 60,271Investing ActivitiesPurchase of property, plant and equipment (23,199) (12,611)Payments on projects in progress, net (18,830) (10,156)Purchase of available-for-sale investments - (49)Dividends received from associates 1,687 147Loans granted to Kemira Arab Potash Company (6,284) (2,000)Loan granted to Jordan Bromine Company - (4,254)Interest received 5,941 4,582Other assets (793) (466)Net cash flows used in investing activities (41,478) (24,807)Financing ActivitiesRepayment of amount due to bank - ( 4,112)Repayment of loans (11,612) (10,867)Interest paid (3,930) (3,005)Dividends paid to equity holders of the parent (29,161) (16,664)Minority interests (1) (301)Net cash flows used in financing activities (44,704) (34,949)Net (decrease)/increase in cash (44,754) 515Cash and cash equivalents at 1 January 136,828 136,313Cash and cash equivalents at 31 December 92,074 136,828

Arab Potash CompanyNotes To the Consolidated Financial Statements

31 December 2006

1. Corporate information

The Arab Potash Company “APC”, “the Company”, a public shareholding company, was founded and registered on July 7, 1956. During 1958, the Company was granted a concession from the Government of Jordan to exploit the minerals and salts of the Dead Sea brine. The concession expires after 100 years from the grant date, after which, the Company’s factories and installations become the property of the Government of Jordan. Under the terms of the concession, the Government of Jordan is entitled to a royalty of JD 8 for each ton of potassium chloride, (“Potash”) exported by the Company. The maximum royalty payable is limited to 25% of the Company’s profit for the year. The concession agreement was amended during 2003 in accordance with the temporary law number (55) of 2003, whereby amendments included the annual rent fees for lands within the concession area, the concession area borders and the exclusive rights given to the Company.

The Company has increased its paid in capital during December 1997 from JD 79,695,000 to JD 83,318,000. The increase was affected through the issue of Global Depository Receipts (GDRs) on the London Stock Exchange at a price of US $ 9.03 for each GDR. Each GDR represents one ordinary share with a nominal value of JD 1 per share. Currently, the Company produces and markets Potash only and trades it in the international market.

The financial statements were authorised for issue by the Board of Directors on 25 March 2007. These financial statements require the approval of the shareholders of the Company.

2.1- Basis of preparation

The consolidated financial statements have been prepared on a historical cost basis, except for available-for-sale investments that have been measured at their fair value. The consolidated financial statements are presented in Jordanian Dinars and all values are rounded to the nearest thousand (JD “000”), except when otherwise indicated.

Statement of Compliance The consolidated financial statements of the Company and all its subsidiaries have been prepared in accordance with International Financial Reporting Standards.

Basis of Consolidation The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at 31 December each year. The financial statements of the subsidiaries are prepared for the same reporting year as the parent company, using consistent accounting policies.

All intra-company balances, transactions, income and expenses and profits and losses resulting from intra-company transactions that are recognised in assets, are eliminated in full.


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Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Company obtains control, and continue to be consolidated until the date that such control ceases.

This control is normally evidenced when the Company owns, either directly or indirectly, more than 50% of the voting rights of a company’s share capital and is able to govern the financial and operating policies of that company so as to benefit from its activities. The equity and net income attributable to minority shareholders’ interests are shown separately in the balance sheets and income statements, respectively.

The following subsidiaries have been consolidated:

Paid in capital(Thousands of shares)

Percentage of Ownership

Jordan Dead Sea Industries 100 100Jordan Magnesia Company * 30,000 55.3Numeira Mixed Salts and Mud Company ** 800 100

* The Jordan Magnesia Company’s financial statements have been consolidated in the accompanying financial statements based on the recoverable values of assets and liabilities and not on the going concern basis due to the uncertainty of the continuation of Jordan Magnesia Company. The recoverable values for the assets are based on the net present value of future cash flows and for the liabilities; they are based on the committed liabilities by the Arab Potash Company. The Company’s share of Jordan Magnesia Company’s losses is included as a line item in the consolidated income statement.

** During 2005, Numeira Mixed Salts and Mud Company reduced its share capital from JD 1,500,000 to JD 800,000.

2.2- Changes in accounting policies

The accounting policies are consistent with those used in the previous financial year.

2.3- Summary of significant accounting estimates and assumptions

Use of Estimates

The preparation of the consolidated financial statements requires management to make estimates and assumptions that affect the reported amount of financial assets and liabilities and disclosure of contingent liabilities. These estimates and assumptions also affect the revenues and expenses and the resultant provisions and in particular, considerable judgment by management is required in the estimation of the amount and timing of future cash flows. Such estimates are necessarily based on assumptions about several factors involving varying degrees of judgment and uncertainty and actual results may differ resulting in future changes in such provisions.

The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to

the carrying amounts of assets and liabilities within the next financial year are discussed below.

Employee Termination Indemnities The Company operates an employee termination indemnity scheme, where the benefit accrues to employees on pro-rata basis during their employment period and is based on each employee’s current salary.

Deferred Tax AssetsDeferred tax assets are recognised for all unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilised. Significant management judgment is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and level of future taxable profits together with future tax planning strategies.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised.

2.4- Summary of significant accounting policies

Cash and Cash Equivalents

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

Trade and other Receivables

Trade receivables, which generally have 30-90 day terms, are recognised and carried at original invoice amount less an allowance for any uncollectible amounts. An estimate for doubtful debts is made when collection of the full amount is no longer probable. Bad debts are written off when identified.

Inventories and Spare Parts

Finished goods are valued at the lower of average cost or net realisable value. Cost includes all direct production costs plus a share of the indirect overheads. Work in progress for Potash is not recognised, since the production cycle spanning the pumping of carnellite, the essential raw material, to the refineries is less than one day.

Spare parts and materials are valued at the lower of the moving average cost or market after provision for slow moving items. Strategic spare parts are expected to be used after more than one year. Since the technology used in producing Potash is unique to the Dead Sea location and is not commonly used by other producers in other locations, the Company’s policy is to maintain sufficient spare parts to maintain its plants.


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Property, Plant and Equipment

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

The initial cost of property, plant and equipment comprises its purchase price, including import duties and non-refundable purchase taxes and any directly attributable costs of 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 repairs and maintenance and overhaul costs, are normally charged to income in the period the costs are incurred. In situations where it can be clearly demonstrated that the expenditures have resulted in an increase in the future economic benefits expected to be obtained from the use of an item of property, plant and equipment beyond its originally assessed standard of performance, the expenditures are capitalised as an additional cost 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 the method and period of depreciation are consistent with the expected pattern of economic benefits from items of property, plant and equipment.

Projects in progress represent plant and properties under construction and are stated at cost. 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 are completed and put into operational use.

Investments in Associates

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

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

Available-for-sale Investments

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 consideration given for them, including transaction costs.

Available-for-sale investments are subsequently carried at fair value without any deduction for transaction 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 fair value 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 recognised directly in the fair value reserve in shareholders equity, until the investment is sold or otherwise disposed of, or until it is determined to be impaired, at which time the cumulative gain or loss previously recognised in equity is included in net profit or loss for the period.

Revenue Recognition

Revenue is recognised to the extent that it is probable that the economic benefits associated with the transaction will flow to the Company and the revenue can be reliably measured.

Revenue from sales of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer and can be reliably measured.

Revenue from interest is recognised as the interest accrues to the net carrying amount of the financial asset.

Revenue from dividends is recognised when the shareholders’ right to receive the payment is established.

Foreign Currency Translation

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

Borrowings

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

Borrowing costs are capitalised until the assets are substantially ready for their intended use.


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3.Property, plant and equipment

Land Buildings DikesMachinery

andequipment

VehiclesFurniture

and fixture

Computersand

softwareTools Total

JD”000” JD”000” JD”000” JD”000” JD”000” JD”000” JD”000” JD”000” JD”000”

Cost:At 1 January 2006(Reclassified (Note 36))

2,937 48,336 132,615 235,571 22,709 4,991 4,699 94 451,952

Additions - 240 13,756 4,268 4,845 86 3 1 23,199

Disposals - - - 56 2,319 225 68 - 2,668

At 31 December 2006

2,937 48,576 146,371 239,783 25,235 4,852 4,634 95 472,483

Depreciation & Impairment:

At 1 January 2006(Reclassified (Note 36))

- 40,376 80,145 205,580 19,205 4,319 4,145 90 353,860

Depreciation charge for the year

- 710 6,625 14,148 1,214 110 77 1 22,885

Disposals - - - 50 2,314 225 66 - 2,655

At 31 December 2006

- 41,086 86,770 219,678 18,105 4,204 4,156 91 374,090

Net Book Value:At 31 December 2006

2,937 7,490 59,601 20,105 7,130 648 478 4 98,393

At 31 December 2005(Reclassified (Note 36))

2,937 7,960 52,470 29,991 3,504 672 553 4 98,091

4. Projects in progress

Beginningof 2006 Additions Transfers End of

2006 JD “000” JD “000” JD “000” JD “000”

Remedial Measures for Dike 18 (Note 26) 7,970 5,786 13,756 -Production expansion * 4,423 25,833 - 30,256Other projects 4,915 4,175 3,208 5,882

17,308 35,794 16,964 36,138

* The purpose of this project is to increase the potash production capacity by making modifications to the solar ponds system and construction of another processing plant. The work on this project started during 2004 and is expected to be completed by the end of 2008. The estimated cost to complete this project is approximately JD 137,000,000.

5. Strategic spare parts

2006 2005 JD “000” JD “000”

Strategic spare parts 19,731 19,696Less: allowance for slow moving spare parts 1,456 2,102

18,275 17,594

6. Loan granted to Jordan Bromine Company

This item represents a loan granted by the Company to Jordan Bromine Company during 2005 with an amount of US $ 6,000,000 (JD 4,254,000). The loan is interest free and shall be paid in whole or in part not earlier than 5 years from the signing of the loan agreement. The Company has the right at anytime to convert the loan to equity in Jordan Bromine Company.

7. Investments in associates

This item represents the Company’s investments in the share capital of the following companies, using the equity method of accounting:

Numberof shares

Percentage of ownership 2006 2005

% JD “000” JD “000” Kemira Arab Potash Company (KEMAPCO) (Note 35) 14,500,000 50 - -

Jordan Bromine Company (JBC) 15,000,000 50 27,758 24,061Nippon Jordan Fertilizer Company (NJFC) 3,345,600 20 5,553 5,362

Jordan Investment and South Development Company (JISDC) 833,000 45.45 145 158

Jordan International Chartering Company (JICC) 12,000 20 119 131

33,575 29,712

The following table illustrates summarised financial information of the Company’s investment in associates:


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JBC NJFC JISDC JICC2006 2005 2006 2005 2006 2005 2006 2005

JD “000” JD “000” JD “000” JD “000” JD “000” JD “000” JD “000” JD “000”Share of the associate’s balance sheet:Current assets 19,788 15,565 2,664 2,560 60 67 144 188Non-current assets 35,056 35,847 4,641 5,250 160 172 4 5Current liabilities (8,182) (6,265) (1,752) (1,901) (75) (81) (29) (62)Non-current liabilities (18,904) (21,086) - (547) - - - -Net assets 27,758 24,061 5,553 5,362 145 158 119 131Share of the associate’s revenue and profit:Revenue 30,236 24,379 7,036 6,731 58 85 177 126Profit (loss) 5,385 3,810 172 316 (14) (19) 107 68

8. Accounts receivable

2006 2005 JD “000” JD “000”

Trade receivables 54,156 54,295Due from associates 4,665 3,291Advances to contractors 1,242 761Others 1,144 1,002

61,207 59,349Less: Allowance for doubtful accounts 17 13

61,190 59,336

9. Inventories

2006 2005 JD “000” JD “000”

Finished potash 6,399 4,108Others 535 251

6,934 4,359

10. Other assets

2006 2005 JD “000” JD “000”

Prepayments 738 720Payments on letters of credit 7,134 5,969Deposits at Sales Tax Department 7,555 4,512Others 1,135 297

16,562 11,498

11. Cash and short-term deposits

This item consists of the following:

- Deposits in Jordanian Dinars at local banks that mature within one and 3 months bearing annual interest that ranges from 3.50% to 6.55%.

- Deposits in US Dollars at local banks that mature within one month bearing annual interest that ranges from 3.45% to 5.47%.

- Deposits in Euro at local banks that mature within one month bearing annual interest that ranges from 2.09% to 3.38%.

12. Issued capital and reserves

Statutory reserve The accumulated amounts in this account of JD 50,464,000 represent 10% of the Company’s net income before income tax according to the Companies Law. The Company has the option to cease such appropriations when the balance of this reserve reaches 25 % of the Company’s authorised capital. The Company decided in 2005 to cease appropriations to the statutory reserve. The statutory reserve is not available for distribution to equity holders.

Voluntary reserve The accumulated amounts in this account of JD 80,699,000 represent cumulative appropriations not exceeding 20% of net income before income tax. This reserve is available for distribution to equity holders.

Dividends The Company’s general assembly approved on its ordinary meeting held during 2006 to distribute JD 29,161,000 as dividends representing 35% of the Company’s issued capital.

13. Interest-bearing loans and borrowings

This item represents loans granted by the following:

Instalments Short term Long term Total

2006 2006 2006 2005 JD “000” JD “000” JD “000” JD “000”

International Bank for Reconstruction & Development 886 887 1,773 2,658Islamic Development Bank - Jeddah 2,881 17,991 20,872 22,462

Syndicated loan 3,550 - 3,550 8,875European Investment Bank 2,915 19,625 22,540 25,283

10,232 38,503 48,735 59,278


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Details of the loans are as follows:• International Bank for Reconstruction & Development The Company was granted loan (C) for an amount of US $ 15,000,000 to finance the previous potash expansion project. The loan is repayable over 24 semi annual instalments, the first of which was due on 15 January 1997 and the last instalment will be due on 15 July 2008. The loan is guaranteed by the Government of Jordan. The loan agreement stipulates that “the borrower shall pay interest on the principal amount of the loan withdrawn and outstanding from time to time at a rate per annum for each interest period equal to one half percent per annum above the cost of the bank’s qualified borrowings for the last semester ending prior to the commencement of such interest period”. The average interest incurred by the Company was approximately 7.6% per annum. The Company pays a guarantee fee at 0.8% per annum.

•Islamic Development Bank - Jeddah Jordan Dead Sea Industries Company (JODICO) signed an agreement on 28 September 1997 with Islamic Bank for Development - Jeddah, according to which the bank assigned JODICO to buy machinery and equipment on behalf of Jordan Magnesia Company for an amount not exceeding US $ 28,035,000 and to lease it to JODICO for 9 years after a preparation period of 3 years for an annual fee of 7.5%. The ownership of the machinery will be transferred to JODICO as a donation at the end of the agreement period. This agreement is guaranteed by Arab Potash Company. The loan agreement was modified on 29 August 2002 for Jordan Magnesia Company to become the borrower instead of JODICO. The loan is repayable over 18 equal semi annual instalments amounting SDR 2,046,827 each, the first of which was due on 1 July 2004 and the last instalment will be due on 1 January 2013.

• Syndicated loan Jordan Magnesia Company was granted a Syndicated loan amounting to US $ 30,000,000 managed by Arab Bank and Citibank to finance part of its project. This loan bears interest at six months LIBOR plus 1.75% and is repayable over 10 unequal semi annual instalments, the first amounting US $ 1,000,000 was due on 12 July 2002 and the last amounting US $ 5,000,000 will be due on 12 January 2007. This loan is guaranteed by Arab Potash Company.

• European Investment Bank The Company was granted a loan amounting to US $ 47,485,760 to finance its operations. The loan is repayable over 22 semi annual instalments, the first of which was due on 10 October 2002 and the last instalment will be due on 10 April 2013. The loan is guaranteed by the Government of Jordan and bears interest at 6.18% per annum and a guarantee fee at 1% per annum.

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

31 DecemberJD “000”

2008 7,0812009 6,6222010 7,0782011 7,5662012 5,982Thereafter 4,174

38,503

14. Other reserves

2006 2005 JD “000” JD “000”

Employees’ end of service indemnity 6,720 22,364Employees’ vacation 82 203

6,802 22,567

15. Due to bank

This item represents the residual amount of the overdraft facilities granted by Jordan Kuwaiti Bank to Jordan Magnesia Company on 28 September 2003 with a ceiling amount of US $ 5,000,000 to finance the working capital of Jordan Magnesia Company. This overdraft is guaranteed by Arab Potash Company and bears interest at six months LIBOR plus 2.75%. During 2005, the ceiling was increased to become US $ 6,000,000.

16. Other liabilities

2006 2005 JD “000“ JD “000“

Royalty to the Government of Jordan 12,364 14,392Income tax payable 10,063 13,145Contractors retentions 2,405 2,063Accrued interest and expenses 4,685 4,549Jordanian Universities fees 506 925Scientific research fees 1,497 1,074Education, vocational and technical training support fund 397 437

Other 942 1,97732,859 38,562

17. Segment information

Following is a breakdown of gross profit by company:

Potash Company Numeira Company Total2006 2005 2006 2005 2006 2005

Potash Salt Unit* Potash Salt Unit*JD “000” JD “000” JD “000” JD “000” JD “000” JD “000” JD “000” JD “000”

Sales 206,733 2,939 223,795 180 523 601 210,195 224,576Cost of Sales 119,097 5,540 109,190 1,643 305 321 124,942 111,154Gross profit (loss) 87,636 (2,601) 114,605 (1,463) 218 280 85,253 113,422Total Assets 399,261 - 413,454 - 1,160 1,094 400,421 414,548Total liabilities 132,558 - 156,612 - 146 83 132,704 156,695

* The Company has not separately classified assets and liabilities for the Salt unit.


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18. Sales analysis

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

Potash Company Numeira Company Total2006 2005 2006 2005 2006 2005

Potash Salt Unit Potash Salt UnitJD “000” JD “000” JD “000” JD “000” JD “000” JD “000” JD “000” JD “000”

Far East 63,541 - 59,989 - - - 63,541 59,989India and China 81,200 - 106,748 - - 5 81,200 106,753Europe 22,456 - 29,901 - 114 137 22,570 30,038South America 16 - 33 - 13 17 29 50Middle East 26,453 2,939 21,444 180 396 442 29,788 22,066Africa 13,067 - 5,680 - - - 13,067 5,680

206,733 2,939 223,795 180 523 601 210,195 224,576

19. Income tax

2006 2005 JD “000” JD “000”

Consolidated income statement -Current year charge 7,497 13,269Deferred income tax relating to (origination) / reversal of temporary differences related to:End of service indemnity provision 2,410 (1,272)Slow moving spare parts provision 35 125Provision for income tax 9,942 12,122

The principal differences between the effective tax rate and the statutory rate of 15% are as follows:

2006 2005 JD “000” JD “000”

Computed tax at statutory rates 7,362 8,276Tax effect of subsidiaries and associates gains (3,796) (663)Tax effect of expenses not allowable for tax purposes 6,059 6,006

Tax effect of provisions allowable for tax relief (2,128) (350)7,497 13,269

2006 2005 JD “000” JD “000”

Consolidated balance sheet -At 1 January 4,635 3,488Additions to / (deductions from) deferred tax asset:End of service indemnity provision (2,410) 1,272 Slow moving spare parts provision (35) (125)At 31 December 2,190 4,635

The Company has obtained a tax clearance from the Income Tax Department up to the end of 2003. The Income Tax Department reviewed the Company’s records for 2004 and 2005 but has not issued the tax clearance up to the date of the accompanying consolidated financial statements.

20. Administrative expenses

2006 2005 JD “000” JD “000”

Salaries, wages and other benefits 1,711 1,855Travel expenses 149 285Depreciation 136 118Board of Directors’ remuneration 65 65Maintenance and repairs 57 108Electricity expenses 57 58Fuel 102 55Post, telephone and telex 536 123Stationery and printing 44 45Professional and consulting fees 432 338Hospitality 36 87Advertising 138 173Dike 19 expenses 377 410License and other fees 257 6Others 1,190 325

5,287 4,051


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21. Other income

2006 2005JD “000” JD “000”

Dividend income 45 45Services income 849 431Others, net 1,622 169

2,516 645

22. Other expenses

2006 2005 JD “000” JD “000”

Donations 3,211 736Educational grants 177 158Jordanian Universities fees 506 568Scientific research fees 506 568Education, vocational and technical training fund fees 395 435

4,795 2,465

23. Selling and distribution expenses

2006 2005 JD “000” JD “000”

MarketingSalaries, wages and other benefits 312 267Sales commission 1,351 2,180Depreciation - 15Travel expenses 76 155Advertising expenses 32 44Sample testing - 235Periodicals - 158Post, telephone and telex 16 17Others 11 140

1,798 3,211Shipping terminal - AqabaPort handling fees 2,402 2,749Salaries, wages and other benefits 889 1,044Depreciation 507 420Electricity 210 258Maintenance 148 170Fuel 23 37Insurance 67 71Rent 19 17Others 288 286

4,553 5,0526,351 8,263

24. End of service indemnity

This amount relates to compensation to be paid to employees who accept voluntary end of service plans offered by the Company.

25. Share of profit of associates

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

2006 2005 JD “000” JD “000”

Jordan Bromine Company 5,385 3,810Nippon Jordan Fertilizer Company 172 316Jordan Investment and South Development Company (14) (19)

Others 87 865,630 4,193

26. Dikes

Dike 18 During 2001, several sinkholes appeared in Dike (18). As a result, the Company stopped pumping water into the pan and reduced the water level to prevent the dike from collapsing.The technical studies revealed the need to rehabilitate the Dike and to increase its safety factor in order to put the Dike back in operations. An impairment loss of JD 4,000,000 was recognised in the 2001 income statement. The Company’s Board of Directors decided in 2004 to write off the total amount of the Dike’s cost. The cost of rehabilitation of the Dike amounted to JD 13,756,000 and has been capitalised in the dikes account under property, plant and equipment (Note 3 and 4).

Dike 19 During March 2000, Dike (19) suffered from partial failure. A definitive quantification of the damages sustained was not readily available during 2000. The Company’s management began legal proceedings, the subject matter of which is to claim for proper compensation. The Company initially provided the amount of JD 10,000,000 from the 2000 income statement. During the last quarter of 2003, the Company received the technical report submitted by the technical consultant, Dar Al-Handasah Harza JV, who was appointed to assess the damages sustained on Dike 19. The report indicated that the repair costs of the Dike exceed its net book value of an amount of JD 17,223,000. Accordingly, the Company’s Board of Directors decided to take an additional provision of JD 17,223,000 during 2003 being the net book value of the Dike.During 2004, the Company’s Board of Directors decided to write off the total cost of the Dike against the taken provision with total amount of JD 27,223,000.Management believes that the Company’s financial position and its results of operations will not be materially affected as a result of the said failure of the Dike and the related litigation (note 32).


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27. Provision for losses of Jordan Magnesia Company

Based on the technical, financial and marketing study prepared for the Jordan Magnesia Company’s project, the Arab Potash Company’s management resolved to record losses representing the commitments to be settled by Arab Potash Company in case the Jordan Magnesia Company ceases to exist in addition to fully provide against its investment. The total losses that the Arab Potash Company might incur were estimated in 2005 to be JD 87,606,000. In 2006, the estimated losses were increased by an amount of JD 8,092,000 which represent the amounts paid by the Company to Jordan Magnesia Company during the year. In addition, the estimated losses were increased in 2006 by an amount of JD 1,379,000 which represents the loss from revaluation of the Islamic Development Bank loan that was granted to Jordan Magnesia Company. This made the total estimated losses from Jordan Magnesia Company to increase during 2006 to an amount of JD 97,077,000.

The amount of JD 5,326,000 shown in Note (29) represents the extra amount committed by Arab Potash Company and not included in the liabilities of Jordan Magnesia Company.

The losses from Jordan Magnesia Company as of 31 December 2006 and 2005 consist of the following:

2006 2005 JD “000” JD “000”

Jordan Magnesia Company loans guaranteed by Arab Potash Company 29,920 38,196

Net investment in Jordan Magnesia Company 13,521 13,521Amounts due from Jordan Magnesia Company 54,349 36,602Less: Net assets at Jordan Magnesia Company (713) (713)

97,077 87,606

28. Provision for losses of Kemira Arab Potash Company (KEMAPCO)

2006 2005 JD “000” JD “000”

Provision for loans granted to KEMAPCO * 6,284 2,000 Provision for APC’s guarantees toward KEMAPCO loans ** 4,500 17,700

10,784 19,700 * During 2003 and 2004, the Company granted loans to KEMAPCO with total amount of US $ 17,957,747 (JD 12,732,000). The loans are interest free and shall be paid in whole or in part not earlier than 5 years from the signing of each loan agreement. The Company has the right at anytime to convert the loans to equity in KEMAPCO. In 2004, The Company’s management resolved to fully provide for the loans amounting to JD 12,732,000 this has been subsequent to the independent assessment study requested by the board of directors of KEMAPCO for the future business prospect of KEMAPCO. During 2005 and 2006 the Company granted KEMAPCO additional loans with the same terms amounted to US $ 2,820,874 (JD 2,000,000) and US $ 8,862,551 (JD 6,284,000) respectively. The Company’s

management resolved to fully provide for the additional loan amounts. ** The Company’s management resolved during 2005 and 2006 to provide for an amount of JD 17,700,000 and JD 4,500,000 respectively against the KEMAPCO’s loans guaranteed by the Company which amounted to JD 22,200,000 (Note 29) as of 31 December 2006.

29. Contingent liability reserve

2006 2005 JD “000” JD“000”

Reserve for Jordan Magnesia Company losses (Note 27) 5,326 6,687

Reserve for Kemira Arab Potash Company losses (Note 28) 22,200 17,700

27,526 24,387

30. Earnings per share

2006 2005 Profit for the year (JD “000”) 39,139 43,053Weighted average number of shares (In thousands of shares) 83,318 83,318

Basic and diluted, for profit for the year attributable to ordinary equity holders of the parent

JD 0.470 JD 0.517

31. Related party transactions

The Company is involved in a number of related party transactions. The principal transactions are as follows:

The concession to exploit the Dead Sea brine was granted by the Government of Jordan. In return, the Company pays to the government an annual royalty, which is computed as explained in Note 1. The concession agreement was amended during 2003 in accordance with the temporary law number (55) of 2003 whereby amendments included the annual rent fees for lands within the concession area to become JD 200,000 annually.

As outlined in Note (13), the government of Jordan has guaranteed certain loans granted to the Company.

On 9 September 2003, the Company signed an agreement with the Ministry of Water and Irrigation whereby the water usage has been determined in terms of water sources, quantities and prices.

On 16 October 2003, PCS Jordan LLC a wholly owned subsidiary of Potash Corporation of Saskatchewan Inc. (“Potashcorp”), a Canadian company, acquired 26 percent of the issued and outstanding common shares of Arab Potash Company from Jordan Investment Company (“JIC”) for US $ 173.8 million. Subsequent to the acquisition, APC is 26.9 percent held by JIC, 27.7 percent by PotashCorp, 19.5 percent by Arab Mining Company, and the


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remainder of APC shares is held by other governments, banks and individual investors. As part of the acquisition transaction, PotashCorp nominated individuals to the top four management positions at APC.

As outlined in Note (13), the Company guaranteed Jordan Dead Sea Industries Company obligations to Islamic Development Bank - Jeddah which resulted from the agreement to purchase and lease Jordan Magnesia Company machinery and equipment for an amount of US $ 28,035,000. The loan agreement was modified on 29 August 2002 for Jordan Magnesia Company to become the borrower instead of Jordan Dead Sea Industries Company. The Islamic Development Bank – Jeddah owns 5.2 % of the Company’s share capital and is represented on its board of directors.

Also, the Company guaranteed the syndicated loan obtained by Jordan Magnesia Company from local banks for US $ 30,000,000.

On 7 July 1992, the Company and Jordan Phosphate Mines Company signed a supply agreement with Nippon Jordan Fertilizer Company (“NJFC”). Under this agreement, the Company undertook to supply NJFC with all of its Potash requirements, and NJFC, undertook to purchase all of its Potash requirements from the Company. The price of Potash will be based on pricing formulas contained in the agreement, whereby the resulting price will be substantially similar to the international market price of Potash. The Company owns 20% of NJFC which commenced production during 1997. Total Company’s sales to NJFC during 2006 and 2005 were JD 3,137,000 and JD 2,750,000 respectively.

On 2 June 1997, the Company signed a cooperation and supply agreement with Numeira Mixed Salts and Mud Company (“Numeira”). Under this agreement, the Company agreed to grant Numeira exclusive rights to produce, dry and sell Carnellite salts and Dead Sea mud within the Company’s concession area. In addition, The Company undertook to provide Numeira with carnellite salts and mud at JD 50 and JD 10 per ton respectively. The selling price has been amended to be JD 35 per ton for carnellite salt effective 1 July 2003 and JD 5 per ton for mud effective 1 January 2003. In addition, Numeira pays an amount of JD 4,000 in return of land annual 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, Jordan Bromine Company (“JBC”). Under this agreement, the Company granted JBC the right to construct and operate an integrated manufacturing facility to produce, sell and market bromine and bromine derivatives within the Company’s concession area for at least 7 years, after which JBC has the right of first refusal on any new projects for production of bromine in Jordan. The Company undertook to provide JBC with potassium chloride in accordance with price formulas specified in the agreement once the construction of the chlorine factory is completed. During 2000, the Company acquired JODICO’s share in JBC. The Company’s potash sales to JBC during 2006 and 2005 were JD 4,748,000 and JD 3,256,000 respectively.

On 22 June 1999, the Company signed an agreement with Kemira Agro to establish a company, Kemira Arab Potash Company (KEMAPCO), to design, construct and operate a Potassium Nitrate, Decalcium Phosphate and Nitric Acid plant using the technology provided by Kemira Agro and potash provided by the Company. The Company agreed to sublease KEMAPCO two plots of land in Aqaba and to supply the new project with muriate of potash. Total Company’s potash sales to KEMAPCO during 2006 and 2005 were JD 9,509,000 and JD 6,950,000 respectively in accordance with price formulas specified in the agreement.

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

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

The Company guaranteed 50% of the loan obtained by Kemira Arab Potash Company from the European Investment Bank for Euro 30,000,000.

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

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

The Company granted loans with total amount of US $ 29,641,172 to Kemira Arab Potash Company (Note 28).

The Company guaranteed facilities obtained by Jordan Magnesia Company from Jordan Kuwaiti Bank with a ceiling amount of US $ 6,000,000.

The Company guaranteed 50% of the short term financing loan obtained by Kemira Arab Potash Company from Citibank for US $ 6,000,000.

The Company guaranteed 50% of the loan obtained by Kemira Arab Potash Company from the Islamic Development Bank – Jeddah for SDR 20,737,280.

The Company granted loan with an amount of US $ 6,000,000 to Jordan Bromine Company (Note 6).

32. Contingencies and commitments

As of 31 December 2006, the Company had the following contingencies and commitments:

• Letters of credit and collection bills amounting to JD 16,376,000.• The Company has committed and contracted for capital expenditure amounting to JD 99,240,000.• The Company has committed but not contracted for capital expenditure amounting to JD 22,336,000.• Jordan Magnesia Company is presently engaged in ICC Arbitration proceedings with the contractor concerning the plant. The contractor has filed claims with total amount of US $ 102 million. Jordan Magnesia Company’s counterclaims exceed the contractor’s claims. The final award expected by mid of 2007. • The Company was named as plaintiff in the following lawsuits:

1. Lawsuit against ATA Company, the contractor of Dikes 19 whereby APC is claiming JD 37,477,000. An arbitration agreement was signed between the parties on 10 April 2001. The Arbitration Committee issued a majority ruling on 30 September 2003 where it has rejected APC’s claim and awarded ATA Company a sum of JD 5,907,000 for the counter claim it had filed against APC before the same arbitration panel. APC has appealed the Arbitration Committee ruling on 29 October 2003. The Court of Appeal accepted APC’s appeal whereby the Arbitration decision and the Arbitration Clause in the Contract were cancelled. ATA took the case to the Cassation Court, and the Cassation Court issued its decision upholding the Court of Appeal decision. The issue is now under close review by APC to determine whether to go to arbitration or litigation with no final decision made as to the date of the accompanying consolidated financial statements.


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2. Lawsuit raised on 22 March 2001 against Middle East Insurance Company, the insurer of Dikes 19 and 20 during construction (issuance of CAR insurance Policy), whereby APC is claiming JD 27,518,000. The lawsuit is under process as of the date of the accompanying consolidated financial statements.

3. Lawsuit against ATA Company, the contractor of Dike 18. ATA filed for the dismissal of the case on the grounds that there is an arbitration clause in the Construction Contract. The First Instance Court accepted ATA’s request. APC appealed the ruling for which a refusal decision was issued on 14 July 2004. APC took the case to the Cassation Court and the said court upheld the Court of Appeal decision. The case is in the process of forming the Arbitration Panel as of the date of the accompanying consolidated financial statements.

• The Company was named as defendant in a lawsuit raised by Al Jaafar Contracting Company, the contractor of Dike 20. The Company is exposed to contingent liability amounting to JD 2,222,000. APC raised a counter claim with Al Jaafar Contracting Company on 28 September 2004 due to the damage of the said Dike with an amount of JD 6,000,000. The lawsuit is still ongoing as of the date of the accompanying consolidated financial statements.

According to the Company’s management, there is no need to provide for any additional amounts regarding the above lawsuits.

33. Financial instruments

Financial risk management The Company operates internationally, giving rise to exposure to market risks from credit and changes 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 counter parties having similar characteristics.

The Company has procedures in place to ensure that sales are made to customers with an appropriate credit history and do not exceed an acceptable credit exposure limit.The Company does not guarantee obligations of other parties except where the group has entered into joint venture agreements or for associates (Note 31). The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the consolidated balance sheet.

(ii) Interest rate risk Most of the financial instruments on the consolidated balance sheet are not subject to interest rate risk except for deposits and loans. Interest on deposits in Jordanian Dinars ranges from 3.50% to 6.55%, on deposits in US Dollars from 3.45% to 5.47% and on deposits in Euro from 2.09% to 3.38%.

(iii) Liquidity riskThe Company’s policy is to maintain sufficient cash and cash equivalents or have available funding through an adequate amount of committed credit facilities to meet its commitments.

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

Deposits LoansJD “000” JD “000”

Jordanian Dinars 57,143 - US Dollars 29,890 28,035Special Drawing Right (SDR) - 20,872Euro 4,776 -

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

Fair values

The Company’s principal financial instruments not carried at fair value are cash and cash equivalents, trade receivables, trade and other payables, at fair value, due to bank and long-term borrowings.The carrying amount of cash and cash equivalents approximates their fair value due to the short term maturity of these financial instruments.Similarly, the historical cost carrying amounts of receivables and payables which are all subject to normal trade credit terms approximate their fair values.The fair value of securities included in available-for-sale investments is estimated by reference to their quoted market price at the balance sheet date.The fair value of long-term borrowings is based on the quoted market price for the same or similar issues or on the current rates available for debt with the same maturity and credit-rating risk profile and amounts to JD 40,824 as of 31 December 2006.

34. New and amended Standards and Interpretations issued but not yet effective

Amendments to IAS 1 – Capital DisclosuresAmendments to IAS 1 Presentation of Financial Statements were issued by the IASB as Capital Disclosures in August 2005. They are required to be applied for periods beginning on or after 1 January 2007. When effective, these amendments will require disclosure of information enabling evaluation of the company’s objectives, policies and processes for managing capital.

IFRS 7 Financial Instruments: DisclosuresIFRS 7 Financial Instruments: Disclosures was issued by the IASB in August 2005, becoming effective for periods beginning on or after 1 January 2007. The new standard will require additional disclosure of the significance of financial instruments for the company’s financial position and performance and information about exposure to risks arising from financial instruments.

IFRS 8 Operating SegmentsIFRS 8 Operating Segments was issued by the IASB in November 2006, becoming effective for periods commencing on or after 1 January 2009. The new standard may require changes in the way the company discloses information about its operating segments.

IFRIC InterpretationsDuring 2006 IFRIC issued the following interpretations:IFRIC Interpretation 8 Scope of IFRS 2IFRIC Interpretation 9 Reassessment of Embedded DerivativesIFRIC Interpretation 11 IFRS 2 – Group and Treasury Share Transactions

Management does not expect these interpretations to have a significant impact on the Company’s consolidated financial statements when implemented.

35.Subsequent events

On 1 February 2007, the Company acquired 50% of the issued shares of Kemira Arab Potash Company (KEMAPCO) thereby becoming the sole shareholder of KEMAPCO. Under the terms of the Share Transfer and Settlement Agreement, the Company paid the amount of JD 1 to Kemira Agro for these shares. The Company and KEMAPCO received a total amount of US $ 12.5 million from Kemira Agro.

The Company accounted for the purchase under the purchase method of accounting which will result in a gain approximating to JD 10,057,000 which will be reflected in the income statement of 2007.The Company has previously accounted for its investment in KEMAPCO under the equity method of accounting but will begin consolidating KEMAPCO effective 1 February 2007. Consolidation will combine, on a line-by-line basis, the accounts of Kemapco with the Company. Had the Company consolidated KEMAPCO in 2006, the following amounts would have been consolidated with the Company’s accounts:

JD “000”Share of KEMAPCO’s balance sheet:Current assets 20,625Non-current assets 29,200Current liabilities (20,863)Non-current liabilities (50,113)Net assets (21,151)Share of KEMAPCO’s revenue and profit:Revenue 33,511Loss (8,687)

36.Classification

Some of 2005 financial statement balances were reclassified to correspond to 2006 presentation. There is no impact on the consolidated financial statements. The effect of classification is on the property, plant and equipment categories (Note 3) as follows:

Before reclassification Reclassified Accumulated Accumulated

Cost Deprecation Cost DeprecationJD “000” JD “000” JD “000” JD “000”

Buildings 43,622 35,473 48,336 40,376Dikes 131,044 76,578 132,615 80,145Machinery and equipment 273,499 246,359 235,571 205,580Vehicles 24,692 20,608 22,709 19,205Furniture and fixture 6,359 5,265 4,991 4,319Hospital equipment 454 444 - -Tools 1,853 1,641 94 90Computers and software - - 4,699 4,145

481,523 386,368 449,015 353,860

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Documents

ARAB POTASH COMPANY · ARAB POTASH COMPANY 7 Board of Directors and Top Management Government of the Hashemite Kingdom of Jordan (Jordan Investment Corporation) Eng. …