Foskor (Pty) Ltd

ANNUAL REPORT 2005

MISSION• We accept our responsibility towards all stakeholders inclusive of the communities in which we conduct

our business.

• Our primary business is the beneficiation of phosphate rock concentrate for the production of phosphoric

acid and phosphate-based fertilisers, which are sold into the international and domestic markets.

• Our secondary business activities include:

– The production of electrofused zirconia from zircon sand; and

– The recovery of low concentrates of copper sulphide minerals.

• The Group is committed to:

– Competitive, reliable, effective production and marketing;

– Striving for excellence as the benchmark of all our endeavours;

– Providing an environment conducive to personal development and participation by all employees;

– Complying with the spirit of the transformation process within the framework of legislative measures;

– Maintaining the highest ethical, professional, quality and loss control standards; and

– Continuing to be environmentally responsible.

VISIONTo create, maintain and enhance a financially viable, performance-driven business, capable of delivering

sustained superior financial and social returns to our shareholders.

PROFILE

The Foskor Group is a well-established South African group of companies. The Group has grown from

a single phosphate mining operation 54 years ago to become one of the world’s largest, most dynamic

phosphate and phosphoric acid producers.

The Group’s recent emergence as a world leader has been based on various strategic initiatives, including:

• Strategic capital investment to ensure a sustainable infrastructure;• An emphasis on inter-group synergies to ensure shareholder value maximisation; and• A focus on expanding the core value-adding operations of the Group.

The Group has three major operating entities:

• A phosphate rock mine and beneficiation plant situated in Phalaborwa;• A phosphoric acid plant situated in Richards Bay; and• A sulphuric acid plant situated in Richards Bay.

A secondary activity – and valuable source of revenue – is the production of electrofused zirconia from

zircon sand. The recovery of copper sulphide mineral found in the phosphate ore also contributes to the

Group’s income, while magnetite recovered from the foskorite ore is stockpiled as a possible future source

of iron and titanium.

FOSKOR 2005 / 01

CONTENTS

Mission, Vision and Profile IFC

Board of Directors 2

Board Committees 2

Executive Management 2

Chairman’s Review 3

Chief Executive Officer’s Review 4

Chief Financial Officer’s Review 7

Corporate Review 9

Annual Financial Statements 11

FOSKOR 2005 | 1

BOARD OF DIRECTORS

Mr LL van Niekerk ChairmanMr MA Pitse CEOMr F Venter DirectorMr G van Wyk DirectorMr HN Giyose Director

BOARD AUDIT COMMITTEE

Mr F Venter ChairmanMr MA Pitse MemberMr G van Wyk Member

BOARD TECHNICAL COMMITTEE

Mr MW Ndodana ChairmanMr MA Pitse MemberMr A Malinga Member

BOARD HUMAN RESOURCES COMMITTEE

Mr LL van Niekerk ChairmanMr MA Pitse MemberMrs ST Ngubane MemberMr AS Mzimela Member

BOARD PROCUREMENT COMMITTEE

Ms L Mthembu ChairmanMr P Motsepe MemberMr K Cele MemberMr M Khan MemberMs M Ngoatje MemberMs L de Jongh Member

EXECUTIVE MANAGEMENT

Mr MA Pitse President & CEO BCompt (Hons), MBL, CA (SA)

Mr CAP Galego Chief Operating Officer B.Sc. Eng (Phys. Met.) GDE

Mr TJ Koekemoer Chief Financial Officer B. Com (Hons) CA (SA) AEP

Mr HQ Mhlongo Vice President: Procurement & Logistics B.Sc. (Chem Eng), M.Sc(IAS)

Mr G Skhosana Vice President: Sales & Marketing B.Comm, MDPD, ASMPD

Mr ND Naidoo Divisional Executive: Richards Bay Operation B. Sc (Chem Eng), MBL

Mr CFH Schmidt Divisional Executive: Foskor Zirconia B.Sc

Mr F van der Schyff Divisional Executive: Phalaborwa Operation B.Sc (Mech Eng), MBA, GCC Mines & Works

DIRECTORS AND MANAGEMENT

List of Directors, Committees and Management as at the end of the nine month financial period ended on 31 March 2005:

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During the period under review, Foskor (Pty) Limited continued to implement its strategy for sustainability by introducing a Strategic Equity Partner (SEP). This is in line with the Group’s quest to be a serious global player in the phosphatic business community: The goal includes integrated and diversified markets and products produced in world class, competitive facilities utilizing the most cost efficient and environmentally acceptable processes available. The company also entered into a Business Assistance Agreement (BAA) with the SEP, in a bid to further reduce costs, improve plant availability and ensure competitive, value-added products.

Foskor continued to be under financial pressure, as the SA Rand continued to strengthen and international selling prices remained low. The company has seen significant benefits resulting from the 2004 restructuring process, whereby production efficiencies and cost levels were addressed, thus reducing the company breakeven point to an exchange rate of just above six Rands to the US Dollar given current market conditions.

The financial year end was altered, to be in line with that of the Industrial Development Corporation (IDC) – of which Foskor is a wholly owned subsidiary – and this resulted in a nine month period under review.

SEP and BAAUnder the guidance of the IDC a process to introduce a SEP was finalized during the period under review.

This resulted in the introduction of Coromandel Fertilisers Limited (CFL), an India-based listed fertiliser company, as Foskor’s SEP. Effective 1 April 2005 CFL takes up an initial 2.5% stake, with the option of obtaining a further 14% by improving the operating profit of the business through CFL’s own initiatives. This, together with Foskor’s initiatives, should result in the turnaround of the financial fortunes of the company. To this end, CFL has entered into a three year BAA, in terms of which management skills, operational efficiencies, technology and access to markets will be provided to Foskor to ensure the future financial viability of the company.

FINANCIAL PERFORMANCE AND RESTRUCTURING OF THE BALANCE SHEETTurnover remained at 2004 levels, despite the strengthening of the currency and the poor production performance of the Richards Bay Division. The improvement in the operating profit before the impairment charge (see below) is mainly attributable to the benefits stemming from the restructuring process.

During the period under review, and as part of the introduction of the SEP, the IDC restructured the company balance sheet – replacing interest-bearing debt with interest-free shareholders’ loans backranked in favour of other Foskor creditors, and allowing FOskor to redeem the foreign loans secured during the expansion of the Richards Bay operation in 1999.

Further, the difficult trading conditions in the fertiliser industry, specifically in the phosphoric acid industry, whereby selling prices remain depressed in comparison to the escalating raw material prices, have forced the Board of Directors to review the underlying carrying value of the Richards Bay assets. The Board has accordingly approved a R300m impairment of these assets, based on the current environment.

PRODUCTION PERFORMANCEThe Phalaborwa Division produced 2.093m tons of phosphate rock, which was above the output for the comparative period in the previous financial year. To secure the market for phosphoric rock the Group decided to purchase the Sasol Nitro operations in Phalaborwa. Accordingly, a Heads of Agreement has been entered into between the parties concerned.

The performance of the phosphoric acid plant in Richards Bay was adversely affected by a major boiler failure and followed by the repeated failures of another boiler on the same sulphuric acid plant, which resulted in ca 100 000 tons of lost production. Fortunately, these problems were resolved and the plant performed at an all-time record level, producing just over 150 000 tons during the last quarter of the financial year – or an equivalent annualised production of ca 600 000 tons. This was further amplified during January 2005, when the plant reached 95% of design capacity, which indicates that the plant is able to achieve the required level of production to ensure its long-term viability.

ENVIRONMENT AND SAFETYThe Phalaborwa Division has, over the last nine months, successfully operated the new collection points around the Selati Tailings Dam and, in accordance with the Water Permit issued by the Department of Water Affairs and Forestry (DWAF), has not discharged any water into the Selati River.

In Richards Bay control of the sulphuric acid plants improved, with all plants achieving in excess of 99.8% average compliance for the year, which is in excess of the permit requirements of 96% for older plants and 98% for new plants.

Foskor Richards Bay retained the Platinum NOSA Integrated Four Star rating on the comprehensive integrated Safety, Health, Environment and Quality (SHEQ) system.

The Phalaborwa Division achieved 1.1 million fatality free production shifts and 3.0 million man-hours without a disabling injury, whilst retaining the NOSA Five Star rating for the 37th time since 1986, now using the integrated system. NOSCAR is NOSA’s highest award for safety management; the Division achieved NOSCAR Platinum status for the 30th time.

HIV/AIDSThe impact of HIV/AIDS continues to be a reality in Foskor, as in all South African companies. Foskor has continued its efforts to complete the AIDS Awareness Programme and, to date, over 85% of the workforce has been exposed to the programme, whilst awareness of the

CHAIRMAN'S REVIEW

FOSKOR 2005 | 3

CHAIRMAN'S REVIEW

value and importance of HIV/AIDS testing is reinforced on an ongoing basis. Foskor has continued the rollout of its support programme, whereby nutritional supplements are provided to all employees, and antiretroviral (ARV) drugs are offered to all those with a disclosed ‘infected’ status.

OUTLOOK FOR 2005/6International market conditions remain uncertain and the company will, accordingly, continue to focus on the optimization of production at the Richards Bay plant and on reducing costs at all operations. The SEP and the execution of the BAA will play a crucial role in helping to achieve the required results. Given current market conditions, the company is expected to be profitable in the 2005/6 financial year. Foskor is awaiting approval by the Competition Commission for the conclusion of the acquisition of the Phalaborwa Works of Sasol Nitro, in order to ensure the continued volumes and cost structure of the Phalaborwa Division.

Looking ahead, the company – with the assistance of its SEP – will continue to explore ways of diversifying from the fertiliser sector into more lucrative sectors in other promising regions.

APPRECIATIONI express my appreciation and thanks to my colleagues on the Board, to the Chief Executive Officer and members of the executive team, and to all Foskor Group employees for their efforts, loyalty, co-operation and support during the period under review.

In particular, we recognise the admirable stewardship of Dr Khaya Ngqula as previous Chairman, who has been instrumental in helping to reposition Foskor over the past years.

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OVERVIEWThe process for the introduction of a SEP into Foskor has now been completed through the introduction of Coromandel Fertilisers Limited (CFL), an India-based, listed fertiliser company. CFL took up an initial nominal minority equity stake, with the option of increasing this through its contribution to turning Foskor towards profitability. To this end, CFL has also entered into a Business Assistance Agreement (BAA) with Foskor, in terms of which CFL will provide management skills, technology and access to markets.

For the nine month period ended 31 March 2005, trading conditions remained difficult for Foskor. Phosphoric acid selling prices remained depressed, with raw material prices and logistics costs on the increase.

FINANCIAL PERFORMANCEThe continued strengthening of the SA Rand against the US Dollar had a significant negative impact on Group profitability. The 12% increase in Dollar-based selling prices of phosphoric acid was, unfortunately, not enough to compensate for the 10% strengthening of the Rand against the Dollar. Operating loss increased by R180m – from R227m in 2004, to a loss of R407m in 2005 after an impairment of assets amounting to R300m. This impairment of assets at the Richards Bay plant is in line with the requirements of Generally Accepted Accounting Practices (GAAP) of South Africa. During the year under review, all foreign loans that had been utilized to finance the R1.1 billion expansion project at Richards Bay were settled. At financial year end, the Group had adequate cash resources with no interest-bearing debt.

PRODUCTION AND OPERATIONS The Phalaborwa Division produced 2.093m tons of phosphate rock. The volume of ore mined was on budget and the waste moved in order to give access to the ore resources was only slightly above budget. The production volumes set for Extension 8 were exceeded by 2.6%, with mill availability being in excess of 90%. Overall, recoveries for the individual production streams were better than budgeted, whilst the operating costs of the Division were marginally below budget and the average cash cost of the operations was 9% below budget.

Although the two phosphoric acid plants in Richards Bay remained under-utilized in the period under review, a record average monthly production of 2068 tons per day was achieved in January 2005. This equates to 95% of design capacity. The performance of the phosphoric acid plants was adversely affected by the failure of the No. 1 Waste Heat Boiler (WHB) four days into the financial year, and followed by repeated failure of the No. 2 WHB on sulphuric acid plant A. The No. 1 WHB failure was covered by an insurance claim for ca R25m in respect of business interruption. The No. 2 WHB failures were due to poor supplier workmanship and a new boiler was installed in February 2005 at no additional cost.

Production was also restricted during December 2004 as a result of logistical constraints in the form of delivery of phosphate rock.

The net effect of such disruptions was a loss of production opportunity. The problems have, however, been resolved.

Costs have been extremely well controlled for the period under review, and great strides have been made in terms of plant efficiencies, with the achievement of a five-year best – realizing savings in excess of R15m. Further efficiency improvements are being sought in order to reduce costs and improve cost per ton ratio.

Emanating primarily from the problem of extended plant breakdowns, and the resulting shortage of phosphoric acid, the Granulation Plant showed poor performance.

MARKETING AND SALESThe overall sales of phosphoric acid and granular fertilisers were down, compared to the previous financial year. This was mainly as a result of the shortage of phosphoric acid during July/August 2004, which problem was slightly offset by the export of phosphate rock to Europe and Japan.

Total sales of phosphate rock to the local market, excluding inter-company sales, were below those of the previous financial year. During the period under review, Foskor moved to internationally competitive pricing of phosphate rock for all domestic customers. About 200 000 tons of phosphate rock were exported.

Total export of phosphoric acid to India was around 9% below budget and total granular fertiliser sales were 37% below budget; these were negatively impacted by the production problems experienced at the Richards Bay plant.

During June 2005, the new selling price of phosphoric acid for the period April 2005 to March 2006 was finalised. The price increased from a base price of US$402.75 to US$454 per ton on a 120 days payment basis. On a cash basis the price will be US$445.

SAFETY, HEALTH, ENVIRONMENT AND QUALITY (SHEQ)SafetyThe Phalaborwa Division achieved 1.1 million fatality free production shifts and 3.0 million man-hours without a disabling injury. The Division retained its NOSA Five Star rating for the 37th time since 1986, now using the integrated system; and also achieved NOSCAR Platinum status for the 30th time. Foskor Zirconia retained its NOSA Five Star rating for the 14th time, now using the integrated system, and also achieved NOSCAR Platinum status for the 14th time.

The Richards Bay Division retained its Platinum NOSA Integrated Four Star rating on the comprehensive

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FOSKOR 2005 | 5

integrated SHEQ system and was awarded Second Place in the NOSA Integrated Five Star Sector.

EnvironmentIn accordance with the Water Permit issued by the Department of Water Affairs and Forestry (DWAF), Phalaborwa operations have, over the last nine months, not discharged any water into the Selati River. Both the Zirconia and Rock and Copper Divisions retained their ISO 14001 Environmental Management System certification. All plants at the Richards Bay Division outperformed the permit emission requirements. Umhlatuze Water is in the process of finalizing the design of a new gypsum disposal system, which will also assist in the reduction of odours from the plant. The implementation of the ISO 14001 Environmental Management System at the Division is ongoing and the first phase ISO 14001 certification audit by external auditors has been completed.

QualityThe Rock and Copper Division and the Zirconia Division retained their ISO 9001-2000 Quality Assurance System certification. The Richards Bay Division has maintained its ISO 9001 Quality Certification for the ninth year in succession.

Subsequent EventsOn 2 June 2005 a slight ammonia leak was identified at one of the isolated blanked flanges. The water deluge system installed to contain ammonia spreading was automatically activated by sensors to minimize dispersion. Eighty employees of the neighbouring companies were medically checked, and three such employees were admitted for further observation. A detailed investigation was undertaken and a report was submitted to the regulatory authorities.

PROCUREMENT AND LOGISTICSInternational sulphur markets have continued to negatively impact the final product costing. Prices have continued to rise during the period under review. Due to production disruptions, the volume of usage in the Richards Bay Division was 15% lower than the previous nine month period.

During the period under review, ammonia markets were highly volatile; procurement of ammonia was carried out when conditions were favourable during the year. Due to low production of granular products, the volume of usage was 50% lower than for the previous nine month period.

Total shipments of rock to Richards Bay were 5% below those of the previous financial year. Due to plant breakdowns, the Richards Bay plant’s consumption was lower than that of the previous financial year.

STAKEHOLDER COMMUNICATIONThe Group has a structured system of relationships that co-ordinate the efforts of its people towards the achievement of organizational objectives. The effective use of communication and corporate governance structures ensures the achievement of this co-ordination at Foskor.

EMPLOYEE PARTICIPATIONFoskor realizes that the organisation’s objectives can be achieved only when they are properly and effectively communicated to employees. The Group has, therefore, launched ongoing multi-level and multi-directional communication through briefings, communication sessions and roadshows. Press cuttings are electronically sent to all employees.

EMPLOYMENT EQUITYIn line with the Employment Equity Act, the Group has adopted a formal employment equity policy. The objective of the policy is to ensure that the company’s demographic profile is changed to reflect the demographics of the country. Employment Equity and Skills Development Committees that include management, worker and designated group representatives have been established in the operating units, to recommend targets and monitor performance against the targets. The Board has approved targets that are far more ambitious than what the Employment Equity Act prescribes. These targets are incorporated into the performance management objectives of top and senior management. The planned employment equity targets for the year under review were met. For the middle, senior and executive management levels the Group achieved 64% compared to the weighted average target of 62%. Supervisory management level was on target at 49%. Attracting senior previously disadvantaged employees to the Phalaborwa operation is still a challenge with which the company is grappling. Artisan skills in the previously disadvantaged categories are also in short supply and the company has invested in Section 28 training to develop in-house talent.

HIV/AIDSThe impact of HIV/AIDS continues to be a reality in Foskor, as in all South African companies. The Group has continued its efforts to complete the AIDS Awareness Programme; and to date over 85% of the workforce has been exposed to the programme, whilst awareness of the value and importance of HIV/AIDS testing is reinforced by an ongoing campaign. Foskor continues its support programme, whereby nutritional supplements are provided to all employees, and ARVs are offered to all those with a disclosed ‘infected’ status.

OUTLOOK FOR 2005/2006Foskor continues to be faced with challenges in the marketplace, and will thus continue to address the cost

CHIEF EXECUTIVE OFFICER’S REVIEW

FOSKOR 2005 / 6

structures of the business. Such initiatives should be well

supplemented by the introduction of the SEP and the

execution of the BAA.

Since 2003 the exchange rate has strengthened, by more

than 30% from an average of R9/$ to the current average of

R6.17/$. Whereas Foskor’s breakeven position at EBIT level

was at R8.6/$ in 2003/4 it has reduced to ca R6.8/$ for the

current period. Looking ahead, it is envisaged that – based on

forecasted volumes and prices – the breakeven will reduce to

just above R6/$.

Given current market conditions, the company is expected

to be profitable in the 2005/6 financial year.

The company is awaiting final approval from the

Competition Commission for the acquisition of the

Phalaborwa Works of Sasol Nitro (‘FEDMIS’).

ACKNOWLEDGEMENTS

On behalf of executive management, I thank the

shareholders and our Board of Directors for their

continued support and commitment to turning around the

fortunes of Foskor (Pty) Limited.

CHIEF EXECUTIVE OFFICER’S REVIEW

FOSKOR 2005 | 7

CHIEF FINANCIAL OFFICER’S REVIEW

REVENUEGroup revenue decreased by R223m or 11% from R2051m in 2004 to R1828m (annualised) (R1371m for nine months) in 2005. The major contributors to the change in revenue were:

• The 10% strengthening of the South African Rand against the US Dollar (US$) from an average of R6.8/$ during 2004 to R6.17/$ during 2005. The selling prices for both phosphate rock and phosphoric acid (P2O5) are determined in the world market in US$ terms. More than 75% of revenue is derived from export sales and more than 95% of total revenue is based on Dollar denominated prices.

• Production of phosphoric acid reduced with 33k tons or 6% from 575k tons to 542k tons (annualised). This reduction was due to a boiler failure at the Richards Bay plant (which issue is addressed elsewhere in the report). In order to honour commitments to phosphoric acid customers, the conversion of phosphoric acid to granular was scaled down significantly. The reduction in P2O5 production leads to a reduction in the required phosphate rock.

• Sales volume of phosphoric acid increased marginally from 435k tons to 437k tons (annualised). Sales of granular fertiliser decreased by 41% from 296k tons to 174k tons (annualised).

• The average CFR price of phosphoric acid increased by $43/t or 12% from $356/t during the year to June 2004 to $399/t for the nine months ending March 2005.

• Production of phosphate rock increased with 149k tons or 6% from 2642k tons to 2791k tons (annualised).

• Phosphate rock sales declined by 15% from 3016k tons to 2575k tons (annualised). Due to logistical constraints relating to the transport of rock from Phalaborwa to Richards Bay, limited storage facilities at Richards

Bay and a reduction in phosphate rock required for the production of P2O5, the additional phosphate rock production volumes could not be sold. Phosphate rock stock levels increased from 189k tons in June 2004 to 399k tons in March 2005.

• The average FOR price of phosphate rock increased by 25% from $43.3/t to $54/t.

IMPAIRMENTThe continued strengthening of the Rand against the US$ had a major impact on the profitability of the Group. Based on current volumes and prices, the impact of a R1 movement against the US$ exceeds R225m at the operating loss/profit level.

The 12% increase in Dollar- based selling prices of phosphoric acid was not enough to compensate for the 10% strengthening of the Rand against the US$. More than 80% of the input costs are SA Rand-based.

The balance sheet values of Foskor’s assets have been assessed in accordance with IAS 36 (AC128) on Impairment of Assets (‘the standard’). The standard requires that each operating unit be measured and based on this. The carrying value of the phosphoric acid plant operations at Richards Bay had to be impaired, with an impairment loss of R300m before taxation being recognised at the operating loss level.

OPERATING LOSSOperating loss increased by R180m, from R227m in 2004 to R407m in 2005 after impairment of assets amounting to R300m. Before impairment, the loss reduced by R120m (annualised ca R160m), from R227m to R107m.

The major contributors to the year on year change include:• The strengthening of the Rand against the US$ resulted in

an additional operating loss of ca R140m.

In line with that of Foskor’s shareholder, the Industrial Development Corporation (IDC), the Foskor year end was changed from June to March, resulting in the current nine month period under review.

The main drivers influencing the period’s results are tabled below.

Key Drivers 2005 2005 2004 2003 Variance Period months Annualised 9 12 12 2005/2004

Exchange Rate – R/$ average 6,17 6,83 9,0 (0,66) (10)%

Revenue – R'm 1 828 1 371 2 051 1 972 (223) (11)%

Volume – Sales – Phosphoric Acid (P2O5) – 000’ tons 437 328 435 307 2 1% – Granular – 000’ tons 174 130 296 148 (122) (41)% – Phosphate Rock – 000’ tons 2 575 1 931 3 016 2 736 (441) (15)%

Volume – Production – P2O5 – 000’ tons 542 406 575 404 (33) (6)% – Phosphate Rock – 000’ tons 2 791 2 093 2 642 2 773 149 6%

Prices – Sales (average) – P2O5 – CFR Price – $/t 399 356 334 43 12% – Phosphate Rock – FOR Price – $/t 54 43,3 39,4 11 25%

Price – Sales (at year-end) – P2O5 – CFR Price – $/t 399 399 349 – –

Prices – Raw material cost – Sulphur – delivered – Price – $/t 86 80 53 6 8%

FOSKOR 2005 / 8

• The loss in production due to a boiler failure at the phosphoric acid plant was partially offset by a business interruption and machinery damage insurance claim of ca R25m.

• The increase in sales prices, improved efficiencies and reduction in Rand based costs have assisted in reducing the breakeven position at operating profit level.

WORKING CAPITALA positive cash flow resulting from improved working capital management amounted to R24m. The major contributors are:• A positive contribution of R12.4m from receivables,

which declined from R456.7m in 2004 to R444.3m in 2005. The strengthening of the exchange rate assisted in this reduction.

• A negative contribution of R17.3m from inventory, which increased from R453.1m to R470.4m due to:

– Phosphate rock inventory at Phalaborwa increased from 189k tons to 399k tons (as discussed above). The rock inventory at Richards Bay decreased from 81k tons to 27k tons.

– Sulphur inventory decreased from 65k tons to 25.6k tons.

– Phosphoric acid inventory increased by 18.1k tons - from 38.6k tons to 56.7k tons.

– Granular inventory decreased by 10.8k tons from 30.8k tons to 20k tons.

• A positive contribution of R28.2m from accounts payable, which increased from R307.4m to R335.6m.

• A positive contribution of R7m due to an increase in provisions.

FREE CASHFLOWFree cashflow (defined as the net of cashflow from operating activities and cashflow from investing activities) reduced from an outflow of R345m in 2004, to an outflow of R88m for the current period. This was the best performance over the past five years (refer to the five-year review at the back of the notes to the Financial Statements).

CAPITAL AND RELATED EXPENDITURECapital expenditure incurred by the Group during the period amounted to R92m (2004: R290m).

The capital expenditure approximates 80% of the depreciation of R114m (2004: R147m) (excluding impairment). It is envisaged that this percentage will reduce further in the future.

Repairs and maintenance was kept at a relatively high level of R185m (R247m annualised) (2004: R265m).

CAPITAL COMMITMENTSIncluded in capital commitments is an amount of R95m, which is earmarked for the acquisition of the Sasol Nitro Phalaborwa Works assets. This amount excludes working capital requirements and will be payable over two years. The transaction is subject to approval by the Competition Commission and will be funded internally and by additional interest-bearing loans from the IDC.

FINANCING STRUCTURE OF THE GROUPThe Group had a positive bank balance of R335m at year end with no interest-bearing debt. During the year under review, all foreign loans that had been utilized to finance the R1.1 billion expansion project at Richards Bay, were settled. The R1450m loan from the IDC is:• subordinated in favour of all other loans and creditors;• unsecured and non-interest-bearing; and• with no repayment terms.Unutilised facilities at year end amounted to R265m.

After year end, Coromandel Fertilisers Limited (CFL), an India-based Strategic Equity Partner (SEP), acquired a 2.5% interest in Foskor for R37.5m by the issuing of new shares. CFL is the holding company of Godavari Chemical Fertilisers Limited of India, in which Foskor holds a 5% interest.

CHIEF FINANCIAL OFFICER’S REVIEW

FOSKOR 2005 | 9

CORPORATE REVIEW

HOLDING COMPANYFoskor (Pty) Limited is a subsidiary of the Industrial Development Corporation (IDC). In 2002 the IDC announced its plans to reduce its stake in Foskor. The company signed a Business Assistance Agreement (BAA) with Coromandel Fertilisers Limited (CFL) on 13 February 2005, granting them an option to purchase up to 16.5% of the equity of Foskor. CFL’s scope of services will include strategic business planning and technical assistance.

BOARD AND BOARD SUB-COMMITTEESAll directors have unlimited access to the advice and services of the Group Secretary, who is responsible to the Board for ensuring that Board procedures are followed.

The Board has established the following sub-committees to assist in the discharge of its duties:• Human Resources• Procurement• Technical• Audit

The Board Audit Committee comprises two non-executive directors and the President/CEO. The Chief Financial Officer and representatives from the external auditors, internal auditors and management attend the meetings of the Committee.

The Committee is authorised by the Board to access any internal audit report and financial information and can instruct the management of Foskor, the internal auditors or the external auditors to conduct any investigation or study as it deems necessary. Both the internal and external auditors have unrestricted access to the Committee, which meets at least once every quarter. The Board Audit Committee operates in accordance with a formalized Board Audit Committee Charter.

Management has reviewed the financial statements with the Board Audit Committee and the external auditors. The quality and appropriateness of the accounting policies were fully discussed with the external auditors. The Board Audit Committee considers the annual financial statements of Foskor (Pty) Limited and its subsidiaries to be a fair representation of its financial position, results of operations and cash flow information for the nine month period ended 31 March 2005.

RISK MANAGEMENTFoskor’s risk management philosophy is:• Risk management does not equate to risk avoidance;• To create and enhance shareholder value, risk has to be borne;• Foskor does not seek to avoid risk but to understand it

properly, manage it effectively and evaluate it in the context of the reward that is being earned;

• Attention is paid to both quantifiable and un-quantifiable risks (e.g. reputation); and

• Risk management is a process that is continual and evolving in nature so that it remains dynamic and relevant to the business, as business changes over time.

The system of risk management and internal control is intertwined with the company’s operating activities to provide assurance that enterprise-wide policies and procedures are in place to address all forms of risk identified as inherent to the company’s activities. Foskor follows a combined assurance concept to manage enterprise-wide risk.

In 2001 Foskor introduced an integrated risk management system in order to comply with good corporate governance in line with King 2 Commission recommendations. To integrate the operational risk management system with the current Safety, Health, Environment and Quality (SHEQ) system without additional employees, a Computer Assisted Risk Management System (CURA) was implemented. This software is due for rollout within Foskor in September 2005.

A Risk Management Steering Committee, which meets quarterly, was established to guide the Group Internal Audit Manager on risk management related issues.

INTERNAL CONTROL AND INTERNAL AUDITTo meet its responsibility with respect to providing reliable and accurate financial information, the Group maintains financial and operating systems of internal control. These controls are designed to provide reasonable assurance regarding the achievement of organizational objectives with respect to:• the effectiveness and efficiency of operations;• the safeguarding of the company’s assets (including

intangible assets);• compliance with applicable laws, regulations and supervisory

requirements;• supporting business sustainability under normal as well as

adverse operating conditions;• the reliability of reporting; and• behaving responsibly towards all stakeholders.

In accordance with recommended corporate governance practice, it is the policy of Foskor to maintain a centralised independent internal audit function, titled Foskor Group Audit Services (FGAS).

The role of this function is to assist the Board Audit Committee of the Board of Directors, as well as management at all levels, in the effective exercise of their responsibilities through the provision of analyses, appraisals, recommendations, counsel, and information concerning the activities reviewed – and by promoting effective control at reasonable cost.

The internal audit function is thus responsible for providing independent assurance to the Board Audit Committee regarding the effective management of all risks that may impact the achievement of the business objectives.

The scope of the work of FGAS is to determine whether Foskor’s network of risk management, control and governance processes, as designed and represented, is adequate and functioning in such a manner as to ensure:• risks are appropriately identified and managed;• interaction with the various governance groups within the

company occurs as appropriate;• significant financial, managerial and operating information

is accurate, reliable and timely;• employees’ actions are in compliance with policies,

standards, procedures and applicable laws and regulations;• resources are acquired economically, used effectively, and

adequately protected;• programmes, plans and objectives are achieved;• quality and continuous improvement are fostered in the

organisation control process; and• significant legislative or regulatory issues impacting on the

company are recognized and addressed appropriately.

FOSKOR 2005 / 10

Based on its assessment, as well as internal and external audit, the Group believes that, as at 31 March 2005, its system of internal control met the criteria for effective internal control.

CODE OF ETHICSFoskor is committed to organisational integrity and sound business ethics as set out in the codes of corporate governance best practices. The Group has adopted a Code of Ethics, which incorporates the Group’s operating, financial and behavioural policies in a set of integrated values and standards required of employees in their interactions, both with one another and with all stakeholders. The code is distributed to all employees of the Group.

A fraud/ethics hotline facility exists to allow staff anonymous reporting of unethical behaviour. This hotline is the responsibility of FGAS, which ensures that all unethical behaviour is adequately investigated, and that timely feedback is provided to the business. A comprehensive fraud report is also provided to the Board Audit Committee for review.

The formation of an Ethics Committee in early 2005 is aimed at ensuring increased transparency in the investigation process.

In the new financial year FGAS will be rolling out Foskor’s Fraud Prevention and Response plan to all Group employees.

EMPLOYMENT EQUITYFoskor is committed to the provisions of the Employment Equity Act. The Group has established Employment Equity Committees at both the Richards Bay and Rock and Copper Divisions.

The Board has approved employment equity targets that are in excess of the Employment Equity Act. This area of accountability is among the performance targets of executive and senior management.

STAKEHOLDER COMMUNICATION AND EMPLOYEE PARTICIPATIONThe CEO continues his monthly feedback sessions to the general workforce. The purpose of the feedback sessions is to share information, source the views and inputs of employees and provide feedback on company performance and future strategies.

A Group Communications Manager was appointed to improve general communication to both internal and external stakeholders. The Group also provides several forums where employees or their representatives participate in consultation and/or joint decision-making.

CORPORATE REVIEW

FOSKOR 2005 | 11

CONTENTS

to The Annual Financial Statements

DIRECTORS’ DECLARATION 12

AUDITORS’ REPORT 13

REPORT OF THE DIRECTORS 14

INCOME STATEMENTS 17

BALANCE SHEET 18

STATEMENT OF CHANGES IN EQUITY 19

CASH FLOW STATEMENT 20

PRINCIPAL ACCOUNTING POLICIES 21

NOTES TO THE FINANCIAL STATEMENTS 26

FIVE-YEAR REVIEW: FOSKOR GROUP 41

NOTICE TO MEMBERS 43

ADMINISTRATION 43

FOSKOR 2005 / 12

DIRECTORS’ RESPONSIBILITY FOR THE ANNUAL FINANCIAL STATEMENTSTo the members of Foskor (Pty) LimitedThe Directors are responsible for monitoring the preparation and the integrity of the financial statements and related information included in this Annual Report.

In order for the Board to discharge its responsibilities, management has developed and continues to maintain a system of internal control. The Board has ultimate responsibility for the system of internal control and reviews its operation primarily through the audit committee and indirectly through other risk-monitoring committees.

Adequate accounting records and an effective system of internal controls are maintained to provide reasonable assurance that assets are safeguarded and that transactions are executed in accordance with policies and procedures.

As part of the system of internal control the internal audit function conducts operational, financial and specific audits and co-ordinates audit coverage with the external auditors. The external auditors are responsible for reporting on the financial statements.

The financial statements are prepared in accordance with generally accepted accounting practices and incorporate responsible disclosure in line with the accounting philosophy of the Group. The financial statements are based on appropriate accounting policies consistently applied and supported by reasonable and prudent judgements and estimates.

Foskor endorses the Code of Corporate Practices and Conduct as contained in the King Report on Corporate Governance and adheres to the Code in all material respects.

The Directors believe that the Group will be a going concern in the year ahead. For this reason they continue to adopt the going concern basis in preparing the Group annual financial statements. The annual financial statements for the nine months period ended 31 March 2005 set out on pages 18 to 44 were approved by the Board of Directors on 22 June 2005 and are signed on its behalf by:

M A PITSE L L VAN NIEKERKPresident and Chief Executive Officer Chairman

CERTIFICATE BY COMPANY SECRETARYI hereby certify that the company has lodged with the registrar all such returns as are required of a public company in terms of the Companies Act of 1973 as amended.

B G DLAMINISECRETARY

DIRECTORS’ DECLARATION

FOSKOR 2005 | 13

Report of the independent auditors to the members of Foskor (Pty) LtdWe have audited the annual financial statements and Group Financial Statements of Foskor Pty Ltd set out on pages 18 to 44 for the nine month period ended 31 March 2005. These financial statements are the responsibility of the Company’s directors. Our responsibility is to express an opinion on these financial statements based on our audit.

SCOPEWe conducted our audit in accordance with statements of South African Auditing Standards. Those standards require that we plan and perform the audit to obtain reasonable assurance that the financial statements are free of material misstatement. An audit includes:– examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements;– assessing the accounting principles used and significant estimates made by management; and– evaluating the overall financial statement presentation.We believe that our audit provides a reasonable basis for our opinion.

AUDIT OPINIONIn our opinion, these financial statements fairly present, in all material respects, the financial position of the company and the Group at 31 March 2005 and the results of their operations and cash flows for the period then ended, in accordance with South African Generally Accepted Accounting Practice and in the manner required by the South African Companies Act.

PRICEWATERHOUSECOOPERS INC NGUBANE & CORegistered Accountants and Auditors Registered Accountants and AuditorsChartered Accountants (SA) Chartered Accountants (SA)Pretoria Durban

AUDITORS’ REPORT

FOSKOR 2005 / 14

The directors have pleasure in submitting their report and the annual financial statements of the company and the Group for the nine month period ended 31 March 2005.

The term ‘Group’, in the context of the financial statements, refers to the company and its wholly owned subsidiaries.

NATURE OF BUSINESSThe core business of the Group is the manufacture and supply of international standard merchant grade phosphoric acid and related granular fertiliser products.

The Phalaborwa plant is sized to meet the phosphate rock concentrate requirements of the domestic market, including that of the Richards Bay operation. Lower than planned production volumes at Richards Bay have, however, allowed the Group to supply rock on a selective basis to specialised users in Japan and the Far East at prices that make a positive contribution.

FINANCIAL RESULTSExports contribute approximately 77% to the Group’s revenue and local sales are based on US Dollar denominated prices. The volatility experienced by the SA Rand on the foreign exchange market had a detrimental effect on the financial results for the period. The average R/$ exchange rate for 2005 was R6.17 compared to the previous year’s R6.83.

Operating loss increased by R180m – from R227m in 2004, to a loss of R407m in 2005 after impairment of assets amounting to R300m. Before impairment, the loss reduced with R120m (annualised ca R160m) from R227m to R107m.

The impairment and other factors are covered in more detail elsewhere in this report.

These adverse circumstances resulted in a net loss of R478m after taxation (2004: R198m loss), attributable to the shareholder for the period.

The activities of the Group fall into four principal classes of business, and the estimated proportion of net operating income attributable to these classes is further explained in the annual report.

SHARE CAPITALThe authorised ordinary share capital remained unchanged at 8 100 000 of R1 each during this period.

23 500 000 New class ‘B’ ordinary shares of R1 each were authorised during this period.

The issued ordinary share capital remained unchanged at 7 784 000 shares of R1 each. All of the shares are held by the Industrial Development Corporation (IDC) of South Africa Limited.

During April 2005, subsequent to year end, Foskor issued 23 500 000 ‘B’ shares of R1 with a share premium of R0.5821 per share and 199 590 ordinary shares of R1 with a share premium of R0.60586 per share to Coromandel Fertilisers Limited (CFL), an India-based company.

The Directors are authorised, until the next annual general meeting, to issue unissued ordinary shares.

CHANGE FROM PUBLIC COMPANY TO PRIVATE COMPANYDuring the period under review the company changed from a public company to a private company.

REPORT OF THE DIRECTORSfor the nine months ended 31 March 2005

FOSKOR 2005 | 15

SUBSIDIARIESDetails of the subsidiaries and associates of the company are set out in Note 7 to the financial statements.

FOSKOR REHABILITATION TRUST Details of contributions to the Trust are as follows:June 1995 R 4 500 000June 1996 R 5 894 000June 1997 R 1 217 000June 1998 R 1 160 000June 1999 R 500 000June 2000 R 496 083June 2004 R 3 000 000 R 16 767 083

The current market value of the assets in the Trust is R26.947m, which is regarded as adequate at this point when considering the remaining life of the mine in question. Subsequent to year end, a decision was taken to contribute R3, 000,000 to the Trust. During the coming year a mine closure evaluation will be performed in order to corroborate the liability as currently reflected. The Trustees are also working on a policy document that will set out the main aims and objectives of the fund and finalise a contribution policy.The total environmental rehabilitation liability has been estimated at R152.4m. The value of the Trust is offset against the liability, leaving a net figure of R125.5m on the balance sheet. This is further explained in Note 25 to the financial statements and in paragraph 16 of the accounting policies of the Group.

ENVIRONMENTAL ACCOUNTINGThe Group is aware of the increasing emphasis on environmental accounting and accountability. Management is continually assessing and monitoring the various environmental issues facing the Group. The Group has adopted the latest accounting principles to ensure adequate disclosure of the environmental rehabilitation costs and liabilities.

INSURANCE AND RISK MANAGEMENT The Group’s philosophy is to manage its risks in order to protect its assets and earnings against unacceptable financial loss and to avoid legal liabilities. In this regard, possible catastrophic type risks are insured at a relatively advantageous cost with satisfactory cover, while non-catastrophic type risks are self-insured. The management of risk is further supported by the Group’s health and safety programmes, and maintenance of the ISO 9002 (quality) and ISO 14001 (environmental) standards. Foskor was the first mining company in South Africa to receive the latter accreditation.Fixed assets are insured at current replacement value, which has been estimated by an external valuator.Risk surveys and assessments are an integral part of the Group’s risk management policy and are performed as part of an integrated Group risk management system. Risks identified during these surveys are eliminated, reduced or transferred to the insurers.

PUBLIC FINANCE MANAGEMENT ACT (PFMA)Foskor is exempted from the Public Finance Management Act until October 2005. The exemption is expected to be renewed.

EMPLOYMENT EQUITYThe Group supports employment equity and the development and promotion of previously disadvantaged employees, and complies with the requirements of the promulgated Employment Equity Act. The Group believes in developing and promoting people from within the company.Training and development programmes are in place to ensure that every employee will have the opportunity to enhance his/her potential. The Group also adheres to the requirements of the Skills Development Act and sees this as yet another opportunity to develop employees.

REPORT OF THE DIRECTORS

FOSKOR 2005 / 16

MINE, HEALTH AND SAFETY ACTThe Group’s statistical report on health and safety is prepared in terms of the Mine, Health and Safety Act, 1996. It was submitted to the Mine Inspector and is available on request from the company.

POST BALANCE SHEET EVENTS During April 2005 new shares were issued to Coromandel Fertilisers Limited. R37.5m was raised in exchange for an effective shareholding of 2.5% in Foskor.On 2 June 2005 an ammonia leak was identified at one of the isolated blanked flanges at the Richards Bay plant. The water deluge system installed to contain ammonia spreading was automatically activated by sensors to minimize dispersion. Eighty employees of the neighbouring companies were medically checked, and three such employees were admitted for further observation. A detailed investigation was undertaken and a report was submitted to the regulatory authorities.

DIRECTORATEDuring the period under review, the following changes in the directorate occurred:

Resignations: 31 July 2004Mr CAP GalegoMr TJ KoekemoerMr WM NdodanaMr JM KriekMr T SadikMr JG ModibaneMrs ST Ngubane Resignations: 31 December 2004Dr K Ngqula (Chairperson)

Appointments: 17 August 2004Mr F VenterMr G van WykMr HN Giyose Appointments: 14 February 2005Mr LL van Niekerk (Chairperson)

There were no contracts during, or at the end of, the financial period in which any directors of the company were materially interested. No service contracts exist between the company and any of its non-executive directors having notice periods exceeding one month, or providing for compensation and benefits in excess of one month’s salary.

Subsequent to year end, there were changes with respect to resignation and appointment of directors. The following directors resigned on 22nd June 2005:Mr F VenterMr HN Giyose

The following directors were appointed on 22nd June 2005:Ms RK Morathi (Deputy Chairperson)Mr A VellayanMs Z MonnakgotlaMs M NhlanhlaMr P LedgerMs A Mthembu

Dr DS Phaho appointed 12 July 2005

REPORT OF THE DIRECTORS

FOSKOR 2005 | 17

INCOME STATEMENTSfor the nine months ended 31 March 2005

Company Group 9 Months ended 12 Months ended 9 Months ended 12 Months ended Notes March 2005 June 2004 March 2005 June 2004 R'000 R'000 R'000 R'000

Revenue 1,559,721 2,237,520 1,371,355 2,050,689

Cost of sales (1,372,710) (2,046,143) (1,079,657) (1,728,030)

Gross profit 187,011 191,377 291,698 322,659

Other operating income 29 603 104,037 28,664 103,929

Distribution costs (325,627) (447,981) (321,776) (445,766)

Impairment of property, plant and equipment (300,000) – (300,000) –

Administration and selling expenses (101,082) (205,030) (105,978) (208,403)

Operating losses 1 (510,095) (357,597) (407,392) (227,581)

Net finance income/(costs) 2 6,795 (19,945) (14,605) (50,510)

Net foreign exchange losses 3 (5,386) (48,853) (5,484) (48,910)

Investment income/(expenses) 1 173,573 (657) 338 (657)

Loss before taxation (335,113) (427,052) (427,143) (327,658)

Taxation 4 (4,115) (120,113) 50,530 (129,316)

Net loss for the year (330,998) (306,939) (477,673) (198,342)

FOSKOR 2005 / 18

Company Group 9 Months ended 12 Months ended 9 Months ended 12 Months ended Notes March 2005 June 2004 March 2005 June 2004 R'000 R'000 R'000 R'000

ASSETS

Property, plant and equipment 5 1,351,809 1,698,076 1,642,978 1,967,470

Ore stockpiling 65,619 73,733 65,619 73,733

Intangible assets 6 1,118 1,124 1,166 1,318

Investments in subsidiaries 7 166,348 166,348 – –

Loans to subsidiaries 7 7,436 7,576 – –

Investment in joint venture 8 25 437 25 437

Investments 9 40,818 30,272 40,933 30,790

Non-current receivables 10 306,357 279,833 1,066 4,486

Non-current assets 1,939,530 2,257,399 1,751,787 2,078,234

Inventory 11 468,935 451,405 470,404 453,075

Receivables and prepayments 12 448,268 457,625 444,270 456,735

Ore stockpile short-term 12,134 12,108 12,134 12,108

Bank and cash balances 333,245 22,779 335,244 26,170

Prepaid taxation 1,131 1,091 3,880 –

Current assets 1,263,713 945,008 1,265,932 948,088

Total assets 3,203,243 3,202,407 3,017,719 3,026,322

EQUITY AND LIABILITIES

Share capital 13 7,784 7,784 7,784 7,784

Retained earnings 193,178 524,176 874,874 1,352,547

Fair value reserve (18,223) (22,918) (18,223) (22,918)

Shareholders’ equity 182,739 509,042 864,435 1,337,413

Shareholders’ loan 14 1,450,000 544,255 1,450,000 544,255

Total shareholders’ interest 1,632,739 1,053,297 2,314,435 1,881,668

Non-interest-bearing borrowings 15 12,800 12,800 12,800 12,800

Environmental rehabilitation liability 25 152,442 147,512 152,442 147,512

Loans from subsidiaries 7 893,950 1,011,653 – –

Interest-bearing borrowings 16 – 397,062 – 397,062

Post-retirement liability 24 136,375 119,316 136,375 119,316

Non-current liabilities 1,195,567 1,688,343 301,617 676,690

Trade and other payables 18 328,484 303,009 335,556 307,358

Provisions 19 46,453 45,740 46,453 45,740

Current portion of interest-bearing borrowings 16 – 95,767 – 95,767

Bank overdraft – 16,251 – 16,251

Current tax liability – – 19,658 2,848

Current liabilities 374,937 460,767 401,667 467,964

Total equity and liabilities 3,203,243 3,202,407 3,017,719 3,026,322

BALANCE SHEET as at 31 March 2005

FOSKOR 2005 | 19

Share Retained Fair Value capital earnings Reserve Total

R’000 R’000 R’000 R’000

GROUP Balance at 1 July 2003 7,784 1,550,889 – 1,558,673

Net loss for the year – (198,342) (198,342)

Net fair value losses:

Available for sale investments – – (22,918) (22,918)

Balance at 30 June 2004 7,784 1,352,547 (22,918) 1,337,413

Net loss for the nine month period – (477,673) – (477,673)

Net fair value profit:

Available for sale investments – – 4,695 4,695

Balance at 31 March 2005 7,784 874,874 (18,223) 864,435

Share Retained Fair Value capital earnings Reserve Total

R’000 R’000 R’000 R’000

Company

Balance at 1 July 2003 7,784 831,115 – 838,899

Net loss for the year – (306,939) – (306,939)

Net fair value losses:

Available for sale investments – – (22,918) (22,918)

Balance at 30 June 2004 7,784 524,176 (22,918) 509,042

Net loss for the nine month period (330,998) (330,998)

Net fair value profit:

Available for sale investments – – 4,695 4,695

Balance at 31 March 2005 7,784 193,178 (18,223) 182,739

STATEMENT OF CHANGES IN EQUITY for the nine months ended 31 March 2005

FOSKOR 2005 / 20

CASH FLOW STATEMENTFor the nine months ended 31 March 2005

Company Group 9 Months 12 Months 9 Months 12 Months ended ended ended ended Note March 2005 June 2004 March 2005 June 2004 R'000 R'000 R'000 R'000

CASH FLOW FROM OPERATING ACTIVITIES Cash (applied to)/generated by operations 26 (64,653) (133,728) 56,881 10,543 Net finance income/(costs) 6,795 (19,945) (14,605) (50,510)Net foreign exchange losses (5,386) (48,853) (5,484) (48,910)Dividend received 173,573 – 338 –

Taxation 4,075 – (37,600) 27,127

Net cash from/(used in) operating activities 114,404 (202,526) (470) (61,750)

CASH FLOW FROM INVESTING ACTIVITIES Additions to property, plant and equipment (84,962) (289,527) (91,853) (289,726)Acquisition of computer software (490) (1,502) (490) (1,502)Proceeds on disposal of property, plant and equipment 11,533 1,342 11,533 1,342 Transfers out of assets 27,536 6,179 – 6,179 Movements in loans (to)/from subsidiaries (117,562) 137,122 – – Acquisition of Godavari Investment (32,094) (32,094)Disposal of unlisted investments 21,133 403 21,133 Other investments available for sale (10,546) (1,567) (10,546) (932)Non-current receivables (26,524) 8,122 3,420 2,966

Investment in joint venture 412 9,154 412 9,154

Net cash used in investing activities (200,603) (141,638) (87,121) (283,480)

CASH FLOW FROM FINANCING ACTIVITIES Decrease in interest-bearing borrowings (397,062) (161,319) (397,062) (161,319)(Decrease)/Increase in current portion of interest-bearing borrowings (95,767) 42,530 (95,767) 42,530

Increase in shareholders’ loans 905,745 444,737 905,745 444,737

Net cash from financing activities 412,916 325,948 412,916 325,948

NET (DECREASE)/INCREASE IN CASH ANDCASH EQUIVALENTS 326,717 (18,216) 325,325 (19,282) CASH AND CASH EQUIVALENTS ATBEGINNING OF YEAR 6,528 24,744 9,919 29,201

CASH AT BANK AND IN HAND AT END OF YEAR 333,245 6,528 335,244 9,919

CASH AT BANK AND IN HAND 333,245 22,779 335,244 26,170 BANK OVERDRAFT – (16,251) – (16,251)

FOSKOR 2005 | 21

The consolidated financial statements of the Foskor Group have been prepared in accordance with the South African Generally Accepted Accounting Practice (GAAP), using the historical cost convention as modified by the revaluation of land and buildings, available-for-sale investment securities, and financial assets and liabilities held for trading.

The preparation of financial statements in conformity with GAAP requires the use of certain accounting estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period based on management’s best knowledge of current events and actions. Actual results may ultimately differ from these estimates.

1. BASIS OF CONSOLIDATION Investment in subsidiariesSubsidiaries, which are those entities (including Special Purpose Entities) in which the Group has an interest of more than one half of the voting rights or otherwise has power to govern the financial and operating policies, are consolidated. The Group annual financial statements incorporate the assets, liabilities and results of the operations of the company and all of its subsidiaries. The results of subsidiaries acquired or disposed of during a financial year are included from the effective date of acquisition or to the effective date of disposal, as appropriate. The assets and liabilities acquired are assessed and included in the balance sheet at their estimated fair value to the Group. Any difference between net asset value and the purchase price of a subsidiary is treated in accordance with the Group’s accounting policy for goodwill.The majority of subsidiaries have financial years ending 31 March and are consolidated to that date. Where relevant, adjustments are made to update results and balances to 31 March, using unaudited management information. Significant inter-company transactions, balances and unrealized gains on transactions between Group companies are eliminated; unrealized losses are also eliminated unless cost cannot be recovered. Where necessary, accounting policies of subsidiaries have been changed to ensure consistency with the policies adopted by the Group.

Joint venturesThe Group’s interest in jointly controlled entities is accounted for by the equity method of accounting. Under this method the company’s share of the post-acquisition profits or losses of joint ventures is recognized in the income statement and its share of post-acquisition movements in reserves is recognised in reserves. The cumulative post-acquisition movements are adjusted against the cost of the investment.

At each balance sheet date the Group assesses whether there is any indication of impairment. If such indications exist an analysis is performed to assess whether the carrying amount of goodwill is fully recoverable. A write-down is made if the carrying amount exceeds the recoverable amount.

2. PROPERTY, PLANT AND EQUIPMENTProperty, plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred.

Depreciation Land with mineral rights and capital work in progress Land with mineral rights and capital work in progress is stated at cost and is not depreciated.

Mining footprintThe mining footprint is depreciated over the estimated remaining life of the mine, restricted to a maximum of 20 years.

Property, plant and equipmentProperty, plant and equipment, except for land that is not depreciated, are depreciated on the straight line method to estimated residual values as follows:Building and structures 30 – 50 yearsVehicles 4 – 5 yearsHeavy plant and machinery 10 – 20 yearsEquipment 8 – 10 yearsComputer equipment 3 – 5 yearsRehabilitation projects 10 – 20 yearsFactory equipment 4 – 5 yearsCapital insurance spares 10 – 16 yearsSoftware 3 years

PRINCIPAL ACCOUNTING POLICIES

FOSKOR 2005 / 22

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amountCertain direct costs incurred on major projects during the period of development or construction are capitalised. Interest costs on borrowings to finance the construction of property, plant and equipment are capitalised during the period of time that is required to complete and prepare the asset for its intended use. Other borrowing costs are expensed.Gains and losses on disposals are determined by comparing proceeds with carrying amount and are included in operating profit.

Repairs and maintenanceRepairs and maintenance are charged to the income statement during the financial period in which they are incurred. The cost of major renovations is included in the carrying amount of the asset when it is probable that future economic benefits in excess of the originally assessed standard of performance of the existing asset will flow to the Group. Major renovations are depreciated over the remaining useful life of the related asset.Geological exploration costs are written off as incurred.

3. INTANGIBLE ASSETSGoodwillGoodwill, being the excess of the purchase consideration over the attributable fair value of net assets acquired, is recognised as an asset and amortized on a straight line basis over the estimated useful life, restricted to a maximum of five years.At each balance sheet date the Group assesses whether there is any indication of impairment. A write-down is made if the carrying amount exceeds the recoverable amount.

4. IMPAIRMENT OF ASSETSProperty, plant and equipment and other non-current assets, including goodwill and intangible assets, are reviewed for impairment losses whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the carrying amount of the assets exceeds its recoverable amount, that is, the higher of an asset’s net selling price or value in use. For the purposes of assessing impairment, assets are grouped at the lowest level that has separate identifiable cash flows.

5. LEASESA Group company is the lesseeAssets held under finance lease agreements are capitalised. Such assets are depreciated in terms of the accounting policy on property, plant, vehicles and equipment stated above. Finance leases are capitalised at the inception of the lease at the lower of the fair value of the leased property or the present value of the minimum future lease payments. Lease finance charges are allocated to accounting periods over the duration of the leases by the effective rate method, which reflects the extent and cost of the lease finance utilized in each accounting period. All other leases are treated as operating leases and the relevant lease payments (net of any incentives received from the lessor) are charged to income on a systematic basis related to the period of use of the assets concerned.

A Group company is the lessorAssets subject to a finance lease agreement are treated as receivables. Finance income is allocated to accounting periods over the duration of the leases by the effective interest rate method, which reflects the extent and cost of lease finance income earned in each accounting period.All other leases are treated as operating leases and the relevant rental incomes are recognised in income on a systematic basis.

6. ORE STOCKPILINGOre stockpiles consist of ore bought from the neighbouring Phalaborwa Mining Company; such ore is stockpiled on Foskor’s property.Ore stockpiles are valued at the lower of cost and net realizable value. Cost includes expenditure incurred in the mining and stockpiling of ore for use in future production.

7. INVENTORIESSpares and consumablesSpares and consumable are valued at the lower of cost and net realizable value, on a weighted average method. The cost of inventories comprises all costs of purchase, conversion and other costs in bringing the inventories to the current location and condition. Obsolete, redundant and slow moving items of spares and consumable stores are identified on a regular basis and written down to their economic or realizable value.

PRINCIPAL ACCOUNTING POLICIES

FOSKOR 2005 | 23

Net realizable value is the estimated selling price in the ordinary course of business, less the costs of completion and selling expenses.

Raw materials and finished goodsRaw materials and finished goods consisting of phosphate rock, phosphoric acid and other minerals are valued at the lower of cost of production and net realizable value.Cost of production is calculated on a standard cost basis, which approximates the actual cost and includes the production overheads. Production overheads are allocated on the basis of normal capacity. The valuation of inventory held by agents or in transit includes forwarding costs, where applicable.Net realizable value is the estimated selling price in the ordinary course of business, less the costs of completion and selling expenses.

8. TRADE AND OTHER RECEIVABLESTrade receivables are recognised initially at fair value and subsequently measured at amortized cost using the effective interest method, less provision for impairment. A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate. The amount of the provision is recognised in the income statement.

9. PROVISIONSA provision is recognised when it is probable that the Group will settle an existing legal or constructive obligation from past events resulting in an outflow of resources embodying economic benefits, and when a reliable estimate of the obligation can be made. Where the effects of discounting are material, provisions are measured at their present values.Staff costs in respect of annual and long service leave are provided for in the period they accrue to employees – being the year in which services were rendered by employees.Restructuring provisions comprise employee termination payments, and are recognised in the period in which the Group becomes legally or constructively committed to payment. Costs relating to the ongoing activities of the Group are not provided for in advance.

10. PENSION OBLIGATIONSThe Group operates defined benefit and defined contribution plans, the assets of which are held in separate trustee-administered funds. The schemes are generally funded through payments to insurance companies or trustee-administered funds as determined by periodic actuarial valuations. A defined benefit plan is a pension plan that defines an amount of pension benefit to be provided, usually as a function of one or more factors such as age, years of service or compensation. A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity (a fund) and will have no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees benefits relating to employee service in the current and prior periods.The liability in respect of defined benefit pension plans is the present value of the defined benefit obligation at the balance sheet date minus the fair value of plan assets, together with adjustments for actuarial gains/losses and past service cost. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by the estimated future cash outflows using interest rates of government securities, which have terms to maturity approximating the terms of the related liability. Actuarial gains and losses arising from experience adjustments and the effects of changes in actuarial assumptions to the defined benefit plans are recognised fully in the income statement in the current year.For defined contribution plans, the company pays contributions to publicly or privately administered pension insurance plans on a mandatory, contractual or voluntary basis. Once the contributions have been paid, the company has no further payment obligations. The regular contributions constitute net periodic costs for the year in which they are due and, as such, are included in staff costs.

11. OTHER POST-RETIREMENT OBLIGATIONSThe Group provides post-retirement healthcare benefits to its retirees who were employed by the company on or before 1 July 1995. The same benefits are provided to a specific group of employees employed before 1 July 1996. The entitlement to post-retirement health care benefits is based on the employee remaining in service up to retirement age. The expected costs of these benefits

PRINCIPAL ACCOUNTING POLICIES

FOSKOR 2005 / 24

are accrued over the period of employment, using the projected unit of credit method. Valuations of these obligations are carried out every third year by independent, qualified actuaries.Actuarial gains and losses arising from experience adjustments and the effects of changes in actuarial assumptions to the defined benefit plans are recognised fully in income statement in the current year. Actuarial gains and losses arising from experience adjustments, changes in actuarial assumptions and amendments to pension plans are charged or credited to income over the average remaining service lives of the related employees.

12. DEFERRED TAXATIONDeferred income taxation is provided in full, using the liability method, on temporary differences arising between the taxation bases of assets and liabilities and their carrying amounts in the financial statements. Currently enacted taxation rates are used in the determination of deferred taxation. Deferred taxation assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized.

13. FOREIGN CURRENCIESTransactions in foreign currencies are translated at the rate of exchange ruling at the transaction date. At subsequent balance sheet dates, items are re-measured as follows:• Foreign currency denominated monetary items

are translated at the closing rate;• Foreign currency denominated non-monetary

items that are carried at historic cost are translated at historic rates; and

• Foreign currency denominated non-monetary items that are carried at fair value are translated at the rate ruling on the date that the fair values were determined.

Monetary assets and liabilities denominated in foreign currencies are translated at the rates of exchange ruling at the balance sheet date. Gains or losses arising on the transaction are charged or credited to income in the year in which the difference occurs.

14. REVENUE Revenue represents the gross income from sales of phosphate rock, phosphoric acid, granular fertiliser, zircon sand and other minerals, and excludes value added tax.

Sales between Group companies are eliminated on consolidation. Revenue from the sales of goods is recognised when significant risks and rewards of the goods are transferred to the buyer.Interest income is recognised on a time proportion basis using the effective interest method.Royalty income is recognised on an accruals basis in accordance with the substance of the relevant agreements.Dividends are recognised when the right to receive payments is established.

15. FINANCIAL INSTRUMENTSFinancial instruments are measured at cost including transaction costs using trade date accounting. Subsequent to initial recognition, financial instruments are measured as follows:

Financial assets (excluding hedges) Financial assets are measured at fair value without any deduction for transaction costs, except for:• loans and receivables originated by the enterprise

and not held for trading;• held to maturity investments; and • those financial assets whose fair value cannot be

reliably measured.These exceptions are measured as follows:• Those that have a fixed maturity are measured

at amortized cost using the effective interest rate method after accumulated impairment losses; and

• Those that do not have a fixed maturity are measured at cost after deducting accumulated impairment losses.

Financial liabilities (excluding hedges) Financial liabilities are measured at amortized cost, except for:• held for trading liabilities, which are recorded at fair value; and

• derivative liabilities, which are recorded at fair value.

Methods and assumptions applied in estimating fair Trade receivables are carried at original invoice amount less provision made for impairment of these receivables. A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables. Cash and cash equivalents are not adjusted for fair value as their carrying amounts approximate their fair value.

PRINCIPAL ACCOUNTING POLICIES

FOSKOR 2005 | 25

The fair value of forward cover contracts and listed investments is calculated using quoted prices.The fair value of interest-bearing loans is calculated using the discounted flow analysis by applying the effective yield method.

Gains and losses on subsequent re-measurement Gains and losses on financial assets and liabilities that are not part of a hedging relationship are accounted for as follows:• Where the financial instrument is held for trading

the gain or loss is included in the determination of net profit/loss for the period to which it relates;

• Where the financial asset is available-for-sale, the gain or loss is recognized directly in equity until the financial asset is disposed of; and

• Where the financial instrument is carried at amortized cost an amortization gain or loss is recognized in the net profit/loss for the period, and the net profit/loss for the period is adjusted when the financial instrument is derecognized or impaired.

Gains and losses arising from the re-measurement of financial instruments that constitute fair value hedges are included in the determination of net profit/loss for the period in which they arise.Assets are derecognized when the enterprise loses control of contractual rights that comprise the assets and liabilities when the obligation is extinguished.

16. ENVIRONMENTAL OBLIGATIONSLong-term environmental obligations are based on the Group’s environmental management plans, in compliance with current environmental and regulatory requirements. Full provision is made based on the net present value of the estimated cost of restoring the environmental disturbance that has occurred up to the balance sheet date. Increases due to additional environmental disturbances are capitalized and amortized over the remaining life of the mine. Annual increases in the provision relating to change in the net current value of the provision, and inflationary increases, are shown separately in the income statement. The estimated costs of rehabilitation are reviewed on a three yearly basis, and adjusted as appropriate for changes in legislation or technology. Cost estimates are not reduced by the potential proceeds from the sale of assets, or from planned clean-up at closure, in view of the uncertainty of estimating the potential future proceeds.

Contributions are made to a dedicated Rehabilitation Trust Fund to fund the estimated cost of rehabilitation during and at the end of the life of the mine.

17. DIVIDENDSDividends are recorded in the Group’s financial statements in the period in which they are approved by the Group’s shareholders.

18. PRESENTATIONWhere necessary, comparative figures have been adjusted to conform to changes in presentation in the current year.

PRINCIPAL ACCOUNTING POLICIES

FOSKOR 2005 / 26

Company Group 9 Months 12 Months 9 Months 12 Months ended ended ended ended March 2005 June 2004 March 2005 June 2004 R'000 R'000 R'000 R'000

1. OPERATING INCOMEOperating loss is arrived at before net financing costs,net foreign exchange (losses)/gains and taxation after taking into account:

Income

Profit on disposal of property, plant and equipment 9,528 1,185 9,419 1,185 Bad debts recovered 6,620 6,620 Loan forgiveness of debt – 83,460 – 83,460 Investment income 173,573 (657) 338 (657)– Dividends received - Subsidiary 173,235 2 – 2 – Share of associate retained earnings – (659) (659)– Dividends received - Associate 338 338

Expenditure Amortisation of intangible assets 496 378 642 Auditors’ remuneration 2,435 2,063 2,460 2,063

– audit fee 1,328 1,520 1,353 1,520 – other services 816 245 816 245 – expenses 291 298 291 298

Depreciation 101,687 131,734 114,222 146,770

– buildings and houses 8,373 9,395 8,382 9,411 – plant, vehicles and equipment 91,987 120,570 104,513 135,590 – mining asset 1,327 1,769 1,327 1,769

Operating lease charges 7,043 4,282 7,152 4,282

– property rentals 512 1,070 567 1,070 – equipment 6,531 3,212 6,585 3,212

Repairs and maintenance 179,636 255,183 185,085 264,737 Increase/(decrease) in: – Environmental rehabilitation liability 4,930 8,350 4,930 8,350 – Post–retirement medical liability 30,040 23,419 30,040 23,419 – Pension fund liability (8,902) 8,902 (8,902) 8,902

Doubtful debts provided for 2,507 4,410 3,020 4,410

Staff costs 236,196 324,796 241,516 330,797

– Salaries and wages 202,651 280,599 207,971 286,600 – pension costs: defined contribution plans 19,204 25,267 19,204 25,267 – pension costs: defined benefit plans (Note 25) 4,087 4,172 4,087 4,172 – other post-retirement benefits (Note 25) 10,254 14,758 10,254 14,758

The average number of employees for the year was 1760 (2004: 1707)

Restructuring costs – 27,822 – 27,822

– Corporate – 5,848 – 5,848 – Phalaborwa – 17,739 – 17,739 – Richards Bay – 4,235 – 4,235

2. NET FINANCE COSTSInterest expenses (12,262) (46,256) (12,262) (44,104)

– interest paid (12,262) (56,937) (12,262) (50,967) – capitalised to property, plant and equipment 10,681 6,863

Rehabilitation liability growth (6,637) (8,350) (6,637) (8,350) Interest income – interest received 25,694 34,661 4,294 1,944

Net finance income/(costs) 6,795 (19,945) (14,605) (50,510)

NOTES TO THE FINANCIAL STATEMENTSfor the nine months ended 31 March 2005

FOSKOR 2005 | 27

Company Group 9 Months 12 Months 9 Months 12 Months ended ended ended ended March 2005 June 2004 March 2005 June 2004 R'000 R'000 R'000 R'000

3. NET FOREIGN EXCHANGE LOSSES/(GAINS)Foreign transaction loss (25,405) (87,283) (25,299) 87,343

– foreign exchange transaction loss (25,405) (87,283) (25,299) 87,343 – Capitalised to property, plant and equipment – –

Foreign transaction gain 20,019 38,430 19,815 38,433

– foreign exchange transaction gains 20,019 38,430 19,815 38,433 – capitalised to property, plant and equipment – –

Net foreign exchange losses/(gains) (5,386) (48,853) (5,484) (48,910)

4. TAXATION CompositionSouth African normal income taxNormal tax (4,115) 665 50,530 (8,538)

– current year – – 26,881 1,602 – adjustment previous year (4,115) 665 23,649 (10,140)

Deferred tax – 120,778 – 120,778

– current – (121,983) – (116,450) – adjustment previous year (1,205) (1,205)– rate change – last year of tax holiday – – – (5,533)

Total taxation as per income statement (4,115) (120,113) 50,530 (129,316)

Reconciliation of tax rate % % % % Permanent differences 14.69 (5.46) (0.64) (17.64)Adjustment previous year (1.23) 0.44 5.54 (2.72)Rate change – – – (1.69) Deferred tax asset not recognised 17.76 63.15 13.27 91.52 Net tax rate for the year (1.23) (28.13) 11.83 (39.47)

Standard tax rate 30 30 30 (30)

5. PROPERTY, PLANT AND EQUIPMENT At cost Mining asset 109,832 109,832 109,832 109,832 Land, buildings and houses 338,340 321,155 339,878 322,694 Plant, equipment and vehicles 2,262,626 2,224,420 2,595,432 2,522,873 Capital work in progress 63,816 66,068 63,816 66,068

2,774,614 2,721,475 3,108,958 3,021,467

Accumulated depreciation Mining asset 81,079 79,752 81,079 79,752 Land, buildings and houses 82,222 74,970 82,331 75,067 Plant, equipment and vehicles 1,259,504 868,677 1,302,570 899,178

1,422,805 1,023,399 1,465,980 1,053,997

Net carrying amount Mining asset 28,753 30,080 28,753 30,080 Land, buildings and houses 256,118 246,185 257,547 247,627 Plant, equipment and vehicles 1,003,122 1,355,743 1,292,862 1,623,695 Capital work in progress 63,816 66,068 63,816 66,068

Net carrying amount 1,351,809 1,698,076 1,642,978 1,967,470

Details of land and buildings are available for inspection at the registered office of the company.

NOTES TO THE FINANCIAL STATEMENTS (continued)for the nine months ended 31 March 2005

FOSKOR 2005 / 28

Rehabilitation Capital assets, land Plant and work in and buildings equipment progress Total

R’000 R’000 R’000 R’000

Nine Months ended March 2005 Movement in carrying value for the year Company Opening balance 276,265 1,355,743 66,068 1,698,076 Additions 1,594 82,596 772 84,962 Impairment of assets – (300,000) – (300,000)Depreciation (9,700) (91,987) – (101,687)Disposals (1,876) (130) – (2,006)Transfers 18,588 (43,099) (3,025) (27,536)

Closing balance 284,871 1,003,123 63,815 1,351,809

Group Opening balance 277,707 1,623,695 66,068 1,967,470 Additions 1,594 89,487 772 91,853 Impairment of assets – (300,000) – (300,000)Depreciation (9,712) (104,519) – (114,231)Disposals (1,876) (238) – (2,114)Transfers 18,588 (15,563) (3,025) –

Closing balance 286,301 1,292,862 63,815 1,642,978

Twelve Months ended June 2004 Movement in carrying value for the year Company Opening balance 196,067 1,257,217 93,335 1,546,619 Additions 45,325 166,617 77,585 289,527 Depreciation (11,164) (120,570) – (131,734)Disposals (145) (12) – (157)Transfers 46,182 52,491 (104,852) (6,179)

Closing balance 276,265 1,355,743 66,068 1,698,076

Group Opening balance 197,524 1,539,991 93,335 1,830,850 Additions 45,324 166,817 77,585 289,726 Disposals (11,180) (135,590) – (146,770)Depreciation (145) (12) – (157)Transfers 46,184 52,489 (104,852) (6,179)

Closing balance 277,707 1,623,695 66,068 1,967,470

NOTES TO THE FINANCIAL STATEMENTS (continued)for the nine months ended 31 March 2005

FOSKOR 2005 | 29

Computer Goodwill Software Total R’000 R’000 R’000

6. INTANGIBLE ASSETSNine Months ended March 2005 Movement in carrying amount Company Opening carrying amount – 1,124 1,124 Additions – 490 490 Amortisation charge – (496) (496)

Closing carrying amount – 1,118 1,118

Group Opening carrying amount 194 1,124 1,318 Additions – 490 490 Amortisation charge (146) (496) (642)

Closing carrying amount 48 1,118 1,166

Twelve Months ended June 2004 Movement in carrying amount Company Opening carrying amount – – – Additions – 1,502 1,502 Less amortisation charge – (378) (378)

Closing carrying amount – 1,124 1,124

Group Opening carrying amount 389 – 389 Additions – 1,502 1,502 Less amortisation charge (195) (378) (573)

Closing carrying amount 194 1,124 1,318

Company Group 9 Months 12 Months 9 Months 12 Months ended ended ended ended March 2005 June 2004 March 2005 June 2004 R'000 R'000 R'000 R'000

At cost Goodwill – – 973 973 Computer Software 1,992 1,502 1,992 1,502

1,992 1,502 2,965 2,475

Accumulated depreciation Goodwill – – (925) (779)Computer Software (874) (378) (874) (378)

(874) (378) (1,799) (1,157)

Net carrying amount Goodwill – – 48 194 Computer Software 1,118 1,124 1,118 1,124

Net carrying amount 1,118 1,124 1,166 1,318

NOTES TO THE FINANCIAL STATEMENTS (continued)for the nine months ended 31 March 2005

FOSKOR 2005 / 30

Issued Ordinary shares and proportion Shares at cost Indebtedness 9 months 12 months 9 months 12 months ended ended ended ended Number % March 2005 June 2004 March 2005 June 2004 R'000 R'000 R'000 R'000

7. INTERESTS IN SUBSIDIARIES AND LOANSInter Minerals SA (Pty) Ltd 22,000 100 22 22 (77,420) (77,420)(South Africa) Indian Ocean Fertiliser (Pty) Ltd 83,265,000 100 83,265 83,265 (635,882) (661,089)(South Africa) Inter Minerals Holdings AG 10,000 100 10 10 (10) – (Switzerland) Verstan Holdings Company Ltd (BV.I) 5,000 100 5 5 (55) (65)Phosphate Suppliers South Africa (Pty) Ltd 100 100 – – (5,947) (2,564)(South Africa) Richards Bay Sulphuric Acid (Pty) Ltd 83,000,000 100 83,000 83,000 (174,635) (270,515)(South Africa)

Loans from subsidiaries (893,949) (1,011,653)

Phosfert Marine (Pty) Ltd 40,000 100 40 40 1,697 1,009 (South Africa) Phosphate Shipping (Pty) Ltd 1,000 100 1 1 1,130 (1,464)(South Africa) Foshulp (Pty) Ltd 5,000 100 5 5 2,730 5,820 (South Africa) Foskor Development Trust (South Africa) 150 482 IOF Property Trust (South Africa) 1,089 1,089 Phosphate Club (South Africa) 640 640

Loans to subsidiaries 7,436 7,576

Total shares at cost/Net loans owing 166,348 166,348 (886,513) (1,004,077)

Company Group 9 Months 12 Months 9 Months 12 Months ended ended ended ended March 2005 June 2004 March 2005 June 2004 R'000 R'000 R'000 R'000

8. INVESTMENT IN JOINT VENTUREFoskor Limited has a 50% interest in a joint venture, Palfos Aviation (Pty) Ltd. The company’s major asset, an aircraft, was sold in June 2004.

Palfos Aviation (Pty) Ltd (South Africa) Opening carrying amount 437 9,574 437 9,574

Investment 437 1,157 437 1,157 Loan – 8,417 – 8,417

Share of current year’s results 275 (657) 275 (657) Movement on loan account – (8,417) – (8,417) Movement on loan account 63 (63) 63 (63) Impairment of the investment (750) – (750) –

Net share of joint venture 25 437 25 437

Directors’ valuation of shares 25 437 25 437

The investment consists of 12 500 shares of R2 each, being 50% of the authorised and issued share capital. The loan was repaid during the previous financial year.

NOTES TO THE FINANCIAL STATEMENTS (continued)for the nine months ended 31 March 2005

FOSKOR 2005 | 31

Company Group 9 Months 12 Months 9 Months 12 Months ended ended ended ended March 2005 June 2004 March 2005 June 2004 R'000 R'000 R'000 R'000

9. INVESTMENTSAvailable for sale investmentsListed shares:Investment in Godavari Fertilisers & Chemicals Ltd (India) 13,871 9,176 13,871 9,176

Unlisted shares – – 115 518

Other investments available for saleHeld for environmental rehabilitation (refer to note 25) 26,947 21,096 26,947 21,096

40,818 30,272 40,933 30,790

10. NON-CURRENT RECEIVABLESFinance lease – Gross investment 599,455 596,674 – – Unearned finance income (284,614) (310,456) – –

314,841 286,218 – –

Loans to employees in accordance with – – 2,670 5,577 housing and other loan schemes

Total non-current receivables 314,841 286,218 2,670 5,577 Current portion (Note 12) (8,484) (6,385) (1,604) (1,091)

Long-term portion of non-current receivables 306,357 279,833 1,066 4,486

Future repayments of employee loans Not later than one year (note 12) – – 1,604 1,091 Later than one year and not later than five years – – 1,066 4,486 Later than five years – – – –

– – 2,670 5,577

The employee loans are classified as originated by the entity and are carried at amortized cost. These loans bear interest at rates that vary between prime and 1% above prime.

Finance lease receivables Gross receivables from finance lease Not later than one year 34,920 33,303 – – Later than one year and not later than five years 174,598 166,515 – – Later than five years 389,937 396,856 – –

Unearned future finance income on finance lease 599,455 596,674 – – Non-current receivables (284,614) (310,456)

Net investment in finance lease 314,841 286,218 – –

Not later than one year 8,484 6,385 – – Later than one year and not later than five years 55,083 42,788 – – Later than five years 251,274 237,045 – –

314,841 286,218 – –

The finance lease is between Foskor Limited and its wholly owned subsidiary, Richards Bay Sulphuric Acid (Pty) Ltd.

NOTES TO THE FINANCIAL STATEMENTS (continued)for the nine months ended 31 March 2005

FOSKOR 2005 / 32

Company Group 9 Months 12 Months 9 Months 12 Months ended ended ended ended March 2005 June 2004 March 2005 June 2004 R'000 R'000 R'000 R'000

11 INVENTORYSpares and consumables stores 122,569 125,938 122,656 126,227 Phosphate rock 100,798 53,210 100,798 53,210 Raw material 78,971 136,838 78,971 136,838 Finished goods 156,872 127,266 158,254 128,647 Work in progress 5,407 6,085 5,407 6,085 Other minerals 4,318 2,068 4,318 2,068

468,935 451,405 470,404 453,075

12. RECEIVABLES AND PREPAYMENTSTrade receivables 379,922 400,460 382,740 403,873 Prepayments 10,690 4,921 10,695 4,921 FEC assets 703 2,104 703 2,104 Finance lease (Note 10) 8,484 6,385 – – Employee loans (Note 10) – – 1,604 1,091 SARS: VAT 25,307 31,762 25,307 31,762 Prepaid insurance 5,335 6,132 5,335 6,132 Copper concentrate 15,726 2,449 15,726 2,449 Other receivables 2,102 3,412 2,161 4,403

448,268 457,625 444,270 456,735

13. SHARE CAPITALAuthorised 8 100 000 ordinary shares of R1 each 8,100 8,100 8,100 8,100 23 500 000 class “B” shares of R1 each 23,500 – 23,500 –

Total authorised share capital 31,600 8,100 31,600 8,100 Issued 7 784 000 ordinary shares of R1 each 7,784 7,784 7,784 7,784

During the year the shareholders authorised 23 500 000 new class “B” ordinary shares of R1. During the year the company changed from a Public Company to a Private Company.

14. SHAREHOLDERS’ LOANIndustrial Development Corporation of South Africa Ltd. 1,450,000 544,255 1,450,000 544,255

The loan is unsecured and interest-free with no repayment terms. It is contractually subordinated in favour of all other loans and creditors.

15. NON-INTEREST-BEARING BORROWINGSNon-interest-bearing borrowings are carried at cost. BHP Billiton South Africa Limited 12,800 12,800 12,800 12,800

The loans are unsecured and interest-free with no repayment terms.

NOTES TO THE FINANCIAL STATEMENTS (continued)for the nine months ended 31 March 2005

FOSKOR 2005 | 33

Company Group 9 Months 12 Months 9 Months 12 Months ended ended ended ended March 2005 June 2004 March 2005 June 2004 R'000 R'000 R'000 R'000

16. INTEREST-BEARING BORROWINGSKBC Bank NV – 89,974 – 89,974 This Euro-based foreign loan of � 0 (2004: 11 792 000) was repaid in full during the financial period.

European Investment Bank – 177,123 – 177,123 This Euro-based foreign loan of � 0 (2004: 23 214 000) was repaid in full during the financial period.

Proparco – 152,598 – 152,598 This Euro-based foreign loan of � 0 (2004: 20 000 000) was repaid in full during the financial period.

Deutsche Bank – 73,134 – 73,134 This US Dollar-based loan of US$ 0 (2004: 11 607 000) was repaid in full during the financial period.

Total interest-bearing debt – 492,829 – 492,829 Less: Current portion of the long-term liabilities – (95,767) – (95,767)

KBC Bank – (24,404) – (24,404)European Investment Bank – (27,489) – (27,489)Proparco – (31,345) – (31,345)Deutsche Bank – (12,529) – (12,529)

Long-term portion of liabilities – 397,062 – 397,062

17. DEFERRED TAXATIONBalance at beginning of year – 120,776 – 120,776 Current charge – 67,853 – 67,853 Under provision prior years – 1,205 – 1,205 Utilisation of assessed loss – (189,834) – (189,834)

Balance at end of year – – – 120,776

Comprising the following: Research and development project 904 841 904 841 Mining capital allowance 216,070 187,573 216,070 187,573 Mining assets per sections 36(11)(a) – (303) – (303)Mining rehabilitation (29,970) (28,194) (29,970) (28,194)Other capital allowance 150,202 107,282 150,202 101,749 Impairment of property, plant and equipment (90,000) – (90,000) – Provisions and impairment (61,038) (56,905) (61,038) (56,905) Payments in advance – – – – Prepaid expenses 40 1,384 41 1,384 Ore stockpiling 73,038 25,752 73,038 25,752 Leased assets and liability 28,152 21,673 20,529 21,673 Inventory interdivisional profits/intercompany – (2,589) – (8,867) Utilisation of tax loss (287,399) (256,514) (279,776) (244,703)

– – – –

The total calculated tax loss of the company amounts to R1 610 930 000 (Group: R1 610 930 000).The deferred tax asset relating to the tax loss amounting to R483 279 000 was limited to the net deferred tax liability of the company of R287 399 000 (Group: R279 776 000).

NOTES TO THE FINANCIAL STATEMENTS (continued)for the nine months ended 31 March 2005

FOSKOR 2005 / 34

Company Group 9 Months 12 Months 9 Months 12 Months ended ended ended ended March 2005 June 2004 March 2005 June 2004 R'000 R'000 R'000 R'000

18. TRADE AND OTHER PAYABLESTrade payables 203,981 115,279 208,050 116,975 Accruals 96,787 151,496 99,790 154,149 Sundry payables 27,716 36,234 27,716 36,234

328,484 303,009 335,556 307,358

19. PROVISIONSBonus 13,436 15,000 13,436 15,000 Social responsibility 2,335 2,500 2,335 2,500 Leave 20,646 15,901 20,646 15,901 13th Cheque 9,269 9,699 9,269 9,699 Provision for bursaries 767 2,640 767 2,640

Total provisions 46,453 45,740 46,453 45,740

Movement in the provisions Opening amount 45,740 32,728 45,740 32,728 Additional provisions 46,453 45,740 46,453 45,740 Utilised during period (45,740) (32,728) (45,740) (32,728)

Closing amount 46,453 45,740 46,453 45,740

COMPANY Social Staff responsibility costs related Total R’000 R’000 R’000

At 01 June 2004 2,500 43,240 45,740 Additional provisions – Charged to the income statement 2,335 44,118 46,453

4,835 87,358 92,193

Utilised during the year (2,500) (43,240) (45,740)

At 31 March 2005 2,335 44,118 46,453

GROUP Social Staff responsibility costs related Total R’000 R’000 R’000

At 01 June 2004 2,500 43,240 45,740 Additional provisions – Charged to the income statement 2,335 44,118 46,453

4,835 87,358 92,193 Utilised during the year (2,500) (43,240) (45,740)

At 31 March 2005 2,335 44,118 46,453

NOTES TO THE FINANCIAL STATEMENTS (continued)for the nine months ended 31 March 2005

FOSKOR 2005 | 35

Group 9 Months 12 Months ended ended March 2005 June 2004 R'000 R'000

20. CONTINGENT LIABILITIES AND GUARANTEESContingent liabilitiesListed below are all the claims against the Foskor Group. Management are however of the opinion that these claims will be successfully defended.

Stolt Infra USD 505 756 ICEC Limited USD 311 645 PCL USD 413 706 G Marais R26 million Loesche (refer to Guarantees below) R15 million Insimbi Engineering R1.1 million Pension Fund: Shortfall on differences between statutory valuation and AC116 valuation (refer Note 24.1) R31.4 million

GuaranteesGuarantees issued by Foskor Ltd and Foskor Group tovarious beneficiaries amount to R45.1 million.

Details Beneficiary Security against Loesch claim currently being litigated Weber Wentzel Bowens Attorneys 14,893 14,893 Electricity Eskom 5,191 5,191 Water and electricity supply Richards Bay T.L.C 6,604 6,604 Rail transport of phosphate rock Transnet 13,100 7,300 Various ZAR-denominated guarantees Various 5,282 4,423

Total 45,070 38,409

Subsequent to year end, on 13 May 2005, the case relating to Loesche claim as stated above was settled for an amount of R1 million plus legal costs.

Company Group 9 Months 12 Months 9 Months 12 Months ended ended ended ended March 2005 June 2004 March 2005 June 2004 R'000 R'000 R'000 R'000

21. COMMITMENTSCapital commitments Authorised and contracted for 1,036 54,000 1,036 54,000 Authorised but not contracted for 63,958 84,540 63,958 84,540

Total capital commitments 64,994 138,540 64,994 138,540

To be expended: – within one year 64,994 138,540 64,994 138,540 – after one year – – – –

64,994 138,540 64,994 138,540

This expenditure will be financed from internally generated funds and available credit facilitiesThe future minimum lease payments under non-cancellable leases are as follows:Payable no later than one year 3,420 3,225 3,420 3,225 Payable later than one year but not later than five years 3,906 8,100 3,906 8,100

7,326 11,325 7,326 11,325

Acquisition of Sasol Nitro Phalaborwa Works fixed assets:

Payable no later than one year 47,500 – 47,500 –

Payable later than one year 47,500 – 47,500 –

95,000 – 95,000 –

This acquisiton will be financed by the IDC with interest-bearing loans. Finalisation of the transaction is subject to approval by the Competition Commission.

NOTES TO THE FINANCIAL STATEMENTS (continued)for the nine months ended 31 March 2005

FOSKOR 2005 / 36

Company Group 9 Months 12 Months 9 Months 12 Months ended ended ended ended March 2005 June 2004 March 2005 June 2004 R'000 R'000 R'000 R'000

22. BORROWING FACILITIESUndrawn borrowing facilities and guaranteesForeign-denominated facilitiesTotal facilities – 497,083 – 497,083 Utilised facility – (497,083) – (497,083)

Unutilised facility – – – –

Rand-denominated facilitiesNon-interest bearing Total facility 1,450,000 1,000,000 1,450,000 1,000,000 Utilised (1,450,000) 544,570 (1,450,000) 544,570

Available – 455,430 – 455,430

The above facility from the IDC (shareholder) has been subordinated in favour of other creditors.

Interest bearing facilities Total facility 265,000 289,800 265,000 289,800 Utilised – 315 – 315

Available 265,000 289,485 265,000 289,485

Guarantees issued Total facility 33,552 44,077 33,552 44,077 Utilised 26,743 33,347 26,743 33,347

Available 6,809 10,730 6,809 10,730

23. FINANCIAL INSTRUMENTSExposure to currency, interest and credit risk arises in the normal course of the Group’s business. The Group’s objective in using financial instruments is to reduce uncertainty over future cash flows arising from the movement in currency and interest rates. While these financial instruments are subject to the risk of market rates changing subsequent to acquisition, such changes would generally be offset by opposite effect on the items being hedged. Foreign currency risk managementThe Group undertakes certain purchase and sales transactions denominated in foreign currency and hence exposure to exchange rate fluctuations arises. The currencies giving rise to currency risk, in which the Group primarily deals, are United States Dollars, Euro and British Pound.Certain of these foreign-denominated transactions are covered via forward exchange contracts. The Group has entered into certain forward exchange contracts, which relate to specific items on the balance sheet. These contracts were entered into to cover firm foreign commitments not yet due and export earnings of which the proceeds are not yet receivable.

Company Group 9 Months 12 Months 9 Months 12 Months ended ended ended ended March 2005 June 2004 March 2005 June 2004 R'000 R'000 R'000 R'000

Details of the contracts are as follows:Forward exchange contracts:ImportsUnited States Dollars 164 – 164 – Rand equivalent 962 – 962 – Average exchange rate 5.87 – 5.87 –

ExportsUnited States Dollars 33,500 6,000 33,500 6,000 Rand equivalent 208,248 40,153 208,248 40,153 Average exchange rate 6.22 6.69 6.22 6.69

Foreign loans - DollarsUnited States Dollars – 11,607 – 11,607 Rand equivalent – 79,914 – 79,914 Average exchange rate - Rand to Dollar – 6.88 – 6.88

Foreign Loans - EuroEuro – 55,710 – 55,710 Rand equivalent – 465,509 – 465,509 Average exchange rate - Rand to Euro – 8.36 – 8.36

NOTES TO THE FINANCIAL STATEMENTS (continued)for the nine months ended 31 March 2005

FOSKOR 2005 | 37

23. FINANCIAL INSTRUMENTS (continued)Interest rate riskAs part of an ongoing restructuring of the borrowing mix and interest rate characteristics of borrowings, the Group restructures funding of operating capital as it sees fit. Where applicable, use may be made of currency and interest rate swaps as well as normal forward cover of foreign interest payments. Credit risk managementCredit risk primarily relates to the exposure on cash and cash equivalents, investments, trade receivables and long- term financial derivative positions. The Group limits its counter party exposure arising from the money market and derivative instruments by dealing only with well-established financial institutions of high credit standing. The granting of credit is controlled by well-established criteria, which are reviewed and updated on an ongoing basis. Liquidity risk managementLiquidity risk arises from existing commitments associated with the industry and the requirements to raise funds in order to meet these commitments. The Group manages liquidity by monitoring forecasted cash flows and ensuring that adequate unutilised borrowing facilities are maintained. For further details, refer to the borrowing note (Note 23).

0 – 12 1 – 2 3 – 5 Beyond months years years 5 years Total R'000 R'000 R'000 R'000 R'000

Financial assetsDerivative instruments 745 – – – 745

Financial liabilitiesDerivative instruments 2,301 – – – 2,301

Fair valueThe fair value of financial instruments is substantially identical to the carrying values reflected in the balance sheet.

Group 9 Months 12 Months ended ended March 2005 June 2004 R'000 R'000

24. PENSION AND OTHER POST-RETIREMENT OBLIGATIONSAmounts recognised in the balance sheet Pension schemes – 8,902 Post-retirement medical benefits 136,375 110,414

136,375 119,316

24.1 Pension liabilitiesThe Group has established a post-retirement pension scheme covering all employees. The pension fund is final salary fully funded. The assets of the fund are held in an independent trustee-administered fund, administered in terms of the Pension Funds Act of 1956, as amended. The fund is valued every three years using the projected unit credit method. The actuarial valuation for purposes of AC116 was performed on 31 December 2004.

The amounts recognised in the balance sheet are as follows:Present value of fund obligations 235,799 234,298 Fair value of plan assets (237,906) (225,396)

(2,107) 8,902

Unrecognised actuarial (losses)/gains 2,107 – Unrecognised portion of liability – –

Liability in the balance sheet – 8,902

The amounts recognised in the income statement are as follow: Current service cost 725 794 Interest cost 20,256 21,932 Expected return on assets (16,894) (18,554)

Total included in staff costs 4,087 4,172

Movement in the liability recognised in the balance sheet

At beginning of year – – Contributions paid (4,087) (3,499) Other expenses included in staff costs 4,087 12,401

Balance at the end of the year – 8,902

The principal actuarial assumptions used for accounting purposes were: – Discount rate 8.00% 9.00%– Expected return on plan assets 7.00% 8.00%– Future salary increases 4.50% 6.50%– Future pension increases 2.50% 3.50%

NOTES TO THE FINANCIAL STATEMENTS (continued)for the nine months ended 31 March 2005

FOSKOR 2005 / 38

Group 2004 2003 R’OOO R’OOO

24.2 Post-employment medical benefits The Group operates a post-employment medical benefit scheme, which is held in an independent trustee-administered fund. The liability is valued every three years using the projected unit credit method. The latest full actuarial valuation was performed on 01 February 2005.

The amounts recognised in the balance sheet are as follows: Present value of fund obligations Discovery Health members 77,142 35,346 Thebe Med members 59,233 75,068 Fosmed – –

Present value of unfunded obligations 136,375 110,414

The amounts recognised in the income statement are as follows: Current service cost 4,046 5,482 Interest cost 6,208 9,276

Total included in staff costs 10,254 14,758

Movement in the liability recognised in the balance sheet At beginning of year 110,414 86,995 Contributions paid (4,079) (2,746)Other expenses 30,040 26,165

Balance at the end of the year 136,375 110,414

The principal actuarial assumptions used for accounting purposes were: – Expected investment return 7.2% 9.6%– General inflation 3.4% 5.3%– Medical inflation 6.4% 8.3%

Company Group 9 Months 12 Months 9 Months 12 Months ended ended ended ended March 2005 June 2004 March 2005 June 2004 R'000 R'000 R'000 R'000

25. ENVIRONMENTAL REHABILITATION LIABILITYFoskor Limited continuously contributes to the Rehabilitation Trust to ensure that adequate funds are available to pay for mine closure and reclamation costs. The Trust is regarded as a Special Purpose Entity and is therefore consolidated as part of Foskor Limited’s figures. This note compares the net present value of the rehabilitation liability to the assets held by the Trust.

Environmental rehabilitation liability Balance at beginning of year 147,512 139,162 147,512 139,162 Rehabilitation liability growth 4,930 8,350 4,930 8,350

Balance at end of year 152,442 147,512 152,442 147,512

Rehabilitation trust Balance at beginning of year 24,096 19,528 24,096 19,528 Restatement opening balance – – – –

Restated opening balance 24,096 19,528 24,096 19,528 Fair valuation of investments 2,849 1,566 2,849 1,566 Profit for the year 2 2 2 2

Investments held by the trusts (refer to note 10) 26,947 21,096 26,947 21,096

Cash contribution made to the trust – 3,000 – 3,000

Total assets held by the trust 26,947 24,096 26,947 24,096

Unfunded portion of rehabilitation liability 125,495 123,416 125,495 123,416

The directors are aware of the estimated cost of rehabilitation and are satisfied that adequate provision is being made to meet this obligation.

NOTES TO THE FINANCIAL STATEMENTS (continued)for the nine months ended 31 March 2005

FOSKOR 2005 | 39

Company Group 9 Months 12 Months 9 Months 12 Months ended ended ended ended March 2005 June 2004 March 2005 June 2004 R'000 R'000 R'000 R'000

26. CASH APPLIED TO OPERATIONSReconciliation of profit for the period:

Operating loss for the period (510,095) (357,597) (407,392) (227,581)Adjustments for: Depreciation 101,687 131,734 114,231 146,770 Amortization of intangible assets 496 378 642 573 Impairment of property, plant and equipment 300,000 – 300,000 Loan forgiveness of debt – (83,460) – (83,460)Increase in investments charged directly to equity 4,695 – 4,695 – Profit on sale of property, plant and equipment (9,528) (1,185) (9,419) (1,185)Growth in environmental rehabilitation 4,930 8,350 4,930 8,350 Growth in retirement benefit obligation 17,059 32,321 17,059 32,321 Decrease in ore stockpiling 8,088 16,237 8,088 16,237 Share of the results joint venture – (657) – (657)

Operating (loss)/profit before working capital changes (82,668) (253,879) 32,834 (108,632)(Increase)/Decrease in inventory (17,530) 58,530 (17,329) 58,742 Decrease in accounts receivable 9,357 123,857 12,465 123,525 Increase/(Decrease) in accounts payable 25,475 (75,248) 28,198 (76,104) Increase in provisions 713 13,012 713 13,012

Cash (applied to)/generated by operations (64,653) (133,728) 56,881 10,543

27. RELATED PARTY TRANSACTIONS DIRECTORS’ EMOLUMENTS

The following table records the emoluments payable to the directors during the year:

Payments for conversion to Fees for Basic Peformance fixed term Expense Pension services salaries Bonuses contracts Allowances Contributions Total R'000 R'000 R'000 R'000 R'000 R'000 R'000

Nine Months ended 31 March 2005 Executive directorsPaid by the company – 1,358,146 205,081 2,614,341 154,143 4,331,711 Paid by subsidiaries – – – – – – – Paid by others – – – – – – –

– 1,358,146 205,081 2,614,341 – 154,143 4,331,711

Non-Executive directors Paid by the company 226,000 – – – – 226,000 Paid by subsidiaries – – Paid by others 269,000 – – – – – 269,000

495,000 – – – – – 495,000

Total 495,000 1,358,146 205,081 2,614,341 – 154,143 4,826,711

Twelve Months ended 30 June 2004 Executive directors Paid by the company – 3,172,713 1,948,734 – – 199,692 5,321,139 Paid by subsidiaries – – – – – – – Paid by others – – – – – – –

– 3,172,713 1,948,734 – – 199,692 5,321,139 3

Non-Executive directors Paid by the company 431,000 – – – 161,400 – 592,400 Paid by subsidiaries – – – – – – – Paid by others 262,500 – – – – – 262,500

693,500 – – – 161,400 – 854,900

Total 693,500 3,172,713 1,948,734 – 161,400 199,692 6,176,039

NOTES TO THE FINANCIAL STATEMENTS (continued)for the nine months ended 31 March 2005

FOSKOR 2005 / 40

28. SEGMENTAL REPORTING

Phosphate Phosphoric rock Copper Zirconia Acid Other Total 2005 2004 2005 2004 2005 2004 2005 2004 2005 2004 2005 2004 R’m R’m R’m R’m R’m R’m R’m R’m R’m R’m R’m R’m

Business segmentation

Segment revenue – External 278 403 21 33 56 79 1,014 1,525 2 11 1,371 2,051 – Internal – Group 518 718 – – – 190 – – – 708 718

Total 796 1,121 21 33 56 79 1,204 1,525 2 11 2,079 2,769

Segment net operating 152 55 19 23 (6) 4 (513) (284) (59) (46) (407) (247) income/(loss) Segment assets – Assets 1,142 1,106 – – 61 59 1,465 1,835 349 27 3,017 3,027 Capital expenditure 61 228 – – 2 3 29 58 – 1 92 290 Depreciation 57 74 – – 1 1 56 71 – – 114 146

Inter-segment transfers between the operations take place at marketrelated prices.

Geographical segmentation

Segment revenue – Local 711 1,025 21 33 2 3 280 239 2 11 1,016 1,312 – Export 85 96 – 54 75 924 1,286 – – 1,063 1,457

Total segment revenue 796 1,121 21 33 56 79 1,204 1,525 2 11 2,079 2,769 Internal revenue 518 718 – – 190 – – – 708 718

Net segment revenue 278 403 21 33 56 79 1,014 1,525 2 11 1,371 2,051

Segment revenue represents the gross income directly and reasonably allocated to segments. These sales are made on a commercial basis.

Segment net operating income equals segment revenue less segment expenses, which include costs of sales and selling and administration expenses. Segment expenses represent direct or reasonably allocated expenses on a segment basis. Segment expenses exclude interest and investment income.

Segment assets and liabilities include directly and reasonably allocated operating assets, investments and liabilities. Given the concentration of assets and liabilities within the Republic of South Africa, it is not meaningful to allocate such elements on a geographical basis.

NOTES TO THE FINANCIAL STATEMENTS (continued)for the nine months ended 31 March 2005

FOSKOR 2005 | 41

Annualised 9 Months 2005 2005 2004 2003 2002 2001

KEY DRIVERS Average exchange rate R/$ 6.17 6.83 8.98 9.97 7.70 P205 CFR price ($/ton) 399 356 334 338 346 P205 CFR price (R/ton) 2,461 2,315 2,999 3,370 2,664 Sulphur FOB price ($/ton) 63 59 40 20 30 Sulphur CFR price ($/ton) 86 81 53 32 44 Sulphur CFR price (R/ton) 574 592 477 314 337 Ammonia CFR price ($/ton) 298 241 175 136 176 Rock FOB sales price ($/ton) 54 43 39 38 37 Rock sales price (R/ton) 324 372 354 379 281 P205 – Production volume (‘000 ton) 542 406 575 404 404 417 P205 – Sales volume (‘000 ton) 437 328 435 307 320 347 Granular – Production volume (‘000 ton) 161 121 297 187 170 181 Granular – Sales volume (‘000 ton) 174 130 296 148 169 194 Rock production volume (‘000 ton) 2,791 2,093 2,642 2,773 2,885 2,901 Rock sales volume (‘000 ton) 2,575 1,931 3,017 2,736 2,706 2,985 INCOME STATEMENT (R million) Revenue 1,828 1,371 2,051 1,972 2,245 1,910 Operating profit (407) (228) 147 505 385 Net finance expenses and foreign (losses)/gains (20) (99) (223) 31 12 (Loss)/profit before tax (427) (328) (76) 535 396 Taxation (50) 129 72 (173) (119) Net (loss)/profit (477) (198) (3) 362 276 Major cost items (R million) Number of employees (at year end) 1760 1707 2034 2072 2079 Staff costs 321 241 331 296 263 222 Repairs and maintenance 247 185 265 250 160 116 Depreciation 152 114 147 136 88 103 Capex 123 92 290 250 822 424 PROFITABILITY RATIOS Operating income to revenue (%) -30% -11% 7% 23% 20% Pre-tax margin (%) -31% -16% -4% 24% 21% Revenue per employee (R’000) - p.a. 1039 779 1201 970 1083 919

BALANCE SHEET Property, plant and equipment 1,643 1,967 1,831 1,724 1,244 Non-current assets 109 111 132 112 140 Current assets 1,266 948 1,159 1,378 1,026

Total assets 3,018 3,026 3,121 3,214 2,410

Shareholders’ equity 864 1,338 1,559 1,567 1,220 Shareholders’ loan – Non-interest bearing 1,450 544 – – –

Total shareholders’ interest 2,314 1,882 1,559 1,567 1,220

Interest-bearing debt (net of cash) – 483 582 389 (38) Ratios Debt/equity ratio (%) (debt net of cash) 0% 26% 46% 42% 30% Current assets to current liabilities (ratio) 3.2 2.0 2.4 2.1 2.2

CASH FLOW STATEMENT Net cash (outflow)/inflow from operating activities (0) (62) 52 240 213Net cash (outflow)/inflow from investing activities (87) (283) (244) (563) (411)

Free cash (outflow) (88) (345) (193) (322) (198)

FIVE-YEAR REVIEW: FOSKOR GROUP

FOSKOR 2005 / 42

2.00

2.25

2.50

2.75

3.00

Rock production volume’000 ton

2001 2002 2003 2004

2,90

1

2,88

5

2,77

3

2,64

2

350

400

450

500

550

600

P205 - Production Volume’000 ton

2001 2002 2003 2004 2005

542

417

404

404

575

30

34

38

42

46

50

54

58

Rock FOB Sales Price$/ton

2001 2002 2003 2004 2005

54

37

38

39

43

0

1

2

3

4

5

6

7

8

9

10

Average Exchange RateR/$

2001 2002 2003 2004

6.00

7.70

9.97

8.98

6.83

0

10

20

30

40

50

60

70

80

90

Sulphur CFR Price$/ton

2001 2002 2003 2004 2005

86

44

32

53

81

250

300

350

400

450

500

550

600

Sulphur CFR PriceR/ton

2001 2002 2003 2004 2005

337

314

477

592

300

320

340

360

380

400

P205 CFR Price$/ton

2001 2002 2003 2004 2005

346

338

334

356

2.0

2.5

3.0

3.5

P205 CFR PriceR/ton

2001 2002 2003 2004 2005

2.46

1

2.66

4

3.37

0

2.99

9

2.31

5

2,79

1

2005

2005

374

399

(2005 – Annualised) (2005 – Annualised)

FIVE-YEAR REVIEW: FOSKOR GROUP

FOSKOR 2005 | 43

NOTICE TO MEMBERSFOSKOR (Pty) LtdREG. NO. 1951/002918/07

NOTICE IS HEREBY GIVEN that the fifty fourth annual general meeting of the members of the above company will be held at 21 John Ross, Parkway, Richardsbay, South Africa on Tuesday, 6 September 2005 for the following purposes:

1. To receive and consider the Annual Financial Statements for the nine months ended 31 March 2005, including the directors’ report and the report of the Auditors thereon.

2. To authorise the directors to approve the auditors’ remuneration for the past year.

3. To transact any other business as may be transacted at an annual general meeting.

4. Re – appoint directors.

A member entitled to attend and vote at the meeting, is entitled to appoint one or more proxies to attend and vote in his stead. A proxy need not also be a member of the Company. Proxy forms should be forwarded to reach the registered office of the company not less than 48 hours before the time for the holding of the meeting.

By Order of the Board

B G DLAMINICompany Secretary4 August 2005

FOSKOR 2005 / 44

PricewaterhouseCoopers IncChartered Accountants (SA)Registered Accountants and Auditors(Registration no 1998/012055/21)

AUDITORS

PRICEWATERHOUSECOOPERS INC

Registered Accountants and Auditors

Chartered Accountants (SA)

Pretoria

NGUBANE & CO

Registered Accountants and Auditors

Chartered Accountants (SA)

Durban

SECRETARY AND REGISTERED OFFICEB G Dlamini

6 Nollsworth Crescent

La Lucia Ridge, La Lucia

P.O. Box 22326

GLENASHLEY

4022

Telephone: (031) 580 7500

Telefax: (031) 566 4448

e-mail: bhekid@foskor.co.za

REGISTRATION NUMBER1951/002918/07

WEBSITE ADDRESShttp://www.foskor.co.za

ADMINISTRATION

REGISTERED OFFICE 6 Nollsworth Crescent, Nollsworth Park, La Lucia, 4051PO Box 22326, Glenashley, 4022 www.foskor.co.za