UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10 - K

                                   (Mark One)
            [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
                    For the fiscal year ended March 28, 1998
                                       OR
          [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
                    For the transition period from ___ to ___

                         Commission file number 33-67546

                       HARRIS CHEMICAL NORTH AMERICA, INC.
             (Exact name of registrant as specified in its charter)

            Delaware                                          48-1135402
  (State or other jurisdiction of                          (I.R.S. Employer
   incorporation or organization)                        Identification Number)

                                2100 Sanders Road
                         Northbrook, Illinois 60062-6142
               (Address of principal executive offices)(Zip Code)

                                 (847) 272-9200
              (Registrant's telephone number, including area code)

           Securities registered pursuant to Section 12(b) of the Act:
                                      None
           Securities registered pursuant to Section 12(g) of the Act:
                                      None

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes (X) No ( )

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]

The number of shares  outstanding of the registrant's  common stock at March 28,
1998 was 1,000 shares.  All of such shares are owned by Harris  Chemical  Group,
Inc.



                                                       1


<PAGE>



<TABLE>
<CAPTION>
                       HARRIS CHEMICAL NORTH AMERICA, INC.

               FORM 10-K For the Fiscal Year ended March 28, 1998

                                      Index


<S>               <C>                                                                            <C>
Part I            Description                                                                    Page #
------            -----------                                                                    ------
Item 1.           Business....................................................................       3

Item 2.           Properties..................................................................      13

Item 3.           Legal Proceedings...........................................................      15

Item 4.           Submission of Matters to a Vote of Security Holders.........................      15

Part II
Item 5.           Market for Registrant's Common Equity and Related
                  Stockholder Matters.........................................................      16

Item 6.           Selected Financial Data ....................................................      16

Item 7.           Management's Discussion and Analysis of Financial Condition
                  and Results of Operations...................................................      17

Item 8.           Financial Statements........................................................      24

Item 9.           Changes in and Disagreements with Accountants on
                  Accounting and Financial Disclosure.........................................      49

Part III
Item 10.          Directors and Executive Officers of the Registrant .........................      49

Item 11.          Executive Compensation .....................................................      51

Item 12.          Security Ownership of Certain Beneficial Owners and Management..............      53

Item 13.          Certain Relationships and Related Transactions..............................      54

Part IV
Item 14.          Exhibits, Financial Statement Schedules and Reports on Form 8-K.............      56

Signatures        ............................................................................      59
</TABLE>



                                                       2


<PAGE>



                       HARRIS CHEMICAL NORTH AMERICA, INC.

                                    FORM 10-K

                                     PART I

Item 1             BUSINESS1

General

     Harris Chemical North America,  Inc. ("Harris") was formed in July 1993 for
the  purpose  of  becoming  a holding  company  for its  principal  wholly-owned
subsidiaries:  North American Chemical Company ("NACC"),  NAMSCO Inc. ("NAMSCO")
and its subsidiaries  North American Salt Company ("NASC") and Sifto Canada Inc.
("Sifto"),  and GSL  Corporation  ("GSL")  and its  subsidiary  Great  Salt Lake
Minerals Corporation ("GSLMC").  Harris and its direct and indirect subsidiaries
are collectively referred to as the "Company."

       The Company is a leading  producer  and  marketer of  inorganic  chemical
products,  including  principally  salt,  soda  products,  boron  chemicals  and
specialty potash  fertilizers.  The Company markets its products  throughout the
United States and Canada as well as in Asia,  the Pacific Rim  countries,  Latin
America and Europe.  Revenues derived from areas outside the United States in FY
1998 were approximately $190.0 million or 38.5% of total revenues.

     Harris is a wholly owned subsidiary of Harris Chemical Group, Inc. ("HCG").
HCG was formed in 1992. On September 24, 1993 the  stockholders of NACC,  NAMSCO
and GSL  exchanged  their shares in those  companies for shares in HCG. HCG then
contributed its shares in NACC, NAMSCO and GSL to Harris. Those transactions are
referred to as the "Consolidation."

       On April 1, 1998,  HCG was  acquired by IMC Global Inc.  ("IMC") and as a
result all of the subsidiaries of HCG, including Harris,  became indirect wholly
owned  subsidiaries of IMC. These  transactions are referred to as the "Merger."
Following the Merger, the names of HCG, NACC, NASC and GSLMC were changed to IMC
Inorganic Chemicals Inc., IMC Chemicals Inc., IMC Salt Inc. and IMC Kalium Ogden
Corp., respectively.  Any references to those companies in this Form 10-K are to
the pre-Merger names.

       Subsequent  to the  Consolidation,  the  Company was  recapitalized  (the
"Recapitalization"). As part of the Recapitalization, Harris issued $250 million
of 10.25% Senior Secured Discount Notes due July 15, 2001 (the "Discount Notes")
and $335 million of 10.75% Senior  Subordinated  Notes due October 15, 2003 (the
"Senior  Subordinated  Notes")  and Sifto  issued  $100  million of 8.5%  Senior
Secured Notes due July 15, 2000 (the "Sifto  Notes").  The Discount  Notes,  the
Senior  Subordinated  Notes and the Sifto  Notes are  collectively  referred  to
herein  as the  "Notes."  The  Discount  Notes  were  issued  for  net  proceeds
aggregating $200.4 million. NACC, NAMSCO and GSL,  collectively,  and Sifto have
also entered into revolving credit agreements (the "Bank Agreements")  providing
for borrowings of up to $130 million and $20 million,  respectively,  secured by
inventory and accounts  receivable.  Sifto terminated the $20 million  revolving
credit agreement simultaneously with the consummation of the Merger.

       The Company  intends to continue its strategy of growth through  internal
reinvestment   and   development,   as  well  as  through  joint   ventures  and
acquisitions, particularly in businesses in which the Company currently competes
or in similar  areas of the  inorganic  chemical  industry  where the  Company's
existing expertise in technology, process capabilities and marketing can be used
to strengthen and improve the acquired business or joint venture.

       In addition,  the Company  continually  reviews its  businesses and asset
base in light of its  cash  requirements  and  strategic  plans.  Based on these
reviews,  the Company may determine that it is in its best interest to (i) enter
into strategic business alliances,  including through the possible  contribution
of assets to joint  ventures  and/or (ii) offer for sale assets deemed not to be
strategic.  In July  1996,  NACC  entered  into an  agreement  for the  sale and
leaseback of an electric and steam
--------
     1Unless otherwise stated,  all references herein to "dollars" or "$" are to
U.S. dollars.  References to any particular fiscal year ("FY") mean the 52 or 53
week fiscal year ending on the last Saturday in March of the indicated year.


                                                       3


<PAGE>



generating facility associated with its Searles Valley Soda Ash Facility ("Argus
Utilities").  See Note 7 to the Consolidated Financial Statements.

       Except for statements of historical fact contained herein, the statements
appearing under Part I, Item 1, "Business;" Part I, Item 3, "Legal Proceedings;"
and Part II,  Item 7,  "Management's  Discussion  and  Analysis  of  Results  of
Operations   and   Financial    Condition,"    presented    herein    constitute
"forward-looking  statements"  within  the  meaning  of the  Private  Securities
Litigation Reform Act of 1995.

       Factors that could cause actual results to differ  materially  from those
expressed  or implied by the  forward-looking  statements  include,  but are not
limited  to,  the  following:  the  effect  of  general  business  and  economic
conditions;   weather;   product  demand  and  industry   capacity;   price  and
availability of freight  transportation;  risks  associated with investments and
operations  in foreign  jurisdictions,  including  those  related  to  economic,
political and regulatory  policies of local  governments and laws or policies of
the United  States and  Canada;  changes in  governmental  laws and  regulations
affecting  environmental  compliance,  taxes and  other  matters  impacting  the
Company;  the risks attendant with mining  operations;  the potential impacts of
increased  competition in the businesses in which the Company operates;  changes
in interest rates and capital markets; manufacturing efficiencies;  availability
and price of raw materials and critical manufacturing equipment; plant expansion
efforts;  the international  regulatory and trade  environment;  and other risks
indicated in this report and other SEC filings. These factors could cause actual
results  to differ  materially  from the  forward-looking  statements  set forth
herein.

Products

       The Company's net sales (in thousands) by product line and the percentage
of net sales represented by such sales during the last three fiscal years are as
follows:


<TABLE>
<CAPTION>

        Product Line                   FY 1996                          FY 1997                            FY 1998
    --------------------     ----------------------------     ----------------------------       ----------------------------
    <S>                          <C>               <C>            <C>               <C>              <C>               <C>  
    Salt ...............         $224,500           47.2%         $235,899           46.4%           $216,443           43.8%
    Soda products ......          115,978           24.4           119,800           23.6             126,341           25.6
    Boron chemicals ....           67,979           14.3            63,051           12.4              68,289           13.8
    Specialty potash
        fertilizers ....           55,459           11.7            71,547           14.1              68,772           13.9
    Other ..............           11,558            2.4            18,325            3.5              14,308            2.9
                             ------------     -----------     ------------      ----------       ------------      ----------
    Net Sales ..........         $475,474          100.0%         $508,622          100.0%           $494,153          100.0%
                             ============     ===========     ============      ==========       ============      ==========
</TABLE>




Salt

       Salt is used in a variety of applications, including as a deicer for both
highway and consumer use, an ingredient in the production of chemicals for paper
bleaching and plastic production, a flavor enhancer and preservative in food, an
ingredient  and  nutrient  in  animal  feeds,  and an  essential  item  in  both
industrial and consumer water  softeners.  The demand for salt has  historically
remained  relatively  stable during  economic cycles due to the large variety of
uses.  However,  demand for salt for  highway  deicing is affected by changes in
winter weather.

       The Company  produced  approximately  9.1 million tons of salt in FY 1998
compared to 9.5 million tons in FY 1997.  Production activities are conducted at
nine  facilities,  five located in the United States and four located in Canada.
Canadian sales  represented  approximately  32% of the Company's  total sales of
salt in FY 1998.

       Businesses/Customers.  The  Company  separates  sales of salt into  three
major segments:  general trade, highway deicing and chemical.  The general trade
segment is the Company's  largest segment and accounted for approximately 46% of
FY 1998 salt sales.  This segment includes  consumer  applications such as table
salt,  water  conditioning,   home  ice  control,   food  and  meat  processing,
agricultural  applications,  including  feed mixes,  and a variety of industrial
applications such as oil refining and drilling, metal processing and tanning.



                                                       4


<PAGE>



       Highway deicing  constitutes the Company's second largest segment of salt
sales  accounting  for  approximately  42%  of FY  1998  salt  sales.  Principal
customers are states,  provinces and municipalities  that purchase bulk salt for
ice control on public  roadways.  Highway salt is sold mostly via a tendered bid
contract system with price, product quality and deliverability being the primary
factors  in  determining  a  supplier.  Location  of  the  source  of  salt  and
distribution  outlets also play a significant role. The Company has an extensive
network of  approximately  80 depots for  storage  and  distribution  of highway
deicing  salt.  The  majority of these depots are located on the Great Lakes and
the Mississippi River system.

       Winter weather  variability is a factor  affecting salt sales for deicing
applications  because mild winters reduce the need for salt used in ice and snow
control.  During the past five years annual highway deicing sales by the Company
ranged  from 3.2  million  tons to 5.9  million  tons per year.  Unusually  mild
weather occurring in the Company's principal deicing sales areas would adversely
affect the  Company's  sales and  earnings.  The vast  majority of the Company's
deicing sales are made in Canada and the northern  United  States,  where winter
weather is generally harsher than in other parts of North America.

       The chemical industry accounted for approximately 12% of the Company's FY
1998 salt sales.  Principal  customers  are producers of  intermediate  chemical
products  used in pulp  bleaching  and  plastic  production  that do not  have a
captive source of brine.

       Sales  and  Marketing.  The  general  trade  segment  is driven by strong
customer relationships.  Sales in our general trade segment occur through retail
channels  such as  grocery,  building  supply and  hardware  stores,  automotive
stores,  feed suppliers,  and industrial  manufacturers  in various  industries.
Distribution  in the U.S.  general trade  segment is channeled  through a direct
sales force located in various parts of the United States,  who sell products to
distributors,  dealers and end users.  The Company  also  maintains a network of
brokers who sell table salt,  consumer deicing and water conditioning  products.
These brokers service wholesale and chain grocery headquarters and retail stores
as well as the food service industry.

       The Company has  maintained a  significant  presence in the U.S.  general
trade  segment  over  recent  years due to its strong  focus on the  mid-western
region, its distribution network to the grocery trade and its relationships with
the large  distributors  of water  conditioning  salt.  In order to  continue to
expand its volume and  profitability  in the general trade segment,  the Company
has focused its efforts on improving its  marketing  programs in both Canada and
the U.S. These programs include:(i)  differentiating the Company's various brand
names through promotional  activities,  (ii) developing an exclusive distributor
network,  (iii)  redesigning  the Canadian water  conditioning  product and (iv)
improving solar salt quality.

       The highway  deicing  customer  base  consists of states,  provinces  and
municipalities  that purchase  bulk salt for ice control.  Contracts are awarded
annually on the basis of tendered  bids once the  purchaser  is assured that the
minimum  requirements  for purity,  service and delivery can be met. The bidding
process  minimizes the need to invest  significant  time and effort in marketing
and advertising.

       Distribution  into the chemical segment is made through  long-term supply
agreements,  which are  negotiated  privately.  Price,  service  and  quality of
product are the major customer requirements.

       Competition.  Harris faces  significant  competition  in each of the salt
sales segments in which it operates. Large, nationally recognized firms, such as
Cargill and Morton International, as well as regional firms, compete against the
Company.

       Production  Techniques and  Facilities.  Summarized  below are the  three
processing methods used to produce salt. The Company utilizes all three methods.

       Rock Salt Mining.  The Company employs a drill and blast mining technique
at its Cote Blanche, Louisiana and Goderich, Ontario rock salt mines.

       Mechanical  Evaporation.   The  mechanical  evaporation  method  involves
subjecting salt-saturated brine to vacuum pressure and heat to precipitate salt.
The resulting product has both a high purity and an attractive physical shape.

       Solar  Evaporation.  The solar  evaporation  method  is a cost  effective
method of salt production used in areas of the world where high salinity and low
rainfall are common.  Water with above average salt content is pumped into large
open ponds where sun and wind evaporate the water and  crystallize the salt into
a solid which is then mechanically harvested.


                                                       5


<PAGE>



       The  Company  produces  salt at nine  different  locations.  Mechanically
evaporated salt for Canada is produced at three facilities strategically located
throughout Canada: Amherst, Nova Scotia in eastern Canada, Goderich,  Ontario in
central Canada and Unity, Saskatchewan in western Canada. From the Goderich rock
salt mine, the Company also serves the highway  deicing market in eastern Canada
as well as the Great Lakes region of the United States.

       The Company's  central and midwest U.S.  customer base is served by three
mechanical  evaporation plants, two located in Kansas and one in Tennessee.  The
Cote Blanche, Louisiana rock salt mine serves chemical customers in the southern
and  western  U.S. as well as the highway  deicing  segment  through a series of
depots  located  along the  Mississippi  and Ohio Rivers.  The  Company's  solar
evaporation facility located at Ogden, Utah is the largest solar salt production
site in the United States.  This facility  principally serves the western United
States with general trade salt, but also provides salt for chemical applications
and highway deicing.

       Control of Resources. Based on the geological characteristics of the salt
deposits that provide the  Company's  raw  materials and the current  production
rates, the Company believes there are sufficient sources of readily  recoverable
salt for the foreseeable future.

Soda Products

       Soda products  include soda ash,  sodium sulfate and sodium  bicarbonate.
Soda ash is used in the production of glass, sodium-based chemicals, detergents,
pulp and paper and for water treatment and numerous other  applications.  Sodium
sulfate  is  used  as an  ingredient  in  many  laundry  detergents  and  in the
processing of wood pulp into paper.  Sodium  bicarbonate  is used as a buffering
agent in animal feeds, as a chemical  additive and in  pharmaceutical,  food and
other consumer applications.

Soda Ash

       There are currently two production  processes for soda ash. The principal
production process,  the "ammonia-soda" or "synthetic"  process, is raw material
(using coke, salt, and limestone) and energy-intensive and generates by-products
such as calcium chloride and aluminum chloride. Today, roughly two-thirds of the
worldwide  production  uses a variation of this process.  The other one-third of
worldwide production uses a newer production process,  developed only within the
past  30  years,  which  refines  naturally  occurring  trona  deposits  and  is
considerably  less  costly  than the  synthetic  process.  Outside of the United
States,  production of soda ash using trona deposits occurs  currently in Kenya,
Botswana  and China.  The six U.S.  producers,  by using the natural  production
process,  are regarded as the world's lowest cost producers of high quality soda
ash.

       Of the six U.S.  soda ash  producers,  five are  located in Green  River,
Wyoming. The Green River suppliers produce soda ash by conventional  underground
mining techniques and mechanical  separation.  The Company is the other domestic
producer and produces soda ash from the  carbonation of brine by solution mining
rather than by underground mining. The Company is the only domestic producer not
located in Green River,  Wyoming.  The Company's  California location results in
reduced transportation costs to California and to ports for export.

       Prior to April 1996, the Company had higher costs of production  than the
Green River producers,  but in the Company's opinion these production costs were
largely  offset  by  reduced  transportation  costs for sales of soda ash in the
western U.S., as well as the European and faster growing Asian,  Pacific Rim and
Latin  American  countries.  As of April 1996,  the Company  completed the first
phase of a two-phase  strategic capital  expenditure program (Long Range Process
Plan or "LRPP"). By employing newly developed technology which has increased the
mineral  concentration of the brine and by modifying the existing  manufacturing
process,  the Company has reduced  production  costs and  increased  capacity by
300,000 tons. See "--Production Techniques and Facilities."

       Businesses/Customers.   Soda  ash   produced   by  the  Company  is  used
principally  in the  production  of container  glass,  flat glass,  sodium-based
chemicals and  detergents.  Container  glass and flat glass include  bottles and
other containers, windows for buildings and automobiles, mirrors, lighting ware,
tableware, glassware and laboratory ware. The chemical industry uses soda ash as
a source of sodium ions and to  synthesize  value-added  products.  It is mainly
used  in  the  production  of  sodium  bicarbonate,  sodium  phosphates,  sodium
silicates  and  chrome  chemicals.  Soda  ash is also a  component  of  powdered
detergents  and is often the prime alkali used to make  phosphates and silicates
for dry detergent applications.


                                                       6


<PAGE>



       The Company, along with other U.S. producers of natural soda ash, exports
soda ash through the American Natural Soda Ash Corporation ("ANSAC"),  an export
sales and  marketing  association  organized in 1983 which is  authorized by the
Webb-Pomerene  Act.  ANSAC  represents  the Company and the five other  domestic
producers  for export  sales to  customers  in all parts of the world other than
Canada and the European  Union  ("EU").  ANSAC rules require the Company and the
other  five  domestic  producers  to sell  exclusively  through  ANSAC  in ANSAC
territories, with limited exceptions for sales to affiliates.

       The Company exports soda ash to Europe. All of the production of soda ash
within the EU is by the higher cost synthetic method. In 1993, the EU Commission
initiated an antidumping  action against American producers of soda ash exported
to the EU,  including  soda ash  manufactured  by the  Company.  This action was
vigorously  resisted by the  Company.  In October of 1997,  all dumping  actions
against the Company and other soda ash producers  involved in the dumping action
were rescinded by the EU Commission.  The Company  continues to sell to European
customers.

       Sales and Marketing. The Company's domestic sales are concentrated in the
western U.S., where the Company's soda ash production  facility is located.  The
Company's  strategy for  increasing  soda ash sales in the U.S. is to target the
pulp  processing,  water  treatment and chemical  market  segments as well as to
increase sales into the southeastern  United States.  The Company expects demand
in these segments to grow faster than demand in the glass  segment.  The Company
will continue to participate in ANSAC for sales in all export markets where they
are allowed to operate,  which include all foreign markets other than Canada and
the EU.  ANSAC's  strategy  is to continue to service  these  relatively  faster
growing  developing  markets with low cost,  high quality soda ash from the U.S.
producers.

       Competition.  There are numerous competitors in the sale of soda ash on a
worldwide basis.  Several of these firms, such as Solvay S.A., are larger,  both
in  terms  of  sales  and  capacity,  than  the  Company.  The  Company  expects
competition in the sale of soda ash to remain robust for the foreseeable future.

       Production  Techniques and Facilities.  The Company  produces soda ash at
one facility located at Searles Valley,  California  ("Searles Valley").  At the
end of FY 1997,  the plant had a rated  production  capacity of 1.5 million tons
per  year  and  accounted  for  approximately  12.0%  of  total  U.S.  soda  ash
production. In the Company's process, brine containing carbonate is reacted with
carbon dioxide, cooled to precipitate sodium bicarbonate,  and calcined to yield
an intermediate,  low-density grade of sodium carbonate.  The low-density sodium
carbonate is dissolved and recrystallized,  separated by centrifuge,  dried, and
stored for sale as dense soda ash.

       The  Company   commenced  in  FY  1993  the  LRPP,  a  two-phase  capital
expenditure  program,  which could cost up to $132.0 million,  intended to lower
the Company's soda ash and boron unit production  costs and to increase its soda
ash production capacity.  The initial phase of the LRPP utilizes newly developed
technology that increases the mineral concentration of the brine from which soda
ash and boron  chemicals  are produced and changes the  production  process,  by
including  more  efficient  drying and processing  equipment.  As a result,  the
Company's  soda ash rated  production  capacity is 1.5 million tons annually and
production  costs for soda ash and boron  chemicals  were reduced  further in FY
1998.  The second  phase of the program is  designed to increase  soda ash rated
production  capacity to between  1.8-2.0  million tons annually and reduce costs
further.  The  Company  plans to  market  the  increased  soda ash  volume  both
domestically and in the EU and, through an increase in its ANSAC allocation,  in
other parts of the world.  The Company  spent $68.0 million from FY 1993 through
FY 1997 and completed  the first phase of the LRPP.  The  implementation  of the
second  phase of the  capital  expenditure  program  which is  divided  into two
increments  and the timing of the spending of the  remaining  estimated  capital
requirements  of  approximately  $64.0  million  will  depend upon the growth of
future market demand for soda ash.

       Control of Resources.  The Company  produces  soda ash at its  California
plant by processing  naturally  occurring brines that the Company mines from its
own property as well as under leases with the U.S.  Department  of the Interior,
Bureau of Land  Management  (the "BLM").  The Company's  supply of brine for the
production of soda ash is extensive.  The Company  believes that it has adequate
deposits,  at the Company's  current and  projected  production  rates,  for the
foreseeable future.

Sodium Bicarbonate

        The Company's sodium bicarbonate is produced at a facility approximately
48 miles northwest of Rifle,  Colorado.  Commercial  production at the plant was
started in July 1991.  Located on sodium leases in Rio Blanco County,  Colorado,
the  facility  uses  proprietary   technology   involving  solution  mining  and
crystallization techniques to produce natural sodium bicarbonate.  The Bureau of
Land Management  approved in March 1996 a new mine plan that includes mine field
innovations  and allows for an extraction  level of sodium  bicarbonate  that is
five times higher than was previously allowed.

                                                       7


<PAGE>



       The Company's sodium  bicarbonate sales are targeted for all major sodium
bicarbonate segments. The Company's marketing strategy for sodium bicarbonate is
to: (i)  continue  sales for animal feed use through a  distributor  arrangement
with a recognized  leader in animal  nutrition  products;  (ii) develop specific
marketing  programs  for  industrial  segments  such as swimming  pool and water
treatment,  fire  extinguishers  and  paper  processing  through  the  Company's
existing  secondary   distribution  network  and  sales  force;  (iii)  continue
promotion of a natural,  high quality,  sodium  bicarbonate in food and consumer
segments  through the  Company's  sales force and become a recognized  leader in
distribution to the food industry; and (iv) utilize export logistical advantages
to supply  international  buyers.  Implementation  of this  strategy  has led to
continued sales growth in this segment in FY 1998. The Company believes that the
food processing and selected consumer  segments continue to offer  opportunities
for growth and improved margins.

Sodium Sulfate

       The  Company is the leading  domestic  producer  of  naturally  occurring
sodium sulfate which is used as an inactive  ingredient in dry detergents and as
a source of sulfur in pulp processing. Recent strong demand worldwide for sodium
sulfate,  particularly  from  detergent  manufacturers,  has resulted in Company
sales at  capacity  with  significant  margin  improvements.  Sodium  sulfate is
currently produced at Searles Valley.

Boron Chemicals

       Boron chemicals include boric acid,  several sodium borate products and a
number of related specialty compounds intended for specific applications.  Boron
compounds are used in a wide range of applications.  Approximately  60% of their
use is in glass and ceramic products to improve chemical and thermal  stability.
The remaining 40% is used in fire retardants, fertilizers, soaps, detergents and
pesticides.

       Boric acid is used primarily in the production of textile  fiberglass and
other  borosilicate  glasses where it improves strength and imparts chemical and
thermal  stability.  Sodium  borates  are used in a  broader  range of glass and
ceramic products to enhance manufacturing processes.  They also improve chemical
resistance and thermal stability in products such as frits, ceramics, fiberglass
insulation and specialty glasses such as Pyrex(R) and automobile headlights.

       According to industry data  published in 1997,  the Company is the second
largest  producer of boron  chemicals in the United States and the third largest
producer in the world after the U.K. based RTZ  Corporation  plc and the Turkish
state-owned producer, Etibank.

       Businesses/Customers. The Company sells boron chemicals both domestically
and abroad.  In FY 1998, a majority of sales were derived from domestic sales to
producers  of  textile  fiberglass,   porcelain  frits,  high  quality  glasses,
cellulose insulation and chemical distributors. The remaining FY 1998 sales were
derived from international sales, with western Europe and Japan representing the
Company's two largest sales areas.

       Sales and Marketing. The Company's sales of boric acid and sodium borates
are handled  domestically  through its own national sales staff  complemented by
approved local or regional chemical  distributors.  International sales are made
by both commissioned  agents and  distributors,  whose activities are managed by
the Company's marketing staff.

       Boric  acid  is  used  in  the  production  of  textile   fiberglass  and
borosilicate   glass  where  it  improves   tensile   strength   and   hardness,
respectively.  The Company has  traditionally  been a strong  competitor in this
market due to its product quality.  Specialty  products  marketed by the Company
include nuclear grade and high purity boric acid for laboratory chemicals, which
are  produced  at Societa  Chimica  Larderello  SpA  ("SCL").  SCL is an Italian
producer of specialty  boric acid  products and an affiliate of HCNA. In FY 1994
the Company  entered into an agreement to become the distributor of SCL products
to   the   U.S.    market.    See    "Certain    Relationships    and    Related
Transactions--Agreements with Affiliates."

       The Company's most important  sodium borate  products  include  anhydrous
borax,  decahydrate and pentahydrate  borax, which are used in the production of
frits,  ceramics and  borosilicate  glass where the borate  improves the thermal
resistance of the glass. Historically,  the Company's strategy has been to focus
on the sale of anhydrous borax. The Company continues to focus marketing efforts
to maintain a  leadership  position in this  segment and to  selectively  market
decahydrate and pentahydrate in niche segments.



                                                       8


<PAGE>



     Competition. The Company's principal competition comes from RTZ Corporation
plc,  which  is  the  world's  largest  boron  chemicals  producer  through  its
subsidiaries  U.S. Borax,  Borax  Consolidated  Ltd. (U.K.),  Borax Francais and
Borax Argentina.  Other worldwide  competitors are located in Turkey  (Etibank),
Chile, Russia and the Commonwealth of Independent States.

       Production Techniques and Facilities. Prior to April 1, 1996, the Company
produced  its boron  chemicals  at two  separate  facilities  located in Searles
Valley. Both plants utilized solution mining and chemical processing  techniques
to recover  borax  minerals  from the ore bodies and to refine them further into
finished products.

       At one site,  boric acid is produced by extracting crude borax from brine
through a proprietary solvent extraction process. After extraction, the solution
is  concentrated  in an  evaporator  and the  boric  acid is  recovered  through
crystallization.  At the other site,  sodium  borates were produced by a cooling
process in which  borax-enriched  brines  were cooled to  crystallize  a line of
sodium  borate  products.  Effective  April 1,  1996,  as part of the  strategic
capital  expenditure  program designed to lower the cost of soda ash production,
the Company enhanced its feedstock  process to improve sodium borate  production
consistency. This has resulted in a significant reduction in production costs.

       Control of Resources.  The Company  produces boric acid and sodium borate
by  processing  at its  California  plant  naturally  occurring  brines that the
Company  mines from its own  property as well as under  leases with the BLM. The
Company  believes that its supply of brine for the  production of boric acid and
sodium borate is adequate for the foreseeable future.

Specialty Potash Fertilizers

       Sulfate of potash ("SOP") is a specialty potash  fertilizer used for high
value crops such as fruits,  vegetables,  nuts and  tobacco.  The Company is the
leading  American  producer  of SOP.  The  Company  markets  SOP  products  both
domestically  and overseas.  The Company  offers several grades of SOP which are
designed to differentiate  the Company from its competitors,  as well as, better
serve the needs of its customers.

       Markets/Customers. The annual worldwide consumption of potash fertilizers
approaches 50 million tons. Muriate of potash ("MOP"), or potassium chloride, is
the most common  source of potassium and accounts for  approximately  92% of all
potash  consumed in fertilizer  production.  SOP  represents  about 6% of potash
consumption.  The  remaining 2% is supplied in the forms of potassium  magnesium
sulfate and potassium  nitrate.  All of these  products  contain  varying concen
trations  of  potassium   expressed  as  potassium  oxide  (K20)  and  different
combinations of co-nutrients.

       MOP is the  least  expensive  form  of  potash  fertilizer  based  on the
concentration  of K20. It is the preferred  potassium  source for most crops and
contains about 60% K20. However,  SOP is utilized by growers for some high-value
crops.

       Examples of crops where SOP is utilized include tobacco,  tea,  potatoes,
citrus  fruits,  grapes,  almonds,  some  vegetables  and on turfgrass  for golf
courses.  Approximately  50% of the  Company's  annual  SOP  sales  are  made to
domestic customers,  which include retail fertilizer dealers and distributors of
professional turf care products. These dealers and distributors combine or blend
SOP with other fertilizers and minerals to produce fertilizer blends tailored to
individual requirements.

       Approximately  69% of the world SOP production is located in Europe,  18%
in the United  States and the  remaining  13% in  various  countries.  The world
consumption of SOP totals about 3.5 million tons. Based on studies  conducted by
industry analysts,  the Company expects  consumption of SOP in Asia, the Pacific
Rim  countries  and Latin  America to grow  considerably  through the end of the
century.  This  anticipated  growth is a result of increased  production of high
value cash crops, for which SOP is a preferred potassium source. The Company has
focused on sales to Asia and Pacific Rim  countries  where its inland and marine
transportation costs are at or below competitors' costs.

       Sales and Marketing. The Company's domestic sales of SOP are concentrated
in the  western  states  of  California,  Oregon,  Washington  and Idaho and the
central,  tobacco belt area where the crops and soil  conditions  favor SOP. The
Company employs trained  agronomic  sales personnel and fertilizer  agents,  who
contact dealers and growers in the United States.




                                                       9


<PAGE>



       The Company's  strategy for  increasing SOP sales in the United States is
twofold.  First,  the Company is targeting  specific crops where the benefits of
using SOP versus other potassium sources are identified by research  consultants
in agricultural  testing  programs.  The Company  believes that these activities
have  encouraged  the  increased  use  of  SOP  on  potatoes,   vegetables,  and
professionally  managed  turf and golf  courses.  Second,  the Company  plans to
differentiate itself through unique products  specifically designed for targeted
end uses.  These SOP  products  vary in  particle  size and  product  quality to
provide marketing  strength in bulk fertilizer  blending programs where particle
sizing is  important,  as well as direct SOP  application  where  solubility  is
important.  In addition,  the Company  continues to test market unique SOP-based
products,  with  which the  Company  has  targeted  the  substantial  liquid and
suspension fertilizer markets previously served by non-SOP potassium sources.

       The Company generally exports SOP through major trading companies. Export
SOP sales volumes in FY 1998 were 49% of the Company's annual SOP sales.

       Competition.  The  Company's  major  competition  for SOP  sales in North
America  include  imports from large  European  producers,  other North American
producers and functional  products of other varieties,  such as MOP or Potassium
Nitrate. For exports into Asia, the Pacific Rim countries and Latin America, the
Company  competes with various  local  producers  and European  production.  The
European  producers,  the  largest in the world,  include  Kali und Salz,  A.G.,
Tessenderlo  Chemie  and Kemira Oy. A new  venture in Chile was  announced  with
annual SOP capacity of 250,000 tons. The new production began in May 1998 and it
is expected to sell product in North America, including the United States.

       Production Techniques and Facilities. Prior to April 1, 1996, the Company
produced  SOP at two  facilities.  The largest  facility is located on the Great
Salt Lake in Ogden  Utah  ("Ogden"),  while a smaller  50,000 ton  facility  was
located in Searles  Valley,  California.  During FY 1992 and FY 1993 the Company
invested  approximately  $13.0  million  at its  Ogden  facility  to  match  its
production of raw materials  from the  evaporation  ponds with its present plant
capacity  of  approximately  550,000  tons of SOP.  This  project  consisted  of
construction of a new 17,500 acre preconcentration pond and a 22 mile underwater
canal on the  bottom of the  Great  Salt  Lake.  The  preconcentration  pond and
related canal are operational and supplying  increasing levels of potassium each
year to the primary pond system,  resulting  in  increased  production.  Further
investment in the expansion was completed in FY 1998, which included investments
in cooling capacity and rail facilities at a construction cost of $4.4 million.

       In  April  1996,  the  Company  discontinued  production  of  SOP  at its
California  facility.  The  shutdown was an element of the  Company's  strategic
capital  expenditure  program to increase soda ash production,  reduce its boron
products  production cost and discontinue  production of its potash co-products.
Another element of this plan was the  discontinuance of 100,000 tons per year of
MOP production at Searles Valley. The Company plans to purchase its requirements
for MOP to serve  strategic  Western  United States  markets and has  negotiated
supply arrangements.

       Record levels of rain from 1982 to 1984 at Ogden,  and the resulting rise
in the level of the Great Salt Lake,  caused a breach in the dike  system at the
facilities in May 1984. A large portion of the evaporation pond area was flooded
and the pond floors dissolved. As a result, GSLMC was unable to produce SOP from
1984  through the  beginning of 1989.  Following  the flood,  $26.0  million was
invested to repair the pond system.  As part of this project the major perimeter
dikes were raised to a height three feet over the historic peak flood level. The
new dikes employ interior berms to increase their load bearing  capability,  and
utilize stronger building  materials which are designed to retard erosion due to
wave  action,  a  principal  cause of the 1984 dike  breach.  The dikes are also
designed such that they can be raised further without  weakening the foundation.
Also,  following the flood,  the State of Utah  constructed  and implemented the
West Desert  Pumping  Project  which could be utilized to lower the level of the
Great  Salt  Lake by up to twelve  inches  per year  thus  reducing  the risk of
flooding.  The Company  believes that the subsequent dike  improvements  and the
West Desert Pumping  Project have virtually  eliminated the likelihood of future
pond  flooding.   The  Company  maintains  both  property  damage  and  business
interruption insurance policies for this risk.

       Control of  Resources.  The  Company  obtains its SOP  minerals  from the
potassium  rich  brines  of the  Great  Salt  Lake in Utah.  Based on  estimated
deposits of potassium and the current forecast for production requirements,  the
Company believes it has adequate deposits for the foreseeable future.

Other Products

       The Company also produces several other products which are by-products of
the various manufacturing processes conducted by the Company.

                                                       10


<PAGE>



Seasonality and Backlogs

       Sales of salt for  highway  deicing  are  quite  seasonal,  and vary with
winter  conditions in areas where that product is used. In keeping with industry
practice,  ice control salt is stockpiled  both by the Company and its customers
in sufficient  quantities to meet  estimated  requirements  for the next season.
Sales of soda ash to the glass container  industry are somewhat seasonal because
sales of beverage  containers are stronger in the summer. SOP sales are seasonal
as most of the Company's  sales are made between  December and March in order to
meet the spring fertilizer season. Due to the nature of the Company's  business,
there are no  significant  backlogs.  For a further  discussion of the financial
effects of seasonality on the Company, see "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Seasonality.

Employees

       At the end of FY 1998  the  Company  had  approximately  2,200  full-time
employees,  of which approximately 800 are represented by unions.  Approximately
400  of  these  union  employees  had  their  collective  bargaining  agreements
renegotiated in April 1998 and agreements  covering an additional  approximately
200  employees  will expire  during the twelve  months  following  FY 1998.  The
Company considers its labor relations to be good.

SIFTO

       According  to industry  data  published  in 1995,  Sifto,  a wholly owned
subsidiary of NASC, is the fourth largest salt producer in North America.  Sifto
produced  approximately  6.0  million  tons of salt in FY 1998  compared  to 5.4
million tons in FY 1997.  Sifto sells salt to the full range of end-users in the
highway deicing, general trade and chemical segments.  Sifto's major business is
sales of salt for North American  highway  deicing use.  General trade products,
sold  predominantly in Canada under the Sifto brand name,  include table,  water
conditioning, livestock feed, and deicing salt.

       Highway  deicing salt is sold primarily  through a public tender process.
Sifto uses a computer-pricing  system to determine its bid prices. General trade
and chemical sales contracts are negotiated  privately.  Sifto  distributes salt
through an extensive network of warehouses and depots located within, or closely
linked to, all its key sales areas.

       Sifto  operates a  large-scale  underground  rock salt mine in  Goderich,
Ontario and evaporator  plants at Goderich,  Ontario,  Amherst,  Nova Scotia and
Unity,  Saskatchewan.  All  distribution  facilities are leased or operated on a
contract basis.
Sifto is managed  from the  Company's  headquarters  located in  Overland  Park,
Kansas.

Businesses

       Highway  Deicing  Segment.  Sifto's North American  highway deicing sales
were 47% of Sifto's total revenue in FY 1998. Sifto sells  approximately  60% of
its highway  deicing volume into the United States and 40% into Canada.  Sifto's
competitive  strengths are its efficient mining and distribution of rock salt in
large volumes at low cost, and the  well-located,  high-quality salt deposits in
its rock salt  mines.  The vast  majority of Sifto's  deicing  sales are made in
Canada and the northern United States, where winter weather is generally harsher
than in other parts of North America.

       General Trade Segment.  In FY 1998, the general trade segment contributed
44% of Sifto's total  revenue.  Sifto's direct general trade business is focused
in Canada, where it has established brand-name recognition.

       Chemical  Segment.  In FY 1998,  the chemical  segment  contributed 9% of
Sifto's total revenue.  Consumption of salt by the chemical  industry is largely
dependent on the demand for chlor-alkali  products,  especially chlorine gas and
caustic soda.

Production

       Sifto produces salt at four  locations.  Its rock salt mine is located in
Goderich, Ontario and is the largest rock salt mine in North America. Sifto uses
the bench mining method to extract salt. The Company  believes that the Goderich
mine  operating  cost  structure is among the lowest in the North  American salt
industry.

     Sifto's  evaporated  salt  plants are  located  in  Amherst,  Nova  Scotia,
Goderich,  Ontario and Unity,  Saskatchewan.  The Amherst  plant serves the east
coast of Canada and the United States. The Goderich plant serves Ontario, Quebec
and the  Great  Lakes  states.  The  Unity  plant  serves  western  Canada.  See
"Properties."

                                                       11


<PAGE>



Competition

       Sifto's  competition in the highway deicing  segment is principally  from
Morton and Cargill.  Morton competes with Sifto throughout  Canada,  principally
from its rock salt plant in Ojibway,  Ontario. Akzo competes with Sifto from its
mine located in Cleveland,  Ohio. In general trade,  Sifto competes with Windsor
Salt, the Canadian operation of Morton.

Environmental Matters

       As a producer and marketer of inorganic chemical products, the Company is
subject  to a myriad of  federal,  state,  provincial  and local  environmental,
health and safety laws in the United States and Canada. These standards regulate
the  management  and  handling  of raw  materials  and  products,  air and water
quality,   disposal  of  hazardous  and  solid  wastes,   and  post-mining  land
reclamation.   It  is  the  Company's  policy  to  comply  with  all  applicable
environmental,  health  and  safety  (EHS)  standards.  Through  its  active EHS
management  program,  the Company is confident that it  substantially  satisfies
these requirements.  Nevertheless,  there can be no assurance that unexpected or
additional costs, penalties, or liabilities will not be incurred.  Moreover, EHS
standards applicable to the Company's  operations,  and the industry in general,
continue to evolve.  Until  implementing  regulations  have been  finalized  and
definitive  regulatory  interpretations  have been  adopted,  it is difficult to
ascertain future compliance obligations or estimate future costs.

       The  Company  has  expended,  and  anticipates  that it will  continue to
expend, substantial resources, both financial and managerial, to comply with EHS
standards.  Based on current  information,  it is the opinion of management that
the ultimate liability arising from EHS matters, taking into account established
accruals,  should not have a material adverse effect on the Company's  financial
position.  However,  no  assurance  can be given  that  greater-than-anticipated
environmental expenditures will not be required in 1998 or in the future.



































                                                       12


<PAGE>



Item 2.    PROPERTIES

Facilities

The table below presents  certain  information  relating to facilities owned and
leased by the Company.

<TABLE>
<CAPTION>

Location                                  Description                                                         Status
<S>                                       <C>                                                                 <C>    
The Company:
Searles Valley, California ..........     Soda Ash, Boron Chemicals and Sodium Sulfate
                                          processing plant totaling 11,000 acres                              Owned
                                          24,000 acres of mineral leases                                      Leased
Ogden, Utah .........................     SOP Processing Plant totaling 35,000 square feet                    Owned
                                          Salt Plant totaling 95,000 square feet                              Owned
                                          Solar Ponding Operations located on 37,000 acres                    Leased
                                          Solar Ponding Operations located on 1,500 acres                     Owned
                                          117,000 acres of mineral leases                                     Leased
Cote Blanche, Louisiana .............     Rock Salt Production Facility totaling 11,000 square feet           Owned
                                          Rock Salt Mine totaling 200 acres of leased land                    Leased
                                          Various mineral leases                                              Leased
Lyons, Kansas .......................     Salt Evaporation Plant totaling 134,000 square feet located
                                             on 997 acres                                                     Owned
Hutchinson, Kansas ..................     Salt Evaporation Plant totaling 165,000 square feet located
                                             on 326 acres                                                     Owned
Chicago, Illinois ...................     Salt Packaging Facility totaling 20,000 square feet located
                                             on 12 acres                                                      Owned
New Johnsonville, Tennessee .........     Salt Processing Facility totaling 60,000 square feet on 2.5
                                             acres                                                            Leased
San Diego, California ...............     Shipping and Storage Facility totaling 24,000 square feet
                                             on 93,000 square feet of land                                    Owned
Boron, California ...................     Transloader Facility located on 75,000 square feet of land          Leased
Rifle, Colorado .....................     Sodium Bicarbonate Processing Plant totaling
                                             30,000 square feet                                               Owned
                                             8,200 acres of mineral leases                                    Leased
Sifto:
Goderich, Ontario ...................     Salt Evaporation Plant totaling 85,000 square feet located
                                             on 97 acres                                                      Owned
                                          Rock Salt Production Facility totaling
                                          250,000  square  feet                                               Leased
                                          Rock Salt Mine  totaling 50 acres of leased land                    Leased
Amherst, Nova Scotia ................     Salt Evaporation Plant totaling 90,000 square feet located
                                             on 249 acres                                                     Owned
                                          Various mineral leases                                              Leased
Unity, Saskatchewan .................     Salt Evaporation Plant totaling 94,000 square feet located
                                             on 484 acres                                                     Owned
                                          Various mineral leases                                              Leased
Montreal, Quebec ....................     Salt Packaging Facility totaling 18,000 square feet located
                                             on 4 acres                                                       Owned
</TABLE>


     In addition to the above  properties,  the Company  leases or owns numerous
warehouses and depots and various sales and administrative offices. It also owns
fresh and brackish water systems,  including  extensive  pipelines and wells, in
conjunction with the Mojave Desert plants in Searles Valley,  and track,  office
and service areas related to its two  short-line  common  carriers which connect
the Company facilities with commercial railroads. The Searles Valley facility is
supplied by two on-site power generation facilities which sell excess power to a
local  utility.  In July 1996,  NACC entered into an agreement  for the sale and
leaseback of one of these facilities (See Note 7 to the Financial Statements).



                                                       13


<PAGE>



Encumbrances

     The Argus plant,  which is part of the Searles Valley  property,  serves as
steam host for, and receives back-up power from, the on-site  cogeneration plant
owned by ACE Cogeneration  Company.  The Company's Searles Valley properties are
subject to a ground  lease and  various  easements  granted to ACE  Cogeneration
Company for its cogeneration  plant and related utility services,  parking lots,
access roads and similar requirements.

     Substantially all of the assets of Sifto, except trade accounts receivables
and product inventories, are pledged as security for the Sifto Notes.

Mineral Rights

     In connection  with its Searles Valley plants,  the Company holds 30 leases
from the BLM covering  approximately  24,000 acres of the dry lakebed of Searles
Lake.  The leases are  subject to a royalty fee and have terms of 10 or 20 years
with varying expiration dates and preferential rights for renewal.

     In connection with its Goderich,  Ontario plant,  Sifto holds three mineral
leases from the Ontario  Ministry  of  Northern  Development  and Mines for salt
deposits  located  under Lake Huron and one lease for  surface  rights  from the
Canada Department of Transport. Two of the mineral leases expire in 1999 and one
expires in 2003, but Sifto has an option to renew each of the leases for another
21-year  term. A rental  charge and royalty are paid to the Ontario  Ministry of
Northern  Development  and Mines for each ton of salt mined under the lake.  The
surface lease expires in 1998 but is renewable for an additional 21 years. Sifto
also holds a Mining  License of  Occupation  for salt  deposits  lying under the
Maitland  River in Ontario.  The license was issued in 1960 and does not have an
expiration date.

     In connection with its Cote Blanche,  Louisiana rock salt mine, the Company
holds a private lease for surface  facilities and an underlying  salt dome which
expires in 2060. A royalty is paid to the owners according to a formula based on
the tons of salt shipped and the selling  price of the salt for the  immediately
preceding calendar year.

     In connection with its Ogden plant, the Company holds 9 mineral leases from
the State of Utah. The leases continue in effect so long as salt is produced and
the State of Utah receives a minimum royalty and rent.

     In connection  with its Amherst,  Nova Scotia plant,  Sifto leases the salt
mineral  rights from the Province of Nova Scotia and pays a royalty for each ton
mined.  The  leases  expire in July  2003 and are  renewable  for an  additional
20-year period.

     In connection  with its Unity,  Saskatchewan  plant,  Sifto leases the salt
mineral rights from the Saskatchewan provincial government under a 21-year lease
which expires at the end of December 2009. This lease is renewable for a further
21-year  period.  These  mineral  rights are  subject to a royalty  for each ton
extracted and refined.

     In connection with its Rifle, Colorado plant, the Company holds four leases
from the BLM covering  approximately  8,200  acres.  The leases are subject to a
royalty  fee and have an  expiration  of July 1,  2001 with  successive  10 year
renewal options provided that sodium is being produced in paying quantities.

Railway Companies

     Trona Railway Company  ("TRC"),  a 31-mile common carrier which is a wholly
owned  subsidiary  of  the  Company,   provides  the  Company's  Searles  Valley
facilities  with rail access to  Southern  Pacific  Railroad's  track at Searles
Station, California,  approximately 30 miles from the Company's plants. The rail
cars and locomotives used by TRC are currently leased. The Hutchinson & Northern
Railway Company ("H&N"), a wholly owned subsidiary of the Company,  connects the
Company's  Hutchinson,  Kansas properties with the Santa Fe Railroad,  six miles
away.

North American Terminals, Inc.

     North American Terminals,  Inc. ("NATI"),  a wholly owned subsidiary of the
Company,  operates a bulk cargo  terminal at the Port of San Diego,  California,
from which  products  produced at the Company's  Searles  Valley  facilities are
exported. Its facilities consist of a transloader in Boron, California ("Boron")
and a bulk loading and storage facility in San Diego.  Products are shipped from
the  Searles  Valley  production  facility  via  truck to Boron  where  they are
transloaded  onto the Santa Fe Railroad and shipped to the port in San Diego. In
addition, products are shipped directly by the Southern Pacific Railroad

                                                       14


<PAGE>



from the Searles  Valley  facilities to the San Diego  terminal for export.  The
Company  formed NATI in order to reduce rail and loading  costs while  providing
soda ash, SOP and sodium sulfate storage  capacity.  Prior to December 31, 1997,
the San Diego port  facilities  were  leased.  On December  31, 1997 the Company
purchased the facilities and satisfied its lease for $9.5 million.

Searles Domestic Water Company

     In connection  with its  acquisition of the Searles Valley  facilities from
Kerr-McGee  Chemical   Corporation   ("KMCC"),   KMCC  transferred  all  of  the
outstanding  stock of Searles Domestic Water Company  ("SDWC"),  a water utility
serving a small  number of  residential  customers in Trona,  California  to the
Company.

Licenses, Trademarks and Patents

     The  Company has a  licensing  agreement  with  Culligan  International  to
package and sell water  conditioning  salt under the Culligan  brand name to all
classes of retail  trade.  The Company is currently  marketing the Culligan name
under the brand  "Care  Cubes."  This  product is  currently  available  in most
states. Sifto considers the "Sifto" trademark to be valuable because of its name
brand recognition.

     On March 28, 1989, a patent was granted to a predecessor of the Company for
a nacholite  solution  mining  process at its sodium  bicarbonate  operation  in
Rifle,  Colorado.  The Company believes it is the low cost domestic  producer of
sodium  bicarbonate  as a  result  of this  exclusive  right  to  practice  this
technology.


Item 3.           LEGAL PROCEEDINGS

General

     The Company is involved in legal and administrative  proceedings and claims
of various types from normal business activities.  While any litigation contains
an element of uncertainty,  management,  based upon the opinion of the Company's
counsel,  presently  believes that the outcome of each such  proceeding or claim
which is pending or known to be threatened,  or all of them  combined,  will not
have a  material  adverse  effect on the  Company's  results  of  operations  or
financial position.

Environmental Issues

     Air  Issues.  From  time to time,  the  Company  has  received  notices  of
violation  from the San  Bernardino  County Air Quality  Control  District  (the
"Local District"),  relating to the operation of equipment for which its Searles
Valley  facility has air permits.  In July 1992,  the  California  Air Resources
Board  ("CARB"),  which has  oversight  jurisdiction  over the  Local  District,
conducted  an  inspection  of the Searles  Valley  facility.  CARB  reported its
findings to the Local District and to the U.S.  Environmental  Protection Agency
("EPA")  and in 1994,  the EPA served the  Company  with a Finding and Notice of
Violation  ("NOV") issued  pursuant to the Clean Air Act. On April 26, 1997, the
United States  District Court for the Central  District of California  entered a
Consent Decree settling in full the NOV. The Consent Decree required the Company
to install pollution controls (selective catalytic reduction),  on a gas turbine
at the Company's  West End  facility,  to pay a civil penalty of $320,000 and to
spend $140,000 on a supplemental  environmental project to pave certain roads to
reduce dust  emissions.  The Company  completed the  requirements of the Consent
Decree during FY 1998.


 Item 4.          SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     Not Applicable.









                                                       15


<PAGE>



                                                       PART  II

Item 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
            MATTERS

     Not Applicable.


Item 6.    SELECTED  FINANCIAL DATA

     The following selected historical consolidated financial information should
be read in conjunction with the audited Consolidated Financial Statements of the
Company as of March 28, 1998 and March 29, 1997 and for the three  fiscal  years
ended March 28, 1998,  included in the financial  statement section of this Form
10-K.


<TABLE>
<CAPTION>
                                                          FY 1994        FY 1995         FY 1996         FY 1997          FY 1998
                                                        ------------   ------------    ------------    ------------    -------------
                                                                                  (Dollars in thousands)
                                                                     
<S>                                                     <C>            <C>             <C>             <C>             <C>
Statement of Operations Data:
  Net sales ........................................... $   427,588    $   435,864     $   475,474     $   508,622     $    494,153
  Cost of sales .......................................     325,690        331,949         351,040         374,137          350,146
                                                        ------------   ------------    ------------    ------------    -------------
    Gross profit ......................................     101,898        103,915         124,434         134,485          144,007
  Selling, general and administrative expenses ........      50,578         55,578          64,273          57,508           55,670
  Recapitalization expenses ...........................      68,753             --              --              --               --
  Asset impairment charge .............................          --             --           7,044              --               --
                                                        ------------   ------------    ------------    ------------    -------------
    Operating income (loss) ...........................     (17,433)        48,337          53,117          76,977           88,337
  Interest expense ....................................     (55,664)       (78,526)        (84,938)        (91,925)         (95,348)
  Foreign currency exchange gain (loss) ...............      (6,078)        (1,743)          2,039          (1,301)            (685)
  Other income ........................................       5,290          5,944           6,240           3,916            5,518
                                                        ------------   ------------    ------------    ------------    -------------
    Income (loss) before taxes and extraordinary item .     (73,885)       (25,988)        (23,542)        (12,333)          (2,178)
  Provision (benefit) for income taxes ................     (11,093)         5,308           5,200           9,100            6,639
                                                        ------------   ------------    ------------    ------------    -------------
    Income (loss) from continuing operations ..........     (62,792)       (31,296)        (28,742)        (21,433)          (8,817)
  Extraordinary items, net of taxes ...................     (71,371)            --              --              --           (2,500)
                                                        ------------   ------------    ------------    ------------    -------------
    Net income (loss) ................................. $  (134,163)   $   (31,296)    $   (28,742)    $   (21,433)    $    (11,317)
                                                        ============   ============    ============    ============    =============
Other Data:
  Operating income (loss) ............................. $   (17,433)   $    48,337     $    53,117     $    76,977     $     88,337
  Depreciation and amortization in operating income ...      49,097         53,295          56,930          54,496           57,558
  Capital additions (includes capital leases) .........      79,863         52,044          45,915          39,270           45,237

Net Sales by Product Line:
  Salt ................................................ $   199,345    $   191,917     $   224,500     $   235,899     $    216,443
  Soda products .......................................     100,160        103,247         115,978         119,800          126,341
  Boron chemicals .....................................      69,179         67,479          67,979          63,051           68,289
  Specialty potash fertilizers ........................      48,289         61,453          55,459          71,547           68,772
  Other ...............................................      10,615         11,768          11,558          18,325           14,308

Balance Sheet Data (end of period):
   Total assets ....................................... $   661,619    $   651,658     $   677,973     $   665,394     $    643,467
   Working capital (1) ................................     110,671         91,286         117,668         119,362          105,701
   Total debt .........................................     736,650        740,715         792,258         783,775          777,335
   Common stockholder's equity (deficit) ..............    (216,841)      (249,137)       (280,930)       (306,431)        (320,733)

</TABLE>


(1) Working capital represents current assets less current liabilities excluding
the current portion of long-term debt.

                                                       16


<PAGE>



Item 7.    MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OF  FINANCIAL CONDITION AND
             RESULTS  OF  OPERATIONS

     The  following  discussion  of the  results  of  operations  and  financial
condition should be read in conjunction with the Company's Financial  Statements
and related Notes thereto.

Introduction2

     The  Company  is a  major  producer  and  marketer  of  inorganic  chemical
products.  Its principal products include salt, sodium products  (including soda
ash,  sodium sulfate and sodium  bicarbonate),  boron  chemicals,  and specialty
potash  fertilizers.  The highway  deicing salt business is highly  dependent on
weather.  Consequently,  the extent of snowfall in the Company's primary deicing
markets in Canada and the Upper Midwest can result in  significant  fluctuations
in the  Company's  sales,  earnings  and  liquidity.  See Item 1 - Products  and
Seasonality for additional  discussion of the Company's products and the effects
of weather and seasonality on the Company's results of operations.

Results of Operations

     The following  table sets forth,  in both dollars and as percentages of net
sales, selected components of the consolidated  statements of operations as well
as net sales by product line,  for the fiscal years ended March 30, 1996,  March
29, 1997 and March 28, 1998.


<TABLE>
<CAPTION>
                                                       FY 1996                    FY 1997                    FY 1998
                                                 -----------------------    -----------------------     -----------------------
                                                                            (Dollars in thousands)
                                                                          
<S>                                              <C>             <C>        <C>             <C>         <C>             <C>  
Net sales .....................................  $     475,474    100.0%    $     508,622    100.0%     $     494,153    100.0%
Cost of sales .................................        351,040     73.8           374,137     73.6            350,146     70.9
                                                 --------------  --------   --------------  --------    --------------  --------
   Gross profit ...............................        124,434     26.2           134,485     26.4            144,007     29.1
Selling, general and administrative expenses ..         64,273     13.5            57,508     11.3             55,670     11.2
Asset impairment charge .......................          7,044      1.5                --      0.0                 --      0.0
                                                 --------------  --------   --------------  --------    --------------  -------- 
   Operating income ...........................         53,117     11.2            76,977     15.1             88,337     17.9
Interest expense ..............................        (84,938)   (17.9)          (91,925)   (18.1)           (95,348)   (19.3)
Foreign currency exchange gain (loss) .........          2,039      0.4            (1,301)    (0.3)              (685)    (0.1)
Other income ..................................          6,240      1.3             3,916      0.8              5,518      1.1
                                                 --------------  --------   --------------  --------    --------------  -------- 
   Income (loss) before taxes and
   extraordinary item .........................        (23,542)    (5.0)          (12,333)    (2.5)            (2,178)    (0.4)
Provision for income taxes ....................          5,200      1.0             9,100      1.7              6,639      1.4
                                                 --------------  --------   --------------  --------    --------------  -------- 
  Income (loss) before extraordinary item .....        (28,742)    (6.0)          (21,433)    (4.2)            (8,817)    (1.8)
Extraordinary item ............................             --      0.0                --      0.0             (2,500)    (0.5)
                                                 --------------  --------   --------------  --------    --------------  -------- 
      Net income (loss) .......................  $     (28,742)    (6.0)%   $     (21,433)    (4.2)%    $     (11,317)    (2.3)%  
                                                 ==============  ========   ==============  ========    ==============  ========
Net sales by product line:
   Salt .......................................  $     224,500     47.2%    $     235,899     46.4%     $     216,443     43.8%
   Soda products ..............................        115,978     24.4           119,800     23.6            126,341     25.6
   Boron chemicals ............................         67,979     14.3            63,051     12.4             68,289     13.8
   Specialty potash fertilizers ...............         55,459     11.7            71,547     14.1             68,772     13.9
   Other ......................................         11,558      2.4            18,325      3.5             14,308      2.9
                                                 --------------  --------   --------------  --------    --------------  --------  
      Total ...................................  $     475,474    100.0%    $     508,622    100.0%     $     494,153    100.0%
                                                 ==============  ========   ==============  ========    ==============  ========
</TABLE>
--------
     2Parenthetical  references herein to a "Note" followed by a number refer to
the notes accompanying the consolidated financial statements.

                                       17

<PAGE>

FY 1998 Compared With FY 1997

   Net sales for FY 1998 were $494.2  million  compared to $508.6 million for FY
1997.

   Salt sales  decreased  $19.5 million for FY 1998 versus FY 1997.  The highway
deicing and chemicals  segment sold 8% fewer tons than in the prior year period,
due to a less favorable winter season in FY 98 compared to above average deicing
weather  conditions  in the FY 97 winter  season.  Additionally,  general  trade
segment sales  declined by $12.0  million,  compared to prior year, due to a 15%
decline in volumes resulting from the introduction of the exclusive  distributor
program.

   Net  sales  from  soda  products   (soda  ash,   sodium  sulfate  and  sodium
bicarbonate)  increased $6.5 million, or 5% versus FY 1997. Most of the increase
was due to  increases  of $3.3 million and $3.0 million in the sales of soda ash
and sodium sulfate, respectively. The soda ash increase was due to a 6% increase
in the  volumes  sold  partially  offset by lower  prices.  The  sodium  sulfate
increase  was due to both a 16%  increase  in the  average  sales price and a 3%
increase in volumes  sold.  Sodium  sulfate,  which is used as an  ingredient in
detergents, among other things, experienced a price increase late in FY 1997 due
to strong demand for this product.  Both soda ash and sodium sulfate,  which are
produced at the Searles Valley facility, benefited from the greater availability
of these  products,  resulting  from higher  production.  The higher  production
reflects the first full year of production  following the completion of the Long
Range Process Plan.  Sales of sodium  bicarbonate in FY 1998 were  substantially
unchanged from the prior year period.

   Boron products' net sales were up $5.2 million,  or 8%, in the FY 1998 period
compared to FY 1997.  The primary  reason for the higher sales was a 7% increase
in sales volumes  during the FY 1998 period.  The boron  products which are also
produced  at  Searles  Valley  benefited  from the same  full  year of  expanded
production from the Long Range Process Plan.

   Specialty potash  fertilizer net sales were down $2.8 million,  or 4%, for FY
1998 versus FY 1997,  due to a 12% decline in volumes  sold.  This was partially
offset by a 9% increase in the average  sales price.  The decline in volumes was
primarily  due to the  depletion  of the  remaining  inventory  from the Searles
Valley  facilities in California.  Production of the specialty potash fertilizer
was terminated in Searles Valley upon completion of the Long Range Process Plan.

   Other sales  declined by $4.0 million in FY 1998 versus FY 1997.  Other sales
include  magnesium  chloride,  crude  trona and the  revenues  of other  service
subsidiaries  of the  Company.  Approximately  $1.5  million of the  decline was
related to sales of magnesium chloride used in deicing.

   Cost of sales as a percentage of net sales in FY 1998 was 71% compared to 74%
in FY 1997. The  improvement in the gross margin  percentage from the prior year
period  is  attributable  to  continued  efficiencies  being  gained in the soda
products  and  boron  businesses  from  the  implementation  of  cost  reduction
strategies  and the positive  impact of capital  projects which have resulted in
higher  levels of production at lower  average  costs.  Additionally,  the gross
margin  percentage  in the  general  trade  salt  segment  increased  due to the
implementation of an exclusive distributor program. These factors were partially
offset by higher raw material costs in the specialty potash fertilizer  business
resulting from last year's poor summer solar evaporation season.

   Selling,  general and administrative expenses for FY 1998 were $55.7 million,
or 11.3% of net sales,  down from $57.5 million,  also 11.3% of net sales in the
previous year. The decline in selling,  general and  administrative  expenses is
primarily  due to a  decline  in  salaries  and  benefits  costs  for the  year,
partially offset by an increase in professional fees which occurred early in the
fiscal year.

   Interest  expense was $3.4 million higher in FY 1998 compared to FY 1997. The
increase was due to higher  interest  costs for the Argus  utilities  debt which
originated in the second quarter of FY 1997,  lower  capitalized  interest,  and
$1.5 million of accreted  interest on the San Diego Terminal lease obligation in
FY 1998 (see Note 10).

    The  exchange  loss,  relating  to  the  translation  of the  United  States
dollar-denominated debt of Sifto into Canadian dollars, declined by $0.6 million
in FY 1998 compared to FY 1997. No other  significant  exchange  gains or losses
were recorded during the year.

    Other  income was $1.6 million  higher in FY 1998 than in FY 1997  primarily
due to the second  quarter  sale of land near the  Searles  Valley  facility  in
California for a gain of $0.8 million.  Other  miscellaneous  expenses were also
lower in FY 1998.


                                       18


<PAGE>



    A  provision  for  income  taxes of $6.6  million  was  recorded  in FY 1998
relating to Sifto's  Canadian  income taxes,  Ontario mining taxes,  and current
state income  taxes.  Lower income in Canada in FY 1998  resulted in a lower tax
provision in FY 1998 than in FY 1997.  Income tax benefits  associated  with the
U.S. FY 1998 loss have not been  recognized as future  realization  is uncertain
(see Note 5).

    The extraordinary  loss is due to the early  extinguishment of the San Diego
Terminal lease  obligation (see Note 10). On December 31, 1997, the Company paid
$9.5 million to the lessor in satisfaction  of its  obligations  under the lease
agreement, resulting in a $2.5 million loss to the Company.

FY 1997 Compared with FY 1996

    Net sales for FY 1997 were $508.6 million  compared to $475.5 million for FY
1996.

    Salt sales  increased  $11.4  million for FY 1997 versus FY 1996  because of
greater volumes partially offset by unfavorable  price/mix variances compared to
the prior year.  Total  volumes were up 9% compared to the prior year because of
an increase in highway deicing tons, partly offset by lower chemical and general
trade volumes. The increased highway deicing tons sold were the result of record
production  combined with  increased  sales  resulting  from heavy  snowfalls in
Canada and the Upper Midwest,  the Company's  primary highway  deicing  markets.
Highway  deicing sales  experienced  slight price  declines due to mix offset by
favorable price/mix variances in chemical and general trade salt.

    FY 1997 soda  products  (soda ash,  sodium  sulfate and sodium  bicarbonate)
sales increased $3.8 million or 3% versus FY 1996. Soda ash volumes decreased 2%
compared to the prior year and average  sales prices per ton  increased  3%. Net
unfavorable soda ash volume variances were due to decreased sales volume in both
domestic and non-ANSAC export markets partially offset by increased sales volume
in the ANSAC market.  Domestic soda ash pricing was higher than in FY 1996 while
export and ANSAC pricing was slightly  lower than in FY 1996  resulting in a net
favorable price  variance.  Domestic demand in FY 1997 was impacted by a decline
in caustic soda pricing,  a drop of 7% in demand for container glass and a delay
in the start-up of a major soda ash consumption project at Du Pont, coupled with
a capacity  expansion by another soda ash  manufacturer.  Sodium sulfate volumes
were down 28%  partially  offset by an increase  in prices and a more  favorable
mix. As a result of production volume  constraints for sodium sulfate related to
the  start up of the Long  Range  Process  Plan  ("LRPP")  project  and  reduced
inventory  carryover from FY 1996, the Company  selectively reduced sales to its
lower margin markets and improved  overall  pricing.  Sodium  bicarbonate  sales
increased 59% over the prior year. Increased production at the White River plant
allowed the Company to  increase  sales  volumes by 47%.  Average  sales  prices
increased 8% compared to the prior year because of increased sales to the higher
margin food and chemical processing segments.

    In the  aggregate,  boron chemical sales were $4.9 million lower for FY 1997
compared to FY 1996. The unfavorable  variance is due to net unfavorable  volume
variances partially offset by net favorable price variances and improved product
mix. The unfavorable  volume variances result from a shortfall in the production
of crude borax during the start up phase of the LRPP project.

    The Company's  specialty potash  fertilizer sales in FY 1997 increased $16.1
million or 29% compared by FY 1996.  Volumes were up 28% and average pricing was
up 1% compared to FY 1996.  The  increased  volumes  were due to greater  export
shipments in FY 1997 compared to FY 1996.

    Other sales increased by $6.8 million in FY 1997 versus FY 1996. Other sales
include  magnesium  chloride,  crude  trona and the  revenues  of other  service
subsidiaries  of the Company.  Approximately  $4.4 million of the increase in FY
1997 versus FY 1996 was related to magnesium chloride sales.

    Cost of sales were $374.1  million or 73.6% of sales in FY 1997  compared to
$351.0 million or 73.8% of sales in FY 1996. The $23.1 million  increase in cost
of sales was  primarily  due to increased  sales  volumes in salt and  specialty
potash fertilizer products.  The slight decline in cost of sales as a percentage
of sales was largely due to price  improvements in sodium and boron products and
reduced  production  costs as a result of increased  production  volumes of rock
salt and soda ash partially  offset by decreased  production  of boron  chemical
products and sodium sulfate.

    Selling,  general and administrative expenses were $57.5 million or 11.3% of
sales in FY 1997  compared  to $64.3  million or 13.5% of sales in FY 1996.  The
decrease was due principally to lower incentive compensation,  payroll,  selling
expenses and professional fees.

                                       19


<PAGE>



    The  asset  impairment  charge  of $7.0  million  in FY 1996 was a  non-cash
write-down  arising  out of the shut down in March  1996 of the  Company's  Main
Plant Cycle at the Searles  Valley  plant in  California.  The shut down was the
result of the implementation of the strategic LRPP at the Searles Valley plant.

    Interest expense was $7.0 million higher in FY 1997 compared to FY 1996. The
increase was due to higher average  long-term debt balances in FY 1997 versus FY
1996,  higher interest costs recorded for the Argus Utilities  transaction  (see
Note 7) and interest  capitalized on  construction in process being $3.0 million
lower in FY 1997 compared to FY 1996.

    An exchange loss of $1.3 million  related to the translation of United Sates
dollar-denominated  debt of Sifto into Canadian  dollars was recorded in FY 1997
compared to a gain of $2.0 million in FY 1996.

    Other income  principally  consists of ground lease and maintenance  income,
gains and losses on  disposals of property,  plant and  equipment  and equity in
earnings on investments. Other income was $2.3 million lower in FY 1997 compared
to FY 1996. The decrease was due to $0.8 million higher losses on disposition of
assets in FY 1997  compared  to FY 1996 and an equity  loss of $0.4  million  on
investments in FY 1997 compared to equity income of $0.5 million in FY 1996.

    A  provision  for  income  taxes of $9.1  million  was  recorded  in FY 1997
primarily relating to Sifto's Canadian income tax, Ontario mining taxes, current
U.S. alternative minimum tax and state income taxes. Greater income in Canada in
FY 1997  utilized all of the  Canadian  net  operating  loss  carryforwards  and
resulted in a higher tax  provision  in FY 1997. A $5.2  million  provision  for
income taxes was recorded in FY 1996.  Income tax benefits  associated  with the
U.S. FY 1997 loss have not been  recognized as future  realization  is uncertain
(see Note 5).

Liquidity, Capital Resources and Financial Condition

Seasonality and Cash Flows

    The Company's combined accounts  receivable and inventory levels have varied
by as much as $60 million during a fiscal year. Generally, during the second and
third  fiscal  quarters  highway  deicing  salt  inventories  are  increased  in
preparation  for the winter  season.  The  harvesting  of the solar ponds at the
Ogden  facility  also takes place in the third  quarter  adding to the inventory
levels.  Inventories  begin to decline in the fourth  fiscal  quarter.  Accounts
receivable  increase during the third and fourth fiscal quarters as highway salt
sales and  specialty  potash  fertilizer  sales peak  during this  period.  Cash
requirements  rapidly  decline near the end of the fourth fiscal quarter and the
early part of the next fiscal year first fiscal  quarter as accounts  receivable
are converted into cash. Sales of soda products and boron chemicals are, for the
most part, not as cyclical.

    Cash  provided by  operating  activities  increased  $22.9  million to $61.2
million in FY 1998 compared to FY 1997,  primarily because of an increase in net
income before extraordinary loss.  Receivables  generated $11.2 million of funds
in FY 1998,  compared to a use of funds of $8.5 million and $17.8  million in FY
1997 and FY 1996,  respectively.  The increase in cash provided from receivables
is due to the collection of  receivables  associated  with the  relatively  high
sales of salt in the  fourth  quarter  of FY 1997  caused  by a  severe  winter.
Offsetting this cash inflow was a build-up of inventories  during FY 1998 due to
lower sales of salt and a more depleted level of inventory  opening the year due
to the high FY 1997 fourth quarter sales.  Accounts payable and accrued expenses
provided $11.8 million more cash in FY 1998 than in prior year due to the timing
of payments.

    FY 1998 investing activities used $38.3 million of cash compared to a use of
$33.3 million in FY 1997 and $47.1 million in FY 1996. The change in use of cash
from  investing  activities is primarily  due to the change in capital  spending
from year to year. The decline in expenditures from FY 1996 is primarily related
to the Long Range Process Plan at Searles Valley, a multi-year project which was
substantially completed in FY 1996.

    FY 1998 financing activities used $20.0 million of cash compared to a source
of cash in FY 1997 and FY 1996 of $3.1 million and $16.2 million,  respectively.
During FY 1998, the capital lease  obligation  related to the San Diego Terminal
was  extinguished,  resulting in a $9.5 million cash payment to the lessors (see
Note 10). Net revolver  payments or borrowings  fluctuate based on cash provided
from  operations,  cash used in  investing  activities,  principal  payments  on
long-term  debt and  proceeds  from the issuance of new debt.  As a result,  net
revolver  borrowings  were $3.0  million  in FY 1998  compared  to net  revolver
payments  of $79.0  million  in FY 1997  and net  revolver  borrowings  of $32.0
million in FY 1996.  The net  payments  in FY 1997 were the result of a sale and
leaseback  transaction.  In FY 1997, the Company issued $75.0 million in debt by
entering  into an agreement  for the sale and leaseback of an electric and steam
generating facility associated with

                                       20


<PAGE>



the Searles  Valley soda ash  facilities  (see Note 7). Also in FY 1997, a steam
provider  prepaid $23.2 million for contractual  amounts due to the Company over
an 18 year  period.  The  prepayment  was  recorded  as  deferred  revenue to be
amortized over the remaining life of the contract. The FY 1997 proceeds from the
sale and leaseback and prepayment  transactions were used to pay down borrowings
under the Company's revolving lines of credit.

Long-term Debt and Liquidity

    At March 28, 1998,  the Company had $100 million of 8.5% Senior Notes,  $250
million of 10.25%  Senior  Notes and $335 million of Senior  Subordinated  Notes
(collectively,  "Notes"). The Notes require that Harris or Sifto, as applicable,
offer to  purchase  all of the  outstanding  Notes  for 101% of their  principal
amount plus accrued  interest  ("Offer to Purchase")  within 60 days following a
change of control of Harris or HCG. The  consummation of the Merger (see Note 1)
on April 1, 1998, resulted in a change of control transaction, as defined by the
Notes.  Both Harris and Sifto made the Offer to Purchase on May 28, 1998,  which
will be outstanding  until June 29, 1998,  unless extended.  Because the Company
and IMC intend to finance any repayments of principal with long-term borrowings,
the Notes are  classified  as long-term  debt in the  accompanying  Consolidated
Balance Sheets.

    At March 28, 1998,  the Company had a $130 million  revolving line of credit
("US  Credit  Facility")  with  a  group  of  lenders  for  three  of  its  U.S.
subsidiaries  (NACC, NAMSCO and GSL). At March 28, 1998, the aggregate principal
amount  outstanding  under the US Credit Facility was $3 million.  The US Credit
Facility  is  guaranteed  by the Company  and each of the  Company's  other U.S.
subsidiaries,  and is  secured  by the trade  accounts  receivable  and  product
inventories of NACC,  NAMSCO and GSL. The US Credit  Facility  terminates on the
earlier of  February  28, 2002 or February  15, 2001 if any  Discount  Notes are
outstanding as of such date. The US Credit Facility accrues interest, at Harris'
option,  at  either a  defined  US Base Rate  plus  1.50% or LIBOR  plus  2.75%.
Commitment  fees of  0.375%  per year of the  unused  portion  of the US  Credit
Facility are payable  quarterly.  Simultaneously  with the  consummation  of the
Merger (see Note 1), the lenders  under the US Credit  Facility  assigned all of
their  rights and  interest  under the US Credit  Facility to IMC.  Prior to its
assumption  by IMC and  amendment,  the US Credit  Facility and the Sifto Credit
Facility  required the Company to maintain  certain minimum  interest  coverage,
fixed charge and net funded debt coverage  ratios.  The Company  modified its US
Credit Facility in May 1998 to delete or change certain  covenant  requirements.
Borrowing  availability  for the Company is determined based on a borrowing base
calculation.

    At March 28, 1998, Sifto had a $20 million  revolving line of credit ("Sifto
Credit  Facility")  with a group of Canadian banks which would  terminate on the
earlier of  February  28, 2002 or February  15, 2001 if any  Discount  Notes are
outstanding  on such  date.  At  March  28,  1998,  there  were  no  outstanding
borrowings under the Sifto Credit Facility. The Sifto Credit Facility is secured
by the trade accounts  receivable  and product  inventories of Sifto and accrues
interest,  at Sifto's option, at either a defined Canadian Base Rate plus 1.50%,
or a defined Bankers Acceptance Loan Rate plus 2.75%.  Commitment fees of 0.375%
per  year of the  unused  portion  of the  Sifto  Credit  Facility  are  payable
quarterly.  Sifto terminated the Sifto Credit Facility  simultaneously  with the
consummation of the Merger (see Note 1).

    As of March 28, 1998,  the Company had $72.7 million of available  borrowing
capacity  under its  revolving  lines of credit and $18.1  million  of cash.  No
significant long term debt payments are due until FY 2001. Capital  expenditures
for the next twelve months are estimated to be  approximately  $34 million.  The
Company's  new  parent,  IMC (see  Note 1),  is  currently  evaluating  the debt
structure  of Harris and is  considering  various  options  available to it. The
Company  believes  that  cash  generated  from  operations  along  with  capital
contributions  from  IMC will be  adequate  to meet  the  Company's  anticipated
working  capital  needs  during  the  next  twelve  months,  including  any cash
requirements necessary as a result of the Offer to Purchase.

Impact of Year 2000

    The Year 2000 is not  expected  to have a material  impact on the  Company's
information systems.  Significant  applications currently in use are either Year
2000  compliant  or are being  modified to be Year 2000  compliant.  The cost of
these  modifications  has  not  been  material.  The  Company  has a plan in the
remainder  of 1998 and 1999 to  modify  and test  any  additional  hardware  and
software for  compatibility  with the Year 2000.  These additional costs are not
expected to be material.  The impact of the Year 2000 on the Company's customers
and vendors is not known.

    In addition, the Company is starting the process of assessing the effect the
Year 2000 will have on its operations. An assessment will be made and conversion
plan developed to have all modifications implemented and operational by year-end
1999.  The cost of this project is yet  undetermined,  but is not expected to be
material to the Company.

                                       21


<PAGE>



Impact of Inflation

    Inflation  has not had a  significant  impact  on the  Company's  operations
during the three fiscal years ended March 28, 1998.

Environmental Matters

    Due to the nature of the Company's  business,  it must  continually  monitor
compliance with all applicable environmental laws and regulations.  At March 28,
1998,  the Company had  recorded  $3.8 million of current  liabilities  and $6.9
million  of  non-current  liabilities  to reflect  the  estimated  future  costs
associated with environmental matters.  Environmental costs, other than those of
a capital nature,  are accrued at the time the exposure  becomes known and costs
can reasonably be estimated.  Management  believes that the outcome of presently
known environmental contingencies will not have a material adverse effect on the
operations, financial condition or liquidity of the Company.

    Amounts expensed for environmental  costs were $1.9 million in FY 1998, $1.6
million in FY 1997 and $1.8 million in FY 1996.

Recently Issued Accounting Standards

    In June 1997,  Statement of Financial  Accounting Standard ("SFAS") No. 130,
"Reporting   Comprehensive   Income"  was  issued.  This  statement  established
standards of reporting and display of comprehensive income and its components in
a full set of general purpose financial statements.  Also in June 1997, SFAS No.
131,  "Disclosures about Segments of an Enterprise and Related  Information" was
issued. This standard establishes standards of reporting and displaying segments
of a  business  by  requiring  segments  to  be  disclosed  in  accordance  with
management's  criteria for reviewing  operating  performance.  In February 1998,
SFAS No. 132, "Employers'  Disclosures about Pensions and Other  Post-retirement
Benefits" was issued.  These statements  established  standards of reporting and
displaying  information  about  pension  plans and other  benefit  plans.  These
statements  will be effective for the Company's  next audited  reporting  period
ending  December  31,  1998  (see the  discussion  regarding  the  change in the
Company's  fiscal  year  end in Note 1) and  require  comparative  prior  period
presentation.  Adoption of these  statements  is not  expected to  significantly
alter the Company's financial statement presentation.

Seasonality and Quarterly Financial Data (Unaudited)

    The Company  experiences a substantial amount of seasonality in sales of the
various products. The result of this seasonality is that net sales and operating
income are generally higher in the third and fourth fiscal quarters and lower in
the first and second fiscal quarters of each fiscal year.

    Sales of highway deicing salt in particular, are seasonal in nature, varying
with the  winter  conditions  in areas  where  the  product  is used.  Following
industry practice, the Company and its customers stockpile sufficient quantities
of ice  control  salt in the  first  three  fiscal  quarters  to meet  estimated
requirements  for the  winter  season.  Soda ash  sales to the  glass  container
industry  tend  to be  somewhat  seasonal  due to  stronger  summer  demand  for
beverages  packaged in glass  bottles.  Most of the Company's  specialty  potash
sales are made between  December and March in order to meet the spring  planting
season requirements.















                                       22


<PAGE>



    The table below reflects the seasonality of the Company's business by fiscal
quarter.


<TABLE>
<CAPTION>
                                                  Fiscal 1997                                             Fiscal 1998
                                 ------------------------------------------------  -------------------------------------------------
                                   1st          2nd          3rd          4th         1st          2nd         3rd           4th
                                   ---          ---          ---          ---         ---          ---         ---           ---
                                                                            (in thousands)
<S>                               <C>         <C>          <C>          <C>         <C>          <C>         <C>           <C>
Operating Data:
   Net sales .................... $99,581     $92,337      $151,068     $165,636    $93,199      $94,907     $146,214      $159,833
   Gross profit .................  18,103      17,854        46,715       51,813     17,192       22,923       50,254        53,638
   Operating income (loss) ......   4,138       4,841        32,217       35,781      1,685        9,672       36,238        40,742
   Interest expense .............  20,533      22,293        24,485       24,614     23,660       24,109       24,456        23,123
   Net income (loss) ............ (15,092)    (17,589)        5,763        5,485    (20,245)     (13,557)       8,230        14,255
Sales by Product:
   Salt .........................  35,287      35,141        72,124       93,347     31,021       33,965       73,737        77,720
   Soda products ................  31,186      28,302        31,179       29,133     31,333       30,200       34,430        30,378
   Boron chemicals ..............  17,214      14,743        14,417       16,677     16,109       17,505       17,313        17,362
   Specialty potash fertilizers .  12,465      11,068        23,484       24,530     11,587       10,053       16,086        31,046
   Other ........................   3,429       3,083         9,864        1,949      3,149        3,184        4,648         3,327
</TABLE>









































                                       23


<PAGE>



Item 8.    FINANCIAL  STATEMENTS

Index

<TABLE>
<CAPTION>

Description                                                                                      Page #

   <S>                                                                                            <C>
   Report of Coopers & Lybrand L.L.P., Independent Accountants                                    25

   Consolidated Balance Sheets as of March 29, 1997 and March 28, 1998                            26

   Consolidated Statements of Operations for the three fiscal years ended March 28, 1998          27

   Consolidated Statements of Common Stockholder's Equity (Deficit) for the three fiscal
   years ended March 28, 1998                                                                     28

   Consolidated Statements of Cash Flows for the three fiscal years ended March 28, 1998          29

   Notes to Consolidated Financial Statements                                                     31
</TABLE>



                                       24


<PAGE>



REPORT  OF  COOPERS  &  LYBRAND  L.L.P.  INDEPENDENT  ACCOUNTANTS


       To the Board of Directors of Harris Chemical North America, Inc. and
           Subsidiaries

       We have audited the consolidated  financial statements of Harris Chemical
North America, Inc. and Subsidiaries listed in the index on page 56 of this Form
10-K.  These  financial  statements  are  the  responsibility  of the  Company's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements based on our audits.

       We conducted our audits in accordance  with generally  accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

       In our  opinion,  the  financial  statements  referred  to above  present
fairly, in all material respects,  the consolidated financial position of Harris
Chemical North America, Inc. and Subsidiaries as of March 28, 1998 and March 29,
1997 and the  consolidated  results of their operations and their cash flows for
each of the three fiscal years in the period ended March 28, 1998, in conformity
with generally accepted accounting principles.






                                                   /s/  Coopers & Lybrand L.L.P.
Kansas City, Missouri                               COOPERS & LYBRAND L.L.P.
May 22, 1998





























                                       25


<PAGE>



<TABLE>
<CAPTION>
                                 HARRIS CHEMICAL NORTH AMERICA, INC. AND SUBSIDIARIES
                                              CONSOLIDATED BALANCE SHEETS
                                        as of March 29, 1997 and March 28, 1998
                                                    (in thousands)


                                                                               March 29,                  March 28,
                                                                                 1997                       1998
                                                                           -----------------           ---------------
<S>                                                                            <C>                       <C> 
                                          ASSETS
Current assets:
  Cash and cash equivalents .............................................      $   17,076                $   18,088
  Trade accounts receivable, less allowance for doubtful
       accounts of $1,716 at March 29, 1997 and $1,772
       at March 28, 1998 ................................................         117,726                   101,440
  Other receivables .....................................................           9,916                    14,986
  Inventories ...........................................................          86,818                    97,017
  Deferred income taxes .................................................           6,019                     4,092
  Other .................................................................           6,938                     5,367
                                                                               ------------              ------------ 
      Total current assets ..............................................         244,493                   240,990

Property, plant and equipment, net ......................................         388,011                   374,916
Deferred financing costs, net ...........................................          25,553                    21,125
Other ...................................................................           7,337                     6,436
                                                                               ------------              ------------ 
      Total assets ......................................................      $  665,394                $  643,467
                                                                               ============              ============
            LIABILITIES AND STOCKHOLDER'S DEFICIT
Current liabilities:
  Current portion of long-term debt .....................................      $    9,403                $   10,674
  Accounts payable ......................................................          59,526                    70,069
  Accrued expenses ......................................................          25,259                    21,702
  Accrued interest ......................................................          23,250                    23,700
  Accrued salaries and wages ............................................          14,613                    16,963
  Income taxes payable ..................................................           2,483                     2,855
                                                                               ------------              ------------           
      Total current liabilities .........................................         134,534                   145,963

Long-term debt, net of current portion ..................................         774,372                   766,661
Deferred income taxes ...................................................          26,417                    24,393
Other noncurrent liabilities ............................................          36,502                    27,183
Commitments and contingencies
Common stockholder's deficit:
  Common stock, at par ..................................................              --                        --
  Additional paid-in capital ............................................          99,941                    97,341
  Cumulative translation adjustment .....................................          (3,532)                   (3,700)
  Common stockholder's receivable .......................................          (3,462)                   (3,679)
  Accumulated deficit ...................................................        (399,378)                 (410,695)
                                                                               ------------              ------------
      Total common stockholder's deficit ................................        (306,431)                 (320,733)
                                                                               ------------              ------------ 
      Total liabilities and stockholder's deficit .......................      $  665,394                $  643,467
                                                                               ============              ============
</TABLE>




    The accompanying notes are an integral part of the financial statements.


                                       26


<PAGE>



<TABLE>
<CAPTION>
                                 HARRIS CHEMICAL NORTH AMERICA, INC. AND SUBSIDIARIES
                                         CONSOLIDATED STATEMENTS OF OPERATIONS
                                    for the three fiscal years ended March 28, 1998
                                                    (in thousands)








                                                                      FY 1996                   FY 1997                  FY 1998
                                                                  ---------------           --------------           ---------------
<S>                                                               <C>                       <C>                      <C>
Net sales ....................................................    $    475,474              $   508,622              $    494,153
Cost of sales ................................................         351,040                  374,137                   350,146
                                                                  ---------------           --------------           ---------------
   Gross profit ..............................................         124,434                  134,485                   144,007

Selling, general and administrative expenses .................          64,273                   57,508                    55,670
Asset impairment charge ......................................           7,044                       --                        --
                                                                  ---------------           --------------           ---------------
   Operating income ..........................................          53,117                   76,977                    88,337

Other income (expense):
   Interest expense ..........................................         (84,938)                 (91,925)                  (95,348)
   Foreign currency transaction gain (loss) ..................           2,039                   (1,301)                     (685)
   Other, net ................................................           6,240                    3,916                     5,518
                                                                  ---------------           --------------           ---------------
   Income (loss) before taxes and extraordinary item .........         (23,542)                 (12,333)                   (2,178)

Provision for income taxes ...................................           5,200                    9,100                     6,639
                                                                  ---------------           --------------           ---------------
   Income (loss) before extraordinary item ...................         (28,742)                 (21,433)                   (8,817)

Extraordinary item - loss on early retirement of debt.........              --                       --                    (2,500)
                                                                  ---------------           --------------           ---------------
   Net income (loss) .........................................    $    (28,742)             $   (21,433)             $    (11,317)
                                                                  ===============           ==============           ===============
</TABLE>



















    The accompanying notes are an integral part of the financial statements.


                                       27


<PAGE>



<TABLE>
<CAPTION>
                                 HARRIS CHEMICAL NORTH AMERICA, INC. AND SUBSIDIARIES
                           CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDER'S EQUITY (DEFICIT)
                                    for the three fiscal years ended March 28, 1998
                                                    (in thousands)



                                                                                      Common
                                    Common        Additional       Cumulative      Stockholder's
                                    Stock,         Paid-in        Translation          Notes          Accumulated
                                    at Par         Capital         Adjustment       Receivable          Deficit             Total
<S>                              <C>             <C>             <C>               <C>              <C>                <C>
Balance, March 25, 1995 ........ $        --     $     107,253   $       (3,395)   $       (3,792)  $      (349,203)   $   (249,137)
   Translation adjustment ......                                             52                                                  52
   Receivable from HCG .........                                                           (3,103)                           (3,103)
   Noncash capital
      distribution to HCG ......                        (1,812)                             1,812                                 0
   Harris Chemical Australia
      rights (Note 10) .........                        (2,000)                             2,000                                 0
   Net loss ....................                                                                            (28,742)        (28,742)
                                 -------------   --------------  ---------------   ---------------  ----------------   -------------
Balance, March 30, 1996 ........          --           103,441           (3,343)           (3,083)         (377,945)       (280,930)
   Translation adjustment ......                                           (189)                                               (189)
   Receivable from HCG .........                                                           (1,129)                           (1,129)
   Noncash capital
      distribution to HCG ......                          (750)                                750                                0
   Purchase of patents
      from affiliate ...........                        (2,750)                                                              (2,750)
   Net loss ....................                                                                            (21,433)        (21,433)
                                 -------------   --------------  ---------------   ---------------  ----------------   -------------
Balance, March 29, 1997 ........          --            99,941           (3,532)           (3,462)         (399,378)       (306,431)
   Translation adjustment ......                                           (168)                                               (168)
   Receivable from HCG..........                                                             (217)                             (217)
   Purchase of trademarks
     from affiliate.............                        (2,600)                                                              (2,600)
   Net loss.....................                                                                            (11,317)        (11,317)
                                 -------------   --------------  ---------------   ---------------  ----------------   -------------
Balance, March 28, 1998......... $        --     $      97,341   $       (3,700)   $       (3,679)  $      (410,695)   $   (320,733)
                                 =============   ==============  ===============   ===============  ================   =============
</TABLE>




















    The accompanying notes are an integral part of the financial statements.


                                       28


<PAGE>



<TABLE>
<CAPTION>
                                 HARRIS CHEMICAL NORTH AMERICA, INC. AND SUBSIDIARIES
                                         CONSOLIDATED STATEMENTS OF CASH FLOWS
                                    for the three fiscal years ended March 28, 1998
                                                    (in thousands)



                                                                                 FY 1996          FY 1997         FY 1998
                                                                               ------------     ------------    ------------
<S>                                                                            <C>              <C>             <C>    
Cash flows from operating activities:
   Loss before extraordinary item ...........................................  $   (28,742)     $   (21,433)    $   (8,817)
   Adjustments to reconcile loss to net cash flows from operating activities:
      Depreciation ..........................................................       56,187           53,242         56,877
      Finance fee amortization ..............................................        5,749            5,342          4,800
      Operating amortization ................................................          743            1,254            681
      Accreted interest .....................................................       19,362               --          1,502
      Deferred income taxes .................................................        3,778            3,768           (292)
      Unrealized foreign currency transaction loss (gain) ...................       (2,317)            (232)           747
      Loss (gain) on disposal of property, plant and equipment ..............           47              895           (529)
      Asset impairment charge ...............................................        7,044               --             --
      Other .................................................................         (959)             440           (106)
      Changes in operating assets and liabilities:
         Receivables ........................................................      (17,796)          (8,527)        11,216
         Inventories ........................................................      (15,201)          16,437        (10,200)
         Other assets .......................................................        1,067           (2,597)         1,806
         Accounts payable ...................................................        6,409           (6,775)        10,543
         Accrued expenses and other noncurrent liabilities ..................       (1,156)          (3,499)        (9,025)
                                                                               ------------     ------------    -----------
            Net cash provided by operating activities .......................       34,215           38,315         59,203
                                                                               ------------     ------------    -----------
Cash flows from investing activities:
   Capital expenditures .....................................................      (41,382)         (32,719)       (38,885)
   Capitalized interest .....................................................       (4,230)          (1,244)          (243)
   Proceeds from sales of property, plant and equipment .....................          171              679            853
   Other ....................................................................       (1,650)              --             --
                                                                               ------------     ------------    -----------
            Net cash used in investing activities ...........................      (47,091)         (33,284)       (38,275)
                                                                               ------------     ------------    -----------
Cash flows from financing activities:
   Revolver borrowings ......................................................      152,287          206,745        158,302
   Revolver payments ........................................................     (120,287)        (285,745)      (155,302)
   Principal payments on other long-term debt, including capital leases .....      (11,645)          (8,155)       (19,889)
   Issuance of long-term debt ...............................................           --           75,000             --
   Capitalized finance costs ................................................       (1,049)          (6,794)          (324)
   Proceeds from deferred revenue ...........................................           --           23,152             --
   Other ....................................................................       (3,103)          (1,129)        (2,817)
                                                                               ------------     ------------    ----------- 
            Net cash provided by (used in) financing activities .............       16,203            3,074        (20,030)
                                                                               ------------     ------------    -----------
Effect of exchange rate changes on cash .....................................          118             (122)           114
                                                                               ------------     ------------    -----------   
            Net increase in cash ............................................        3,445            7,983          1,012
Cash and cash equivalents, beginning of period ..............................        5,648            9,093         17,076
                                                                               ------------     ------------    -----------
Cash and cash equivalents, end of period ....................................  $     9,093      $    17,076     $   18,088
                                                                               ============     ============    ===========
</TABLE>







    The accompanying notes are an integral part of the financial statements.


                                       29


<PAGE>



<TABLE>
<CAPTION>
                                 HARRIS CHEMICAL NORTH AMERICA, INC. AND SUBSIDIARIES
                                  CONSOLIDATED   STATEMENTS   OF  CASH  FLOWS  -
                                    (Continued) for the three fiscal years ended
                                    March 28, 1998
                                                    (in thousands)



                                                                                 FY 1996          FY 1997         FY 1998
                                                                               ------------     ------------    ------------
<S>                                                                            <C>              <C>             <C>  
Supplemental cash flow information:
   Interest paid including capitalized interest .............................  $    60,009      $    91,578     $   93,983
   Income taxes paid ........................................................        1,695            3,007          5,773

Supplemental disclosure of noncash activities:
   Assets acquired under capital leases .....................................  $     4,533      $     6,551     $    6,352
   Acquisition of White River Nahcolite L.L.C. ..............................        9,008               --             --
   Noncash capital distribution .............................................        1,812              750             --
   Harris Chemical Australia rights .........................................        2,000               --             --
</TABLE>











































    The accompanying notes are an integral part of the financial statements.

                                       30


<PAGE>



              HARRIS CHEMICAL NORTH AMERICA, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  Organization and Merger:

       The consolidated  financial statements include the consolidated  accounts
of:  Harris  Chemical  North  America,  Inc.  ("Harris")  and its  wholly  owned
subsidiaries,  North American Chemical Company ("NACC"),  NAMSCO Inc. ("NAMSCO")
and its wholly owned subsidiaries North American Salt Company ("NASC") and Sifto
Canada  Inc.  ("Sifto"),  and  GSL  Corporation  ("GSL")  and its  wholly  owned
subsidiary Great Salt Lake Minerals Corporation ("GSLMC"). Harris and its direct
and indirect  subsidiaries are collectively referred to as the "Company." Harris
is a wholly owned subsidiary of Harris Chemical Group, Inc. ("HCG").  The common
stockholder's  equity of  Harris  consists  of a single  class of $.01 par value
common stock with 1,000 shares  authorized,  issued and outstanding at March 28,
1998.

       On April 1,  1998,  HCG was  acquired  by IMC  Global  Inc.,  a  Delaware
corporation  ("IMC"),  pursuant to an Agreement and Plan of Merger,  dated as of
December  11,  1997,  by and among HCG,  IMC and IMC Merger Sub Inc., a Delaware
corporation  and a wholly  owned  subsidiary  of IMC. On April 1, IMC Merger Sub
Inc.  was merged with and into HCG ("the  Merger")  and as a result,  all of the
subsidiaries of HCG, including Harris, became wholly owned subsidiaries of IMC.

       Harris is a producer and marketer of  inorganic  chemical and  extractive
mineral  products  with  manufacturing  sites in North  America.  Its  principal
products  are  salt,  sodium-based  chemicals  including  soda  ash  and  sodium
bicarbonate,  sulfate of potash, and boron chemicals. Together, these businesses
serve a variety of markets, including agriculture, food processing, the chemical
process industry, glass manufacturing and highway de-icing.

2.  Summary of Significant Accounting Policies:

 a. Management Estimates:  The preparation of financial statements in conformity
with  generally  accepted  accounting  principles  requires  management  to make
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 revenues  and expenses
during the reporting period. Actual results could differ from those estimates.

 b. Basis of Consolidation:  The consolidated  financial  statements include the
consolidated  accounts  of  Harris  and  its  wholly  owned  subsidiaries.   All
significant  intercompany  balances and  transactions  have been  eliminated  in
consolidation.  Certain  reclassifications  have been  made to the prior  year's
financial statements to conform with the current year presentation.

 c.  Foreign Currency  Translation:  Assets and liabilities are  translated into
U.S.  dollars at year-end  exchange rates.  Revenues and expenses are translated
using the average rates of exchange for the year. Adjustments resulting from the
translation  of a  foreign  currency  financial  statement  into  the  reporting
currency,  U.S.  dollars,  are made  directly to a separate  component of common
stockholder's equity. Exchange gains and losses from transactions denominated in
a currency other than a company's functional currency are included in income.

 d.  Fiscal  Year-End:  The  Company has adopted a 52-53 week fiscal year ("FY")
ending on the last Saturday in March.  FYs 1998 and 1997 include 52 weeks and FY
1996 includes 53 weeks.  On April 1, 1998, in  connection  with the Merger,  the
Company  changed its fiscal year end to December 31, 1998. A report on Form 10-K
will be filed by the Company covering the transition  period beginning March 29,
1998 and ending December 31, 1998.

 e.  Cash  and Cash  Equivalents:   The Company  considers all  investments with
original maturities of three months or less to be cash equivalents.  The Company
maintains the majority of its cash in bank deposit  accounts with two commercial
banks with high  credit  ratings in the U.S.  and Canada.  The Company  does not
believe  it is  exposed  to  any  significant  credit  risk  on  cash  and  cash
equivalents.

 f.  Inventories:   Inventories are stated at  the lower of cost or market.  Raw
materials  and supply costs are  determined  by either the  first-in,  first-out
(FIFO) or the average cost method. Finished goods costs are determined by either
the last-in, first-out (LIFO) or average cost method.

 g.  Revenue Recognition: Revenue is recognized by the Company upon the transfer
of title to the customer, which is generally at the time product is shipped.


                                       31


<PAGE>



 h. Property,  Plant and  Equipment:  Property,  plant and equipment,  including
assets under capital  leases,  are stated at cost and include  interest on funds
borrowed to finance  construction.  The costs of  replacements or renewals which
improve or extend the life of existing property are capitalized. Maintenance and
repairs  are  expensed  as  incurred.  The costs of  certain  major  maintenance
projects  are  accrued  ratably  over the  periods  prior to the next  scheduled
maintenance   project.   Depreciation  and  amortization  are  provided  on  the
straight-line method over the following estimated useful lives:

    Land improvements........................................ 5 to 25 years
    Buildings and improvements...............................10 to 40 years
    Machinery and equipment.................................. 3 to 18 years
    Solar ponds complex......................................10 to 20 years
    Rolling stock and track..................................15 to 25 years
    Furniture and fixtures................................... 3 to 10 years

 i.  Deferred Financing Costs:  Deferred financing  costs are net of accumulated
amortization of  $18,727,000 in  FY 1997 and  $23,427,000 in FY 1998.   Deferred
financing costs are amortized using the effective  interest rate method over the
term of the related debt.

j. Income Taxes: HCG files  consolidated  federal income tax returns with Harris
and its U.S.  subsidiaries.  Under the Tax Sharing  Agreement,  Harris generally
agrees to reimburse HCG in amounts  designed to approximate the amount of income
taxes that Harris and its wholly  owned  subsidiaries  (other than Sifto)  would
have paid had they filed consolidated  federal income tax returns (and analogous
state and local  returns)  separate  from HCG.  Sifto files a separate  Canadian
income tax return.

     The  Company  accounts  for  income  taxes  using the  liability  method in
accordance  with the provisions of Statement of Financial  Accounting  Standards
No. 109 - Accounting for Income Taxes ("SFAS 109").  Under the liability method,
deferred taxes are  determined  based on the  differences  between the financial
statement and the tax basis of assets and liabilities using enacted tax rates in
effect in the years in which the differences are expected to reverse.

k.  Research  and Development Expenses:   Research and development  expenditures
are  expensed as  incurred  and were  approximately  $1,041,000,  $1,010,000 and
$1,147,000 in FYs 1996, 1997 and 1998, respectively.

l.  Environmental  Costs:  Environmental  costs,  other  than those of a capital
nature,  are  accrued  at the time the  exposure  becomes  known  and  costs can
reasonably be estimated.  Costs are accrued based upon management's estimates of
all direct  costs,  after taking into  account  reimbursement  by third  parties
(primarily  the sellers of  acquired  businesses),  and are  reviewed by outside
consultants. Environmental costs are charged to expense unless a settlement with
an  indemnifying  party  has been  reached.  Reimbursement  of costs  previously
expensed is recorded as a reduction of operating  expense when  settlement  with
the indemnifying  party is reached.  The Company does not accrue liabilities for
unasserted  claims that are not probable of  assertion,  nor does it provide for
environmental  clean-up  costs,  if any,  at the end of the useful  lives of its
facilities  because,  given the long lives of its  mineral  deposits,  it is not
practical to estimate such costs.

m. Recently Issued Accounting Standards:  In June 1997, SFAS No. 130, "Reporting
Comprehensive  Income" was  issued.  This  statement  established  standards  of
reporting and display of  comprehensive  income and its components in a full set
of  general  purpose  financial  statements.  Also in June 1997,  SFAS No.  131,
"Disclosures  about  Segments  of an  Enterprise  and Related  Information"  was
issued. This standard establishes standards of reporting and displaying segments
of a  business  by  requiring  segments  to  be  disclosed  in  accordance  with
management's  criteria for reviewing  operating  performance.  In February 1998,
SFAS No. 132, "Employers'  Disclosures about Pensions and Other  Post-retirement
Benefits" was issued.  These statements  established  standards of reporting and
displaying  information  about  pension  plans and other  benefit  plans.  These
statements  will be effective for the Company's  next audited  reporting  period
ending  December  31,  1998  (see the  discussion  regarding  the  change in the
Company's  fiscal  year  end in Note 1) and  require  comparative  prior  period
presentation.  Adoption of these  statements  is not  expected to  significantly
alter the Company's financial statement presentation.







                                       32


<PAGE>



3.  Inventories:

     Inventories  are stated at the lower of cost or market,  and consist of the
following (in thousands):


<TABLE>
<CAPTION>
                                                  March 29, 1997                March 28, 1998
                                                -------------------           -------------------
<S>                                             <C>                           <C>                   
Finished goods ............................     $            54,820           $            63,336
Raw materials and supplies ................                  31,998                        33,681
                                                -------------------           -------------------
                                                $            86,818           $            97,017
                                                ===================           ===================
</TABLE>

       As of March  29,  1997 and  March  28,  1998  approximately  52% and 44%,
respectively,  of finished goods  inventories  are valued at LIFO. The excess of
LIFO costs over the current cost of inventories  based upon the LIFO method (and
after lower of cost or market  adjustments) was $3,402,000 at March 29, 1997 and
$3,377,000 at March 28, 1998.

4.  Property, Plant & Equipment:

       Property, plant and equipment consists of the following (in thousands):


<TABLE>
<CAPTION>
                                                  March 29, 1997                March 28, 1998
                                                -------------------           -------------------
<S>                                             <C>                           <C>                    
Land and improvements .....................     $            30,992           $            30,459
Buildings and improvements ................                  76,764                        83,712
Machinery and equipment ...................                 523,295                       550,997
Solar ponds complex .......................                  33,233                        36,776
Rolling stock and track ...................                   7,464                         8,737
Furniture and fixtures ....................                   8,724                         9,055
Construction in progress ..................                  22,472                        25,872
                                                -------------------           -------------------
                                                            702,944                       745,608
Less accumulated depreciation .............                 314,933                       370,692
                                                -------------------           -------------------
                                                $           388,011           $           374,916
                                                ===================           ===================
</TABLE>

       In April, 1996, the Company  discontinued  production at a section of its
facility located in Searles Valley,  California.  The shutdown was an element of
the  Company's  strategic  capital  expenditure  program  to  increase  soda ash
production  and reduce boron and soda ash  production  costs.  The amount of the
loss due to the discontinued production was $7.0 million which is reflected as a
charge against operating income for the year ended March 30, 1996. To the extent
that  assets  were no longer of any use to other  production  facilities  at the
Searles  Valley  location,  they  were  written  off in their  entirety  as they
represent no additional value to the Company. For those assets which can be used
by other production facilities,  the values were transferred to those facilities
at their net book value as of March 30, 1996. In connection with Argus Utilities
Financing  in July 1996 (see Note 7), the Company  extended  the useful lives of
Argus Utilities plant and equipment with a net book value of $28.2 million to 15
years to match the terms of the lease.  This  revision in useful  lives  reduced
depreciation expense and the net loss by $6.5 million in FY 1997.














                                       33


<PAGE>



5.  Income Taxes:

       The  income tax  provisions  for FYs 1996,  1997 and 1998  consist of the
following (in thousands):



<TABLE>
<CAPTION>
                                                            FY 1996                FY 1997                FY 1998
                                                          ------------           ------------           ------------
<S>                                                       <C>                    <C>                    <C>  
Current:
  Federal ..............................................  $       50             $      545             $        0
  State ................................................         150                    760                    711
  Foreign income .......................................         438                    645                  2,751
  Foreign mining .......................................         984                  3,050                  2,801
                                                          ------------           ------------           ------------
    Total current ......................................       1,622                  5,000                  6,263
                                                          ------------           ------------           ------------
Deferred:
  Federal ..............................................     (14,362)               (13,577)                (9,378)
  State ................................................      (3,314)                (3,133)                (2,164)
  Foreign income .......................................       2,403                  3,366                   (560)
  Foreign mining .......................................       1,032                    532                      2
  Change in valuation allowance ........................      17,819                 16,912                 12,476
                                                          ------------           ------------           ------------
    Total deferred .....................................       3,578                  4,100                    376
                                                          ------------           ------------           ------------
Total provision before extraordinary item ..............       5,200                  9,100                  6,639
Tax benefit of extraordinary item -- early
   extinguishment of debt ..............................          --                     --                   (875)

Valuation allowance ....................................          --                     --                    875
                                                          ------------           ------------           ------------
Total provision for income taxes .......................  $    5,200             $    9,100             $    6,639
                                                          ============           ============           ============
</TABLE>

       The sources of income (loss), excluding extraordinary items, before taxes
are as follows (in thousands):


<TABLE>
<CAPTION>
                                                       FY 1996                  FY 1997                FY 1998
                                                   ---------------           -------------           ------------
<S>                                                <C>                       <C>                     <C>            
United States ..................................   $      (31,877)           $    (27,821)           $   (12,776)
Foreign ........................................            8,335                  15,488                 10,598
                                                   ---------------           -------------           ------------
Income (loss) before taxes and
   extraordinary item ..........................   $      (23,542)           $    (12,333)           $    (2,178)
                                                   ===============           =============           ============
</TABLE>


       The Company does not provide U.S.  federal income taxes on  undistributed
earnings of foreign  subsidiaries  that are not currently  taxable in the United
States. No undistributed  earnings of foreign  subsidiaries were subject to U.S.
income tax in FY 1996, FY 1997 or FY 1998. Total undistributed earnings on which
no U.S.  federal  income tax has been  provided  were $33.5 million at March 28,
1998.  If these  earnings  are  distributed,  foreign  tax  credits  may  become
available  under current law to reduce or possibly  eliminate the resulting U.S.
income tax liability.

     Reconciliation  of the  U.S.  statutory  federal  income  tax  rate  to the
effective income tax rate is as follows:

<TABLE>
<CAPTION>
                                                      FY 1996              FY 1997             FY 1998
                                                   -------------        -------------       -------------
<S>                                                <C>                  <C>                 <C>  
U.S. federal statutory tax rate .................         35.0%                35.0%               35.0%
U.S. statutory depletion ........................         22.9                 39.4               254.0
State income taxes, net of federal tax benefit ..          9.2                 12.5                43.4
Foreign income tax rate differential ............          0.3                 11.4                69.7
Foreign mining taxes ............................         (8.6)               (29.0)             (128.7)
Change in valuation allowance....................        (75.7)              (137.2)             (572.8)
Other, net ......................................         (5.2)                (5.9)               (5.4)
                                                   -------------        -------------       -------------
    Effective tax rate ..........................        (22.1)%              (73.8)%            (304.8)%
                                                   =============        =============       =============
</TABLE>


                                       34


<PAGE>






       Deferred tax assets and  liabilities  are  recognized  for the  estimated
future tax effects,  based on enacted tax law, of temporary  differences between
the values of assets and  liabilities  recorded for financial  reporting and for
tax purposes and of net operating loss and other carryforwards.  The tax effects
of the  types of  temporary  differences  and  carryforwards  that  give rise to
deferred tax assets and liabilities are as follows (in thousands):


<TABLE>
<CAPTION>
                                                                  March 29, 1997                 March 28, 1998
                                                               --------------------           ---------------------
<S>                                                            <C>                            <C>    
Deferred tax liabilities:
  Fixed assets and deprecation .............................   $            40,385            $             39,375
  Inventories ..............................................                   521                             481
  Other ....................................................                 7,924                           6,999
                                                               --------------------           ---------------------
                                                                            48,830                          46,855
                                                               --------------------           ---------------------
Deferred tax assets:
   Inventories .............................................                   202                             202
   Accrued reserves and liabilities ........................                 7,640                           5,127
   Interest on high yield debt .............................                19,795                          19,795
   Prepaid income ..........................................                 9,627                           8,878
   Net operating loss carryforwards ........................                72,947                          89,079
   Alternative minimum tax credit carryforwards ............                 2,720                           2,670
   Other ...................................................                 5,902                           4,555
                                                               --------------------           ---------------------
                                                                           118,833                         130,306
Less valuation allowance ...................................                90,401                         103,752
                                                               --------------------           ---------------------
                                                                            28,432                          26,554
                                                               --------------------           ---------------------
Net deferred tax liabilities ...............................                20,398                          20,301
Less net current deferred tax assets .......................                 6,019                           4,092
                                                               --------------------           ---------------------
Net long-term deferred tax liabilities .....................   $            26,417            $             24,393
                                                               ====================           =====================
</TABLE>


       SFAS 109 requires a valuation  allowance  against deferred tax assets if,
based on available evidence,  it is more likely than not that some or all of the
deferred  tax assets  will not be  realized.  The  Company  carried a  valuation
allowance relating to the future utilization of net operating loss carryforwards
and foreign currency  translation  losses of $90.4 million and $103.8 million as
of March 29, 1997 and March 28, 1998, respectively.

       At March 28, 1998,  net operating  loss  carryforwards  for U.S.  federal
income tax purposes  available to offset future  taxable  income for the Company
are approximately $229.0 million. If not utilized, these carryforwards expire in
the FYs 2005 through  2013. As of March 28, 1998,  Sifto has fully  utilized its
Canadian federal and provincial net operating loss carryforwards.

       In  addition,   the  Company  has  an  alternative   minimum  tax  credit
carryforward  at March 28, 1998 of  approximately  $2.3  million.  These  credit
carryforwards  may be  carried  forward  indefinitely  to offset  any  excess of
regular tax liability over alternative  minimum tax liability subject to certain
separate company limitations. To the extent not offset by a valuation allowance,
these net operating loss and alternative  minimum tax credit  carryforwards have
been reflected as a reduction of noncurrent  deferred income tax liabilities for
financial reporting purposes.

       The Company has begun  assessing  the impact the Merger (see Note 1) will
have on the  valuation  allowance  relating  to the  future  utilization  of net
operating loss  carryforwards.  The ultimate  utilization of these net operating
loss carryforwards by the Company as a subsidiary of IMC will be impacted by the
future  profitability  of HCG and its  U.S.  subsidiaries  and will  further  be
subject to annual  limitations under the change in control provisions of the IRS
rules and regulations.



                                       35

<PAGE>



6.  Other Income:
       Other income, net consists of the following (in thousands):


<TABLE>
<CAPTION>
                                                                          FY 1996             FY 1997             FY 1998
                                                                       -------------        ------------       -------------
<S>                                                                    <C>                  <C>                <C>               
Land lease and revenue sharing - cogeneration facility .............   $      4,033         $     4,774        $      5,663
Interest income ....................................................            379                 213                 364
Equity income (loss) in Harris Chemical Europe Ltd. ................            513                (399)                (61)
Other ..............................................................          1,315                (672)               (448)
                                                                       -------------        ------------       -------------
   Other income, net ...............................................   $      6,240         $     3,916        $      5,518
                                                                       =============        ============       =============
</TABLE>

7.  Long-term Debt:

Long-term debt consists of the following (in thousands):


<TABLE>
<CAPTION>
                                                                              March 28, 1997                 March 28, 1998
                                                                            -------------------           --------------------
<S>                                                                         <C>                           <C>    
Senior debt:
   Notes payable, 8.5%, due July 15, 2000 ................................  $          100,000            $           100,000
   Notes payable, 10.25%, due July 15, 2001 ..............................             250,000                        250,000
Senior subordinated debt:
   Notes payable, 10.75%, due October 15, 2003 ...........................             335,000                        335,000
Revolving lines of credit ................................................                  --                          3,000
Argus utilities notes payable, 12.3%, due through 2011 ...................              73,517                         71,502
Other, including capital lease obligations ...............................              25,258                         17,833
                                                                            -------------------           --------------------
                                                                                       783,775                        777,335
Less current portion .....................................................              (9,403)                       (10,674)
                                                                            -------------------           --------------------    
                                                                            $          774,372            $           766,661
                                                                            ===================           ====================
</TABLE>

Contractual maturities of long-term debt are as follows (in thousands):  $10,674
in FY 1999; $6,738 in FY 2000;  $108,726 in FY 2001; $254,261 in FY 2002; $4,018
in FY 2003 and $392,918 thereafter.

       In FY 1994,  Harris issued $250 million of 10.25% Senior Secured Discount
Notes due July 15, 2001 (the  "Discount  Notes"),  $335 million of 10.75% Senior
Subordinated  Notes due October 15, 2003 (the "Senior  Subordinated  Notes") and
Sifto  issued $100 million of 8.5% Senior  Secured  Notes due July 15, 2000 (the
"Sifto Notes").  The Discount Notes, the Senior Subordinated Notes and the Sifto
Notes  are  collectively  referred  to herein as the  "Notes."  The Sifto  Notes
require interest  payments each January 15 and July 15. The Discount Notes began
accruing  cash interest  January 15, 1996 with interest  payable each January 15
and July 15  starting  July 15,  1996.  The Senior  Subordinated  Notes  require
interest payments each April 15 and October 15.

       The Discount  Notes and Senior  Subordinated  Notes are redeemable at any
time on or after October 15, 1998 and prior to maturity at the option of Harris,
in  whole  or  in  part,  at  the  following  redemption  prices  (expressed  as
percentages of principal  amount) plus accrued  interest if redeemed  during the
12-month periods beginning October 15 of the years indicated:

                                                          Senior Subordinated
                                   Senior Notes                  Notes
                              ----------------------    ------------------------
1998 .........................        103.0%                     104.05%
1999 .........................        101.5%                     102.70%
2000 .........................        100.0%                     101.35%
2001 and thereafter ..........        100.0%                     100.00%
 .
     The Notes require that Harris or Sifto,  as  applicable,  offer to purchase
all of the  outstanding  Notes for 101% of their  principal  amount plus accrued
interest  ("Offer to Purchase")  within 60 days following a change of control of
Harris or

                                       36


<PAGE>



HCG. The consummation of the Merger (see Note 1) on April 1, 1998, resulted in a
change of control transaction,  as defined by the Indentures,  pursuant to which
the Notes were issued. The Offer to Purchase must be outstanding  between 30 and
60 days.  Both  Harris and Sifto  intend to make the Offer to  Purchase no later
than May 31, 1998.  Because the Company and IMC intend to finance any repayments
of principal  with long-term  borrowings,  the Notes are classified as Long-term
debt in the accompanying Consolidated Balance Sheets.

     At March 28, 1998, the Company had a $130 million  revolving line of credit
("US  Credit  Facility")  with  a  group  of  lenders  for  three  of  its  U.S.
subsidiaries  (NACC,  NAMSCO and GSL).  At March 28,  1998,  the  Company had $3
million  outstanding  under the US Credit  Facility.  The US Credit  Facility is
guaranteed by the Company and each of the Company's other U.S. subsidiaries, and
is secured by the trade  accounts  receivable  and product  inventories of NACC,
NAMSCO and GSL. The US Credit Facility terminates on the earlier of February 28,
2002 or February 15, 2001 if any Discount Notes are outstanding as of such date.
The US Credit Facility accrues interest,  at Harris' option, at either a defined
US Base Rate plus 1.50% or LIBOR plus 2.75%.  Commitment fees of 0.375% per year
of  the  unused  portion  of the  US  Credit  Facility  are  payable  quarterly.
Simultaneously  with the  consummation  of the Merger  (see Note 1), the lenders
under the US Credit Facility assigned all of their rights and interest under the
US Credit  Facility to IMC.  The Company  modified it US Credit  Facility in May
1998 to delete or change certain covenant requirements.

     At March 28, 1998, Sifto had a $20 million revolving line of credit ("Sifto
Credit  Facility")  with a group of Canadian banks which would  terminate on the
earlier of  February  28, 2002 or February  15, 2001 if any  Discount  Notes are
outstanding  on such date.  The Sifto  Credit  Facility  is secured by the trade
accounts  receivable and product  inventories of Sifto and accrues interest,  at
Sifto's option,  at either a defined Canadian Base Rate plus 1.50%, or a defined
Bankers  Acceptance Loan Rate plus 2.75%.  Commitment fees of 0.375% per year of
the unused  portion of the Sifto Credit  Facility are payable  quarterly.  Sifto
terminated the Sifto Credit Facility simultaneously with the consummation of the
Merger (see Note 1).

     Harris has pledged the common stock of NACC, NAMSCO and GSL for the benefit
of the Discount  Notes and the Senior Notes.  The Sifto Notes are secured by all
of the  assets of Sifto  (other  than  trade  accounts  receivable  and  product
inventories).  Borrowing  capacity  under the US and Sifto credit  facilities is
reduced by outstanding  letters of credit,  which totaled $25.9 million at March
28, 1998.  The Company had $72.7 million of available  borrowing  capacity under
its revolving  credit  facilities at March 28, 1998.  Prior to its assumption by
IMC and  amendment,  the  revolving  credit  facilities  required the Company to
maintain  certain minimum  interest  coverage,  fixed charge and net funded debt
coverage ratios.

     In July 1996,  NACC entered into an agreement for the sale and leaseback of
an electric and steam  generating  facility  associated  with its Searles Valley
soda ash facilities  (the "Argus  Utilities").  Under the terms of the agreement
the Argus  Utilities were sold to two  institutional  investors for $75 million,
approximately  $70  million in cash,  net of  related  expenses  and taxes.  The
initial  term of the lease is 13 years with a  two-to-fifteen  year reduced rate
renewal  option.  After  expiration of the reduced rate renewal period there are
three  fair  market  renewal  options of up to 5 years  each.  The  Company  has
provided a guarantee for the performance of NACC's  obligations  under the lease
and related agreements.  In addition,  during the initial term of the lease NACC
is  required  to  provide  letters  of credit of  approximately  $15  million as
additional  credit  support.  The Company has also agreed to certain  covenants,
including  maintaining access to adequate working capital,  meeting fixed charge
and interest  coverage  ratios,  and  restrictions  on assets  dispositions  and
mergers.  The  transaction  is being  accounted  for as a financing  transaction
during  the  initial  and  reduced  rate  rental  periods.  Proceeds  from  this
transaction were used to reduce the outstanding revolving credit balance.

     In  August  1995,  NACC and  NaTec  Resources,  Inc.  ("NRI")  executed  an
agreement  regarding  the  acquisition  by NACC of the remaining 50% interest in
White River  Nahcolite  Limited  Liability  Co.  ("White  River")  owned by NRI.
Pursuant to that agreement,  the  consideration  paid to NRI totaled  $9,508,000
consisting  of (i)  $500,000  in cash paid by NACC to NRI,  (ii) a $4.0  million
non-interest bearing promissory note of NACC payable in installments through the
third anniversary of the closing date (discounted  balance $3,236,000) and (iii)
a $6.0 million  non-interest  bearing  promissory  note of White River which was
paid on January 12, 1996 (discounted balance $5,772,000).  The remaining note is
collateralized  by  substantially  all of  White  River's  assets  and has  been
classified as Current portion of long-term debt in the accompanying Consolidated
Balance Sheet of March 28, 1998.





                                       37


<PAGE>




8.  Employee Benefit Plans:

     The Company has a 401(k)  retirement  savings and investment  plan covering
substantially all employees. Contributions are made to this plan by participants
through  voluntary  salary  deferral and by the Company in  accordance  with the
terms  of the  plan.  Company  contributions  to  the  plan  were  approximately
$6,295,000, $6,199,000 and $5,728,000 in FYs 1996, 1997 and 1998, respectively.

     NAMSCO has defined  benefit  pension plans that cover certain of its hourly
employees.  Benefits  are based on years of service and levels of  compensation.
NAMSCO  funds  an  amount  equal  to the  maximum  allowable  deduction  for tax
purposes.  Net periodic  pension  cost for FYs 1996,  1997 and 1998 was $95,000,
$86,000,  and $109,000,  respectively.  At March 28, 1998,  the NAMSCO plans are
fully  funded and have net  prepaid  pension  assets of  $293,000.  The  Company
distributed  the  assets of a GSL  defined  benefit  pension  plan to the vested
participants in FY 1997.

     The Company offers a variety of health and welfare  benefit plans to active
employees. No Company-sponsored  health and welfare benefit plans are offered to
retirees.

9.  Commitments  and Contingencies:

     The Company is involved in legal and administrative  proceedings and claims
of various types from normal business activities.  While any litigation contains
an element of uncertainty,  management,  based upon the opinion of the Company's
counsel,  presently  believes that the outcome of each such  proceeding or claim
which is pending or known to be threatened,  or all of them  combined,  will not
have a material adverse effect on the Company's results of operations, financial
condition or liquidity.

Leases:  The Company leases certain property and equipment under  non-cancelable
operating leases for varying periods.  The Company also leases various equipment
under capital  leases with a net book value of  $16,828,000  and  $17,085,000 at
March 29, 1997 and March 28, 1998, respectively,  that are included in property,
plant, and equipment in the accompanying consolidated balance sheet.

     The  aggregate  minimum  annual  rentals  under lease  arrangements  are as
follows (in thousands):

Fiscal                                             Capital         Operating
Year                                                Leases           Leases
------------------------------------------     --------------    --------------
1999 .....................................     $       6,404     $      15,324
2000 .....................................             4,159            14,582
2001 .....................................             2,474            13,870
2002 .....................................               573            13,434
2003 .....................................               109            13,036
Thereafter ...............................                --           113,820
                                               --------------    --------------
    Total ................................     $      13,719     $     184,066
                                                                 ==============
Less amounts representing interest .......             1,563
                                               -------------- 
Present value of net minimum lease .......     $      12,156
                                               ==============

     Rental  expense,  net of sublease  income,  for FYs 1996, 1997 and 1998 was
$16,514,000, $16,603,000, and $16,998,000, respectively.

Royalties: A substantial portion of the land used in the Company's operations at
the Searles Valley facility is owned by the U.S. government.  The Company pays a
royalty  to  the  U.S.  government  of 5% on the  sales  value  of the  minerals
extracted from  government  land.  The leases  generally have a term of 10 years
with  preferential  renewal  options.  Total royalty  expense was  approximately
$6,732,000,  $4,675,000 and $3,274,000 in FYs 1996, 1997 and 1998, respectively.
In addition,  the Company has various  private,  state and  Canadian  provincial
leases associated with the salt and specialty potash  businesses.  Total royalty
expense  related to these leases was  approximately  $2,018,000,  $3,459,000 and
$3,826,000 in FYs 1996, 1997 and 1998, respectively.


                                       38


<PAGE>



Purchase  Commitments:  NACC  is  committed  under  a  contract  to  purchase  a
percentage  of tons of coal based on total coal  purchases  per year,  at agreed
upon prices,  for operations at its Searles Valley  facility in California.  The
contract continues through December 1999, with an option to extend the agreement
an additional five years.

Environmental  Matters:  At March 28, 1998, the Company has recorded accruals of
$10.7  million ($3.8  million  classified  in accrued  expenses and $6.9 million
classified in other  noncurrent  liabilities)  for future costs  associated with
existing  environmental  exposures  at certain of its  facilities.  The  Company
estimates  that a  significant  portion of these  accruals will be used over the
next five  years.  It is the  opinion of  management  that the  outcome of known
environmental  contingencies  will not have a  material  adverse  effect  on the
results of operations, financial condition or liquidity of the Company.

10. Related Party Transactions:

     HCG's  wholly  owned  subsidiaries  include  Harris  (see  Note 1),  Harris
Chemical Europe,  Ltd. ("HCEL") and Harris Chemical Group Europe, Inc. ("HCGE").
The  principal  wholly  owned  subsidiaries  of HCEL include  NAMSCO (UK),  Ltd.
("NUK"),  with salt operations in the United Kingdom (Salt Union Ltd. or "SUL"),
Matthes + Weber GmbH  ("M&W"),  with soda  operations  in  Germany,  Harris Soda
Products  Europe  ("HSPE")  which is based in France and  markets and sells soda
products  in  Europe,  and  Societa  Chimica  Larderello  ("SCL"),   with  boron
operations  in Italy.  In addition,  certain  stockholders  of HCG have minority
ownership interests in Penrice Soda Products Pty Ltd.  ("Penrice"),  U.S. Silica
and Harris Specialty Chemical Company.  These entities are collectively referred
to as HCG affiliates.

     The Company has management  services agreements with HCG and certain of its
affiliates  and  the  Company  occasionally  purchases  and  sells  products  at
market-based  prices to HCG affiliates in the ordinary  course of business.  The
following table  summarizes the revenues  (expenses) with HCG affiliates in FY's
1996, 1997 and 1998 (in thousands):


<TABLE>
<CAPTION>
                                                                 FY 1996             FY 1997            FY 1998
                                                              --------------      -------------      --------------
<S>                                                                 <C>                <C>                 <C>  
Harris services agreement with HCG .........................          $408               $408               $  --
NAMSCO services agreement with NUK .........................           403                378                 415
NAMSCO fee to HCGE for services to NUK .....................          (282)              (378)               (415)
NACC technical services agreement with SCL .................            --               (105)               (250)
NACC inventory sales to SCL ................................         1,852                217               1,299
GSL inventory sales to SCL .................................           911                356                  --
NACC inventory sales to HSPE ...............................            --                 66                 305
NACC inventory sales to Penrice ............................            --                118                  43
NACC inventory purchases from SCL ..........................        (2,643)            (2,963)             (2,769)
GSL inventory purchases from SCL ...........................            --               (343)                 --
</TABLE>


     The Notes  and,  prior to its  amendment,  the US Credit  Facility,  permit
Harris to pay to HCG an amount not to exceed  $750,000  per fiscal  year for the
purpose of enabling  HCG to pay its actual  operating  expenses in the  ordinary
course of business.  The total amount paid by Harris to HCG was $750,000 in FY's
1996,  1997 and 1998.  At March 29, 1997 and March 28,  1998,  the Company has a
balance due from HCG of approximately  $3,462,000 and $3,679,000,  respectively,
classified  as a reduction  in  stockholder's  equity.  Such amount  consists of
advances to HCG for the  repurchase of common  shares of HCG from  employees who
terminated their  relationship with the Company and the services  agreement with
Harris (see above).

     The Company has net receivables from HCG affiliates  totaling  $458,000 and
$210,000 at March 29, 1997 and March 28, 1998, respectively.

     In FY 1996, NAMSCO exchanged its 5.6% economic ownership in NUK for a 6.51%
economic  ownership in Harris  Chemical Europe Limited  ("HCEL"),  a corporation
organized  under the laws of the United  Kingdom.  NAMSCO has recorded an equity
investment in HCEL of $1,674,000  and $1,664,000 at March 29, 1997 and March 28,
1998, respectively.


                                       39


<PAGE>



     The Company entered into an agreement in FY 1994 to become a distributor of
SCL products to the U.S.  market.  SCL also  distributes  certain boron chemical
products of the Company in Europe.  The Company  prepaid to SCL $1,300,000 in FY
1997 for boron containing minerals used in SCL's production process. In FY 1997,
NACC entered into a technical  services agreement with SCL for $250,000 annually
to compensate  SCL for providing  technical  expertise and assistance to NACC in
specialty boron production. Additionally, in FYs 1997 and 1998, an agreement was
reached  whereby NACC purchased  patents and trademarks  from SCL for $2,750,000
and $2,600,000,  respectively. The amounts have been reflected as a reduction to
paid in capital in the  accompanying  balance  sheets and  statements  of common
stockholder's  equity.  The Company had net  receivables due from SCL of $91,000
and $695,000 at March 29, 1997 and March 28, 1998, respectively.

     In FY 1996,  certain  stockholders of HCG purchased a minority  interest in
Penrice, an Australian  enterprise engaged in the production and distribution of
soda ash products.  In connection  therewith,  HCG obtained an option  agreement
that  permits  HCG to  purchase  Penrice  at fair  market  value  under  certain
circumstances.  HCG  transferred  this option to the Company.  In addition,  HCG
permitted  the  Company to enter into a services  agreement  with  Penrice.  The
agreement  provides that Penrice will pay the Company 200,000 Australian dollars
per year  beginning in FY 1997 for management  consulting and operating  support
services.  Management  believes this agreement will also open up new markets for
certain of the Company's  products.  The Company agreed to consideration of $2.0
million to HCG which is the  estimated  fair  market  value to HCNA of the above
agreements.  The $2.0 million is reflected as a reduction of both  stockholder's
receivable and paid in capital in the  accompanying  balance sheet and statement
of common stockholder's equity.

     In 1993,  NACC entered into an agreement to sell its port facilities in San
Diego to SDT Capital,  Inc. ("SDT") for $5.5 million,  and lease such facilities
back from SDT.  SDT's  president is a relative of a former officer of Harris who
was a shareholder  in HCG.  Annual rentals under the agreement were $1.7 million
per year payable quarterly for the initial  four-year  period.  Additional rents
were due at $3 per ton for  shipments  in excess of 850,000  tons per year.  The
Company had the option to  repurchase  the  facilities  at the end of either the
initial lease period  (December  31, 1997) or any renewal  option period for the
greater of $7.0 million or fair market value. This transaction was accounted for
as a financing  with the  difference  between the initial  stated  value of $5.5
million and the minimum  repurchase  value of $7.0 million being accrued through
the term of lease.  During fiscal year 1998, the Company exercised its option to
repurchase the port  facilities.  On December 31, 1997,  the Company  reached an
agreement as to the fair market value of the facilities,  $9.5 million, and paid
that amount to SDT in satisfaction of its obligations under the lease agreement.
As a result,  the Company  has  recorded an  extraordinary  loss,  net of income
taxes, of $2.5 million in fiscal 1998 for the early extinguishment of debt.

11. Fair Value of Financial Instruments:

     The carrying  amounts and estimated fair values of the Company's  financial
instruments at March 28, 1998 are as follows (in thousands):

                                              Carrying           Estimated
                                               Value            Fair Value
                                           ---------------    ---------------
Senior debt:
    Notes payable, 8.5% .................        $100,000           $104,250
    Notes payable, 10.25% ...............         250,000            261,875
Subordinated debt:
    Notes payable, 10.75% ...............         335,000            355,938
Revolving lines of credit ...............           3,000              3,000
Argus utilities notes payable, 12.3% ....          71,502             71,502
Other, including capital leases .........          17,833             17,833









     The following  methods and assumptions were used to estimate the fair value
of the financial instruments:

Senior debt and Subordinated  debt: The fair value is based on the quoted market
price at the close of trading on March 27, 1998.


                                       40


<PAGE>



Revolving  Lines of Credit Argus Utilities and Other,  Included  Capital Leases:
The Company  believes that the interest rates,  including the applicable  margin
percentage, is reflective of current interest rates available to the Company for
obligations  with  similar  terms  and  maturities.  Therefore,  the fair  value
approximates carrying value.


12.  Export Sales:

     Export sales from the United States were as follows (in millions):


                                     FY 1996         FY 1997         FY 1998
                                   ------------    ------------    ------------
Asia/Pacific Rim ..............    $      51.9     $      58.3     $      64.7
Latin America .................           21.5            25.9            26.2
Europe ........................           14.9            11.2            19.5
Canada ........................            4.5             4.2             5.3
Other .........................            6.1             7.0             4.8
                                   ------------    ------------    ------------
   Total ......................    $      98.9     $     106.6     $     120.5
                                   ============    ============    ============

13.  Valuation and Qualifying Accounts:

     Activity in the valuation and qualifying accounts for the years ended March
30, 1996, March 29, 1997 and March 28, 1998 is as follows:



<TABLE>
<CAPTION>
                                                                Additions          Additions
                                                                 Charged            Charged
                                            Balance at              to                to                                 Balance at
                                            Beginning           Costs and            Other                                 End of
                                            of Period            Expenses          Accounts            Deductions          Period
                                             (000's)             (000's)            (000's)             (000's)            (000's)
                                          --------------      --------------    ---------------     --------------    --------------
<S>                                       <C>                 <C>               <C>                 <C>                 <C>
Year ended March 30, 1996:
Allowance for doubtful accounts ......    $      1,155        $      1,381      $          65       $        265      $      2,336
Inventory obsolescence reserves ......           1,522                 985                201              1,259             1,449
Accumulated amortization:
   Deferred financing costs ..........           7,459               5,888                 81                 --            13,428
   Deferred organization costs .......             770                 553                406                 --             1,729
Year ended March 29, 1997:
Allowance for doubtful accounts ......    $      2,336        $      2,909      $          71       $      3,600      $      1,716
Inventory obsolescence reserves ......           1,449               1,804                  1                997             2,257
Accumulated amortization:
   Deferred financing costs ..........          13,428               5,336                 --                 37            18,727
   Deferred organization costs .......           1,729                 545                 --                 --             2,274

Year ended March 28, 1998:
Allowance for doubtful accounts ......    $      1,716        $        169      $        (253)      $       (140)     $      1,772
Inventory obsolescence reserves ......           2,257                 738               (110)               471             2,414
Accumulated amortization:
   Deferred financing costs ..........          18,727               4,777                 --                 77            23,427
   Deferred organization costs .......           2,274                 543                 --                 --             2,817
</TABLE>






                                       41


<PAGE>



14.  Condensed Consolidating Financial Statements:

     Separate   condensed   consolidating   financial   statements   of  certain
subsidiaries  of the Company are  presented  below.  Except for Sifto,  which is
domiciled  in Canada,  all  subsidiaries  of Harris are  domiciled in the United
States. In order to present the financial  statements of Sifto  separately,  the
financial  statements of NAMSCO  present the  investment in Sifto using the cost
method.

     Separate  financial  statements  of the  subsidiaries  of Harris which have
guaranteed  Harris' and  Sifto's  outstanding  public  debt (the  "Guarantors"),
including  NACC,  North  American  Terminals,  Inc.,  NAMSCO,  NASC,  Carey Salt
Company, The Hutchinson & Northern Railway Company, GSL, GSLMC, and White River,
are not included for the  following  reasons:  (i) pursuant to their  respective
guarantees,  the  Guarantors  are jointly and  severally  liable with respect to
Harris'  and  Sifto's  outstanding  public  debt,  (ii)  the  aggregate  assets,
liabilities,  earnings and equity of the Guarantors and Sifto are  substantially
equal  to  the  assets,  liabilities,   earnings  and  equity  of  Harris  on  a
consolidated basis and (iii) accordingly,  Harris does not believe that separate
full  financial  statements  concerning the Guarantors and Sifto are material to
investors.  Financial  statements  of the  subsidiaries  of Harris which are not
Guarantors are not presented separately as these companies are immaterial.


                                                         42


<PAGE>



<TABLE>
<CAPTION>
                            HARRIS  CHEMICAL  NORTH  AMERICA,  INC.  AND  SUBSIDIARIES
                           NOTES  TO  CONSOLIDATED  FINANCIAL  STATEMENTS - (Continued)


                                      CONDENSED CONSOLIDATING BALANCE SHEETS
                                                  March 29, 1997
                                                  (in thousands)

                                   NACC         GSL        NAMSCO       Sifto        HCNA     Eliminations Consolidated
                               ----------------------------------------------------------------------------------------
<S>                            <C>          <C>          <C>          <C>         <C>         <C>          <C>         
Cash and cash equivalents .... $      --    $      --    $  (3,980)   $   5,561   $  15,495   $       --   $  17,076
Receivables, net .............    49,298       24,502       30,630       22,754         458           --     127,642
Inventories ..................    39,403       15,389       20,663       11,983          --         (620)     86,818
Other current assets .........     9,539          185        1,979          752         502           --      12,957
Property, plant and
  equipment, net .............   216,334       42,828       65,206       63,643          --           --     388,011
Investment in Sifto ..........        --           --        2,513           --          --       (2,513)         --
Other ........................    10,006           46        1,833        2,410     413,250     (394,655)     32,890
                               ----------------------------------------------------------------------------------------    
Total assets ................. $ 324,580    $  82,950    $ 118,844    $ 107,103   $ 429,705   $ (397,788)  $ 665,394
                               ========================================================================================
Total current liabilities .... $  52,129    $  14,020    $  21,936    $  20,797   $  25,599   $       53   $ 134,534
Long-term debt, net of
  current portion ............    83,234        1,440        2,878      101,820     585,000           --     774,372
Other noncurrent liabilities .    43,718       (5,629)     (32,875)     (30,001)    125,537      (37,831)     62,919
Total common stockholder's
  equity (deficit) ...........   145,499       73,119      126,905       14,487    (306,431)    (360,010)   (306,431)
                               ----------------------------------------------------------------------------------------
Total liabilities and
  common stockholder's
  equity (deficit) ........... $ 324,580    $  82,950    $ 118,844    $ 107,103   $ 429,705   $ (397,788)  $ 665,394
                               ========================================================================================
</TABLE>


<TABLE>
<CAPTION>
                                      CONDENSED CONSOLIDATING BALANCE SHEETS
                                                  March 28, 1998
                                                  (in thousands)

                                   NACC         GSL        NAMSCO       Sifto        HCNA     Eliminations Consolidated
                               ----------------------------------------------------------------------------------------
<S>                            <C>          <C>          <C>          <C>         <C>         <C>          <C>         
Cash and cash equivalents .... $      --    $      --    $      --    $  16,175   $   1,913   $       --   $  18,088
Receivables, net .............    48,996       14,195       34,212       16,775       2,248           --     116,426
Inventories ..................    38,709       17,676       28,706       12,007          --          (81)     97,017
Other current assets .........     8,534          245        1,815          588         204       (1,927)      9,459
Property, plant and
  equipment, net .............   195,618       45,668       66,398       67,232          --           --     374,916
Investment in Sifto ..........        --           --        2,513           --          --       (2,513)         --
Other ........................     9,289           52        1,837        1,674     466,860     (452,151)     27,561
                               ----------------------------------------------------------------------------------------
Total assets ................. $ 301,146    $  77,836    $ 135,481    $ 114,451   $ 471,225   $ (456,672)  $ 643,467    
                               ========================================================================================
Total current liabilities .... $  56,348    $  14,222    $  22,974    $  27,919   $  24,642   $     (142)  $ 145,963
Long-term debt, net of
  current portion ............    72,366        1,256        6,162      101,877     585,000           --     766,661
Other noncurrent liabilities .    17,315      (20,611)     (38,631)     (34,907)    182,316      (53,906)     51,576
Total common stockholder's
  equity (deficit) ...........   155,117       82,969      144,976       19,562    (320,733)    (402,624)   (320,733)
                               ----------------------------------------------------------------------------------------
Total liabilities and
  common stockholder's
  equity (deficit) ........... $ 301,146    $  77,836    $ 135,481    $ 114,451   $ 471,225   $ (456,672)  $ 643,467
                          =============================================================================================
</TABLE>


                                       43


<PAGE>



<TABLE>
<CAPTION>
                            HARRIS  CHEMICAL  NORTH  AMERICA,  INC.  AND  SUBSIDIARIES
                           NOTES  TO  CONSOLIDATED  FINANCIAL  STATEMENTS - (Continued)


                                 CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
                                     For the Fiscal Year Ended March 30, 1996
                                                  (in thousands)

                                   NACC         GSL        NAMSCO       Sifto        HCNA     Eliminations Consolidated
                               ----------------------------------------------------------------------------------------
<S>                            <C>          <C>          <C>          <C>         <C>         <C>          <C>         
Net sales .................... $  202,797   $   67,943   $  154,840   $   94,023  $      --   $  (44,129)  $  475,474
Cost of sales ................    172,192       54,574      104,268       64,208         --      (44,202)     351,040
                               ----------------------------------------------------------------------------------------
  Gross profit ...............     30,605       13,369       50,572       29,815         --           73      124,434
Selling, general and
   administrative expenses ...     25,197        5,302       18,908       11,818      3,048           --       64,273
Write down of assets .........      7,044           --           --           --         --           --        7,044
                               ----------------------------------------------------------------------------------------
   Operating income (loss) ...     (1,636)       8,067       31,664       17,997     (3,048)          73       53,117
Interest (expense) income ....        284         (218)         443      (11,696)   (73,751)          --      (84,938)
Other income (expense) .......      5,853        6,956       (6,564)       2,034     48,176      (48,176)       8,279
                               ----------------------------------------------------------------------------------------
   Income (loss) before
   provision for income
   taxes .....................      4,501       14,805       25,543        8,335    (28,623)     (48,103)     (23,542)
Provision (benefit) for
   income taxes ..............         --        2,991        4,891        4,300        119       (7,101)       5,200
                               ----------------------------------------------------------------------------------------
   Net income (loss) ......... $    4,501   $   11,814   $   20,652   $    4,035  $ (28,742)  $  (41,002)  $  (28,742)
                               ========================================================================================
</TABLE>


<TABLE>
<CAPTION>
                                 CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
                                     For the Fiscal Year Ended March 29, 1997
                                                  (in thousands)

                                   NACC         GSL        NAMSCO       Sifto        HCNA     Eliminations Consolidated
                               ----------------------------------------------------------------------------------------
<S>                            <C>          <C>          <C>          <C>         <C>         <C>          <C>         
Net sales .................... $  197,717   $   84,490   $  159,606   $  105,080  $      --   $  (38,271)  $  508,622
Cost of sales ................    172,508       69,068      106,602       64,021         --      (38,062)     374,137
                               ----------------------------------------------------------------------------------------
  Gross profit ...............     25,209       15,422       53,004       41,059         --         (209)     134,485
Selling, general and
   administrative expenses ...     17,598        5,542       16,795       13,146      4,427           --       57,508
                               ----------------------------------------------------------------------------------------
  Operating income (loss) ....      7,611        9,880       36,209       27,913     (4,427)        (209)      76,977
Interest (expense) income ....    (11,293)        (284)         462      (11,110)   (69,700)            -     (91,925)
Other income (expense) .......      5,442        6,525       (8,037)      (1,315)    54,034      (54,034)       2,615
                               ----------------------------------------------------------------------------------------
   Income (loss) before
   provision for income
   taxes .....................      1,760       16,121       28,634       15,488    (20,093)     (54,243)     (12,333)
Provision (benefit) for
   income taxes ..............        125        5,701       10,594        7,547      1,340      (16,207)       9,100
                               ----------------------------------------------------------------------------------------
   Net income (loss) ......... $    1,635   $   10,420   $   18,040   $    7,941  $ (21,433)  $  (38,036)  $  (21,433)
                               ========================================================================================
</TABLE>




                                       44


<PAGE>



<TABLE>
<CAPTION>
                            HARRIS  CHEMICAL  NORTH  AMERICA,  INC.  AND  SUBSIDIARIES
                           NOTES  TO  CONSOLIDATED  FINANCIAL  STATEMENTS - (Continued)

                                 CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
                                     For the Fiscal Year Ended March 28, 1998
                                                  (in thousands)

                                   NACC         GSL        NAMSCO       Sifto        HCNA     Eliminations Consolidated
                               ----------------------------------------------------------------------------------------
<S>                            <C>          <C>          <C>          <C>         <C>         <C>          <C>         
Net sales .................... $  202,691   $   78,824   $  146,499   $   96,334  $      --   $  (30,195)  $  494,153
Cost of sales ................    161,542       64,284       92,996       62,058         --      (30,734)     350,146
                               ----------------------------------------------------------------------------------------    
Gross profit .................     41,149       14,540       53,503       34,276         --          539      144,007
Selling, general and
   administrative expenses ...     18,059        6,347       18,251       11,789      1,224           --       55,670
                               ----------------------------------------------------------------------------------------
Operating income (loss) ......     23,090        8,193       35,252       22,487     (1,224)         539       88,337
Interest (expense) ...........    (17,056)        (304)        (659)     (10,026)   (67,303)          --      (95,348)
Other income (expense) .......      6,160        6,274       (5,908)      (1,863)    57,834      (57,664)       4,833
                               ----------------------------------------------------------------------------------------
Income (loss) before
   provision for income
   taxes and extraordinary
   item ......................     12,194       14,163       28,685       10,598    (10,693)     (57,125)      (2,178)
Provision (benefit) for
   income taxes ..............         76        4,313       10,667        5,302        624      (14,343)       6,639
                               ----------------------------------------------------------------------------------------
Net income (loss) before
  extraordinary item .........     12,118        9,850       18,018        5,296    (11,317)     (42,782)      (8,817)
Extraordinary item ...........     (2,500)          --           --           --         --           --       (2,500)
                               ----------------------------------------------------------------------------------------
Net income (loss) ............ $    9,618   $    9,850   $   18,018   $    5,296  $ (11,317)  $  (42,782)  $  (11,317)
                               ========================================================================================
</TABLE>





                                       45


<PAGE>



<TABLE>
<CAPTION>
                            HARRIS  CHEMICAL  NORTH  AMERICA,  INC.  AND  SUBSIDIARIES
                           NOTES  TO  CONSOLIDATED  FINANCIAL  STATEMENTS - (Continued)


                                 CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
                                     For the Fiscal Year Ended March 30, 1996
                                                  (in thousands)


                                   NACC         GSL        NAMSCO       Sifto        HCNA     Eliminations Consolidated
                               ----------------------------------------------------------------------------------------
<S>                            <C>          <C>          <C>          <C>          <C>         <C>         <C>
Net cash provided by (used
   in) operating activities .. $   63,388   $    1,107   $  (10,998)  $    6,306   $   13,149  $  (38,737) $   34,215
                               ----------------------------------------------------------------------------------------
Cash flows from investing:
   Capital expenditures ......    (32,369)      (2,767)      (3,704)      (2,542)          --          --     (41,382)
   Capitalized interest ......     (4,230)          --           --           --           --          --      (4,230)
   Proceeds from sales .......        111           59           --            1           --          --         171
   Other .....................     (1,679)          --           29           --      (18,489)     18,489      (1,650)
                               ----------------------------------------------------------------------------------------
Net cash used in
   investing activities ......    (38,167)      (2,708)      (3,675)      (2,541)     (18,489)     18,489     (47,091)
                               ----------------------------------------------------------------------------------------
Cash flows from financing:
   Gross borrowings ..........     19,643       25,184       75,342       32,118           --          --     152,287
   Gross repayments ..........    (24,617)     (18,644)     (56,115)     (32,556)          --          --    (131,932)
   Other .....................    (20,247)      (4,939)      (4,554)          --       (4,100)     29,688      (4,152)
                               ----------------------------------------------------------------------------------------
Net cash provided by (used
   in) financing activities ..    (25,221)       1,601       14,673         (438)      (4,100)     29,688      16,203
                               ----------------------------------------------------------------------------------------    
Effect of exchange rate
   changes on cash ...........         --           --           --          118           --          --         118
                               ----------------------------------------------------------------------------------------
Net increase (decrease) in
 cash and cash equivalents ...         --           --           --        3,445       (9,440)      9,440       3,445
Cash and cash equivalents:
   Beginning of period .......         --           --           --        5,648       11,851     (11,851)      5,648
                               ----------------------------------------------------------------------------------------
   End of period ............. $       --   $       --   $       --   $    9,093   $    2,411  $   (2,411) $    9,093
                               ========================================================================================
</TABLE>



                                       46


<PAGE>



<TABLE>
<CAPTION>
                               HARRIS CHEMICAL NORTH AMERICA, INC. AND SUBSIDIARIES
                             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


                                 CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
                                     For the Fiscal Year Ended March 29, 1997
                                                  (in thousands)


                                   NACC         GSL        NAMSCO       Sifto        HCNA     Eliminations Consolidated
                               ----------------------------------------------------------------------------------------
<S>                            <C>          <C>          <C>          <C>          <C>         <C>         <C>
Net cash provided by (used
   in) operating activities .. $   29,690   $   16,933   $   38,177   $   24,134   $  (16,246) $  (54,373) $   38,315
                               ----------------------------------------------------------------------------------------
Cash flows from investing:
   Capital expenditures ......     (9,638)      (6,574)      (9,975)      (6,532)          --          --     (32,719)
   Capitalized interest ......     (1,244)          --           --           --           --          --      (1,244)
   Proceeds from sales .......         24           --          503          152           --          --         679
   Other .....................         --           --           --           --      (53,845)     53,845          -- 
                               ----------------------------------------------------------------------------------------
Net cash used in
   investing activities ......    (10,858)      (6,574)      (9,472)      (6,380)     (53,845)     53,845     (33,284)
                               ----------------------------------------------------------------------------------------
Cash flows from financing:
   Gross borrowings ..........     99,986       21,995      108,502       51,262           --          --     281,745
   Gross repayments ..........    (63,493)     (29,746)    (148,530)     (52,131)          --          --    (293,900)
   Other .....................    (55,325)      (2,608)       7,343      (20,295)      83,175       2,939      15,229
                               ----------------------------------------------------------------------------------------
Net cash provided by (used
   in) financing activities ..    (18,832)     (10,359)     (32,685)     (21,164)      83,175       2,939       3,074
                               ----------------------------------------------------------------------------------------
Effect of exchange rate
   changes on cash ...........         --           --           --         (122)          --          --        (122)
                               ----------------------------------------------------------------------------------------
Net increase (decrease) in
   cash and cash equivalents .         --           --       (3,980)      (3,532)      13,084       2,411       7,983
Cash and cash equivalents:
   Beginning of period .......         --           --           --        9,093        2,411      (2,411)      9,093
                               ----------------------------------------------------------------------------------------
   End of period ............. $       --   $       --   $   (3,980) $     5,561   $   15,495  $       --  $   17,076
                               ========================================================================================
</TABLE>























                                       47


<PAGE>




<TABLE>
<CAPTION>
                               HARRIS CHEMICAL NORTH AMERICA, INC. AND SUBSIDIARIES
                             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


                                 CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
                                     For the Fiscal Year Ended March 28, 1998
                                                  (in thousands)


                                   NACC         GSL        NAMSCO       Sifto        HCNA     Eliminations Consolidated
                               ----------------------------------------------------------------------------------------
<S>                            <C>          <C>          <C>         <C>           <C>         <C>         <C>   
Net cash provided by (used
   in) operating activities .. $   42,881   $   28,979   $   25,662  $    28,641   $   (9,296) $  (57,664) $   59,203
                               ----------------------------------------------------------------------------------------
Cash flows from investing:
   Capital expenditures ......     (9,897)      (7,767)      (7,823)     (13,398)          --          --     (38,885)
   Capitalized interest ......       (243)          --           --           --           --          --        (243)
   Proceeds from sales .......        846           --            5            2           --          --         853
   Other .....................         --           --           --           --      (57,496)     57,496          --
                               ----------------------------------------------------------------------------------------
Net cash used in
   investing activities ......     (9,294)      (7,767)      (7,818)     (13,396)     (57,496)     57,496     (38,275)
                               ----------------------------------------------------------------------------------------
Cash flows from financing:
   Gross borrowings ..........     74,500       11,000       61,000       11,802           --          --     158,302
   Gross repayments ..........    (90,264)     (12,982)     (59,215)     (12,730)          --          --    (175,191)
   Other .....................    (17,823)     (19,230)     (15,649)      (3,817)      53,210         168      (3,141)
                               ----------------------------------------------------------------------------------------
Net cash provided by (used
   in) financing activities ..    (33,587)     (21,212)     (13,864)      (4,745)      53,210         168     (20,030)
                               ----------------------------------------------------------------------------------------
Effect of exchange rate
   changes on cash ...........         --           --           --          114           --          --         114
                               ----------------------------------------------------------------------------------------
Net increase (decrease) in
   cash and cash equivalents .         --           --        3,980       10,614      (13,582)         --       1,012
Cash and cash equivalents:
   Beginning of period .......         --           --       (3,980)       5,561       15,495          --      17,076
                               ----------------------------------------------------------------------------------------
   End of period ............. $       --   $       --   $       --  $    16,175   $    1,913  $       --  $   18,088
                               ========================================================================================
</TABLE>



                                       48



<PAGE>



Item 9.       CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
                AND  FINANCIAL  DISCLOSURE

     Not applicable.

                                                     Part III

Item 10.      DIRECTORS  AND  EXECUTIVE  OFFICERS  OF  THE  REGISTRANT

     The  following  table sets forth the name,  age and position with Harris or
Sifto of each person who is currently an executive officer or director of Harris
or Sifto.

<TABLE>
<CAPTION>
   Name                                 Age       Position
   <S>                                   <C>      <C>                               
   Robert E. Fowler, Jr...............   62       Chairman and Director of Harris
   John F. Tancredi...................   55       President of Harris
   J. Bradford James..................   51       Vice President of Harris
   Marschall I. Smith.................   53       Vice President and Assistant Secretary and Director of Harris
   William J. Sichko, Jr..............   44       Director of Harris
   Rose Marie Williams................   44       Director and Secretary of Harris
   Robert F. Clark....................   56       President of IMC Salt Inc. and Director of Sifto
   Rowland Howe.......................   40       Director of Sifto
   Allan Hamilton.....................   46       Director of Sifto
</TABLE>

   The Certificate of Incorporation and By-Laws of Harris provide for a Board of
Directors of not less than three or more than fifteen directors, with the number
of directors currently set at four.  Directors are elected at the annual meeting
of the stockholders. Each director holds office until a successor is elected and
qualified, or until such director's earlier resignation or removal.

Robert E. Fowler, Jr.
     Mr.  Fowler has been  Chairman and director of Harris since the Merger with
IMC Global Inc. ("IMC") on April 1, 1998. Additionally, Mr. Fowler has served as
President  and Chief  Executive  Officer of IMC from July 1997 to present and as
President and Chief Operating  Officer of IMC from March 1996 through June 1997.
He served as President  and Chief  Executive  Officer of The Vigoro  Corporation
("Vigoro") from September 1994 through  February 1996 and as President and Chief
Operating  Officer of Vigoro from July 1993 to September 1994. Mr. Fowler served
as President and Chief  Executive  Officer of BCC Industrial  Services from June
1991 to June 1993.  He is a director of Anixter  International  Inc. Mr.  Fowler
previously served as a director of Vigoro from August 1993 through February 1996
and has served as an IMC Director since March 1996.

John F. Tancredi
     Mr.  Tancredi  has been  President  of Harris  since the Merger with IMC on
April 1, 1998 and President of IMC  Chemicals  Inc. and its  predecessor,  NACC,
since April 1996. Previously, since 1989, Mr. Tancredi was Vice President- Chief
Technical and Quality Officer of International Specialty Products.

J. Bradford James
     Mr. James has been a Vice  President of Harris since the Merger with IMC on
April 1, 1998. Additionally,  Mr. James has been Senior Vice President and Chief
Financial  Officer of IMC since joining IMC in February  1998.  Prior to joining
IMC, Mr. James served as Executive Vice President of USG  Corporation  from 1995
through  1997 and  Senior  Vice  President  and Chief  Financial  Officer of USG
Corporation from 1991 through 1994.

Marschall I. Smith
     Mr. Smith has been Vice  President and Assistant  Secretary and director of
Harris since the Merger with IMC on April 1, 1998.  Additionally,  Mr. Smith has
been Senior Vice President and General Counsel of IMC since joining IMC in 1993.
Mr.  Smith was Senior Vice  President  and General  Counsel of American  Medical
International Inc. from 1992 until 1993.



                                       49


<PAGE>



William J. Sichko, Jr.
     Mr. Sichko has been a director of Harris since the Merger with IMC on April
1, 1998.  Additionally,  Mr. Sichko has been the Senior Vice  President of Human
Resources of Harris since 1996, and has served as an officer and/or  director of
various subsidiaries of Harris and HCG since 1991.

Rose Marie Williams
     Ms.  Williams has been a director and  Secretary of Harris since the Merger
with IMC on April 1, 1998. Additionally,  Ms. Williams has been Secretary of IMC
since March 1996.  Prior  thereto,  she was Secretary of Vigoro from May 1993 to
March 1996.

Robert F. Clark
     Mr. Clark has been President of IMC Salt Inc. and a director of Sifto since
the Merger with IMC on April 1, 1998. Previously,  Mr. Clark served as President
and  director  of  GSL  and  GSLMC  (1993-1998),  and  Vice  President  of  NACC
(1991-1993).

Rowland Howe
     Mr.  Howe has been a director of Sifto since  April 1, 1998.  Since 1995 he
has  been the  Goderich Mine  Manager and prior to  that from 1993 to  1995,  he
served as Manager of SUL's Windsford mine.

Allan Hamilton
     Mr.  Hamilton has been a director of Sifto since August 1995.  From 1989 to
1995,  Mr.  Hamilton was the Mine Manager at the Goderich Mine and since 1995 he
has been Sifto's Chemical Business Manager.

   Directors  serving after the Merger  receive no additional  compensation  for
serving on the Board of  Directors.  Directors  serving  during FY 1998 who were
officers of the Company  received no additional  compensation for serving on the
Board of Directors.  Prior to the Merger,  the Company had  authorized an annual
retainer to non-employee  Directors of $15,000 plus $1,000 for each day on which
they attend a Board meeting and/or one or more Board  Committee  meetings,  with
any  director  who  served as a chair of such  Committee  meeting  receiving  an
additional $250.



                                       50


<PAGE>



Item 11.      EXECUTIVE  COMPENSATION

     The following  table sets forth the Harris related  compensation  earned by
the Chief Executive Officer and the four next most highly compensated  executive
officers of the Company in FY 1998 and their Harris related  compensation for FY
1997 and FY 1996.

<TABLE>
<CAPTION>
                                          Summary Compensation Table
                                                                                            Long Term Compensation (1)
                                           Annual Compensation                            Awards             Payouts
                          ----------------------------------------------------  -------------------------------------

                                                                       Other                   Securities
                                                                      Annual      Restricted   Underlying               All Other
Name and                  Fiscal                                      Compen-       Stock       Options/       LTIP      Compen-
Principal Position         Year        Salary           Bonus         sation        Awards        SARs       Payouts   sation (3)
------------------------- ------  -------------   -------------  -------------  ------------ ------------  ---------- ------------
<S>                       <C>      <C>             <C>            <C>                                                  <C>          
D. George Harris          1998     $    945,833    $        (2)   $    148,070       -            -            -       $   100,133
   Chairman               1997        1,150,000             (2)           -          -            -            -            55,707
                          1996        1,150,000             (2)           -          -            -            -           135,845

Anthony J. Petrocelli     1998          648,667             (2)           -          -            -            -            61,695
   Vice Chairman          1997          758,000             (2)           -          -            -            -            48,323
                          1996          775,000             (2)           -          -            -            -            98,206

Michael R. Boyce          1998          650,000         332,907           -          -            -            -            32,198
   Chief Operating Officer1997          550,000         441,784           -          -            -            -            22,410
                          1996          550,000         279,043           -          -            -            -            65,284

Donald G. Kilpatrick      1998          420,833         204,284           -          -            -            -            26,009
   General Counsel        1997          400,000         271,095           -          -            -            -            21,128
                          1996          370,000         157,532           -          -            -            -            14,682

Richard J. Donahue        1998          325,001         121,057           -          -            -            -            23,312
   Senior Vice President  1997          275,000         160,649           -          -            -            -            21,838
                          1996          275,000          71,470           -          -            -            -            16,152
</TABLE>


(1)  The named executive  officers did not  participate in any of the long  term
compensation plans offered by HCG.

(2) No bonus  awarded  based on the joint  compensation  agreement  (see  "Joint
Compensation Agreement").

(3)  All Other  Compensation  in FY 1998  consists of Company  contributions  to
     defined  contribution  plans on behalf of the  executive  officer,  imputed
     income on excess  Company-paid  life insurance  premiums and automobile and
     personal  tax  return  allowances.   The  following  table  identifies  and
     quantifies these amounts for the named executive officers in FY 1998:


                             401(K)                             Automobile and
                            Company           Excess Life        Tax Return
Name                      Contribution         Insurance         Allowances
----------------------   ----------------  -----------------  -----------------
D. George Harris          $   29,955        $    15,379        $    54,799
Anthony J. Petrocelli         28,443              8,668             24,584
Michael R. Boyce              13,400              6,707             12,091
Donald G. Kilpatrick          22,600              1,909              1,500
Richard J. Donahue            19,176              3,496                640








                                       51


<PAGE>



Aggregated Warrants/Exercises in FY 1998

     There were no warrants exercised in FY 1998.

Compensation Committee Interlocks and Insider Participation

     The Harris Board of Directors had a  Compensation  Committee  consisting of
six  directors,  two of whom were  designated  by the Chairman and three of whom
were  designated by The  Prudential  Insurance  Company of America  ("Prudential
Insurance"),  Chase Manhattan  Capital  Corporation  ("Chase Capital") and First
Plaza Group Trust ("First Plaza") (collectively, the "Institutional Investors").
Pursuant to the terms of the Stockholders  Agreement which became effective with
the completion of the Recapitalization  among HCG, the Institutional  Investors,
certain  members  of  management  of HCG  and  other  stockholders  of HCG  (the
"Stockholders  Agreement"),  any  increase  in  compensation  of officers of the
Company  required  approval of the  Compensation  Committee.  During FY 1998, D.
George Harris, the former chief executive officer of the Company, and Michael R.
Boyce, the former president and chief operating officer of the Company, and four
former directors,  James T. Beale,  Fred W. Broling,  John D. Burns and Heinn F.
Tomfohrde III served as members of the Compensation  Committee until they ceased
to serve as directors of Harris, effective April 1, 1998, in connection with the
Merger of HCG with IMC.

Joint Compensation Agreement

     D. George Harris, Anthony J. Petrocelli and Richard J. Donahue were parties
to a joint compensation agreement (the "Joint Compensation Agreement") with HCG,
Harris and certain  subsidiaries  of Harris.  The Joint  Compensation  Agreement
contained customary employment terms and provided for a base annual salary and a
bonus  based  on  the  earnings  of  the  Company  before  interest,  taxes  and
depreciation.  The Joint Compensation Agreement was canceled in October 1997 and
a new compensation agreement was entered into between Mr. Harris, Mr. Petrocelli
and HCG, Harris and certain subsidiaries.

Sale Bonuses For Five Key Employees

     During 1997, HCG entered into  arrangements  with each of D. George Harris,
Anthony J.  Petrocelli,  Michael R. Boyce,  Donald G.  Kilpatrick and Richard J.
Donahue  providing for the payment of a sale incentive bonus to such individuals
upon  the  sale  of HCG.  Payments  in the  amount  of  $5,300,000,  $3,710,000,
$650,000,  $400,000 and $650,000  were made to such  persons,  respectively,  in
April 1998 in satisfaction of such arrangements in connection with the Merger of
HCG and IMC.

Severance Payments

     As a result  of the  Merger of HCG and IMC,  Michael  R.  Boyce,  Donald G.
Kilpatrick and Richard J. Donahue ceased employment with HCG. Under the terms of
the Company's severance policy,  payments in the amount of $200,000 and $243,750
were made to Mr.  Kilpatrick  and Mr.  Donahue,  respectively,  in April 1998. A
severance payment of $975,000 was made to Mr. Boyce in April 1998.

                                       52


<PAGE>



Item 12.                        SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
                                                 AND MANAGEMENT

     Harris is a wholly owned  subsidiary of HCG. In connection with the Merger,
HCG became a wholly owned  subsidiary of IMC. The following table sets forth the
beneficial  ownership  of the IMC Common  Stock as of June 1, 1998,  by (i) each
director  of Harris  and Sifto,  (ii) each  executive  officer  named in Item 11
hereof,  and (iii) all current  directors and  executive  officers of Harris and
Sifto as a group.

<TABLE>
<CAPTION>
                                                                       Number of
                                                                       Shares
Name and Address of                                                    Beneficially     Percent of
   Beneficial Owner                                                    Owned              Class

<S>                                                                   <C>                  <C>           <C>
Robert E. Fowler, Jr........................................          648,374              --            (1)
John F. Tancredi............................................             --                --            (1)
J. Bradford James...........................................            1,000              --            (1)
Marschall I. Smith..........................................           95,540              --            (1)
William J. Sichko, Jr.......................................            1,000              --            (1)
Rose Marie Williams.........................................            4,390              --            (1)
Robert F. Clark.............................................             --                --            (1)
Rowland Howe................................................             --                --            (1)
Allan Hamilton..............................................             --                --            (1)
D. George Harris ...........................................             --                --            (1)
Anthony J. Petrocelli ......................................            3,000              --            (1)
Michael R. Boyce............................................             --                --            (1)
Richard J. Donahue..........................................             --                --            (1)
Donald G. Kilpatrick .......................................             --                --            (1)
Directors and executive officers of Harris and Sifto as a group
  (18 persons)..............................................          750,304              --            (1)


(1)  Less than 1%.
</TABLE>

                                       53


<PAGE>



Item 13.          CERTAIN  RELATIONSHIPS  AND  RELATED  TRANSACTIONS

     For descriptions of certain  continuing  transactions with affiliates,  see
Note 10.

     HCG's  wholly  owned  subsidiaries  include  Harris  (see  Note 1),  Harris
Chemical Europe,  Ltd. ("HCEL") and Harris Chemical Group Europe, Inc. ("HCGE").
The  principal  wholly  owned  subsidiaries  of HCEL include  NAMSCO (UK),  Ltd.
("NUK"),  with salt operations in the United Kingdom (Salt Union Ltd. or "SUL"),
Matthes + Weber GmbH  ("M&W"),  with soda  operations  in  Germany,  Harris Soda
Products  (Europe) SAS  ("HSPE")  which is based in France and markets and sells
soda products in Europe,  and Societa Chimica  Larderello S.p.A.  ("SCL"),  with
boron operations in Italy. In addition, certain persons who were stockholders of
HCG  prior to the  Merger  of HCG and IMC  Global  Inc.  ("IMC")  held  minority
ownership interests in Penrice Soda Products Pty Ltd. ("Penrice") prior to their
divestiture  of such  interests as of the  completion  of such Merger,  and such
persons  continue to hold interests in U.S. Silica Company and Harris  Specialty
Chemicals, Inc. These entities are collectively referred to as HCG affiliates.

   On  April  1,  1998,  HCG was  acquired  by IMC and as a  result,  all of the
subsidiaries of HCG, including Harris, became indirect wholly owned subsidiaries
of IMC.

Services Agreement with HCG

     Upon consummation of the  Recapitalization,  Harris entered into a services
agreement  with HCG  pursuant to which  Harris  provides to HCG office space and
certain corporate tax, treasury,  legal and other  administrative  services from
time to time. As compensation for such services, Harris is entitled to receive a
fee for the services provided.
There was no compensation to Harris under this agreement in FY 1998.

Management Agreement with HCG

     Pursuant to the Notes and, prior to its amendment,  the US Credit Facility,
Harris is allowed to pay to HCG an amount not to exceed $750,000 per fiscal year
for the  purpose of  enabling  HCG to pay its actual  operating  expenses in the
ordinary  course of business.  The total amount paid by Harris to HCG in FY 1998
was $750,000.

Arrangements with Affiliates

     SCL is an  Italian  producer  of  specialty  boric  acid and  caustic  soda
products,  and is a subsidiary of HCEL,  which is a subsidiary of HCG. During FY
1994,  the Company  entered  into an agreement  to become a  distributor  of SCL
products in North America.  SCL also distributes certain boron chemical products
of the Company in Europe.  In FY 1997,  NACC entered  into a technical  services
agreement  with  SCL for  $250,000  annually  to  compensate  SCL for  providing
technical  expertise  and  assistance  to NACC in  specialty  boron  production.
Additionally,  in FY 1998,  an  agreement  was reached  whereby  NACC  purchased
trademarks from SCL for $2,600,000. See "Business--Boron Chemicals."

     In FY 1996,  HCG entered into a services  agreement  with Penrice.  Certain
persons  who were  stockholders  of HCG owned an indirect  minority  interest in
Penrice, prior to the merger of HCG and IMC. The agreement provides that Penrice
will pay HCG 200,000 Australian  dollars per year for management  consulting and
operating support services.
HCG received $145,000 in FY 1998.

     The Company markets its soda products in Europe through HSPE. Sales to HSPE
in FY 1998 were $305,000.

North American Terminals, Inc. Asset Sale and Purchase

     In 1993,  NACC entered into an agreement to sell its port facilities in San
Diego to SDT Capital,  Inc. ("SDT") for $5.5 million,  and lease such facilities
back from SDT.  SDT's  president is a relative of a former officer of Harris who
was a shareholder  in HCG.  Annual rentals under the agreement were $1.7 million
per year payable  quarterly for the initial  four-year  period and the first and
second five-year option periods.  The agreement provided that annual rentals for
the first and second option  periods would be increased for any increases in the
seven-year U.S. Treasury note rate.  Additional rents were due at $3 per ton for
shipments  in excess of  850,000  tons per year  through  the end of the  second
option period. The agreement also provided for three additional five-year option
periods and a final six-year option period with rents based on fair market value
rents as agreed to by SDT and the Company. The Company had the

                                       54


<PAGE>



option to  repurchase  the  facilities  at the end of either the  initial  lease
period  (December 31, 1997) or any renewal option period for the greater of $7.0
million or fair market value.  During FY 1998, the Company  exercised its option
to repurchase the port facilities.  On December 31, 1997, the Company reached an
agreement as to the fair market value of the facilities,  $9.5 million, and paid
that amount to SDT in satisfaction of its obligations under the lease agreement.

Tax Sharing Agreement

     Pursuant to a Tax Sharing  Agreement  entered into in  connection  with the
Consolidation,  HCG agreed to file consolidated  federal income tax returns with
Harris and its U.S. subsidiaries. According to the Tax Sharing Agreement, Harris
agreed  generally to reimburse HCG in amounts designed to approximate the amount
of income taxes that Harris and its wholly owned subsidiaries (other than Sifto)
would have paid had they filed  consolidated  federal  income tax  returns  (and
analogous state and local returns) separate from HCG.

The Stockholders Agreement

     Pursuant to the terms of the  Stockholders  Agreement,  each party  thereto
agreed to vote all of the shares of HCG Common Stock owned by such party (i) for
the  maintaining  of the number of  directors  of HCG at eleven and (ii) for the
election of a slate of  directors so that at all times five  directors  would be
designated by D. George Harris,  three  directors would be designated by Anthony
J.  Petrocelli  and two  directors  would  be  designated  by the  Institutional
Investors.

     The Stockholders  Agreement contained certain rights and obligations of HCG
and  the  stockholders  thereof  with  respect  to HCG  Common  Stock,  such  as
preemptive  rights of the stockholders  with respect to certain issuances of HCG
capital stock, rights of first offer of HCG and the stockholders with respect to
certain  sales  of HCG  Common  Stock  by any  stockholder,  rights  of  certain
stockholders  to sell  HCG  Common  Stock  to HCG at  certain  times or upon the
occurrence  of certain  events,  rights of HCG to purchase HCG Common Stock from
certain HCG  stockholders  at certain  times or upon the  occurrence  of certain
events and rights of the stockholders to cause the sale of HCG Common Stock held
by other  stockholders,  or  participate in the sale of HCG Common Stock held by
other  stockholders,  upon the occurrence of certain  events.  The  Stockholders
Agreement  also contained  certain  covenants  which  prohibited HCG from taking
certain actions,  such as amending HCG's Certificate of Incorporation,  entering
into certain  transactions  with  affiliates  of HCG,  disposing of  significant
assets,   incurring  indebtedness  above  specified  levels  and  entering  into
transactions  which  would  cause a change of control of HCG,  or require HCG to
take certain actions, unless the consent of the holders of specified percentages
of the HCG Common Stock was obtained.  Such rights and obligations  were subject
to  various   restrictions,   limitations   and  exceptions  set  forth  in  the
Stockholders Agreement.

   In connection with the Merger of HCG and IMC, the Stockholders  Agreement was
amended to clarify  that the rights of certain  Stockholders  to sell HCG Common
Stock to HCG at certain times or upon the occurrence of certain events would not
be triggered in the event of a merger  involving HCG. Upon the completion of the
Merger of HCG and IMC, the Stockholders Agreement terminated.

The Registration Rights Agreement

   Certain of the parties to the  Stockholders  Agreement were also parties to a
Registration  Rights  Agreement  (the  "Registration  Rights  Agreement")  which
provided that upon the earlier of an initial public offering of HCG Common Stock
and the fourth anniversary of the Recapitalization,  the Institutional Investors
holding  10% of the HCG  Common  Stock  would  have the  right,  for five  years
thereafter,  to demand that HCG  register  at least 10% of the HCG Common  Stock
held by them under the  Securities  Act of 1933, as amended.  The  Institutional
Investors  were  entitled to  exercise  such right six times (no more than three
times  for  long  form   registrations   and  the   remainder   for  short  form
registrations)  in which HCG would have been  obligated to pay all  registration
expenses. The Institutional  Investors also had rights to an unlimited number of
"piggyback"  registrations.  All of such  registration  rights  were  subject to
various  restrictions,  limitations and exceptions set forth in the Registration
Rights  Agreement.  The  Registration  Rights  Agreement was terminated upon the
Merger of HCG and IMC.



                                       55


<PAGE>



Item 14.          EXHIBITS,  FINANCIAL  STATEMENT  SCHEDULES  AND
                  REPORTS  ON  FORM  8-K

(a)  Set forth below is a list of documents filed as part of this report.

1.   Financial Statements included in Item 8.

<TABLE>
<CAPTION>
   Description                                                                                   Page No.

     <S>                                                                                           <C>
     Report of Coopers & Lybrand L.L.P., Independent Accountants                                   25

     Consolidated Balance Sheets as of March 29, 1997 and March 28, 1998                           26

     Consolidated Statements of Operations for the three fiscal years ended March 28, 1998         27

     Consolidated Statements of Common Stockholder's Equity (Deficit) for the three fiscal
     years ended March 28, 1998                                                                    28

     Consolidated Statements of Cash Flows for the three fiscal years ended March 28, 1998         29

     Notes to Consolidated Financial Statements                                                    31
</TABLE>


2.   The following exhibits are required by Item 601 of Regulation S-K.

<TABLE>
<CAPTION>
Exhibit No.   Description of Exhibit
   <S>        <C>   
    2.1       Consolidation Agreement among Harris Chemical Group, Inc. ("HCG"), Harris, NAMSCO Inc.
              ("NAMSCO"), NAMSCO Acquisition Corp., GSL Corporation ("GSL"), GSL Acquisition Corp., North
              American Chemical Company ("NACC"), and NACC Acquisition Corp., dated as of August 5, 1993.
              (1)
    2.2       Agreement of Merger dated as of August 5, 1993 among HCG, NACC Acquisition Corp. and NACC.
              (1)
    2.3       Agreement of Merger dated as of August 5, 1993 among HCG, NAMSCO Acquisition Corp. and
              NAMSCO. (1)
    2.4       Agreement of Merger dated as of August 5, 1993 among HCG, GSL Acquisition Corp. and GSL. (1)
    2.5       Certificate of Ownership and Merger, merging GSL Holdings, Inc. into GSL Corporation. (4)
    2.6       Agreement and Plan of Merger, dated as of December 11, 1997, by and among HCG, IMC Global Inc.
              and IMC Merger Sub Inc. (10)
    3.1       Certificate of Incorporation of Harris together with amendments thereto. (1)
    3.2       By-Laws of Harris as amended June 28, 1996. (6)
    4.1       Senior Secured Indenture dated as of October 15, 1993 by and between Harris, the Subsidiary
              Guarantors named therein and the Bank of New York. as trustee. (2)
    4.2       Senior Subordinated Indenture dated as of October 15, 1993 by and between Harris, the Subsidiary
              Guarantors named therein and the IBJ Schroder Bank & Trust Company. as trustee. (2)
    4.3       Senior Secured Indenture dated as of October 15, 1993 by and between Sifto, Harris, the Subsidiary
              Guarantors named therein and Chemical Bank, as trustee. (2)
    4.4       Deed of Trust and Mortgage dated as of October 15, 1993 between Sifto and TD Trust Company, as
              trustee. (2)
    4.5       Certificate of Incorporation of Sifto together with amendments thereto. (1)
    4.6       Restated Certificate of Incorporation of NAMSCO. (1)
    4.7       Restated Certificate of Incorporation of North American Salt Company ("NASC") together with
              amendments thereto. (1)
    4.7.1     Certificate of Amendment to Restated Certificate of Incorporation of NASC.
    4.8       Restated Certificate of Incorporation of NACC. (1)
    4.8.1     Certificate of Amendment to Restated Certificate of Incorporation of NACC.



                                       56


<PAGE>



Exhibit No.   Description of Exhibit
    4.9       Restated Certificate of Incorporation of GSL. (1)
    4.10      Restated Certificate of Incorporation of Great Salt Lake Minerals Corporation ("GSLMC") together with
              amendments thereto. (1)
    4.10.1    Certificate of Amendment to Restated Certificate of Incorporation of GSLMC.
    4.11      Certificate of Incorporation of Carey Salt Company ("Carey") together with amendments thereto. (1)
    4.12      Certificate of Incorporation of The Hutchinson & Northern Railway Company ("H&N") together with
              amendments thereto. (1)
    4.13      Articles of Incorporation of North American Terminals, Inc. ("NATI") together with amendments
              thereto.(1)
    4.14      By-Laws of Sifto. (1)
    4.15      By-Laws of NAMSCO. (1)
    4.16      By-Laws of NASC (formerly American Salt Company). (1)
    4.17      By-Laws of NACC. (1)
    4.18      By-Laws of GSL. (1)
    4.19      By-Laws of GSLMC. (1)
    4.20      By-Laws of Carey (formerly Carey Louisiana Inc.). (1)
    4.21      By-Laws of H&N. (1)
    4.22      By-Laws of NATI. (1)
   10.1       Recapitalization Agreement dated as of October 18, 1993, between Harris, HCG Recapitalization Corp.
              and the other persons named therein. (2)
   10.2       Recapitalization Merger Agreement dated as of October 18, 1993, between HCG and the HCG
              Recapitalization Corp. (2)
   10.3       Services Agreement dated as of October 28, 1993 between Harris and HCG. (2)
   10.4       Tax Sharing Agreement dated as of September 24, 1993 among HCG, Harris and other signatories
              thereto. (2)
   10.5       Harris Chemical Group Incentive Compensation Plan.
   10.6       Lease dated June 17, 1985 between Minister of Natural Resources for the Province of Ontario and
              Domtar Inc. (predecessor in interest to Sifto) together with amendments thereto. (1)
   10.7       Lease dated June 17, 1985 between Minister of Natural Resources for the Province of Ontario and
              Domtar Inc. (predecessor in interest to Sifto) together with amendments thereto. (1)
   10.8       Lease dated April 16, 1986 between Minister of Northern Development and Mines for the Province of
              Ontario and Domtar Inc. (predecessor in interest to Sifto) together with amendments thereto. (1)
   10.9       Sodium Chloride Agreement dated December 1, 1988 between Minister of Energy and Mines for the
              Province of Saskatchewan and Domtar Inc. (predecessor in interest to Sifto) together with amendments
              thereto. (1)
   10.10      Lease dated July 2, 1983 between Minister of Mines and Energy for the Province of Nova Scotia and
              Domtar Inc. (predecessor in interest to Sifto) together with amendments thereto. (1)
   10.11      Lease dated July 2, 1983 between Minister of Mines and Energy for the Province of Nova Scotia and
              Domtar Inc. (predecessor in interest to Sifto) together with amendments thereto. (1)
   10.12      Salt and Surface Lease dated June 21, 1961 between John Taylor Caffery, et al., and Carey with
              amendments thereto. (1)
   10.13      Distribution Agreement dated December 18, 1988 between Cargill, Incorporated and Domtar Industries
              Inc., Sifto Salt Division (predecessor in interest to Sifto). (1)
   10.14      Master Purchase and Lease Agreement between NACC and KENETECH Energy Systems, Inc. dated
              October 29, 1993, Equipment Schedule No.1 dated November 4, 1993 and Equipment Schedule No. 2
              dated February 28, 1994. (4)
   10.15      Acquisition Agreement between NACC and NaTec Resources, Inc. dated April 5, 1995. (5)
   10.16      Amendment No. 1 to Acquisition Agreement between NACC and NaTec Resources, Inc. dated July 31,
              1995. (7)
   10.17      Form of Participation Agreements dated as of July 15, 1996 among NACC, Harris, Owner Participant
              and U.S. Trust Company of California, N.A., as Owner Trustee. (8)
   10.18      Form of Annex A to Participation Agreement. (8)
   10.19      Form of Facility Lease dated as of July 15, 1996 between U.S. Trust Company of California, N.A., as
              Owner Trustee as Lessor, and NACC, as Lessee. (8)
   10.20      Form of Guaranty Agreement dated as of July 15, 1996 by Harris for the benefit of Owner Participants
              and U.S. Trust Company of California, N.A., as Owner Trustee. (8)

                                       57


<PAGE>



Exhibit No.   Description of Exhibit
   10.21      US $130,000,000 Credit and Guarantee Agreement dated as of October 15, 1993, as amended and
              restated as of February 27, 1997. (9)
   10.21.1    Assignment and Acceptance of US $130,000,000 Credit and Guarantee Agreement dated as of April 1,
              1998.
   10.21.2    Amendment No. 1 and Consent to US $130,000,000 Credit and Guarantee Agreement, dated May 22,
              1998.
   10.22      Compensation agreement dated October 31, 1997 between D. George Harris, Anthony J. Petrocelli and
              HCG.
   10.23      Change of control arrangement dated April 25, 1997 between Richard J. Donahue and HCG.
   10.24      Sale incentive bonus arrangement dated November 11, 1997 between Richard J. Donahue and HCG.
   10.25      Sale incentive bonus arrangement dated November 11, 1997 between Michael R. Boyce and HCG.
   10.26      Sale incentive bonus arrangement dated November 11, 1997 between Donald G. Kilpatrick and HCG.
   10.27      Severance and resignation arrangement dated March 30, 1998 between Michael R. Boyce and HCG.
   21         Subsidiaries of Harris.
-----------------------------------------------------------------------------------------------------------------------


   (1)        Incorporated by reference from the registration statement on Form S-1, as amended (Registration No.
              33-67546) filed by Harris and Sifto.

   (2)        Incorporated  by reference from the quarterly  report on Form 10-Q
              for the second quarter ended September 23, 1993 filed by Harris.

   (3)        Not used.

   (4)        Incorporated by reference from the annual report on Form 10-K for the fiscal year ended March 26,
              1994.

   (5)        Incorporated by reference from the annual report on Form 10-K for the fiscal year ended March 25,
              1995.

   (6)        Incorporated by reference from the annual report on Form 10-K for the fiscal year ended March 29,
              1997 filed by Harris.

   (7)        Incorporated  by reference from the quarterly  report on Form 10-Q
              for the second quarter ended September 23, 1995 filed by Harris.

   (8)        Incorporated by reference from the quarterly report on Form 10-Q for the first quarter ended June 29,
              1996 filed by Harris.

   (9)        Incorporated by reference from the current report on Form 8-K dated February 27, 1997 filed by Harris.

   (10)       Incorporated by reference from the current report on Form 8-K dated April 1, 1998 filed by Harris.
</TABLE>

(b)  A report on Form 8-K  dated  April 1,  1998 was  filed  reporting  on HCG's
     Merger with IMC.

     A report on Form 8-K dated May 28, 1998 was filed reporting on Harris' and
     Sifto's Offer to Purchase the outstanding senior notes.



                                       58


<PAGE>



                                                      SIGNATURES

Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  the  registrant  has duly  caused  this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

                                             Harris Chemical North America, Inc.
                                             (Registrant)



      June 26, 1998                                /s/ Robert E. Fowler, Jr.
                                             -----------------------------------
                                                     Robert E. Fowler, Jr.
                                                     Chairman and Director
                                                 (Principal Executive Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following  persons on behalf of the  registrant and
in the capacities and on the dates indicated:


<TABLE>
     <S>            <C>                                <C>            <C> 
     June 26, 1998  /s/ Robert E. Fowler, Jr.          June 26, 1998  /s/ J. Bradford James
                    ------------------------------                    ------------------------------
                        Robert E. Fowler, Jr.                             J. Bradford James
                        Chairman and Director                               Vice President
                                                                      (Principal Financial and Accounting Officer)


     June 26, 1998  /s/ Marschall I. Smith             June 26, 1998  /s/ William J. Sichko, Jr..
                    ------------------------------                    ------------------------------
                        Marschall I. Smith                                William J. Sichko, Jr.
                        Vice President and                                      Director
                    Assistant Secretary and Director


     June 26, 1998  /s/ Rose Marie Williams
                    ------------------------------
                        Rose Marie Williams
                       Secretary and Director
</TABLE>
























                                       59


<PAGE>



SUPPLEMENTAL  INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION
15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO
SECTION 12 OF THE ACT.

No  annual  report  covering  FY 1998  or  proxy  materials  have  been  sent to
security-holders.





















































                                       60


<PAGE>