UTAH INTERNATIONAL INC. 550 CALIFORNIA STREET SAN FRANCISCO, CALIFORNIA 94104 September 16, 1975 To Our Shareholders: Since the time of our last quarterly report to you, dated July 15, 1975, a series of events have taken place which directly affect Utah International. Some of these events are very favorable from Utah's standpoint, while others are not. During this same period, the quoted price of Utah's common stock has moved sharply lower, with an unusually high volume of shares traded. Beginning the year at $39 1/2 and rising to a high of $74 7/8 earlier this summer, the price at the time of this writing had declined to $45 1/8. Recognizing the uncertainties created for stockholders by the combination of unplanned events and declining stock values, we consider it appropriate at this time to share with you a more complete description and appraisal of recent occurrences than might be available through your normal information sources. Expropriation of Marcona's Peruvian Operations On July 25, 1975 the Peruvian government expropriated the iron ore mining properties and facilities of Marcona Mining Company in Peru. Marcona Mining Company is a wholly owned subsidiary of Marcona Corporation which, in turn, is 46%-owned by Utah. The nationalization of large foreign interests in Peru by the military government there has not been an uncommon practice during the past several years. In recognition of this, and prior to the recent expropriation announcement, Marcona Mining Company had been conducting negotiations with the government in an attempt to transfer the company's net assets in Peru to an agency of the Peruvian government for an equitable consideration. Although the Peruvian mine operated at a loss during the last two years, historically it has been a profitable investment. Based on a relatively small initial capital outlay in 1953, the early mining operation generated sufficient income for a number of expansion programs that followed, raising the annual production capacity to the current level of 10 million tons. Additionally, Marcona has long taken pride in the role it has played in bringing social and economic benefits to the people at its Peruvian operations. Upon notice of the expropriation, Marcona indicated that it would use every appropriate legal recourse to protect its rights; but in view of the uncertainties regarding any compensation for these assets, Utah elected to write off the full book value of its share of these investments. Accordingly, an extraordinary loss of $19,071,000 was recorded in the third quarter. The mine expropriation will also eliminate Marcona's profitable ancillary activities in the marketing and shipping of the Peruvian ore unless the Peruvian government and Marcona can agree to a restoration of all or part of these functions. The resulting excess shipping capacity, which includes Marcona-owned vessels as well as chartered ships, has put Marcona's remaining operations into a loss position until the ships can be redeployed and the shipping market strengthens. On August 29, a little over a month after the expropriation, announcements came from Peru that its President had been peacefully deposed and replaced by one generally thought to be more moderate. Subsequently, a number of changes have been made in the Peruvian cabinet. It would be premature to predict the extent to which this change might improve Marcona's position with respect to reaching an equitable settlement for its assets. However, we can report that the new government has asked to meet with representatives of Marcona Mining Company to discuss a settlement.