10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2008

Commission file number 1-10351

Potash Corporation of Saskatchewan Inc.

(Exact name of the registrant as specified in its charter)

Canada
(State or other jurisdiction of
incorporation or organization) N/A
(I.R.S. employer
identification no.)

Suite 500, 122 – 1^st Avenue South

Saskatoon, Saskatchewan, Canada S7K 7G3

306-933-8500

(Address and telephone number of the registrant’s principal executive offices)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of exchange on which registered
Common Shares, No Par Value	New York Stock Exchange

The Common Shares are also listed on the Toronto Stock Exchange in Canada

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

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

               Yes þ     No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

               Yes o     No þ

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 þ     No o

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 the 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.     þ

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

               Large accelerated filer þ          Non-accelerated filer o

               Accelerated filer o                Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

               Yes o     No þ

At June 30, 2008, the aggregate market value of the 306,386,166 Common Shares held by non-affiliates of the registrant was approximately $70,030,685,962.62. At February 20, 2009, the registrant had 295,240,247 Common Shares outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s Financial Review Annual Report for the fiscal year ended December 31, 2008 (the “2008 Financial Review”), attached as Exhibit 13, are incorporated by reference into Part II.

Portions of the registrant’s Proxy Circular for its Annual and Special Meeting of Shareholders to be held on May 7, 2009 (the “2009 Proxy Circular”), attached as Exhibit 99(a), are incorporated by reference into Part III.

POTASH CORPORATION OF SASKATCHEWAN INC.

Form 10-K
Annual Report
For the Fiscal Year Ended December 31, 2008

Table of Contents

FORWARD-LOOKING STATEMENTS		1
PART I		3
Item 1.	Business	3
	General	3
	Potash Operations	4
	Phosphate Operations	9
	Nitrogen Operations	13
	Marketing	14
	Distribution and Transportation	16
	Competition	18
	Employees	18
	Royalties and Certain Taxes	19
	Environmental Matters	19
	Our Executive Officers	24
	Presentation of Financial Information	25
	Where You Can Find More Information	25
Item 1A.	Risk Factors	25
Item 1B.	Unresolved Staff Comments	28
Item 2.	Properties	28
Item 3.	Legal Proceedings	28
Item 4.	Submission of Matters to a Vote of Security Holders	29
PART II		30
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	30
Item 6.	Selected Financial Data	31
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	31
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	31
Item 8.	Financial Statements and Supplementary Data	31
Item 9.	Changes In and Disagreements With Accountants on Accounting and Financial Disclosure	31
Item 9A.	Controls and Procedures	32
Item 9B.	Other Information	32
PART III		34
Item 10.	Directors, Executive Officers and Corporate Governance	34
Item 11.	Executive Compensation	34
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	34
Item 13.	Certain Relationships and Related Transactions, and Director Independence	34
Item 14.	Principal Accounting Fees and Services	34
PART IV		35
Item 15.	Exhibits and Financial Statement Schedules	35
	List of Documents Filed as Part of this Report	35
SIGNATURES		41
EXHIBIT 10(N)
EXHIBIT 10(R)
EXHIBIT 10(U)
EXHIBIT 10(V)
EXHIBIT 10(W)
EXHIBIT 10(X)
EXHIBIT 10(Z)
EXHIBIT 10(AA)
EXHIBIT 10(JJ)
EXHIBIT 10(PP)
EXHIBIT 10(QQ)
EXHIBIT 11
EXHIBIT 12
EXHIBIT 13
EXHIBIT 21
EXHIBIT 23
EXHIBIT 31(A)
EXHIBIT 31(B)
EXHIBIT 32
EXHIBIT 99(A)
EXHIBIT 99(B)

(i)

Forward-Looking Statements

This document, including the documents incorporated by reference, contains “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 that relate to future events or our future financial performance. Statements containing words such as “could,” “expect,” “may,” “anticipate,” “believe,” “intend,” “estimate,” “plan” and similar expressions constitute forward-looking statements. These statements are based on certain factors and assumptions as set forth in this document and the documents incorporated by reference herein, including foreign exchange rates, expected growth, results of operations, performance, business prospects and opportunities and effective income tax rates. We consider these factors and assumptions to be reasonable based on information currently available.

Forward-looking statements are subject to important risks and uncertainties that are difficult to predict. The results or events predicted in forward-looking statements may differ materially from actual results or events. Some of the factors that could cause actual results or events to differ from current expectations include the following:

•  variances from our assumptions with respect to foreign exchange rates, expected growth, results of operations, performance, business prospects and opportunities, and effective income tax rates;

•  fluctuations in supply and demand for fertilizer, including fluctuations as a result of economic or political conditions in our markets, which, among other things, can cause volatility in the prices of our fertilizer products;

•  fluctuations in the prices and availability of other raw materials, including sulfur, which is a primary input in our phosphate operations;

•  fluctuations in the cost and availability of transportation and distribution for our raw materials and products, including railcars and ocean freight;

•  changes in competitive pressures, including pricing pressures;

•  the current global financial crisis and conditions and changes in credit markets;

•  the results of negotiations with China and India;

•  timing and amount of capital expenditures;

•  volatility in the price of natural gas, which is the primary raw material used for our nitrogen products, and risks associated with our continued ability to manage natural gas costs in the United States through hedging activities;

•  changes in capital markets and corresponding effects on our investments, including our investments in auction rate securities and changes in currency and exchange rates;

•  unexpected or adverse weather conditions, which can impact demand for fertilizer and timing of fertilizer sales during the year;

•  unexpected geological conditions, including water inflows;

•  imprecision in reserve estimates;

•  the outcome of legal proceedings;

•  strikes or other forms of work stoppage or slowdown;

•  changes in, and the effects of, government policy and regulations, including environmental regulations and regulations and actions affecting our transportation and sale of natural gas, which could increase our costs of compliance and otherwise affect our business;

•  acquisitions we may undertake in the future; and

•  earnings, exchange rates and the decisions of taxing authorities, all of which could affect our effective tax rates.

We sell to a diverse group of customers both by geography and by end product. Market conditions will vary on a year-over-year basis, and sales can be expected to shift from one period to another.

FORM 10-K ï Forward-Looking Statements Page  1

In addition to the factors mentioned above, see “Risk Factors” under Item 1A for a description of other factors affecting forward-looking statements. As a result of these and other factors, there is no assurance that any of the events, circumstances or results anticipated by forward-looking statements included or incorporated by reference into this document will occur or, if they do, of what impact they will have on our business or on our results of operations and financial condition.

Forward-looking statements are given only as at the date of this document or the document incorporated by reference herein, and we disclaim any obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

FORM 10-K ï Forward-Looking Statements Page  2

Part I

 Item 1. Business

General

Potash Corporation of Saskatchewan Inc. is a corporation organized under the laws of Canada. As used in this document, the term “PCS” refers to Potash Corporation of Saskatchewan Inc. and the terms “we,” “us,” “our,” “PotashCorp” and the “Company” refer to PCS and its direct and indirect subsidiaries, individually or in any combination, as applicable.

We are the world’s largest integrated fertilizer and related industrial and feed products company. We are the largest producer of potash worldwide by capacity. In 2008, we estimate our potash operations represented 17% of global production and 22% of global potash capacity. We are the third largest producer of phosphates worldwide by capacity. In 2008, we estimate our phosphate operations produced 5% of world phosphoric acid production. We are the third largest nitrogen producer worldwide by ammonia capacity. In 2008, we estimate our nitrogen operations produced 2% of the world’s ammonia production.

Our potash is produced from six mines in Saskatchewan and one mine in New Brunswick. Of these mines, we own and operate five in Saskatchewan and one in New Brunswick.

Our phosphate operations include the manufacture and sale of solid and liquid phosphate fertilizers, animal feed supplements and industrial acid, which is used in food products and industrial processes. We believe that our North Carolina facility is the world’s largest integrated phosphate mine and processing plant. We also have a phosphate mine and two mineral processing plant complexes in northern Florida and six phosphate feed plants in the United States. In 2008, we sold our phosphate feed plant located in Brazil. We can produce a variety of phosphate products at our Geismar, Louisiana facility.

Our nitrogen operations involve the production of nitrogen fertilizers and nitrogen feed and industrial products, including ammonia, urea, nitrogen solutions, ammonium nitrate and nitric acid. We have nitrogen facilities in Georgia, Louisiana, Ohio and Trinidad.

We are organized under the laws of Canada. Our principal executive offices are located at 122 – 1^st Avenue South, Suite 500, Saskatoon, Saskatchewan, Canada S7K 7G3, and our telephone number is (306) 933-8500.

History

PCS is a corporation continued under the Canada Business Corporations Act and is the successor to a corporation without share capital established by the Province of Saskatchewan in 1975. Between 1976 and 1990, we acquired substantial interests in the Saskatchewan potash industry. We purchased the Cory mine in 1976, the Rocanville and Lanigan mines in 1977, and, by 1990, 100% of the Allan mine when we acquired all of the outstanding shares of Saskterra Fertilizers Ltd.

In 1989, the Province of Saskatchewan privatized PCS. While the Province initially retained an ownership interest in PCS, this interest had been reduced to zero by the end of 1993. Since 1993, we have made the following acquisitions of significance to the development of our Company:

•  the New Brunswick potash mine and port facilities and our Patience Lake solution mine in Saskatchewan in 1993;

•  PCS Phosphate Company, Inc. (formerly Texasgulf Inc.) and White Springs Agricultural Chemicals, Inc., phosphate fertilizer and feed producers, in 1995;

•  Arcadian Corporation, a producer of nitrogen fertilizer, industrial and feed products, in 1997;

FORM 10-K ï Part I Page  3

•  PCS Cassidy Lake, a potash mill facility located at Clover Hill, New Brunswick, in 1998;

•  approximately 9% of the shares of Israel Chemicals Ltd. (“ICL”) pursuant to a public offering by the State of Israel in 1998. In June 2005, we acquired twenty-one million additional shares in ICL, increasing our ownership interest to 10%. In October 2008, we acquired 14.3 million additional shares in ICL, increasing our ownership interest to 11%;

•  PCS Purified Phosphates (formerly a joint venture we had with Albright & Wilson Americas Inc.), a phosphoric acid joint venture, in 2000;

•  20% of the shares of Sociedad Química y Minera de Chile S.A. (“SQM”), a Chilean specialty fertilizer, iodine and lithium company, in transactions in October 2001 and April and May of 2002. In 2004, we sold a portion of this investment and subsequently acquired ICL’s entire interest in SQM, resulting in our ownership of approximately 25% of the outstanding equity of SQM. In October and December 2006 and July 2007, we increased our ownership interest to 32%;

•  26% of the shares of Arab Potash Company (“APC”) from Jordan Investment Corporation, an arm of the Jordanian government, in October of 2003. In June 2005, we acquired one million additional shares in APC and in April 2006, we acquired 220,100 additional shares in APC, increasing our ownership interest to 28%; and

•  approximately 10% of the shares of Sinofert Holdings Limited (“Sinofert”), a vertically-integrated fertilizer company and a subsidiary of Sinochem Corporation, in July 2005. In February 2006, we exercised an option to acquire an additional 10% of the shares of Sinofert, increasing our ownership interest to 20%. During July 2007, our ownership interest was diluted to approximately 19% due to the issuance of shares by Sinofert. In 2008, we acquired a total of 385.9 million additional shares of Sinofert, increasing our ownership interest to 22%.

Potash Operations

Our potash operations include the mining and production of potash, which is predominantly used as fertilizer.

Properties

All potash produced by the Company in Saskatchewan is in the southern half of the Province, where extensive potash deposits are found. The potash ore is contained in a predominantly rock salt formation known as the Prairie Evaporite, which lies about 1,000 metres below the surface. The evaporite deposits, which are bounded by limestone formations, contain the potash beds of approximately 2.4 to 5.1 metres thickness. Three potash deposits of economic importance occur in the Province, the Esterhazy, Belle Plaine and Patience Lake Members. The Patience Lake Member is mined at the Lanigan, Allan, Patience Lake and Cory mines, and the Esterhazy Member is mined at the Rocanville and Esterhazy mines.

Under a mining and processing agreement effective through December 31, 2026 and subject to available reserves, Mosaic Potash Esterhazy Limited Partnership (“Mosaic”) mines and processes our mineral rights at the Esterhazy mine. We have the option to terminate this agreement every five years. The next opportunity to terminate is December 31, 2011, for which notice must be given no later than June 30, 2011. Mosaic has the option to abandon the mine at any time after December 31, 2011, thus terminating the mining and processing agreement. Following the expansion at Esterhazy, which was completed in 2007, the maximum finished product we are permitted to take each year under the mining and processing agreement is 1,313,000 tonnes and the minimum required amount is 453,600 tonnes. For the year ending December 31, 2009, we have notified Mosaic that we require 1,125,000 tonnes of finished product. Water inflow at the Esterhazy mine has continued, to a greater or lesser degree, since December 1985. We share, on an annual basis, in such water inflow remediation costs at the Esterhazy mine. See “Production” and “Reserves” tables for additional information.

We also produce potash at our mine near Sussex, New Brunswick from the flank of an elongated salt structure. We also hold an interest in certain oil and gas rights in the vicinity of the New Brunswick mine. Natural gas has been discovered and we, in conjunction with Corridor Resources Inc., have supplied the New Brunswick facility with natural gas to meet its fuel needs since 2003. During exploration for natural gas in the vicinity of the Sussex division, potash was detected to the south and east of existing mine operations (referred

FORM 10-K ï Part I Page  4

to as Penobsquis), a new area of potash mineralization called the Picadilly deposit. Enough detailed exploration (3D seismic and drilling) took place to delineate a potash resource large enough to warrant mine design and capital cost estimate studies. These studies were completed by mid-2007 and in July 2007, the Company announced plans for a new potash mine and expanded milling facility at the New Brunswick site. Construction of this new mining facility is proceeding.

We control the right to mine 652,508 acres of land in Saskatchewan. Included in these holdings are mineral rights to 546,203 acres contained in blocks around the six mines in which we have an interest, of which acres approximately 34% we own, approximately 51% are under lease from the Province of Saskatchewan and approximately 15% are leased from other parties. Our remaining 106,305 acres are located elsewhere in Saskatchewan. Our leases with the Province of Saskatchewan are for 21 year terms, renewable at our option. Our significant leases with other parties are also for 21 year terms. Such leases are renewable at our option, providing generally that production is continuing and that there is continuation of the applicable Crown lease. In New Brunswick, we mine pursuant to a mining lease with the Province of New Brunswick. We control the right to mine 58,263 acres of land in New Brunswick. The lease is for a term of 21 years from 1978 with renewal provisions for three additional 21 year periods. This lease was renewed effective June 13, 1999.

The following map shows the location of our Canadian mining operations and Esterhazy.

Production

We produce potash using both conventional and solution mining methods. In conventional operations, shafts are sunk to the ore body and mining machines cut out the ore, which is lifted to the surface for processing. In solution mining, the potash is dissolved in warm brine and pumped to the surface for processing. Eleven grades of potash are produced to suit different preferences of the various markets.

In 2008, our conventional potash operations (excluding Esterhazy) mined 23.119 million tonnes of ore at an average grade of 22.88% potassium oxide (“K₂O”). In 2008, our potash production from all our operations (including Esterhazy) consisted of 8.697 million tonnes of potash (“KCl” or “finished product”) with an average grade of 60.99% K₂O, representing 47% of North American production.

Our present annual potash capacity is approximately 13.249 million tonnes KCl, which includes maximum annual production under the mining and processing agreement with Mosaic of 1,313,000 tonnes at Esterhazy. In 2008, our capacity represented an estimated 56% of the North American total capacity. We allocate production among our mines on the basis of various factors, including cost efficiency and the grades of product that can be produced. The Patience Lake mine, which was originally a conventional underground

FORM 10-K ï Part I Page  5

mine, now employs a solution mining method. The other Saskatchewan mines we own or in which we have an interest employ conventional underground mining methods.

The New Brunswick mine is a conventional cut and fill underground mining operation. In addition to potash production, this mine also produced 0.64 million tonnes of sodium chloride (salt) in 2008. We continue to incur costs at the New Brunswick division in relation to management of a brine inflow.

The following table sets forth, for each of the past three years, the production of ore, grade and finished product for each of our mines.

	Annual
	Capacity		2008 Production						2007 Production						2006 Production
	Finished						Finished						Finished						Finished
	Product		Ore				Product		Ore				Product		Ore				Product
	(Millions		(Millions		Grade		(Millions		(Millions		Grade		(Millions		(Millions		Grade		(Millions
	of tonnes)		of tonnes)		% K2O		of tonnes)		of tonnes)		% K2O		of tonnes)		of tonnes)		% K2O		of tonnes)
Lanigan		3.828		7.688		20.16		2.141		7.201		20.07		1.907		5.416		20.16		1.471
Rocanville		3.044		8.086		24.81		2.834		7.657		24.26		2.647		5.675		23.99		1.897
Allan		1.885		3.213		24.63		1.093		4.906		25.66		1.744		2.984		25.14		0.992
Cory		1.361		1.680		22.49		0.420		2.672		24.20		0.768		2.545		25.12		0.772
Patience Lake(1)		1.033		–		–		0.282		–		–		0.257		–		–		0.190
Esterhazy(2)		1.313		–		–		1.125		–		–		1.043		–		–		0.953
New Brunswick		0.785		2.452		23.01		0.802		2.427		22.89		0.793		2.273		23.03		0.743
Totals		13.249		23.119				8.697		24.863				9.159		18.893				7.018

(1)	Solution mine.
(2)	Product tonnes received at Esterhazy are based on a mining and processing agreement with Mosaic.

The mining of potash is a capital-intensive business subject to the normal risks and capital expenditure requirements associated with mining operations. The processing of ore may be subject to delays and costs resulting from mechanical failures and such hazards as unusual or unexpected geological formations, subsidence, floods and other water inflows, and other conditions involved in mining ore.

Reserves

The Company’s estimates for its conventional mining operations in Saskatchewan are based on exploration drill hole data, seismic data and actual mining results during the past 38 to 43 years. In Saskatchewan reserves are estimated by identifying material in place that is delineated on at least two sides and material in place within one mile from an existing sampled mine entry or borehole. The Company’s estimates for its conventional mining operations in New Brunswick are based on exploration drill hole data, seismic data and actual mining results during the past 25 years. In New Brunswick reserves are estimated by identifying material in place delineated by drilling or mining with results projected conservatively from these intersections.

FORM 10-K ï Part I Page  6

A historical extraction ratio from the 25 to 43 years of mining results is applied to estimate the mineable reserves. The Company’s estimated recoverable ore (reserve tonnage only) as of December 31, 2008 for each of our potash mines is as follows:

	Mineral Reserves		Average
	(Millions of tonnes		Grade		Years of Remaining
	recoverable ore)(1)(2)(3)		K2O		Mine Life(4)
Allan		328		25.9%		89
Cory		224		25.1%		97
Lanigan		570		22.0%		84
Rocanville		426		22.5%		60
Patience Lake(5)		–		–		–
Esterhazy(6)		10		24.5%		3
New Brunswick		193		24.6%		81

(1)	Mineral reserves include proven and probable reserves. There has been no third party review of reserve estimates within the last three years.
(2)	The extraction ratio of recoverable ore to in-place material for each mine is as follows: Allan 0.32, Cory 0.26, Lanigan 0.30, Rocanville 0.33 and New Brunswick 0.46.
(3)	The concentration of recoverable ore tonnes to finished product (KCl) for each of the divisions is as follows (three-year running average): Allan 2.90, Cory 3.52, Lanigan 3.68, Rocanville 2.90 and New Brunswick 3.06.
(4)	Estimates are based upon proven and probable reserves and annual mining rates (million tonnes of ore hoisted per year) equal to the three-year running average for each of the divisions as follows: Allan 3.70, Cory 2.30, Lanigan 6.77, Rocanville 7.14 and New Brunswick 2.38. Mining rates are constrained by the equipment and manpower we utilize at each mine so that our production capacity at each mine depends, in part, on the ore concentration ratio encountered at each mine. Years of remaining mine life, in the case of the Saskatchewan mines, do not include any announced expansions and, in the case of the New Brunswick mines, are based upon applying the current annual mining rate to the expanded reserves.
(5)	Given the characteristics of the solution mining method employed at the Patience Lake mine, it is not possible to estimate reliably the productive capacity of or the recoverable ore reserve from this operation. In solution mining, the potash is dissolved in warm brine and pumped to the surface for processing. Chemical compositions and volumes of brine pumped into and out of the underground mineralized zone are known, but the precise nature of the solution mining process is not. Estimates are made utilizing the surfaces available for dissolution in the abandoned mine workings, the concentration of the circulated brine recovered from the mine, annual crystallization rates in the ponds and the annual volume of KCl recovered from the ponds. However, this inability to properly describe details of the mining process precludes reporting of an ore reserve for Patience Lake. The extent of the Patience Lake potash resource is given in the next table. The Patience Lake operation accounted for only 3.3% of the Company’s potash production in 2008.
(6)	At Esterhazy, mine operator Mosaic mines potash for which the Company holds mineral rights. Production is carried out under a mining and processing agreement with Mosaic. The Esterhazy mineral reserve tonnage presented here is the current estimate of mineable tonnes remaining in the Company’s lands after reconciliation of historic tonnes mined and product received from Mosaic. Since the tonnage of product to be received by the Company is based on an agreement with Mosaic, the entire tonnage available is placed in the “Mineral Reserves (Millions of tonnes recoverable ore)” category. The “Years of Remaining Mine Life” reported for Esterhazy assumes that the nominated amount for 2009 and the maximum amount of product under the agreement for subsequent years will be received by the Company. However, Mosaic, has expressed a different view with respect to the remaining life under the agreement and Mosaic and the Company are currently in discussions regarding the extent of remaining Company reserves and by extension, the Years of Remaining Life for the Company’s entitlement. The Company intends to continue to assert its position vigorously in such discussions with Mosaic.

Resources

Mineral resources, which are exclusive of the mineral reserves reported above, are contained within the lands for which a mining lease is held at each mine. These resources are reported as mineralization in-place while the reserves are reported as recoverable ore.

FORM 10-K ï Part I Page  7

In Saskatchewan, where geological correlations are straightforward, the mineral resource categories are generally characterized by the Company as follows:

•  areas with detailed exploration coverage (drilling, seismic, close to underground workings) are reported in the measured mineral resource category;

•  areas with sparse exploration coverage (usually seismic coverage only) and far from underground workings are reported in the indicated mineral resource category;

•  areas with limited exploration coverage, but still within the mining lease, are reported in the inferred mineral resource category.

Exploration information used to infer and compute resource tonnage estimates for Saskatchewan consists of physical sampling (boreholes) and surface seismic data (3D and 2D).

In New Brunswick, where geology is complex, mineral resource categories are generally characterized by the Company as follows:

•  areas with many drillhole intersections within a seismically defined area and with consistent stratigraphy, mineralogy and potash quality are reported in the measured mineral resource category;

•  areas with few drill intersections within a seismically defined area, or with structurally modified (folded) and less consistent mineralogy, but still exhibiting good quality potash intersections, are reported in the indicated mineral resource category; and

•  areas with little or no drilling, complex geology, partial seismic coverage and/or inconsistent potash quality in drill intersections are reported in the inferred mineral resource category.

Exploration information used to infer and compute resource tonnage estimates in New Brunswick consists of physical sampling (boreholes and regional surface mapping), surface seismic data (3D and 2D), airborne electromagnetic and regional gravity data.

The Company’s estimated mineral resource tonnage as of December 31, 2008 for each of our mines is as follows:

	Mineral Resource
	Measured Resource		Indicated Resource		Inferred Resource
	(Millions of tonnes		(Millions of tonnes		(Millions of tonnes
	in-place)		in-place)		in-place)
Allan		1,153		–		3,895
Cory		958		266		2,950
Lanigan		1,447		1,849		1,755
Rocanville		–		419		616
Patience Lake(1)		–		–		–
Esterhazy(2)		–		–		–
New Brunswick		–		153		319

(1)	Given the characteristics of the solution mining method employed at the Patience Lake mine as described in footnote 5 in the “Mineral Reserve” table, it is not possible to estimate reliably the resource tonnage from this operation at present.
(2)	Since mining at Esterhazy is carried out under an agreement with mine operator Mosaic, all potash tonnes anticipated from this operation are reported in the “Mineral Reserve” table. The Company holds no mineral resource tonnage over and above the reported reserve at Esterhazy.

The scientific and technical information included in the Potash Operations section has been prepared under the supervision of persons who are “qualified persons” under Canadian National Instrument 43-101. For Saskatchewan and New Brunswick operations, Garth Moore, P. Eng. (President, PCS Potash) is the qualified person who supervised the preparation of the information and who verified the data disclosed herein.

FORM 10-K ï Part I Page  8

Data for the mineral reserve and mineral resource estimates for our mining operations reported herein were verified by:

•  reviewing underground potash sample information (boreholes and in-mine ore samples);

•  reviewing surface geophysical exploration results (3D and 2D seismic data);

•  cross-checking mined-tonnages reported by minesite technical staff with tonnages estimated from mine survey information; and

•  cross-checking reserve and resource computations carried out by senior mine technologists.

Phosphate Operations

We mine phosphate ore and manufacture phosphoric acid, solid and liquid fertilizers, animal feed supplements and purified phosphoric acid which is used in food products and industrial processes.

Properties

We conduct our phosphate operations primarily at two facilities, one a 35,000-acre facility near Aurora, North Carolina and the other a 100,580-acre facility near White Springs in northern Florida. We believe the Aurora facility, with a capacity of 1.2 million tonnes of phosphoric acid (“P₂O₅”) per year, to be the largest integrated phosphate mine and phosphate processing complex at one site in the world. The Aurora facility includes a 6.0 million tonne per-year mining operation, four sulfuric acid plants, four phosphoric acid plants, four purified acid plants, a liquid fertilizer plant, a superphosphoric acid (“SPA”) plant, a defluorinated phosphate (“DFP”) or animal feed plant, two granulation plants capable of producing diammonium phosphate (“DAP”) or monoammonium phosphate (“MAP”) and four silicon tetrafluoride (“STF”) plants. The White Springs facility is the third largest phosphoric acid producer, by capacity, in the United States.

The White Springs facility includes a mine and two production facilities, Suwannee River and Swift Creek, with two sulfuric acid plants, one phosphoric acid plant, two DAP/MAP plants, a SPA plant, a dicalcium phosphate plant and a DFP plant located at the Suwannee River complex and two sulfuric acid plants and a superphosphoric plant located at the Swift Creek complex.

The location of our Aurora and White Springs mining operations are shown on the following map.

FORM 10-K ï Part I Page  9

At our Geismar, Louisiana facility, we manufacture phosphoric acid. The Geismar facility has a sulfuric acid plant, a phosphoric acid plant and a liquid fertilizer plant. A significant portion of the phosphoric acid produced at the Geismar facility is sold as feedstock to Innophos, Inc. for use in its neighboring purified acid plant. Our other phosphate properties include:

•  animal feed plants in Marseilles, Illinois; Weeping Water, Nebraska; and Joplin, Missouri;

•  a technical and food grade phosphate plant in Cincinnati, Ohio; and

•  a terminal facility at Morehead City, North Carolina.

Plant Locations	Phosphate Products Produced
Aurora, North Carolina	DAP, MAP, SPA, animal feed, liquid fertilizer, purified acid, merchant grade phosphoric acid (“MGA”), STF
White Springs, Florida(1)	SPA, DAP, MAP, MGA(2), animal feed
Cincinnati, Ohio	Blended purified acid products
Geismar, Louisiana(3)	MGA
Marseilles, Illinois	Animal feed
Weeping Water, Nebraska	Animal feed
Joplin, Missouri	Animal feed

(1)	In 2005, production of DFP at this location was suspended indefinitely.
(2)	All of the MGA is consumed internally in the production of downstream products.
(3)	In 2006, production of superphosphoric acid and ammonium polyphosphate products at this location was suspended indefinitely.

Production

We extract phosphate ore using surface mining techniques. At each mine site, the ore is mixed with recycled water to form a slurry, which is pumped from the mine site to our processing facilities. The ore is then screened to remove coarse materials, washed to remove clay and floated to remove limestone and calcareous gangue to produce phosphate “rock.” The annual production capacity of our mines is currently 9.6 million tonnes of phosphate rock. During 2008, the Aurora facility’s total production of phosphate rock was 4.03 million tonnes and the White Springs facility’s total production of phosphate rock was 3.03 million tonnes. The sequence for mining portions of the Aurora property has been identified in the permit issued by the U.S. Army Corps of Engineers in 1997. The permit expires in 2017, but the reserves in these areas could be exhausted before then. We are seeking a new permit from the Corps to mine additional areas. The Company expects to have the necessary approvals for mine continuation in April 2009. Failure to secure the required approvals for continuation of the mining operations, on acceptable terms, would negatively affect our reserves and costs.

Phosphate rock is the major input in our phosphorus processing operations. Substantially all of the phosphate rock produced is used internally for the production of phosphoric acid, SPA, chemical fertilizers, purified phosphoric acid and animal feed products. Unlike the Aurora and White Springs operations, the Geismar facility does not mine phosphate rock. Presently, the Geismar facility purchases phosphate rock from Morocco pursuant to a long-term agreement with a Moroccan government-owned company, wherein prices are reset at prescribed dates through negotiation.

In addition to phosphate ore, the principal raw materials we require are sulfur and ammonia. The production of phosphoric acid requires substantial quantities of sulfur, which we purchase from third parties. Any significant disruption in our sulfur supply to the phosphate facilities could adversely impact our financial results. We produce sulfuric acid at the Aurora facility, White Springs facility and Geismar facility.

Our phosphate operations purchase all of their ammonia at market rates from or through our nitrogen and sales subsidiaries. Phosphoric acid is reacted with ammonia to produce DAP and MAP as well as liquid fertilizers. In addition, ammonia operations include the purchase, sale and terminalling of anhydrous

FORM 10-K ï Part I Page  10

ammonia and much of this ammonia is purchased from third parties. Ammonia to White Springs will be supplied through an ammonia tank lease in Tampa, Florida. Ammonia to Aurora will be supplied through rail deliveries from our Lima, Ohio production facility, Geismar, Louisiana storage facility, and leased storage at Pascagoula, Mississippi.

We produce MGA at Aurora, White Springs and Geismar. Some MGA is sold to foreign and domestic fertilizer producers and industrial customers. We further process the balance of the MGA to make solid fertilizer (DAP and MAP); liquid fertilizers; animal feed supplements for the poultry and livestock markets; and purified phosphoric acid for use in a wide variety of food, technical and industrial applications.

The following table sets forth, for each of the last three years, the Company’s production of phosphate rock (including tonnage and grade) and the production of phosphoric acid.

Phosphate Rock
(Millions of tonnes)
	Annual		2008				2007				2006
	Capacity		Production		% P2O5		Production		% P2O5		Production		% P2O5
Aurora, NC		6.0		4.027		27.35		4.086		27.39		4.577		27.62
White Springs, FL		3.6		3.025		29.88		3.226		29.87		3.114		29.79
Geismar, LA		–		–		–		–		–		–		–
Total		9.6		7.052				7.312				7.691

Phosphoric Acid
(Millions of tonnes P2O5)
	Annual		2008		2007		2006
	Capacity		Production		Production		Production
Aurora, NC		1.202		1.054		1.083		1.080
White Springs, FL		0.966		0.741		0.925		0.881
Geismar, LA		0.202		0.147		0.156		0.147
Total		2.370		1.942		2.164		2.108

Reserves

Our phosphate deposits in North Carolina occur in a formation known as the Pungo River formation of the middle Miocene age. The formation, typically 75 feet to 125 feet below ground surface, is composed of interbedded phosphatic sands, silts and clays, diatomaceous clays and phosphatic limestone. Phosphate of value in the ore horizon occurs as pellets of brown and black sand-sized particles, with flat-sided angular quartz grains and variable amounts of silt, clay and interbedded limestone. The phosphate ore (matrix) horizon throughout is distinguished by its relative uniformity in thickness, percent P₂O₅ and other quality characteristics.

Our White Springs operations are in Hamilton County, Florida. The Hamilton County phosphate deposits in the North Florida Phosphate District are reported to be of the middle Miocene and Pliocene ages. Because of partial reworking during the Pliocene age, these deposits tend to be more variable than middle Miocene deposits, such as those found in North Carolina.

In estimating our phosphate reserves, we had previously retained a third party to prepare reports of the estimated phosphate ore reserves at Aurora and White Springs. Based on (i) a review and assessment of the Company’s land-ownership maps, (ii) drilling and technical assays and assessments, (iii) discussions with Company personnel familiar both with the geology of the phosphate ore deposits and each site’s mining operations and (iv) judgments regarding the recoverability of phosphate from the ore deposits based on economic and technical factors such as the ore grade, mining, transportation and beneficiation issues and environmental and regulatory factors, the reserve estimates set forth in the reports were developed.

FORM 10-K ï Part I Page  11

Since receipt of the reports (1995 for Aurora and 1997 for White Springs), we annually adjusted and updated the ore reserve estimates for both the Aurora and White Springs operations by making adjustments for ore consumed, number of tonnes sterilized (i.e., bypassed), deletions (for property sold, traded or agreed to be set aside for environmental or other purposes), additions (based on land and mineral right acquisitions) and other appropriate adjustments. There has been no third party review of the estimates within the last four years.

The following table sets forth the Company’s estimated proven and probable phosphate reserves for Aurora and White Springs as of December 31, 2008 at an average grade of 30.7% P₂O₅.

	Tonnes of
	Phosphate Rock		Average Grade
	(Millions of tonnes)		% P2O5
Aurora		340		30.7%
White Springs		49		30.7%
Total		389

The reserves set forth above for Aurora would permit mining to continue at annual production rates for about 90 years. This mine life is based on an average annual production rate of approximately 3.79 million tonnes of 30.7% concentrate over the three-year period ended December 31, 2008. Prior to our acquisition of Texasgulf in April 1995, Texasgulf transferred approximately 408 million tonnes of phosphate reserves to a newly established company, the common stock of which was transferred to Elf Aquitaine, Inc. and Williams Acquisition Holding Company, Inc. We were granted a 20-year right of first refusal (from April 10, 1995) in the event that the newly established company proposes to sell the reserves.

The reserves set forth above for White Springs would permit mining to continue at annual production rates for about 16 years. This mine life is based on an average annual production rate of approximately 3.04 million tonnes of 30.7% concentrate over the three-year period ended December 31, 2008.

The scientific and technical information included in the Phosphate Operations section has been prepared by persons who are “qualified persons” under Canadian National Instrument 43-101. For the Aurora operation, I. K. Gilmore CPG, PG (PCS Phosphate – Aurora, Superintendent Mine Planning & Chief Geologist) is the qualified person who prepared the information and who verified the data disclosed here. For the White Springs operation, Cameron Lynch P.E. (PCS Phosphate – White Springs, Superintendent Mine Planning/Mine Services) is the qualified person who supervised the preparation of the information and verified the data disclosed herein.

Data for the mineral reserve estimates reported for Aurora were verified by reviewing:

•  existing reserve areas for ownership status and mining parameters;

•  drill hole database;

•  surveyed areas mined, sterilized, acquired or deleted;

•  the calculated area of drill hole influence; and

•  the calculation of the in situ tonnes of P₂O₅ depleted or added as summarized in monthly and annual reports.

Data for the mineral reserve estimates reported for White Springs were verified by reviewing:

•  existing reserve areas for ownership status and mine geometry parameters;

•  existing and new drill hole data;

•  input and output parameters for analysis in geostatistical three-dimensional modeling software developed by a third-party vendor;

•  mined-tonnage reported by mine operations staff with tonnages forecast by Mine Planning staff; and

•  reserve computations carried out by senior staff geologist.

FORM 10-K ï Part I Page  12

Nitrogen Operations

Our nitrogen operations include production of nitrogen fertilizers and nitrogen chemicals. These products are used for agricultural, industrial and animal nutrition purposes.

Properties

We have four nitrogen production facilities, of which three are located in the United States and one is located in Trinidad. The following table sets forth the facility locations and production capabilities.

Plant Locations	Nitrogen Products Produced
Augusta, Georgia	Ammonia, urea, nitric acid, ammonium nitrate and nitrogen solutions
Geismar, Louisiana(1)	Nitric acid and nitrogen solutions
Lima, Ohio	Ammonia, urea, nitric acid and nitrogen solutions
Point Lisas, Trinidad	Ammonia and urea

(1)  Since 2003, we have not produced ammonia at Geismar.

Production

Unlike potash and phosphate, nitrogen is not mined. It is taken from the air and reacted with a hydrogen source, usually natural gas reformed with steam, to produce ammonia. The ammonia is used to produce a full line of upgraded nitrogen products, including urea, nitrogen solutions, ammonium nitrate and nitric acid. Ammonia, urea and nitrogen solutions are sold as fertilizers to agricultural customers and to industrial customers for various applications, while nitric acid and ammonium nitrate are sold to industrial customers for various applications. Urea is also sold for animal feed applications.

The following table sets forth, for each of the last three years, the Company’s production of ammonia.

Ammonia(1)
(Millions of tonnes)
	Annual			2008		2007		2006
	Capacity			Production		Production		Production
Trinidad		2.177			1.785		2.077		1.932
Augusta, GA		0.713	(2)		0.674		0.610		0.633
Lima, OH		0.588			0.538		0.531		0.339
Total		3.478			2.997		3.218		2.904

(1)	A substantial portion is upgraded to value added products.
(2)	Ammonia capacity increased by 25,000 tonnes.

Raw Materials

Natural gas is the primary raw material used for the production of nearly all of our nitrogen products. In the U.S., we employ natural gas hedges with the goal of minimizing risk from volatile gas prices. In Trinidad, natural gas is purchased pursuant to long-term contracts using pricing formulas related to the market price of ammonia. In Trinidad, we have multiple long-term gas contracts in place. These contracts, which include minimum take or pay requirements, can provide the entire ammonia complex with 100% of our needs in 2009 and 2010, 90% in 2011, 83% in 2012, 67% in 2013, 56% in 2014 and 2015, and 51% from 2016 to 2018. With the exception of the Trinidad facility, we purchase most of our natural gas from producers or marketers at the point of delivery of the natural gas into the pipeline system, then pay the pipeline company and, where applicable, the local distribution company to transport the natural gas to our nitrogen facilities. Approximately

FORM 10-K ï Part I Page  13

85% of our domestic consumption of natural gas by our nitrogen operations is delivered pursuant to firm transportation contracts, which do not permit the pipeline or local distribution company to interrupt service to, or divert natural gas from, the plant.

Marketing

The following table summarizes our sales from potash, phosphate and nitrogen products (by geographical distribution) in the past three fiscal years.

	2008		2007		2006
	(millions of dollars)
Potash
Canada	$	150.6	$	88.0	$	65.7
United States		1,353.1		764.7		557.5
Canpotex(1)		2,257.1		782.7		467.1
Other		307.3		161.8		137.2
Total	$	4,068.1	$	1,797.2	$	1,227.5
Phosphates
Canada	$	200.3	$	125.7	$	78.1
United States		1,640.6		1,076.2		799.9
PhosChem(1)		713.6		264.6		232.2
Other		326.2		170.6		144.9
Total	$	2,880.7	$	1,637.1	$	1,255.1
Nitrogen
Canada	$	9.9	$	1.3	$	13.9
United States		2,251.1		1,651.0		1,185.2
Other		236.7		147.6		85.0
Total	$	2,497.7	$	1,799.9	$	1,284.1

(1)  See discussion below for information regarding Canpotex Limited (“Canpotex”) and Phosphate Chemicals Export Association, Inc. (“PhosChem”) sales.

For financial information about our business segments and North American and offshore sales, see the information under “Potash – Performance” on pages 18 through 20, “Phosphate – Performance” on pages 24 through 26 and “Nitrogen – Performance” on pages 30 through 32 in our 2008 Financial Review, attached as Exhibit 13, and Note 19, Segment Information, to our 2008 consolidated financial statements, incorporated by reference under Items 7 and 8 in this report. Information with respect to the geographical locations of long-lived assets is disclosed in Note 19, Segment Information, to our 2008 consolidated financial statements incorporated by reference under Item 8 in this report.

We have a diversified customer base and, apart from sales to Canpotex, no one customer accounted for more than 10% of our sales in 2008.

Potash from our Saskatchewan mines for sale outside Canada and the United States is sold exclusively to Canpotex. PCS Sales (Canada) Inc. and PCS Sales (USA), Inc. execute offshore marketing and sales for our New Brunswick potash and marketing and sales for our potash, phosphate and nitrogen products in Canada. PCS Sales (USA), Inc. executes marketing and sales for our potash, phosphate and nitrogen products in the United States. PhosChem, an association formed under the U.S. Webb-Pomerene Act, is the principal vehicle through which we execute offshore marketing and sales for our phosphate fertilizers. See “Offshore Marketing” below.

FORM 10-K ï Part I Page  14

North American Marketing

In 2008, North American sales from potash products represented 37% of our total potash sales, substantially all of which were attributable to potash customers in the United States. Typically, our North American potash sales are larger in the first half of the year. The vast majority of sales are made on the spot market with the balance made under short-term contracts. We have no material contractual obligations in connection with North American sales to sell potash in the future at a fixed price.

In 2008, North American sales from phosphate products represented 64% of our total phosphate sales, substantially all of which were attributable to phosphate customers in the United States. In 2008, the majority of our phosphate product sales were made on the spot market, with the balance made under short-term contracts (generally on an annual basis) and a limited number of sales made pursuant to multi-year contracts. We have no material contractual obligations in connection with North American sales to sell phosphate products in the future at a fixed price.

In 2008, North American sales from nitrogen products represented 91% of our total nitrogen sales and our total non-fertilizer products accounted for 65% of our total nitrogen revenue. Typically, North American nitrogen fertilizer sales are greatest in the second calendar quarter. In 2008, our nitrogen product sales were made on the spot market and under short-term and multi-year contracts. We have no material contractual obligations in connection with North American sales to sell nitrogen in the future at a fixed price.

Ammonia purchased by us is used in our operations and is sold to third party customers by PCS Sales (USA), Inc.

The primary customers for fertilizer products are retailers, dealers, cooperatives, distributors and other fertilizer producers. Such retailers, dealers and cooperatives have both distribution and application capabilities. The primary customers for industrial products are chemical product manufacturers. The majority of our purified phosphoric acid is sold directly to consumers of the product, with the balance sold through an authorized non-exclusive distribution network.

Offshore Marketing

Potash we produce in Saskatchewan for sale outside Canada and the United States is sold to Canpotex, which is owned in equal shares by the three potash producers in the Province of Saskatchewan (including us). Canpotex, which was incorporated in 1970 and commenced operations in 1972, acts as an export company and as a unified sales, marketing and distribution force for all Saskatchewan potash production in the offshore marketplace. Each shareholder of Canpotex has an equal voting interest as a shareholder through its nominees on the board of directors. All the shareholders of Canpotex have agreed that, as long as they are members of Canpotex and with respect to potash produced in Canada, they will not make offshore sales independently. The members of Canpotex have exempted production from our New Brunswick mine from this requirement. Any member may terminate its membership in Canpotex at a specified time of the year on six months’ notice.

In general, Canpotex sales are allocated among the producers based on production capacity. If a shareholder cannot satisfy demand for potash by Canpotex, the remaining shareholders are entitled to satisfy the demand pro rata based on their allotted production capacity. In 2008, we supplied 54% of Canpotex’s requirements. Canpotex generally sells potash to private firms and government agencies pursuant to contracts at negotiated prices or by spot sales.

FORM 10-K ï Part I Page  15

The following table sets forth the percentage of sales volumes by Canpotex for the past three calendar years in the various geographical regions.

	2008			2007			2006
Asia		68	%		69	%		70	%
Latin America		26			26			22
Oceania		5			4			5
Europe		1			1			3
Total		100	%		100	%		100	%

For 2008, sales to Canpotex represented 55% of our total potash sales. Offshore sales of potash from the New Brunswick mine, through PCS Sales (Canada) Inc. and PCS Sales (USA), Inc., represented 8% of our total potash sales in 2008.

Since 1975, PhosChem has been the largest exporter of U.S. phosphate fertilizers. Currently, the members of PhosChem are PCS Sales (USA), Inc. and Mosaic Crop Nutrition LLC. The PhosChem members have agreed, except for certain sales that are reserved individually to the PhosChem member companies, to export their fertilizer products exclusively through PhosChem. PhosChem negotiates prices and other terms for such export sales of its members’ phosphate fertilizer products that are made through PhosChem. According to the terms of a PhosChem agreement effective January 1, 1995, Mosaic Global Operations Inc. is responsible for the marketing of solid fertilizers and PCS Sales (USA), Inc., is responsible for the marketing of liquid merchant grade phosphoric acid to export countries. Total sales for 2008 (on a P₂O₅ basis) were apportioned as follows: 78% to Mosaic Crop Nutrition LLC and 22% to PCS Sales (USA), Inc. The PhosChem agreement is renewed annually.

Revenue from sales to PhosChem accounted for 25% of our total phosphate sales in 2008. Other offshore phosphate sales accounted for 11% of our total phosphate sales in 2008. In 2008, 88% of PhosChem’s sales volume was in the form of DAP.

The following table sets forth the percentage of DAP sales volumes of PhosChem for the past three calendar years in the various geographical regions.

	2008			2007			2006
Asia		81	%		62	%		71	%
Latin America		15			34			23
Oceania		4			3			4
Other		–			1			2
Total		100	%		100	%		100	%

Ammonia and urea predominate offshore sales of nitrogen and originate primarily from Trinidad, with other sales coming from purchased product locations. For 2008, our offshore sales of nitrogen products represented 9% of our total nitrogen sales.

Offshore sales are subject to those risks customarily encountered in foreign operations, including (i) fluctuations in foreign currency exchange rates; (ii) changes in currency and exchange controls; (iii) the availability of foreign exchange; (iv) laws, policies and actions affecting foreign trade; and (v) other economic, political and regulatory policies of foreign governments.

Distribution and Transportation

We have an extensive infrastructure and distribution system to store and transport our products. In addition to storage located at our production facilities, in 2008, we owned or leased approximately 172 terminal and warehouse facilities, some of which have multi-product capability for a total of 203 strategically located distribution points in Canada and the United States to serve our customers. To complement our distribution

FORM 10-K ï Part I Page  16

system in Canada and the United States, we also own or lease approximately 9,600 rail cars. In the offshore market, the Company leases one warehouse in China and leases one warehouse in Brazil through a joint venture.

Potash Products

Transportation costs add significantly to the total cost of potash. Producers have a definite advantage in markets close to their sources of supply (e.g., Saskatchewan producers in the Midwestern United States, New Brunswick producers on the U.S. Eastern Seaboard and New Mexico producers in the Southern and Western United States). International shipping cost variances permit offshore producers (including those in the former Soviet Union, Germany and the Middle East) to compete effectively in some of our traditional markets.

Most of our potash for North American customers is shipped by rail. Shipments are also made by rail from each of our Saskatchewan mines to Thunder Bay, Ontario, for shipment by lake vessel to our warehouses and storage facilities in Canada and the United States. Potash from the New Brunswick mine is shipped primarily by ocean-going vessel from the Port of Saint John, although truck and rail transport are also used for North American customers.

In the case of our sales to Canpotex, potash is transported by rail principally to Vancouver, British Columbia, where port facilities exist for storage pending shipment overseas. We have an equity interest in Canpotex Bulk Terminals Limited, which is a part owner of these port facilities. Through Canpotex, we also have an interest in a port facility located in Portland, Oregon.

Phosphate Products

With respect to phosphates, we have long-term leases on shipping terminals in Morehead City and Beaufort, North Carolina, through which we receive and store Aurora facility raw materials and finished product. We use barges and tugboats to transport solid products, phosphoric acid and sulfur between the Aurora facility and Morehead City, North Carolina. Raw materials and products, including sulfur, are also transported to and from the Aurora facility by rail.

Sulfur is delivered to the White Springs facility by rail and truck from Canada and the U.S. Most of the phosphoric acid and chemical fertilizers produced at the White Springs facility are shipped to domestic destinations by rail. We also ship some of our products, produced at the White Springs facility, through the bulk terminal located in Morehead City, North Carolina and through a leased terminal in Tampa, Florida, for offshore sales. We received ammonia for our phosphate operations at White Springs and Aurora primarily through our ammonia terminal in Savannah, Georgia. The ammonia was shipped by rail from Savannah to the White Springs and Aurora facilities. Our operations at the Port of Savannah ceased in December 2008. Ammonia to White Springs will be supplied through an ammonia tank lease in Tampa, Florida commencing in 2009. Ammonia to Aurora will be supplied through rail deliveries from our Lima, Ohio production facility, Geismar, Louisiana storage facility and leased storage at Pascagoula, Mississippi commencing in 2009.

Much of the Geismar facility’s phosphoric acid and sulfuric acid is delivered via pipeline to nearby customers. The balance of the facility’s phosphate products are shipped by rail or tank truck. Phosphate rock feedstock is delivered to Geismar from Morocco in large ocean-going vessels. Sulfur is delivered to the Geismar facility by barge, truck and rail.

Nitrogen Products

We distribute our nitrogen products by vessel, barge, railcar, truck and direct pipeline to our customers and, in high consumption areas, through our strategically located storage terminals. We lease or own 22 nitrogen terminal facilities. The terminals provide off-season storage and also serve local dealers during the peak seasonal demand period.

We distribute products from the Trinidad plant to markets in Latin America and Europe in addition to the United States. Our distribution operations in Trinidad employ four long-term chartered ocean-going vessels and

FORM 10-K ï Part I Page  17

utilize short-term and spot charters as necessary for the transportation of ammonia. All bulk urea production from Trinidad is shipped through third-party carriers.

Competition

Potash is a commodity and consequently producers compete based on price and service (e.g., delivery time and ability to supply high quality material). We price competitively and sell high quality products and provide high quality service to our customers. Our service includes maintaining warehouses, leasing railcars and chartering ocean-going vessels to enhance our delivery capabilities. The high cost of transporting potash affects competition in various geographic areas. Our competition includes three North American producers and offshore producers located in the former Soviet Union, the Middle East, Europe, Asia and Latin America.

Markets for most phosphate products are highly competitive. Our principal advantage at Aurora and White Springs is that we operate integrated phosphate mine and phosphate processing complexes, while most of our North American competitors are required to ship phosphate rock by rail or truck greater distances from their mines to their mineral processing plants, thus incurring higher rock processing costs. In addition, due to our location in North Carolina and the relatively high cost of transportation, our U.S. phosphate sales from Aurora have a natural advantage in the Northeast, mid-Atlantic and eastern Midwest regions. Similarly, White Springs and other Florida producers have a natural advantage in the South. Gulf Coast producers have a natural advantage in areas of the Midwest accessible to barge traffic up the Mississippi River.

We compete with government enterprises and independent phosphate producers in important exporting countries, including Morocco, Tunisia, Jordan, South Africa, Russia and Australia. In addition, increased phosphate fertilizer production in traditionally important U.S. export markets such as China have impacted U.S. export sales to those countries. Our principal competitors in North American markets include The Mosaic Company and CF Industries, Inc.

Within the animal feed supplement business in the phosphate segment, opportunities exist to differentiate products based on nutritional content, thereby making it less commodity-like. We have a significant presence in the domestic feed supplement market segments.

Industrial products are the least commodity-like of the phosphate products as product quality is a more significant consideration for customer buying decisions. We market industrial phosphate products only in the U.S. and we compete against domestic suppliers and imports from Morocco, Israel and China.

Nitrogen, globally the most widely produced nutrient, is primarily a regional business. However, ammonia, the feedstock for all nitrogen products, can be manufactured in any country with adequate natural gas supplies and can enable developing nations to monetize their natural gas resources. Several countries with large reserves and low production costs use little of their gas domestically, and can produce ammonia cheaply for the export market. Rising natural gas costs in several markets around the world have led to plant curtailments and/or closures, since natural gas can be up to 90% of the cash cost of producing ammonia.

Nitrogen is an input into industrial production of a wide range of products. Manufacturers want consistent quality and just-in-time delivery to keep their plants running. Many industrial consumers are attached to their suppliers by pipeline.

Our nitrogen production serves both fertilizer and industrial customers. Our U.S. plants primarily supply industrial customers, and Trinidad supplies both our fertilizer and industrial customers. We are not immune when expensive natural gas makes U.S. ammonia plants non-competitive with offshore production, but our lower-cost Trinidad operations help offset this. Within North America, sales are regionalized due to transportation costs. CF Industries, Inc., Koch Industries, Inc., Terra Industries, Inc. and importers are our main competitors. Imports are expected to continue.

Employees

At December 31, 2008, we employed 5,301 persons, of whom 1,779 were salaried and 3,522 were hourly paid. Of these 5,301 employees, our potash operations employed 1,964 people, our phosphate operations

FORM 10-K ï Part I Page  18

2,131 and our nitrogen operations 801. Our sales and transportation and distribution functions were handled by 104 employees in Northbrook, Illinois and various other locations in the United States and by 18 employees in Saskatoon, Saskatchewan. Excluding sales personnel, the Saskatoon and Northbrook offices had a staff of 283.

We have entered into eight collective bargaining agreements with labor organizations representing employees. The collective bargaining agreements at the Allan, Cory and Patience Lake divisions expire on April 30, 2011. The Lanigan agreement expired on January 31, 2009 and contract negotiations at Lanigan began in early 2009. PCS and the Rocanville Potash Employees Association have an agreement that expires on May 31, 2009. The agreement at PCS Cassidy Lake expires on December 31, 2010. The agreement between Mosaic and the union representing the employees at the Esterhazy mine expires on January 31, 2010. The collective bargaining agreement with the union representing employees at the White Springs plant expires on December 7, 2009 and the agreement at the PCS Purified Phosphates facility in Cincinnati expires on November 1, 2010. The agreement with the union representing employees at the Lima plant expires on October 1, 2012. We believe our relations with our employees to be good.

Royalties and Certain Taxes

Saskatchewan potash production is taxed at the provincial level under The Mineral Taxation Act, 1983 (Saskatchewan). This tax consists of a base payment and a profit tax (“Potash Production Tax”). The Potash Production Tax totaled $431.3 million in 2008. As a resource corporation in the Province of Saskatchewan, we are also subject to a capital tax that is the greater of a percentage of our taxable paid up capital or a percentage of the value of our resource sales (as defined in The Corporation Capital Tax Act of Saskatchewan). In addition, we pay capital tax on our taxable capital as defined in the New Brunswick Income Tax Act. In 2008, we paid total capital tax of $108.3 million.

In addition to the Potash Production Tax and capital tax, royalties, taxes and rental fees are payable to the Provinces of Saskatchewan and New Brunswick, municipalities and others by potash producers in respect of potash sales, production or property in the Provinces of Saskatchewan and New Brunswick. These royalties, taxes and fees, which are included in cost of goods sold, were $110.9 million in 2008.

For 2008, miscellaneous taxes paid (not included above) totaled $3.8 million. We do not make royalty payments in connection with our phosphate and nitrogen operations.

Income Taxes

PCS and certain subsidiaries are subject to federal and provincial income taxes in Canada. Our subsidiaries that operate in the United States are subject to U.S. federal and state income taxes. Our nitrogen subsidiary operating in Trinidad is subject to Trinidadian taxes.

The effective income tax rate for 2008 was 24% compared to 27% in 2007. A scheduled one and a half percentage point reduction in the Canadian federal income tax rate applicable to resource companies along with the elimination of the one percent surtax became effective at the beginning of 2008. In addition, there was a significant increase in permanent deductions in the U.S. Income tax recoveries of $71.1 million were recorded in 2008 which related to higher permanent deductions in the U.S. from prior years. In 2008, future income tax assets were written down by $11.0 million and the $25.3 million gain recognized as a result of the change in fair value of the forward purchase contract for shares in Sinofert was not taxable.

Environmental Matters

Our operations are subject to numerous environmental requirements under federal, provincial, state and local laws and regulations of Canada, U.S., Brazil and Trinidad and Tobago. These laws and regulations govern matters such as air emissions, wastewater discharges, land use and reclamation and solid and hazardous waste management. Many of these laws, regulations and permit requirements are becoming increasingly stringent, and the cost of compliance with these requirements can be expected to increase over time.

FORM 10-K ï Part I Page  19

Our operating expenses, other than those associated with asset retirement obligations, relating to compliance with environmental laws and regulations governing ongoing operations were approximately $123.3 million for the year ended December 31, 2008, as compared to $104.8 million and $92.6 million for the years ending December 31, 2007 and December 31, 2006, respectively. These amounts include environmental operating expenses related primarily to the production of phosphoric acid, fertilizer, feed and other products.

We routinely undertake environmental capital projects. In 2008, capital expenditures of $89.6 million (2007 – $44.2 million) were incurred to meet pollution prevention and control objectives and $0.5 million (2007 – $0.5 million) were incurred to meet other environmental objectives. Future capital expenditures are subject to a number of uncertainties, including changes to environmental regulations and interpretations, and enforcement initiatives. While we currently anticipate that our operating and capital expenditures related to environmental regulatory matters in 2009 will not differ materially from amounts expended in the past two years, at this time we are unable to estimate the capital expenditures we may make in subsequent years to meet pollution prevention and control objectives and other environmental objectives.

Environmental Requirements, Permits and Regulatory Approvals

Many of our operations and facilities are required by federal, provincial, state and local environmental laws to operate in compliance with a range of regulatory requirements, permits and approvals. Such permits and approvals typically have to be renewed or reissued periodically. We may also become subject to new laws or regulations that impose new requirements or require us to obtain new or additional permits or approvals. We believe that we are currently in material compliance with existing regulatory programs, permits and approvals. However, there can be no assurance that such permits or approvals will issue in the ordinary course. Further, the terms and conditions of future regulations, permits and approvals may be more stringent and may require increased expenditures on our part.

Air Emissions. With respect to air emissions, we anticipate that additional actions and expenditures may be required to meet increasingly stringent U.S. federal and state regulatory and permit requirements, including existing and anticipated regulations under the federal Clean Air Act. The U.S. Environmental Protection Agency (“USEPA”) has issued a number of regulations establishing requirements to reduce air pollutant emissions. We continue to monitor developments in these various programs and to assess their potential impact on our operations.

In 2002, the Canadian government ratified the Kyoto Protocol, which calls for Canada to reduce its emissions of “greenhouse gases” to 94% of its 1990 emissions by 2012. The Kyoto Protocol became effective on February 16, 2005. The Canadian government has proposed a regulatory approach for addressing the greenhouse gas reductions and other clean air requirements. It is uncertain when final rules will be issued and if they will have any material impact on us. Under the proposal, Canada would begin to apply intensity-based greenhouse gas and air pollutant emissions targets to major industrial sectors in 2010 and 2012, respectively. The United States is not presently expected to ratify the Kyoto Protocol and has announced plans for voluntary programs and incentives. A variety of laws to regulate greenhouse gas emissions have been introduced in the United States Congress, but the prospects for adoption of particular legislative objectives or requirements are uncertain at this time. Brazil and Trinidad and Tobago have also ratified the Kyoto Protocol. Our operations there would not be immediately impacted by the implementation of the treaty as these are developing countries, which do not have any specific emission reduction requirements. We continue to monitor the development of programs to implement the obligations established by the Kyoto Protocol and will continue to assess the range of potential impacts of these programs on our operations. In particular, the United States is participating in global negotiations to develop a system that would become effective in 2012. We have determined that climate change is of sufficient concern to governments, elected officials, non-governmental organizations, community leaders and the general public such that we will pursue a greenhouse gas mitigation strategy. We have assembled a multidisciplinary task force to assess the objectives of such a strategy along with the revenue opportunities and the corporate costs of doing so.

FORM 10-K ï Part I Page  20

USEPA Phosphate Initiative. The USEPA has an ongoing initiative to evaluate implementation within the phosphate industry of a particular exemption for mineral processing wastes under the hazardous waste program. In connection with this industry-wide initiative, the USEPA conducted hazardous waste compliance evaluation inspections at numerous phosphate operations, including our plants in Aurora, North Carolina, Geismar, Louisiana and White Springs, Florida. The USEPA has notified us of various alleged violations of the Resource Conservation and Recovery Act (“RCRA”) at our Aurora and White Springs plants. We and other industry members have met with representatives of the U.S. Department of Justice, the USEPA and various state environmental agencies regarding potential resolution of these matters. During these meetings, we were informed that the USEPA also believes the Geismar plant is in violation of these requirements. As part of the initiative we entered into RCRA 3013 Administrative Orders on Consent to perform certain site assessment activities at our White Springs, Aurora and Geismar plants. We are uncertain if any resolution will be possible without litigation, or, if litigation occurs, what the outcome would be. At this time, we are unable to evaluate the extent of any exposure that the Company may have in these matters.

USEPA Clean Air Act Initiative. The USEPA also has begun an initiative to evaluate compliance with the Clean Air Act at sulfuric and nitric acid plants. In connection with this industry-wide initiative, the USEPA has sent requests for information to numerous facilities, including the company’s plants in Augusta, Georgia; Aurora, North Carolina; Geismar, Louisiana; Lima, Ohio; and White Springs, Florida. The USEPA has notified the company of various alleged violations of the Clean Air Act at its Geismar and Lima plants. The company has met and will continue to meet with representatives of the USEPA and the U.S. Department of Justice regarding potential resolutions of these matters. At this time, we are unable to evaluate the extent of any exposure that the Company may have in these matters.

Aurora Facility Permits. Significant portions of our phosphate reserves in Aurora, North Carolina are located in wetlands. Under the Clean Water Act, we must obtain a permit from the U.S. Army Corps of Engineers (the “Corps”) before disturbing the wetlands. We have a permit from the Corps to mine specified areas. This permit expires in 2017, but the reserves in these areas could be exhausted before then. We are seeking a new permit from the Corps to mine additional areas. This process includes significant public review and comment that could affect current mitigation and reclamation practices. The Company expects to have the necessary approvals for mine continuation in April 2009. Failure to secure the required approvals for continuation of the mining operations on acceptable terms would negatively affect our reserves and costs.

Asset Retirement Obligations

We have recorded in the accompanying consolidated financial statements an asset retirement obligation for the costs associated with the retirement of our long-lived assets when a legal liability to retire such assets exists. This includes obligations incurred as a result of acquisition, construction or normal operation of these assets. The major categories of asset retirement obligations include reclamation and restoration costs at our potash and phosphate mining operations (most particularly phosphate mining), including the management of materials generated by mining and mineral processing, such as various mine tailings and gypsum; land reclamation and revegetation programs; decommissioning of underground and surface operating facilities; general clean-up activities aimed at returning the areas to an environmentally acceptable condition; and post-closure care and maintenance.

The estimation of asset retirement obligation costs depends on the development of environmentally acceptable closure and post-closure plans, which, in some cases, may require significant research and development to identify preferred methods for such plans which are economically sound and which, in most cases, may not be implemented for several decades. We have continued to utilize appropriate technical resources, including outside consultants, to develop specific site closure and post-closure plans in accordance with the requirements of the various jurisdictions in which we operate. Our asset retirement obligations include reclamation costs related to the gypsum stack capping, closure and post-closure operating and maintenance requirements applicable to our phosphate facilities. The asset retirement obligations are generally incurred over an extended period of time. At December 31, 2008, we had accrued a total of $127.5 million for asset retirement obligations. The current portion totaled $8.7 million.

FORM 10-K ï Part I Page  21

The environmental regulations of the Province of Saskatchewan require each potash mine to have decommissioning and reclamation plans. Financial assurances for these plans must be established within one year following approval of these plans by the responsible provincial minister. The Minister of the Environment for Saskatchewan (“MOE”) provisionally approved the plans in July 2000. In July 2001, a Cdn $2.0 million irrevocable Letter of Credit was posted. We submitted a revised plan when it was due in 2006. In early 2009, the MOE advised that our 2006 decommissioning and reclamation plans were approved and advised of its preferred position regarding the financial assurances to be provided by the Company. The financial assurances will be subject to ongoing discussions with the MOE, and the Company has been advised that these financial assurances are to be in place by June 30, 2009. Under the regulations, the decommissioning and reclamation plans and financial assurances are to be reviewed at least once every five years, or sooner as required by the MOE. The next scheduled review for the decommissioning and reclamation plans and financial assurances is in 2011. Based on current information, the Company does not believe that its financial assurance requirements or future obligations with respect to this matter are reasonably likely to have a material impact on its consolidated financial position or results of operations.

Site Assessment and Remediation

We are also subject to environmental statutes that address investigation and, where necessary, remediation of contaminated properties. The U.S. Comprehensive Environmental Response, Compensation and Liability Act of 1980 (“CERCLA”) and other U.S. federal and state laws impose liability on, among others, past and present owners and operators of properties or facilities at which hazardous substances have been released into the environment and persons who arrange for disposal of hazardous substances that are released into the environment. Liability under these laws may be imposed jointly and severally and without regard to fault or the legality of the original actions, although such liability may be divided or allocated according to various equitable and other factors. We have incurred and expect to continue to incur costs and liabilities because of our current and former operations, including those of divested and acquired businesses. We have generated and, with respect to our current operations, continue to generate substances that could result in liability for us under these laws.

We have accrued $18.1 million for costs associated with site assessment and remediation, including consulting fees, related to the clean-up of contaminated sites currently or formerly associated with the Company or its predecessors’ businesses. The current portion of these costs totaled $3.5 million. The accrued amounts include the Company’s or its subsidiaries’ expected final share of the costs for the site assessment and remediation matters, including matters described below to the extent the incurrence of the costs is reasonably probable and reasonably estimable.

Lakeland, Florida Location. In 1998, the Company, along with other parties, was notified by the USEPA of potential liability under CERCLA with respect to certain soil and groundwater conditions at a PCS Joint Venture, Ltd. (“PCS Joint Venture”) blending facility in Lakeland, Florida and certain adjoining property. In 1999, PCS Joint Venture signed an Administrative Order and Consent with the USEPA pursuant to which PCS Joint Venture agreed to conduct a Remedial Investigation and Feasibility Study (“RI/FS”) of these conditions. PCS Joint Venture and another party are sharing the costs of the RI/FS, which is now complete. A Record of Decision (“ROD”) based upon the RI/FS was issued on September 27, 2007. The ROD provides for a remedy that requires excavation of impacted soils and interim treatment of groundwater. The total remedy cost is estimated in the ROD to be $8.5 million. Soil excavation activities are expected to begin in the first quarter of 2009. PCS Joint Venture and additional potentially responsible parties are negotiating with USEPA a Remedial Design/Remedial Action Consent Decree, pursuant to which the parties will perform the ROD remedy. In addition, negotiations are underway regarding the appropriate share of the cost of the remedy that should be borne by each party. Although PCS Joint Venture sold the Lakeland property in July 2006, it has retained the above-described remediation responsibilities and has indemnified the third-party purchaser for the costs of remediation and certain related claims.

Planters Property. The USEPA has identified PCS Nitrogen, Inc. (“PCS Nitrogen”) as a potentially responsible party with respect to a former fertilizer blending operation in Charleston, South Carolina, known

FORM 10-K ï Part I Page  22

as the Planters Property or Columbia Nitrogen Site, formerly owned by a company from which PCS Nitrogen acquired certain other assets. The USEPA has requested reimbursement of $3.0 million of previously incurred response costs and the performance or financing of future site investigation and response activities from PCS Nitrogen and other named potentially responsible parties. In September 2005, Ashley II of Charleston, L.L.C., the current owner of the Planters Property, filed a complaint in the United States District Court for the District of South Carolina (the “Court”) seeking a declaratory judgment that PCS Nitrogen is liable to pay environmental response costs that Ashley II of Charleston, L.L.C. alleges it has incurred and will incur in connection with response activities at the site. The Court entered an order bifurcating the case into two phases. In the third quarter of 2007, the Court issued its decision for the first phase of the case, in which it determined that PCS Nitrogen is the successor to a former owner of the site and may be liable to Ashley II of Charleston, L.L.C. for its environmental response costs at the site. In the first quarter of 2008, PCS Nitrogen filed a motion with the Court for certification of an interlocutory appeal of the Court’s order and to stay further proceedings pending a decision on the appeal from the Fourth Circuit Appellate Court. In April 2008, the Court denied PCS Nitrogen’s motion for certification. PCS Nitrogen will have to wait until the Court issues a final ruling before it can appeal the Court’s decision. PCS Nitrogen has filed third-party complaints against owners and operators that it believes should be responsible parties with respect to the site. PCS Nitrogen is currently pursuing the complaints that it has filed against the third-party defendants. The Court will enter a final decision regarding the allocation and amount of liability that PCS Nitrogen and the third party defendants may have relating to the Planters Property in the second phase of the case. PCS Nitrogen denies that it is a potentially responsible party and is vigorously defending its interests in these actions.

Ward Superfund Site. PCS Phosphate Company, Inc. (“PCS Phosphate”), along with several other entities, has received notice from parties to an Administrative Settlement Agreement (“Settling Parties”) with the USEPA of alleged contribution liability under CERCLA for costs incurred and to be incurred addressing PCB soil contamination at the Ward Superfund Site in Raleigh, North Carolina (“Site”). PCS Phosphate has agreed to participate, on a non-joint and several basis, with the Settling Parties in the performance of the removal action and the payment of certain other costs associated with the Site, including reimbursement of the USEPA’s past costs. The cost of performing the removal at the Site is estimated at $50.0 million. The removal activities commenced at the Site in August 2007. The company anticipates recovering some portion of its expenditures in this matter from other liable parties. In September 2008, the USEPA issued a final remedy, with an estimated cost of $6.1 million, for PCB-impacted sediments downstream of the Site (“Operable Unit 1”). In October 2008, the USEPA issued special notice letters to PCS Phosphate and other alleged potentially responsible parties requiring a good faith offer to perform and/or pay for the cleanup of Operable Unit 1, to perform further investigation at the Site and adjacent properties, and to reimburse USEPA for its past costs. In January 2009, in addition to good faith offers made by other potentially responsible parties, PCS Phosphate, along with some of the Settling Parties, submitted a good faith offer letter to USEPA. USEPA is reviewing the good faith offers. At this time, the company is unable to evaluate the extent of any exposure that it may have for the matters addressed in the special notice letter.

Augusta, Georgia Location. Pursuant to the 1996 Corrective Action Consent Order (the “Order”) executed between PCS Nitrogen Fertilizer, LP, f/k/a Arcadian Fertilizer, LP (“PCS Nitrogen Fertilizer”) and Georgia Department of Natural Resources, Environmental Protection Division (“GEPD”) in conjunction with PCS Nitrogen Fertilizer’s purchase of certain real property located in Augusta, Georgia from the entity from which PCS Nitrogen Fertilizer previously leased such property, PCS Nitrogen Fertilizer agreed to perform certain activities including a facility investigation and, if necessary, a corrective action. In accordance with the Order, PCS Nitrogen Fertilizer has performed an investigation of environmental site conditions and has documented its findings in several successive facility investigation reports submitted to GEPD. Based on these findings and on the requirements of the Order, PCS Nitrogen Fertilizer is implementing a pilot study to evaluate the viability of in-situ bioremediation of groundwater at the site. In the event the technology proves successful and full-scale implementation is warranted, upon GEPD approval, a full-scale bioremediation remedy will be implemented. If the pilot study proves unsuccessful or if GEPD does not approve this remedial strategy, other, more costly remediation alternatives may need to be evaluated and implemented.

FORM 10-K ï Part I Page  23

The Company is also engaged in ongoing site assessment and/or remediation activities at a number of other facilities and sites. Based on current information, it does not believe that its future obligations with respect to these facilities and sites are reasonably likely to have a material adverse effect on its consolidated financial position or results of operations. However, it is often difficult to estimate and predict the potential costs and liabilities associated with these programs, and there is no guarantee that we will not in the future be identified as potentially responsible for additional costs under these programs, either as a result of changes in existing laws and regulations or as a result of the identification of additional matters or properties covered by these programs.

Facility and Product Security

Following the September 11, 2001 terrorist attacks in the United States, we, through our Safety, Health and Environment department, evaluated and addressed actual and potential security issues and requirements associated with our operations in the United States and elsewhere using approved security vulnerability methodologies. Additional actions and expenditures may be required in the future. In the United States, chemical facilities are regulated under the Maritime Transportation Security Act and the Chemical Facility Anti-terrorism Standards. It is anticipated that Congress will continue to consider federal legislation designed to reduce the risk of any future terrorist acts at industrial facilities. We believe that we are in material compliance with applicable security requirements, and we also have adopted security measures and enhancements beyond those presently required. To date, neither the security regulations nor our expenditures on security matters have had a material adverse effect on our financial position or results of operations. We are unable to predict the potential future costs to us of any new governmental programs or voluntary initiatives.

Our Executive Officers

The name, age, period of service with the Company and position held for each of our executive officers as at February 20, 2009 is as follows:

			Served
Name	Age		Since		Position Held
William J. Doyle		58		1987	President and Chief Executive Officer
Wayne R. Brownlee		56		1988	Executive Vice President, Treasurer and Chief Financial Officer
James F. Dietz		62		1997	Executive Vice President and Chief Operating Officer
Barbara Jane Irwin		53		2000	Senior Vice President, Administration
Robert A. Jaspar		50		1997	Senior Vice President, Information Technology
Joseph A. Podwika		46		1997	Senior Vice President, General Counsel and Secretary
G. David Delaney		48		1997	President, PCS Sales
Garth W. Moore		60		1982	President, PCS Potash
Thomas J. Regan, Jr.		64		1995	President, PCS Phosphate and PCS Nitrogen
Stephen F. Dowdle		58		1999	Senior Vice President, Fertilizer Sales, PCS Sales
Daphne J. Arnason		53		1988	Vice President, Internal Audit
Karen G. Chasez		55		2000	Vice President, Procurement
John R. Hunt		50		1997	Vice President, Safety, Health and Environment
Denis A. Sirois		53		1978	Vice President and Corporate Controller

Each of the officers have held the position indicated above for the previous five years except as follows:

Name	Dates of Service	Position Held
Wayne R. Brownlee	July 1999 – December 2005	Senior Vice President, Treasurer and Chief Financial Officer
Joseph A. Podwika	January 2005 – December 2005 March 2002 – December 2004	Vice President, General Counsel and Secretary Senior Counsel, U.S.
Thomas J. Regan, Jr.	August 1999 – January 2007	President, PCS Phosphate
Stephen F. Dowdle	July 2000 – December 2005	Vice President, Fertilizer Sales, PCS Sales
John R. Hunt	November 2003 – January 2005	Senior Director, Operations Development

FORM 10-K ï Part I Page  24

Presentation of Financial Information

We have three principal business segments: potash, phosphate and nitrogen. For information with respect to the sales, gross margin and assets attributable to each segment and to our North American and offshore sales, see Note 19, Segment Information, to our consolidated financial statements as of December 31, 2008 and 2007 and for each of the years in the three-year period ended December 31, 2008, incorporated by reference under Item 8 of this Form 10-K.

We present our consolidated financial statements in accordance with accounting principles generally accepted in Canada, or Canadian GAAP. See Note 33, Reconciliation of Canadian and United States Generally Accepted Accounting Principles, to our 2008 consolidated financial statements, incorporated by reference under Item 8 of this Form 10-K, for a discussion of certain significant differences between Canadian GAAP and accounting principles generally accepted in the United States, or U.S. GAAP, as they relate to us.

Unless otherwise specified, financial information is presented in U.S. dollars.

Where You Can Find More Information

We file annual, quarterly and current reports and other information with the Securities and Exchange Commission (the “Commission”). You may read and copy any of the information on file with the Commission at the Commission’s Public Reference Room, 100 F Street, NE, Room 1580, Washington, DC 20549. Please call the Commission at 1-800-SEC-0330 for further information on the public reference room. In addition, the Commission maintains an Internet site at http://www.sec.gov that contains reports, proxy and information statements and other information regarding issuers that file, as we do, electronically with the Commission.

We make available, free of charge through our website, http://www.potashcorp.com, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as soon as is reasonably practicable after such material is electronically filed with or furnished to the Commission. The information on our website is not incorporated by reference into this annual report on Form 10-K.

 Item 1A. Risk Factors

Our performance and future development are affected by a wide range of risk factors. Any or all of these risks could have a material adverse effect on our business, financial condition, results of operations and cash flows and on the market price of our common shares. We use our integrated Risk Management Framework to identify risks across all segments of the Company, evaluate those risks, and implement strategies designed to mitigate those risks. This process is further described under “Risk Management” on pages 39 and 40 in our 2008 Financial Review, attached as Exhibit 13, incorporated herein by reference. See also note regarding “Forward-Looking Statements,” earlier in this report.

The Company implements strategies to mitigate risks, including the risks identified in this section. A discussion of the Company’s strategies to mitigate certain risks is included in our “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2008 Financial Review, attached as Exhibit 13, on pages 13 through 18 for potash, 21 through 24 for phosphate and 27 through 30 for nitrogen.

Set forth below are the most significant risks and uncertainties that affect the Company and its businesses:

Global demand for our products that differs from expectations could adversely affect the results of future operations.

The Company has taken major steps to prepare for an anticipated increase in potash demand in future years. The Company is undertaking several key expansion and debottlenecking projects totaling approximately Cdn $7 billion. These projects are expected to come on stream incrementally over the next several years.

FORM 10-K ï Part I Page  25

We predict the future level of demand for our products and attempt to meet growing demand. Accurate predictions allow us to avoid surplus inventory and missed sales opportunities. However, incorrect predictions can lead to rising costs and decreased profits. If our estimates of future potash demand prove to be overstated, we would experience a lower return on investment due to lower revenues.

New product supply can create a structural market imbalance, which could reduce our profits.

Fertilizer is a bulk commodity that is generally characterized by minimal product differentiation. Consequently, the market for fertilizer is subject to competitive pricing pressures and cyclicality. An increase in the competitive supply of fertilizer that outpaces the growth in world consumption generally reduces prices; whereas, a supply shortage can increase prices as customers compete for available product. Low prices tend to discourage capacity investment, thereby diminishing future supply growth, while high prices typically accelerate new supply projects and increase production.

Commodity price cyclicality varies from industry to industry. The nitrogen industry, for example, is characterized by many producers around the world, lower capital costs of entry and short construction times. Not surprisingly, nitrogen is prone to substantial price volatility. In contrast, good potash deposits are rare; capital costs are very high; and Greenfield projects take 5 to 7 years to develop. As a result, potash prices are less volatile than nitrogen prices.

We rely heavily upon railcars, ocean freightliners, warehouse and port storage facilities to transport and distribute product to our customers.

Transportation is a significant part of the final sale price of our products and some of our customers require just-in-time delivery. Finding affordable and dependable transportation is important in allowing us to supply customers close to our operating facilities and customers around the world. Labor disputes, derailments, adverse weather or other environmental events, short term swings in demand for potash and changes to rail or ocean freight systems could interrupt or limit available transport services, which could result in customer dissatisfaction, loss of sales potential and could negatively affect our financial performance.

Strong demand for grain and other products affects railcar availability. A shortage of railcars for carrying product and increased transit time in North America may result in inability to deliver on a timely basis, customer dissatisfaction, loss of sales and higher transportation costs. Delays and missed shipments relying on ocean freight could result in customer dissatisfaction and loss of sales potential and could negatively affect our financial performance.

As discussed below, the global financial crisis could affect our ability to access transport services as and when required because of the potential impact on the businesses of these transport service providers.

The Company is subject to risks associated with international operations.

The Company has operations and investments in countries outside of Canada and the United States. Historically, these countries have had less stable political environments. We have a nitrogen production facility in Trinidad. In addition, we have significant investments in SQM, APC, Sinofert and ICL. Additionally, potash from our Saskatchewan operations for sale outside Canada and the United States is sold exclusively to Canpotex, which acts as an export marketing and sales company. A significant portion of Canpotex sales are to China. Other key offshore customers are located in Brazil, India, Indonesia, Malaysia and Japan.

Global expansion opportunities with the lowest cost and the highest synergies are sometimes located in politically sensitive regions. Risks inherent in doing business inside Canada and the United States also exist in foreign countries and may be exaggerated by differences in culture, laws and regulations. Political and economic conditions, foreign trade policies, fiscal policies, laws, regulations and other activities of foreign governments may affect performance and development of our operations and investments. Our operations and investments may be affected by abrupt political change, forced divestiture, selective discrimination,

FORM 10-K ï Part I Page  26

inconvertibility of funds, armed conflict, terrorist activity and unexpected changes in regulatory requirements, social, political, labor and economic conditions.

Water inflows in our potash mines, or potash mines in which we have an interest, could result in increased costs and could require us to abandon a mine, either of which could adversely affect the results of our operations.

The presence of water-bearing strata in many underground mines carries the risk of water inflows. It is difficult to predict if water inflow will occur at our mines or mines in which we have an interest. We currently manage water inflows at our New Brunswick mine, while ongoing water inflows are being managed at the Esterhazy mine, in which we have an interest in the mineral rights. Additional water inflows at these or other mines could increase the costs required to operate such mines, injure our employees and/or lead to the abandonment of a mine. The risk of underground water inflows, similar to other underground risks, is not insurable.

The Company may be adversely affected by changing anti-trust laws to which it is subject.

We are subject to anti-trust laws in various countries throughout the world. We cannot predict how these laws or their interpretation, administration and enforcement will change over time. Changes in anti-trust laws globally, or the interpretation, administration or enforcement thereof, may limit our future acquisitions, or the operations of Canpotex and PhosChem.

Strikes or other forms of work stoppage or slowdown could disrupt our business and lead to increased costs.

Adverse labor relations or contract negotiations that do not result in an agreement could result in strikes or slowdowns. These disruptions may decrease our production and sales or impose additional costs to resolve disputes.

Damage to our reputation could negatively affect our performance.

Loss of our reputation can be the consequence of a number of events. Reputation loss extends throughout all risk categories and may result in loss of investor confidence, loss of customer confidence, poor community relations and a decline in employee productivity. Reputation loss could interfere with our ability to execute our strategies. Reputation loss is a negative consequence resulting from these or other risks and can have a detrimental affect on our performance.

Deliberate, malicious acts involving our products or facilities or downstream product mishaps may expose employees, contractors or the public to extensive injury, cause property damage or affect the Company’s reputation.

Intentional acts of destruction could hinder our sales or production and interrupt our supply chain. Facilities could be damaged leading to a reduction in our operational production capacity. Employees, contractors and the public could suffer substantial physical injury. The consequences of any such actions could damage our reputation, negatively affecting our sales and profits.

Other risks may hurt our operating results.

The duration and depth of the global financial crisis are impossible to predict. As a result of this crisis, our relationships with customers and with external partners in the supply chain upon whom we rely may become riskier. Conditions in the credit markets could negatively affect the ability of our customers to pay or reduce their demand for our products. If our customers’ financial condition reduces demand for our products or our suppliers’ financial condition causes disruptions to our supply chain, our operating results may be negatively affected.

FORM 10-K ï Part I Page  27

In addition to the above, other risks may affect our performance including unexpected or adverse weather conditions; price risks associated with feedstocks, including natural gas and sulfur; other hedging activities; changes in capital markets and corresponding effects on our investments, including our investments in auction rate securities; changes in currencies and exchange rates; unexpected geological or environmental conditions; legal proceedings; changes in, and the effects of, government policy and regulation, including environmental regulations and greenhouse gas regulations and regulations and actions affecting our transportation and sale of natural gas; inherent risks in industrial operations, including inability to obtain insurance for underground operations; inappropriate handling and transportation of some of our products by customers or carriers; and future acquisitions by the Company.

 Item 1B. Unresolved Staff Comments

None.

 Item 2. Properties

Information concerning our properties is set forth under the “Properties” sections in Item 1.

 Item 3. Legal Proceedings

Between September 11 and October 2, 2008, the company and PCS Sales (USA), Inc., were named as defendants in eight very similar antitrust complaints filed in federal courts. Other potash producers are also defendants in these cases. Each of the separate complaints allege conspiracy to fix potash prices, to divide markets, to restrict supply and to fraudulently conceal the conspiracy, all in violation of Section 1 of the Sherman Act.

Five of the eight complaints were brought by plaintiffs who claim to have purchased potash directly from at least one of the defendants during the period between July 1, 2003, and the present (collectively, the “Direct Purchaser Plaintiffs”). All five Direct Purchaser Plaintiffs purport to sue on behalf of a class of persons who purchased potash in the United States directly from a defendant. The Direct Purchaser Plaintiffs, who filed a single, consolidated amended complaint on November 13, 2008, seek unspecified treble damages, injunctive relief, attorneys’ fees, costs and pre- and post-judgment interest.

The other three complaints were brought by Plaintiffs who claim to be indirect purchasers of potash (collectively, the “Indirect Purchaser Plaintiffs”). The Indirect Purchaser Plaintiffs, who purport to sue on behalf of all persons who purchased potash indirectly in the United States, filed a single, consolidated amended complaint on November 13, 2008. In addition to the Sherman Act claim described above, the Indirect Purchaser Plaintiffs also assert claims for violation of various state antitrust laws; violations of various state consumer protection statutes; and for unjust enrichment. The Indirect Purchaser Plaintiffs seek injunctive relief, unspecified damages, treble damages where allowed, costs, fees and pre- and post-judgment interest.

All eight lawsuits have been consolidated into a Multidistrict Litigation proceeding, or MDL, (No. 1996) for coordinated pretrial proceedings before Judge Ruben Castillo in the United States District Court for the Northern District of Illinois.

The company and PCS Sales (USA), Inc. believe each of these eight private antitrust law lawsuits is without merit and intend to defend them vigorously.

FORM 10-K ï Part I Page  28

General

In the normal course of business, we are subject to legal proceedings being brought against us. While the final outcome of these proceedings is uncertain, we believe that these proceedings, in the aggregate, are not reasonably likely to have a material adverse effect on our financial position or results of operations.

Environmental Proceedings

For a description of certain environmental proceedings in which we are involved, see “Environmental Matters” under Item 1.

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

None.

FORM 10-K ï Part I Page  29

Part II

 Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

The information under “Common Share Prices and Volumes”, “Ownership”, “Dividends” and “NYSE Corporate Governance” on page 118 in our 2008 Financial Review, attached as Exhibit 13, is incorporated herein by reference and “11 Year Report” on page 61 in our 2008 Financial Review, attached as Exhibit 13, is incorporated herein by reference.

On May 2, 2007, the Board of Directors of the Company approved a three-for-one stock split of the Company’s outstanding common shares. The stock split was effected in the form of a stock dividend of two additional common shares for each share owned by shareholders of record at the close of business on May 22, 2007. All equity-based benefit plans have been adjusted to reflect the stock split. In this annual report on Form 10-K, all share and per-share data has been adjusted to reflect the stock split.

In each of the first and second quarters of 2007, the Company paid a cash dividend of $0.05 per common share, and in each of the third and fourth quarters of 2007, the Company paid a cash dividend of $0.10 per common share, for a total of $0.30 for the year. In each quarter of 2008, the Company paid a cash dividend of $0.10 per common share, for a total of $0.40 for the year.

Dividends paid to U.S. holders of our common shares, who do not use the shares in carrying on a business in Canada, are subject to a Canadian withholding tax under the Income Tax Act. Under the Canada-U.S. Income Tax Convention (1980), the rate of withholding is generally reduced to 15%. Shareholders in the U.S. who have not filed a W-9 are also subject to the back-up withholding tax (currently 28%). Subject to certain limitations, the Canadian withholding tax is treated as a foreign income tax that can generally be claimed as a deduction from income or as a credit against the U.S. income tax liability of the holder. Holders are generally not subject to tax under the Income Tax Act with respect to any gain realized from a disposition of common shares.

The following table provides information about company purchases of equity securities that are registered by the Company pursuant to Section 12 of the Exchange Act during the quarter ended December 31, 2008:

					(c) Total Number of		(d) Maximum
					Shares Purchased		Number of Shares
	(a) Total Number		(b) Average		as Part of Publicly		that May Yet Be
	of Shares		Price Paid		Announced		Purchased Under
Period	Purchased		per Share(1)		Programs(2,3)		the Programs(3)
October 1, 2008 – October 31, 2008		379,200	$	69.13		16,199,200		15,300,800
November 1, 2008 – November 30, 2008		3,100,000	$	69.48		19,299,200		12,200,800
December 1, 2008 – December 31, 2008		3,550,000	$	59.68		22,849,200		8,650,800
Total		7,029,200	$	64.51		22,849,200		8,650,800

(1)	Average price paid per share includes cash paid for commissions.
(2)	On January 23, 2008, the Company announced that its Board of Directors had approved an open market repurchase program of approximately 5 percent of the Company’s outstanding common shares, or approximately 15.82 million common shares, through a normal course issuer bid. Purchasing under the program was permitted from January 31, 2008 until January 30, 2009.
(3)	On September 11, 2008, the Company announced that its Board of Directors had approved an increase in the share repurchase program to authorize the purchase of up to an additional 15.68 million common shares, or approximately 5 percent of the Company’s outstanding common shares, raising the ceiling of the share repurchase program to approximately 31.5 million common shares.

FORM 10-K ï Part II Page  30

 Item 6. Selected Financial Data

The information under “11 Year Report” on page 61 in our 2008 Financial Review, attached as Exhibit 13, is incorporated herein by reference. Such information has been presented on the basis of Canadian GAAP. These principles differ in certain significant respects from U.S. GAAP. The following supplemental financial data is provided on the basis of reconciliations between Canadian and U.S. GAAP.

	(In millions of US dollars, except per-share amounts)
U.S. GAAP	2008		2007		2006		2005		2004
Net income		3,395.2		1,061.5		625.8		532.7		290.5
Net income per share – basic		11.04		3.36		2.01		1.64		0.90
Total assets		9,889.4		9,483.6		7,038.9		5,841.8		5,202.7
Long-term obligations(1)		1,758.0		1,358.3		1,339.8		1,257.6		1,258.6

(1)  Represents long-term debt obligations and does not include unamortized costs. (See Note 13 to the Company’s consolidated financial statements for a description of such amounts.)

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

The information under “Management’s Discussion & Analysis of Financial Condition and Results of Operations” on pages 4 through 61 and “Appendix” on pages 119 and 120 in our 2008 Financial Review, attached as Exhibit 13, is incorporated herein by reference.

 Item 7A. Quantitative and Qualitative Disclosures About Market Risk

The information under “Management’s Discussion & Analysis of Financial Condition and Results of Operations – Market Risks Associated With Financial Instruments” on page 54 and Note 28 to the Company’s consolidated financial statements on pages 99 through 103 in our 2008 Financial Review, attached as Exhibit 13, is incorporated herein by reference.

 Item 8. Financial Statements and Supplementary Data

The information under “Management’s Responsibility”, “Accountants’ Reports” and “Consolidated Financial Statements” contained on pages 65 through 117 in our 2008 Financial Review, attached as Exhibit 13, are incorporated herein by reference and “Management’s Discussion & Analysis of Financial Condition and Results of Operations – Quarterly Results” on pages 45 and 46 in our 2008 Financial Review, attached as Exhibit 13, are incorporated herein by reference.

 Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure

None.

FORM 10-K ï Part II Page  31

 Item 9A. Controls and Procedures

As of December 31, 2008, we carried out an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Based upon that evaluation and as of December 31, 2008, the Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in the reports the Company files and submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported as and when required and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

There has been no change in our internal control over financial reporting during the year ended December 31, 2008 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. “Management’s Report on Internal Control Over Financial Reporting” and the “Report of Independent Registered Chartered Accountants” contained on pages 65 and 66 in our 2008 Financial Review, attached as Exhibit 13, are incorporated herein by reference.

 Item 9B. Other Information

Medium-Term Incentive Plan

On February 23, 2009, we adopted a new Medium Term Incentive Plan (the “Plan”) that is effective for the performance period that began January 1, 2009 and ends December 31, 2011. The Plan replaces the Medium-Term Incentive Plan that was effective for the performance period that began January 1, 2006 and ended December 31, 2008.

The Plan is intended to reward senior executives and other key employees for superior performance over a three-year performance period and for continued contributions to our success. The performance objectives under the Plan are designed to further align the interests of senior executives and other key employees with those of shareholders by linking the vesting of awards to the total return to shareholders, or TSR, over the three-year performance period. TSR measures the capital appreciation in shares of our common stock, including dividends paid during the performance period, and thereby simulates the actual investment performance of the shares.

Our named executive officers are eligible to participate in the Plan and, as described in the Plan, were granted a number of units based on the participant’s salary at the beginning of the performance period (multiplied by three), a target award percentage, and the average share price of our common stock over the 30 trading days immediately preceding the performance period. The target award percentages range from 20% to 70%, depending upon the executive’s position and potential for contribution to our success, and are set forth in Section 4.04 of the Plan.

Units granted under the Plan vest over the three-year performance period ending December 31, 2011. One-half of the units vest based on increases in our TSR. The remaining one-half of the units vest based on the extent to which our TSR matches or exceeds the TSR of the common shares of a peer group of companies, which consists of the companies included in the DAXglobal Agribusiness Index. None of the units vest if minimum TSR-based performance objectives are not achieved.

Plan participants generally are required to continue in a qualifying position throughout the performance period as a condition to vesting. However, if a participant’s employment terminates earlier due to the participant’s retirement, disability or death, or we terminate a participant’s employment without just cause,

FORM 10-K ï Part II Page  32

the participant is entitled to a cash payment in settlement of a pro rata number of units. A participant who resigns or whose employment is terminated for just cause forfeits all rights to any units granted under the Plan.

The foregoing description of the Plan is qualified in its entirety by reference to the Plan, which is attached hereto as Exhibit 10(qq) and incorporated herein by reference.

Supplemental Retirement Plans and Agreements

On February 23, 2009, we entered into amendments (collectively, the “Amendments”), effective with respect to services provided on or after July 1, 2009, to (1) the Company’s Supplemental Executive Retirement Income Plan (the “Canadian Plan”), (2) the Company’s Supplemental Retirement Plan for U.S. Executives (the “U.S. Plan”), and (3) the agreements (the “Individual Agreements”) we had entered into with each of William J. Doyle, President and Chief Executive Officer of the Company, Wayne R. Brownlee, Executive Vice President, Treasurer and Chief Financial Officer of the Company, and Garth W. Moore, President, PCS Potash, concerning supplemental retirement benefits.

For the purpose of calculating a participant’s benefit under the Canadian Plan, the U.S. Plan and the Individual Agreements, the Amendments limit the inclusion of awards paid pursuant to the Company’s Short-Term Incentive Plan to 100% of base salary for the relevant calendar year. In addition, the Amendments modify the calculation of a participant’s benefit under the Canadian Plan and the Individual Agreements to be based on the participant’s three highest consecutive years’ earnings rather than the participant’s three highest years’ earnings.

The foregoing description of the Amendments is qualified in its entirety by reference to the Amendments, which are attached hereto as Exhibits 10(r), 10(v), 10(w), 10(x) and 10(aa) and incorporated herein by reference.

FORM 10-K ï Part II Page  33

Part III

 Item 10. Directors, Executive Officers and Corporate Governance

The information under “Board of Directors – Nominees for Election to the Board of Directors” and the first eight paragraphs under “Appointment of Auditors and Report of Audit Committee – Report of the Audit Committee” in our 2009 Proxy Circular, attached as Exhibit 99(a), and Appendix F to our 2009 Proxy Circular are incorporated herein by reference. Information concerning executive officers is set forth under “Our Executive Officers” in Part I of the Form 10-K.

We have adopted the “PotashCorp Core Values and Code of Conduct” that applies to all of our directors, officers and employees. We make this code, as well as our corporate governance principles and the respective Charters of our Corporate Governance and Nominating, Audit and Compensation Committees, available free of charge on our website, http://www.potashcorp.com, or by request. We intend to disclose certain amendments to the “PotashCorp Core Values and Code of Conduct”, or any waivers of the “PotashCorp Core Values and Code of Conduct” granted to executive officers and directors, on our website within four business days following the date of such amendment or waiver.

 Item 11. Executive Compensation

The information under “Board of Directors – Director Compensation,” “Compensation – Report of the Compensation Committee and Compensation Committee Responsibilities and Procedures,” “Compensation – Compensation Discussion and Analysis” and “Compensation – Executive Compensation” in our 2009 Proxy Circular, attached as Exhibit 99(a), is incorporated herein by reference.

 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information under “Ownership of Shares”, and the tables titled “Board of Directors – “At-Risk” Investment and Year Over Year Changes” and “Adoption of 2009 Performance Option Plan – Equity Compensation Plan Information” in our 2009 Proxy Circular, attached as Exhibit 99(a), is incorporated herein by reference.

 Item 13. Certain Relationships and Related Transactions, and Director Independence

The information under “Board of Directors – Director Independence and Other Relationships” on pages 12 through 14 in our 2009 Proxy Circular, attached as Exhibit 99(a), is incorporated herein by reference.

 Item 14. Principal Accounting Fees and Services

The information under “Appointment of Auditors and Report of Audit Committee – Appointment of Auditors” in our 2009 Proxy Circular, attached as Exhibit 99(a), is incorporated herein by reference.

FORM 10-K ï Part III Page  34

Part IV

 Item 15. Exhibits and Financial Statement Schedules

List of Documents Filed as Part of this Report

1.   Consolidated Financial Statements in Annual Report

The consolidated financial statements contained on pages 65 through 117 in our 2008 Financial Review, attached as Exhibit 13, are incorporated under Item 8 by reference.

Reports of Independent Registered Chartered Accountants	66-67
Consolidated Statements of Financial Position	68
Consolidated Statements of Operations and Retained Earnings	69
Consolidated Statements of Cash Flow	70
Consolidated Statements of Comprehensive (Loss) Income	71
Consolidated Statements of Accumulated Other Comprehensive Income	71
Notes to the Consolidated Financial Statements	72-117

2.   Schedules

Schedules not listed are omitted because the required information is inapplicable or is presented in the consolidated financial statements.

REPORT OF INDEPENDENT REGISTERED CHARTERED ACCOUNTANTS

To the Board of Directors and Shareholders of Potash Corporation of Saskatchewan Inc.

We have audited the consolidated financial statements of Potash Corporation of Saskatchewan Inc. and subsidiaries (the “Company”) as of December 31, 2008 and 2007, and for each of the three years in the period ended December 31, 2008, and the Company’s internal control over financial reporting as of December 31, 2008, and have issued our reports thereon (which reports (1) express an unqualified opinion on the consolidated financial statements and include an explanatory paragraph referring to changes in the Company’s accounting for inventories and (2) express an unqualified opinion on the effectiveness of internal control over financial reporting), dated February 20, 2009; such consolidated financial statements and reports are included in your 2008 Financial Review Annual Report and are incorporated herein by reference. Our audits also included the consolidated financial statement schedules of the Company listed in Item 15. These consolidated financial statement schedules are the responsibility of the Company’s management. Our responsibility is to express an opinion based on our audits. In our opinion, such consolidated financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.

/s/  Deloitte & Touche LLP

Independent Registered Chartered Accountants

Saskatoon, Canada

February 20, 2009

FORM 10-K ï Part IV Page  35

Potash Corporation of Saskatchewan Inc.
Schedule II – Valuation and Qualifying Accounts
(in millions of US dollars)
(audited)
			Additions
	Balance at		Charged to
	Beginning of		Costs and				Balance at
Description	Year		Expenses		Deductions		End of Year
Allowance for doubtful trade accounts receivable
2008		5.9		5.0		3.2		7.7
2007		4.7		1.9		0.7		5.9
2006		5.1		0.7		1.1		4.7
Allowance for inventory valuation
2008		6.3		93.1		2.1		97.3
2007		8.9		4.7		7.3		6.3
2006		12.9		2.4		6.4		8.9
Allowance for deferred income tax assets
2008		10.4		64.5		2.0		72.9
2007		53.1		0.3		43.0		10.4
2006		45.5		11.2		3.6		53.1

3.   Exhibits

				Incorporated By Reference
Exhibit						Filing Date/
Number			Description of Document	Form		Period End Date
	3	(a)	Articles of Continuance of the registrant dated May 15, 2002.		10-Q		6/30/2002
	3	(b)	Bylaws of the registrant effective May 15, 2002.		10-Q		6/30/2002
	4	(a)	Term Credit Agreement between The Bank of Nova Scotia and other financial institutions and the registrant dated September 25, 2001.		10-Q		9/30/2001
	4	(b)	Syndicated Term Credit Facility Amending Agreement between The Bank of Nova Scotia and other financial institutions and the registrant dated as of September 23, 2003.		10-Q		9/30/2003
	4	(c)	Syndicated Term Credit Facility Second Amending Agreement between The Bank of Nova Scotia and other financial institutions and the registrant dated as of September 21, 2004.		8-K		9/24/2004
	4	(d)	Syndicated Term Credit Facility Third Amending Agreement between The Bank of Nova Scotia and other financial institutions and the registrant dated as of September 20, 2005.		8-K		9/22/2005
	4	(e)	Syndicated Term Credit Facility Fourth Amending Agreement between The Bank of Nova Scotia and other financial institutions and the registrant dated as of September 27, 2006.		10-Q		9/30/2006
	4	(f)	Syndicated Term Credit Facility, Fifth Amending Agreement between the Bank of Nova Scotia and other financial institutions and the registrant dated as of October 19, 2007.		8-K		10/22/2007
	4	(g)	Indenture dated as of June 16, 1997, between the registrant and The Bank of Nova Scotia Trust Company of New York.		8-K		6/18/1997

FORM 10-K ï Part IV Page  36

				Incorporated By Reference
Exhibit						Filing Date/
Number			Description of Document	Form		Period End Date
	4	(h)	Indenture dated as of February 27, 2003, between the registrant and The Bank of Nova Scotia Trust Company of New York.		10-K		12/31/2002
	4	(i)	Form of Note relating to the registrant’s offering of $600,000,000 principal amount of 7.75% Notes due May 31, 2011.		8-K		5/17/2001
	4	(j)	Form of Note relating to the registrant’s offering of $250,000,000 principal amount of 4.875% Notes due March 1, 2013.		8-K		2/28/2003
	4	(k)	Form of Note relating to the registrant’s offering of $500,000,000 principal amount of 5.875% Notes due December 1, 2036.		8-K		11/30/2006
	4	(l)	Amended and Restated Revolving Term Credit Facility Agreement between the Bank of Nova Scotia and other financial institutions and the registrant dated as of January 21, 2009.		8-K		1/22/2009

The registrant hereby undertakes to file with the Securities and Exchange Commission, upon request, copies of any constituent instruments defining the rights of holders of long-term debt of the registrant or its subsidiaries that have not been filed herewith because the amounts represented thereby are less than 10% of the total assets of the registrant and its subsidiaries on a consolidated basis.

				Incorporated By Reference
Exhibit					Filing Date/
Number			Description of Document	Form	Period End Date
	10	(a)	Sixth Voting Agreement dated April 22, 1978, between Central Canada Potash, Division of Noranda, Inc., Cominco Ltd., International Minerals and Chemical Corporation (Canada) Limited, PCS Sales and Texasgulf Inc.	F-1 (File No. 33-31303)		9/28/1989
	10	(b)	Canpotex Limited Shareholders Seventh Memorandum of Agreement effective April 21, 1978, between Central Canada Potash, Division of Noranda Inc., Cominco Ltd., International Minerals and Chemical Corporation (Canada) Limited, PCS Sales, Texasgulf Inc. and Canpotex Limited as amended by Canpotex S&P amending agreement dated November 4, 1987.	F-1 (File No. 33-31303)		9/28/1989
	10	(c)	Producer Agreement dated April 21, 1978, between Canpotex Limited and PCS Sales.	F-1 (File No. 33-31303)		9/28/1989
	10	(d)	Canpotex/PCS Amending Agreement, dated as of October 1, 1992.	10-K		12/31/1995
	10	(e)	Canpotex PCA Collateral Withdrawing/PCS Amending Agreement, dated as of October 7, 1993.	10-K		12/31/1995
	10	(f)	Canpotex Producer Agreement amending agreement dated as of January 1, 1999.	10-K		12/31/2000
	10	(g)	Canpotex Producer Agreement amending agreement dated as of July 1, 2002.	10-Q		6/30/2004

FORM 10-K ï Part IV Page  37

				Incorporated By Reference
Exhibit					Filing Date/
Number			Description of Document	Form	Period End Date
	10	(h)	Esterhazy Restated Mining and Processing Agreement dated January 31, 1978, between International Minerals & Chemical Corporation (Canada) Limited and the registrant’s predecessor.	F-1 (File No. 33-31303)		9/28/1989
	10	(i)	Agreement dated December 21, 1990, between International Minerals & Chemical Corporation (Canada) Limited and the registrant, amending the Esterhazy Restated Mining and Processing Agreement dated January 31, 1978.	10-K		12/31/1990
	10	(j)	Agreement effective August 27, 1998, between International Minerals & Chemical (Canada) Global Limited and the registrant, amending the Esterhazy Restated Mining and Processing Agreement dated January 31, 1978 (as amended).	10-K		12/31/1998
	10	(k)	Agreement effective August 31, 1998, among International Minerals & Chemical (Canada) Global Limited, International Minerals & Chemical (Canada) Limited Partnership and the registrant assigning the interest in the Esterhazy Restated Mining and Processing Agreement dated January 31, 1978 (as amended) held by International Minerals & Chemical (Canada) Global Limited to International Minerals & Chemical (Canada) Limited Partnership.	10-K		12/31/1998
	10	(l)	Potash Corporation of Saskatchewan Inc. Stock Option Plan – Directors, as amended.	10-K		12/31/2006
	10	(m)	Potash Corporation of Saskatchewan Inc. Stock Option Plan – Officers and Employees, as amended.	10-K		12/31/2006
	10	(n)	Short-Term Incentive Plan of the registrant effective January 2000, as amended.
	10	(o)	Resolution and Forms of Agreement for Supplemental Retirement Income Plan, for officers and key employees of the registrant.	10-K		12/31/1995
	10	(p)	Amending Resolution and revised forms of agreement regarding Supplemental Retirement Income Plan of the registrant.	10-Q		6/30/1996
	10	(q)	Amended and restated Supplemental Retirement Income Plan of the registrant and text of amendment to existing supplemental income plan agreements.	10-Q		9/30/2000
	10	(r)	Amendment, dated February 23, 2009, to the amended and restated Supplemental Retirement Income Plan.
	10	(s)	Form of Letter of amendment to existing supplemental income plan agreements of the registrant.	10-K		12/31/2002
	10	(t)	Amended and restated agreement dated February 20, 2007, between the registrant and William J. Doyle concerning the Supplemental Retirement Income Plan.	10-K		12/31/2006
	10	(u)	Amendment, dated December 24, 2008, to the amended and restated agreement, dated February 20, 2007, between the registrant and William J. Doyle concerning the Supplemental Retirement Income Plan.

FORM 10-K ï Part IV Page  38

				Incorporated By Reference
Exhibit					Filing Date/
Number			Description of Document	Form	Period End Date
	10	(v)	Amendment, dated February 23, 2009, to the amended and restated agreement, dated February 20, 2007, between the registrant and William J. Doyle concerning the Supplemental Retirement Income Plan.
	10	(w)	Amendment, dated February 23, 2009, to the amended and restated agreement dated August 2, 2006, between the registrant and Wayne R. Brownlee concerning the Supplemental Retirement Income Plan.
	10	(x)	Amendment, dated February 23, 2009, to the amended and restated agreement, dated August 2, 1996, between the registrant and Garth W. Moore concerning the Supplemental Retirement Income Plan.
	10	(y)	Supplemental Retirement Benefits Plan for U.S. Executives dated effective January 1, 1999.	10-Q		6/30/2002
	10	(z)	Amendment No. 1, dated December 24, 2008, to the Supplemental Retirement Plan for U.S. Executives.
	10	(aa)	Amendment No. 2, dated February 23, 2009, to the Supplemental Retirement Plan for U.S. Executives.
	10	(bb)	Forms of Agreement dated December 30, 1994, between the registrant and certain officers of the registrant.	10-K		12/31/1995
	10	(cc)	Form of Agreement of Indemnification dated August 8, 1995, between the registrant and certain officers and directors of the registrant.	10-K		12/31/1995
	10	(dd)	Resolution and Form of Agreement of Indemnification dated January 24, 2001.	10-K		12/31/2000
	10	(ee)	Resolution and Form of Agreement of Indemnification – July 21, 2004.	10-Q		6/30/2004
	10	(ff)	Chief Executive Officer Medical and Dental Benefits.	10-K		12/31/2004
	10	(gg)	Second Amended and Restated Membership Agreement dated January 1, 1995, among Phosphate Chemicals Export Association, Inc. and members of such association, including Texasgulf Inc.	10-K		12/31/1995
	10	(hh)	International Agency Agreement dated effective December 15, 2006, between Phosphate Chemicals Export Association, Inc. and PCS Sales (USA), Inc.	10-K		12/31/2006
	10	(ii)	Deferred Share Unit Plan for Non-Employee Directors, as amended.	10-Q		3/31/2008
	10	(jj)	U.S. Participant Addendum No. 1 to the Deferred Share Unit Plan for Non-Employee Directors.
	10	(kk)	Potash Corporation of Saskatchewan Inc. 2005 Performance Option Plan and Form of Option Agreement, as amended.	10-K		12/31/2006
	10	(ll)	Potash Corporation of Saskatchewan Inc. 2006 Performance Option Plan and Form of Option Agreement, as amended.	10-K		12/31/2006
	10	(mm)	Potash Corporation of Saskatchewan Inc. 2007 Performance Option Plan and Form of Option Agreement.	10-Q		3/31/2007

FORM 10-K ï Part IV Page  39

				Incorporated By Reference
Exhibit					Filing Date/
Number			Description of Document	Form	Period End Date
	10	(nn)	Potash Corporation of Saskatchewan Inc. 2008 Performance Option Plan and Form of Option Agreement.	10-Q		3/31/2008
	10	(oo)	Medium-Term Incentive Plan of the registrant effective January 2006.	10-K		12/31/2005
	10	(pp)	Amendment, dated December 24, 2008 to the Medium-Term Incentive Plan.
	10	(qq)	Medium-Term Incentive Plan of the registrant effective January 2009.
	11		Statement re Computation of Per Share Earnings.
	12		Computation of Ratio of Earnings to Fixed Charges.
	13		2008 Financial Review Annual Report. The 2008 Financial Review Annual Report, except for those portions that are expressly incorporated by reference, is furnished for the information of the Commission and is not to be deemed “filed” as part of or otherwise form part of this filing.
	21		Subsidiaries of the registrant.
	23		Consent of Deloitte & Touche LLP.
	31	(a)	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	31	(b)	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	32		Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	99	(a)	2009 Notice of Meeting, Proxy Circular and Form of Proxy. The 2009 Notice of Meeting, Proxy Circular and Form of Proxy, except for those portions thereof that are expressly incorporated by reference, are furnished for the information of the Commission and are not to be deemed “filed” as part of or otherwise form part of this filing.
	99	(b)	2008 Summary Annual Report. The 2008 Summary Annual Report is furnished for the information of the Commission and is not to be deemed “filed” as part of or otherwise form part of this filing.

FORM 10-K ï Part IV Page  40

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.

POTASH CORPORATION OF SASKATCHEWAN INC.

By:  /s/  WILLIAM J. DOYLE

William J. Doyle

President and Chief Executive Officer

February 26, 2009

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.

Signature	Title	Date
/s/  DALLAS J. HOWE Dallas J. Howe	Chair of the Board	February 26, 2009
/s/  WAYNE R. BROWNLEE Wayne R. Brownlee	Executive Vice President, Treasurer and Chief Financial Officer (Principal financial and accounting officer)	February 26, 2009
/s/  WILLIAM J. DOYLE William J. Doyle	President and Chief Executive Officer	February 26, 2009
/s/  JOHN W. ESTEY John W. Estey	Director	February 26, 2009
/s/  WADE FETZER III Wade Fetzer III	Director	February 26, 2009
/s/  C. STEVEN HOFFMAN C. Steven Hoffman	Director	February 26, 2009
/s/  ALICE D. LABERGE Alice D. Laberge	Director	February 26, 2009
/s/  KEITH G. MARTELL Keith G. Martell	Director	February 26, 2009
/s/  JEFFREY J. MCCAIG Jeffrey J. McCaig	Director	February 26, 2009

FORM 10-K ï Signatures Page  41

Signature	Title	Date
/s/  MARY MOGFORD Mary Mogford	Director	February 26, 2009
/s/  PAUL J. SCHOENHALS Paul J. Schoenhals	Director	February 26, 2009
/s/  E. ROBERT STROMBERG, Q.C. E. Robert Stromberg, Q.C.	Director	February 26, 2009
/s/  ELENA VIYELLA DE PALIZA Elena Viyella de Paliza	Director	February 26, 2009

FORM 10-K ï Signatures Page  42

EXHIBIT INDEX

				Incorporated By Reference
Exhibit						Filing Date/
Number			Description of Document	Form		Period End Date
	3	(a)	Articles of Continuance of the registrant dated May 15, 2002.		10-Q		6/30/2002
	3	(b)	Bylaws of the registrant effective May 15, 2002.		10-Q		6/30/2002
	4	(a)	Term Credit Agreement between The Bank of Nova Scotia and other financial institutions and the registrant dated September 25, 2001.		10-Q		9/30/2001
	4	(b)	Syndicated Term Credit Facility Amending Agreement between The Bank of Nova Scotia and other financial institutions and the registrant dated as of September 23, 2003.		10-Q		9/30/2003
	4	(c)	Syndicated Term Credit Facility Second Amending Agreement between The Bank of Nova Scotia and other financial institutions and the registrant dated as of September 21, 2004.		8-K		9/24/2004
	4	(d)	Syndicated Term Credit Facility Third Amending Agreement between The Bank of Nova Scotia and other financial institutions and the registrant dated as of September 20, 2005.		8-K		9/22/2005
	4	(e)	Syndicated Term Credit Facility Fourth Amending Agreement between The Bank of Nova Scotia and other financial institutions and the registrant dated as of September 27, 2006.		10-Q		9/30/2006
	4	(f)	Syndicated Term Credit Facility, Fifth Amending Agreement between the Bank of Nova Scotia and other financial institutions and the registrant dated as of October 19, 2007.		8-K		10/22/2007
	4	(g)	Indenture dated as of June 16, 1997, between the registrant and The Bank of Nova Scotia Trust Company of New York.		8-K		6/18/1997
	4	(h)	Indenture dated as of February 27, 2003, between the registrant and The Bank of Nova Scotia Trust Company of New York.		10-K		12/31/2002
	4	(i)	Form of Note relating to the registrant’s offering of $600,000,000 principal amount of 7.75% Notes due May 31, 2011.		8-K		5/17/2001
	4	(j)	Form of Note relating to the registrant’s offering of $250,000,000 principal amount of 4.875% Notes due March 1, 2013.		8-K		2/28/2003
	4	(k)	Form of Note relating to the registrant’s offering of $500,000,000 principal amount of 5.875% Notes due December 1, 2036.		8-K		11/30/2006
	4	(l)	Amended and Restated Revolving Term Credit Facility Agreement between the Bank of Nova Scotia and other financial institutions and the registrant dated as of January 21, 2009.		8-K		1/22/2009

The registrant hereby undertakes to file with the Securities and Exchange Commission, upon request, copies of any constituent instruments defining the rights of holders of long-term debt of the registrant or its subsidiaries that have not been filed herewith because the amounts represented thereby are less than 10% of the total assets of the registrant and its subsidiaries on a consolidated basis.

				Incorporated By Reference
Exhibit					Filing Date/
Number			Description of Document	Form	Period End Date
	10	(a)	Sixth Voting Agreement dated April 22, 1978, between Central Canada Potash, Division of Noranda, Inc., Cominco Ltd., International Minerals and Chemical Corporation (Canada) Limited, PCS Sales and Texasgulf Inc.	F-1 (File No. 33-31303)		9/28/1989
	10	(b)	Canpotex Limited Shareholders Seventh Memorandum of Agreement effective April 21, 1978, between Central Canada Potash, Division of Noranda Inc., Cominco Ltd., International Minerals and Chemical Corporation (Canada) Limited, PCS Sales, Texasgulf Inc. and Canpotex Limited as amended by Canpotex S&P amending agreement dated November 4, 1987.	F-1 (File No. 33-31303)		9/28/1989
	10	(c)	Producer Agreement dated April 21, 1978, between Canpotex Limited and PCS Sales.	F-1 (File No. 33-31303)		9/28/1989
	10	(d)	Canpotex/PCS Amending Agreement, dated as of October 1, 1992.	10-K		12/31/1995
	10	(e)	Canpotex PCA Collateral Withdrawing/PCS Amending Agreement, dated as of October 7, 1993.	10-K		12/31/1995
	10	(f)	Canpotex Producer Agreement amending agreement dated as of January 1, 1999.	10-K		12/31/2000
	10	(g)	Canpotex Producer Agreement amending agreement dated as of July 1, 2002.	10-Q		6/30/2004
	10	(h)	Esterhazy Restated Mining and Processing Agreement dated January 31, 1978, between International Minerals & Chemical Corporation (Canada) Limited and the registrant’s predecessor.	F-1 (File No. 33-31303)		9/28/1989
	10	(i)	Agreement dated December 21, 1990, between International Minerals & Chemical Corporation (Canada) Limited and the registrant, amending the Esterhazy Restated Mining and Processing Agreement dated January 31, 1978.	10-K		12/31/1990
	10	(j)	Agreement effective August 27, 1998, between International Minerals & Chemical (Canada) Global Limited and the registrant, amending the Esterhazy Restated Mining and Processing Agreement dated January 31, 1978 (as amended).	10-K		12/31/1998
	10	(k)	Agreement effective August 31, 1998, among International Minerals & Chemical (Canada) Global Limited, International Minerals & Chemical (Canada) Limited Partnership and the registrant assigning the interest in the Esterhazy Restated Mining and Processing Agreement dated January 31, 1978 (as amended) held by International Minerals & Chemical (Canada) Global Limited to International Minerals & Chemical (Canada) Limited Partnership.	10-K		12/31/1998
	10	(l)	Potash Corporation of Saskatchewan Inc. Stock Option Plan – Directors, as amended.	10-K		12/31/2006
	10	(m)	Potash Corporation of Saskatchewan Inc. Stock Option Plan – Officers and Employees, as amended.	10-K		12/31/2006
	10	(n)	Short-Term Incentive Plan of the registrant effective January 2000, as amended.
	10	(o)	Resolution and Forms of Agreement for Supplemental Retirement Income Plan, for officers and key employees of the registrant.	10-K		12/31/1995
	10	(p)	Amending Resolution and revised forms of agreement regarding Supplemental Retirement Income Plan of the registrant.	10-Q		6/30/1996

				Incorporated By Reference
Exhibit					Filing Date/
Number			Description of Document	Form	Period End Date
	10	(q)	Amended and restated Supplemental Retirement Income Plan of the registrant and text of amendment to existing supplemental income plan agreements.	10-Q		9/30/2000
	10	(r)	Amendment, dated February 23, 2009, to the amended and restated Supplemental Retirement Income Plan.
	10	(s)	Form of Letter of amendment to existing supplemental income plan agreements of the registrant.	10-K		12/31/2002
	10	(t)	Amended and restated agreement dated February 20, 2007, between the registrant and William J. Doyle concerning the Supplemental Retirement Income Plan.	10-K		12/31/2006
	10	(u)	Amendment, dated December 24, 2008, to the amended and restated agreement, dated February 20, 2007, between the registrant and William J. Doyle concerning the Supplemental Retirement Income Plan.
	10	(v)	Amendment, dated February 23, 2009, to the amended and restated agreement, dated February 20, 2007, between the registrant and William J. Doyle concerning the Supplemental Retirement Income Plan.
	10	(w)	Amendment, dated February 23, 2009, to the amended and restated agreement dated August 2, 2006, between the registrant and Wayne R. Brownlee concerning the Supplemental Retirement Income Plan.
	10	(x)	Amendment, dated February 23, 2009, to the amended and restated agreement, dated August 2, 1996, between the registrant and Garth W. Moore concerning the Supplemental Retirement Income Plan.
	10	(y)	Supplemental Retirement Benefits Plan for U.S. Executives dated effective January 1, 1999.	10-Q		6/30/2002
	10	(z)	Amendment No. 1, dated December 24, 2008, to the Supplemental Retirement Plan for U.S. Executives.
	10	(aa)	Amendment No. 2, dated February 23, 2009, to the Supplemental Retirement Plan for U.S. Executives.
	10	(bb)	Forms of Agreement dated December 30, 1994, between the registrant and certain officers of the registrant.	10-K		12/31/1995
	10	(cc)	Form of Agreement of Indemnification dated August 8, 1995, between the registrant and certain officers and directors of the registrant.	10-K		12/31/1995
	10	(dd)	Resolution and Form of Agreement of Indemnification dated January 24, 2001.	10-K		12/31/2000
	10	(ee)	Resolution and Form of Agreement of Indemnification – July 21, 2004.	10-Q		6/30/2004
	10	(ff)	Chief Executive Officer Medical and Dental Benefits.	10-K		12/31/2004
	10	(gg)	Second Amended and Restated Membership Agreement dated January 1, 1995, among Phosphate Chemicals Export Association, Inc. and members of such association, including Texasgulf Inc.	10-K		12/31/1995

				Incorporated By Reference
Exhibit					Filing Date/
Number			Description of Document	Form	Period End Date
	10	(hh)	International Agency Agreement dated effective December 15, 2006, between Phosphate Chemicals Export Association, Inc. and PCS Sales (USA), Inc.	10-K		12/31/2006
	10	(ii)	Deferred Share Unit Plan for Non-Employee Directors, as amended.	10-Q		3/31/2008
	10	(jj)	U.S. Participant Addendum No. 1 to the Deferred Share Unit Plan for Non-Employee Directors.
	10	(kk)	Potash Corporation of Saskatchewan Inc. 2005 Performance Option Plan and Form of Option Agreement, as amended.	10-K		12/31/2006
	10	(ll)	Potash Corporation of Saskatchewan Inc. 2006 Performance Option Plan and Form of Option Agreement, as amended.	10-K		12/31/2006
	10	(mm)	Potash Corporation of Saskatchewan Inc. 2007 Performance Option Plan and Form of Option Agreement.	10-Q		3/31/2007
	10	(nn)	Potash Corporation of Saskatchewan Inc. 2008 Performance Option Plan and Form of Option Agreement.	10-Q		3/31/2008
	10	(oo)	Medium-Term Incentive Plan of the registrant effective January 2006.	10-K		12/31/2005
	10	(pp)	Amendment, dated December 24, 2008 to the Medium-Term Incentive Plan.
	10	(qq)	Medium-Term Incentive Plan of the registrant effective January 2009.
	11		Statement re Computation of Per Share Earnings.
	12		Computation of Ratio of Earnings to Fixed Charges.
	13		2008 Financial Review Annual Report. The 2008 Financial Review Annual Report, except for those portions that are expressly incorporated by reference, is furnished for the information of the Commission and is not to be deemed “filed” as part of or otherwise form part of this filing.
	21		Subsidiaries of the registrant.
	23		Consent of Deloitte & Touche LLP.
	31	(a)	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	31	(b)	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	32		Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	99	(a)	2009 Notice of Meeting, Proxy Circular and Form of Proxy. The 2009 Notice of Meeting, Proxy Circular and Form of Proxy, except for those portions thereof that are expressly incorporated by reference, are furnished for the information of the Commission and are not to be deemed “filed” as part of or otherwise form part of this filing.
	99	(b)	2008 Summary Annual Report. The 2008 Summary Annual Report is furnished for the information of the Commission and is not to be deemed “filed” as part of or otherwise form part of this filing.

EX-10.N

Exhibit 10(n)

		Adopted March 15, 2000
		Amended January 1, 2008
		Amended January 1, 2009
		Short-Term Incentive Plan
		Effective January 1, 2000
		Potash Corporation of Saskatchewan Inc.
	/s/ Barbara Jane Irwin
Signature	/s/ John W. Estey
Date	February 23, 2009

Contents

Section 1—Establishment of the Plan	1
1.01 Purpose	1
1.02 Effective Date	1
Section 2—Definitions	1
2.01 Accrued Incentive Awards	1
2.02 Adjusted Cash Flow Return (ACFR)	1
2.03 Average Accumulated Amortization	2
2.04 Average Accumulated Depreciation	2
2.05 Average Assets	2
2.06 Average Non-Interest Bearing Current Liabilities	2
2.07 Award Payment	3
2.08 Award Percentage	3
2.09 Board	3
2.10 Cash Flow Return (CFR)	3
2.11 Current Taxes	4
2.12 CEO	4
2.13 Committee	4
2.14 Corporation	4
2.15 Depreciation and Amortization	4
2.16 Eligible Employee	4
2.17 Entitled Employee	4
2.18 Hourly Employee	5
2.19 Non-recurring/Unusual Items	5
2.20 Operating Income	5
2.21 PCS Inc.	5
2.22 Plan	5
2.23 Salary	5
2.24 Target CFR	5
2.25 Target Percentage	5
2.26 Unrealized Gains/Losses on Derivative Instruments Included in Net Income	6
2.27 Year	6
Section 3—Participation	6
3.01 Participation Requirements	6
Section 4—Award Payments	6
4.01 Eligibility	6
4.02 Calculation of Award Payment	6
4.03 Entitled Operations Employees	7
4.04 Limitation of Award Payments and General Discretion	7
4.05 Timing of Award Payments	8
4.06 Recoupment Policy	8
Section 5—Administration of the Plan	8
5.01 Administration	8

i

Section 6—Transfer of Employment	9
6.01 Transfer of Employment	9
Section 7—General Provisions	9
7.01 Assignment or Alienation	9
7.02 Amendment or Termination	9
7.03 Effect of Amendment or Termination	9
7.04 No Enlargement of Contractual Rights	10
7.05 Interpretation	10
7.06 Withholding of Taxes	10
7.07 Binding on Successors	10
7.08 Currency	10
Appendix “A”—Award Percentage	11

ii

Section 1—Establishment of the Plan

1.01	Purpose
	This Annual Incentive Plan is established for the purpose of rewarding eligible employees on an annual basis for their efforts and contributions in the attainment of certain performance measures that contribute materially to the success of the business interests of Potash Corporation of Saskatchewan Inc.
1.02	Effective Date
	Subject to Section 7.02 (Amendment or Termination), this Plan shall be effective on and after January 1, 2000.
	The amendments made to the Plan effective April 30, 2007, including the addition of all permanent salaried employees, shall only be effective on and after April 30, 2007.
	The amendments made to the Plan effective January 1, 2008, including the addition of all permanent Canadian and US Hourly Employees, shall only be effective on and after January 1, 2008.
	The amendments made to the Plan effective January 1, 2009, including the addition of specified Trinidad Employees with jobs valued at Hay Point Level 366 up to Hay Point Level 774, and all PCS Sales employees with jobs valued at Hay Point Level 775 and above who were not previously eligible shall be included in this Plan effective on and after January 1, 2009.

Section 2—Definitions

The following terms, when capitalized, shall be defined as follows:

2.01	Accrued Incentive Awards
	“Accrued Incentive Awards” means the amounts accrued during the Year that represent expected payments under this Plan, the Medium Term Incentive Plan, and other group incentive plans as appropriate.
2.02	Adjusted Cash Flow Return (ACFR)
	“Adjusted Cash Flow Return” or “ACFR” means an amount derived from the following formula:
	ACFR = (CFR divided by Target CFR) multiplied by 100,
	and used in the table in Appendix “A” to calculate an Entitled Employee’s Award Percentage for a given Year.

1

2.03	Average Accumulated Amortization
	“Average Accumulated Amortization” means the average consolidated accumulated amortization of PCS Inc. during a given Year, calculated by dividing (a) by (b) where:

(a)

equals the sum of the consolidated accumulated amortization of PCS Inc. at the beginning of the Year, the consolidated accumulated amortization of PCS Inc. at the beginning of the second quarter of the Year, the consolidated accumulated amortization of PCS Inc. at the beginning of the third quarter of the Year, the consolidated accumulated amortization of PCS Inc. at the beginning of the fourth quarter of the Year and the consolidated accumulated amortization of PCS Inc. at the end of the Year; and,

(b)

equals five (5).

2.04	Average Accumulated Depreciation
	“Average Accumulated Depreciation” means the average consolidated accumulated depreciation of PCS Inc. during a given Year, calculated by dividing (a) by (b) where:

(a)

equals the sum of consolidated accumulated depreciation of PCS Inc. at the beginning of the Year, the consolidated accumulated depreciation of PCS Inc. at the beginning of the second quarter of the Year, the consolidated accumulated depreciation of PCS Inc. at the beginning of the third quarter of the Year, the consolidated accumulated depreciation of PCS Inc. at the beginning of the fourth quarter of the Year and the consolidated accumulated depreciation of PCS Inc. at the end of the Year; and,

(b)

equals five (5).

2.05	Average Assets
	“Average Assets” means the average book value of PCS Inc.’s consolidated assets during a given Year, calculated by dividing (a) by (b) where:

(a)

equals the sum of the book value of the consolidated assets of PCS Inc. at the beginning of the Year, the book value of the consolidated assets of PCS Inc. at the beginning of the second quarter of the Year, the book value of the consolidated assets of PCS Inc. at the beginning of the third quarter of the Year, the book value of the consolidated assets of PCS Inc. at the beginning of the fourth quarter of the Year and the book value of the consolidated assets of PCS Inc. at the end of the Year; and,

(b)

equals five (5).

2.06	Average Non-Interest Bearing Current Liabilities
	“Average Non-Interest Bearing Current Liabilities” means the average consolidated non-interest bearing current liabilities of PCS Inc. during a given Year, calculated by dividing (a) by (b) where:

2

(a)

equals the sum of the consolidated non-interest bearing current liabilities of PCS Inc. at the beginning of the Year, the consolidated non-interest bearing current liabilities of PCS Inc. at the beginning of the second quarter of the Year, the consolidated non-interest bearing current liabilities of PCS Inc. at the beginning of the third quarter of the Year, the consolidated non-interest bearing current liabilities of PCS Inc. at the beginning of the fourth quarter of the Year and the consolidated non-interest bearing current liabilities of PCS Inc. at the end of the Year; and,

(b)

equals five (5).

2.07	Award Payment
	“Award Payment” means a cash payment to an Entitled Employee calculated pursuant to Section 4 (Award Payments).

(a)	Corporate Award Payment is the payment calculated based upon the Corporate ACFR measure of CFR relative to Target CFR.
(b)	Operations Award Payment is the payment calculated based upon operations performance factors as established in accordance with Section 4.03 for the benefit of Entitled Operations Employees.

2.08	Award Percentage
	“Award Percentage” means the percentage of an Entitled Employee’s Salary derived from the table contained in Appendix “A”. The Award Percentages applicable to an Entitled Employee, as set out in the table in Appendix “A”, shall be recommended by the CEO and approved by the Committee.
2.09	Board
	“Board” means the Board of Directors of PCS Inc.
2.10	Cash Flow Return (CFR)
	“Cash Flow Return” or “CFR” means the amount derived from the following formula:

(a)	Operating Income, plus/minus
	Non-recurring/Unusual Items, plus/minus
	Change in Unrealized Gains/Losses on Derivative Instruments Included in Net Income, plus
	Accrued Incentive Awards, plus
	Depreciation and Amortization, minus
	Current Taxes

DIVIDED BY

3

(b)	Average Assets (plus/minus the fair value adjustment for investments in available-for-sale securities and minus the fair value of derivative instrument assets), plus
	Average Accumulated Depreciation, plus
	Average Accumulated Amortization, minus
	Average cash and cash equivalents, minus
	Average Non-Interest Bearing Current Liabilities, excluding Derivatives,

	and used in the table at Appendix “A” to calculate an Entitled Employee’s Award Percentage for a given Year.
2.11	Current Taxes
	“Current Taxes” means the current income taxes accrued for a given Year, less provision for deferred income taxes as set out in the audited consolidated financial statements of PCS Inc. for that Year.
2.12	CEO
	“CEO” means the Chief Executive Officer of PCS Inc.
2.13  Committee
	“Committee” means the Compensation Committee of the Board.
2.14  Corporation
	“Corporation” means Potash Corporation of Saskatchewan Inc. and its direct and indirect subsidiaries.
2.15	Depreciation and Amortization
	“Depreciation and Amortization” means the depreciation and amortization expense for a given Year, as set out in the audited consolidated financial statements of PCS Inc. for that Year.
2.16	Eligible Employee
	“Eligible Employee” means an employee, including an Hourly Employee, who has satisfied the eligibility requirements set out in Section 4.01 (Eligibility).
2.17	Entitled Employee
	“Entitled Employee” means an Eligible Employee who is recommended by the CEO and approved by the Committee to participate in this Plan.

(a)	Entitled Operations Employee
	“Entitled Operations Employee” means an Entitled Employee who is attached to one of the operating facilities of PCS Inc. or its direct or indirect subsidiaries.

4

2.18	Hourly Employee
	“Hourly Employee” means an employee employed at either a Canadian or U.S. operation who is paid on an hourly wage rate basis, including both employees who are and who are not covered by a collective bargaining agreement.
2.19	Non-recurring/Unusual Items
	“Non-recurring/Unusual Items” means exceptional transactions that are considered non-routine, unique, and not expected to be repeated in a normal course of the Corporation’s operating cycle. Such items may result in a measurable charge or increase to income and may or may not be triggered by a management decision.
2.20	Operating Income
	“Operating Income” means the operating income for a given Year, as set out in the audited consolidated financial statements of PCS Inc. for that Year.
2.21	PCS Inc.
	“PCS Inc.” means Potash Corporation of Saskatchewan Inc.
2.22	Plan
	“Plan” means this Annual Incentive Plan, as amended from time to time.
2.23	Salary
	“Salary” means:

(a)	For Entitled Employees who are exempt from the overtime requirements of U.S. wage and hour legislation, other than Canadian Hourly Employees, the annual base salary in effect at the end of a given Year.
(b)	For Entitled Employees who are Canadian Hourly Employees, the actual total base pay for the given Year, excluding, but not limited to, overtime, bonuses, shift differentials and premiums.
(c)	For Entitled Employees who are U.S. employees and who are non-exempt from the overtime requirements of U.S. wage and hour legislation, total earned income, including overtime and shift differentials, for the given Year.

2.24	Target CFR
	“Target CFR” means the CFR projected in the annual budget approved by the Board and used in the table at Appendix “A” to calculate an Entitled Employee’s Award Percentage for a given Year.
2.25	Target Percentage
	“Target Percentage” means the percentage assigned to the Tier Level for Entitled Employees within that Tier, as shown in the table contained in Appendix “A”.

5

2.26	Unrealized Gains/Losses on Derivative Instruments Included in Net Income
	“Unrealized Gains/Losses on Derivative Instruments Included in Net Income” means the mark to market adjustments on the company’s derivative instrument assets and liabilities, including but not limited to, natural gas non-hedging and foreign exchange non-hedging, that are required to be recognized under accounting standards for reporting purposes.
2.27	Year
	“Year” means the fiscal year of PCS Inc.

Section 3—Participation

3.01	Participation Requirements
	Participation in the Plan is limited to Eligible Employees.

Section 4—Award Payments

4.01	Eligibility
	A full-time permanent employee of the Corporation who:

a)	is employed for at least three months during a Year, and who is in the employ of the Corporation at the end of a Year, and
b)	who is not a participant in another annual cash bonus plan sponsored by the Corporation for the same period during the Year as covered by this Plan

	shall become an Eligible Employee.
4.02	Calculation of Award Payment
	Subject to Section 4.04 (Limitation of Award Payments and General Discretion), an Entitled Employee, other than Entitled Operations Employees, shall receive an Award Payment equal to the Entitled Employee’s Award Percentage multiplied by his or her Salary.

a) The Corporate Award Percentage is calculated as follows:

If ACFR equals or exceeds 50% and up to 100%, the calculation is:

          Target Percentage X ACFR = Corporate Award Percentage

If ACFR exceeds 100% and up to 150%, the calculation is:

6

(Two times the Target Percentage multiplied by ACFR) minus Target Percentage = Corporate Award Percentage

b)	The individual Award Payment calculated in accordance with this Section 4.02 is subject to an adjustment of plus or minus 30% depending upon the Entitled Employee’s job performance, as determined by his or her supervisor, and approved in accordance with the provisions of this Plan.
c)	No Corporate Award Percentage is calculated for ACFR less than 50% and for Corporate Award Percentage calculations, ACFR is limited to 150%.

4.03	Entitled Operations Employees
	Subject to Section 4.04 (Limitation of Award Payments and General Discretion), an Entitled Operations Employee shall be entitled to an Award Payment equal to the sum of paragraphs (a) and (b) below:

(a)	the award calculated pursuant to Section 4.02 (Calculation of Award Payment), divided by two (2); and,
(b)	an amount equal to the Target Percentage of the Salary of the Entitled Operations Employee, adjusted by applying a formula to be developed from time to time by the CEO in consultation with the Senior Vice-President, Administration and the appropriate subsidiary President which formula shall reasonably reflect the actual results of the operating facility to which the employee is attached compared to the approved target for that operating facility, subject to achieving a threshold of at least 25% of the operating facility’s targets, and thereafter dividing such amount by two (2).
(c)	The total individual Award Payment calculated in accordance with this Section 4.03, other than for Hourly Employees, is subject to an adjustment of plus or minus 30% depending upon the Entitled Employee’s job performance, as determined by his or her supervisor, and approved in accordance with the provisions of this Plan.
(d)	There will be no adjustment for job performance for Entitled Operations Employees who are Hourly Employees.

4.04 Limitation of Award Payments and General Discretion

(a)	Generally, no Award Payment shall be granted under this Plan with respect to any Year in which the CFR is less than 50% of the Target CFR. However, the Committee may elect, in its discretion, to grant Award Payments in any Year, regardless of the CFR.
(b)	The Award Payment for any Entitled Employee may exceed or be below the amount calculated in accordance with this Section 4. Award Payments falling outside the established range shall be reviewed and approved by the Board and Committee for the CEO and the CEO and Committee for direct reports to the CEO. For all others, approval of the CEO is required.

7

(c)	An Entitled Employee who has been employed by the Corporation for less than one year shall have his or her Award Payment prorated in accordance with his or her period of employment.
(d)	An employee who for part of the Year was a full-time active employee but for part of the Year was on long-term disability or an approved or unpaid leave of absence, may be considered an Entitled Employee and eligible for a pro-rata share of the Award Payment based upon the fraction of the Year the employee was considered a full-time active employee. However, in situations where the fractional portion of the Year worked is less than one-twelfth, the employee will not be considered an Entitled Employee unless the CEO recommends and the Committee approves the exception.
(e)	An Entitled Employee who was, during a Year, promoted or demoted from one Group to another Group set forth in Appendix “A”, shall have his or her Award Payment calculated on the basis of his or her Group as at the end of the Year.
(f)	Notwithstanding the Groups established in Appendix “A”, the Committee may on the recommendation of the CEO, designate an Eligible Employee for inclusion in one of such Groups when, but for such designation, the Eligible Employee would not otherwise be included in such Group.

4.05	Timing of Award Payments
	The Committee shall, on the recommendation of the CEO and within 30 days of the end of a Year, approve the ACFR calculation and the amount of Award Payments for each Entitled Employee who is a direct report to the CEO for any given Year. The CEO’s Award Payment will be approved by the Board. Following approval of the ACFR, final calculations for the remaining Entitled Employees will be prepared. The Award Payments shall be paid to Entitled Employees within 30 days of the Committee’s approval of the ACFR and no later than 2 1/2 months after the end of the Year.
4.06	Recoupment Policy
	Notwithstanding any other provision under this Section, Entitled Employees who also participate in the Corporation’s Medium-Term Incentive Plan shall be subject to the terms and conditions of the Corporation’s Policy on Recoupment of Unearned Compensation (as previously adopted and, from time to time, amended by the Board), a copy of which shall be distributed to each such Entitled Employee upon participation in the Medium-Term Incentive Plan.

Section 5—Administration of the Plan

5.01	Administration
	The Committee shall conclusively interpret the provisions of this Plan and decide all questions of fact arising in the application of the Plan. Determinations and interpretations in individual cases may be made by the CEO with due regard to consistency with any prior action by the Committee and such determination shall be binding and conclusive upon the

8

individual employees concerned and persons claiming under them. The Committee shall be advised of any such determination or interpretation made by the CEO. To the extent applicable, the Plan shall be administered with respect to Entitled Employees subject to U.S. law so as to avoid penalties pursuant to Section 409A of the Internal Revenue Code.

Section 6—Transfer of Employment

6.01	Transfer of Employment
	If an Entitled Employee’s employment is transferred during a Year to a different location, within the Corporation the Senior Vice-President, Administration and the CEO shall determine whether the Entitled Employee’s Award Payment is calculated in accordance with Section 4.02 (Calculation of Award Payment), Section 4.03 (Entitled Operations Employees), or a combination of those sections.

Section 7—General Provisions

7.01	Assignment or Alienation
	Except as required by applicable laws, the right of an Entitled Employee to receive an Award Payment under this Plan shall not be:

(a)	given as security;
(b)	subject to transfer, anticipation, commutation, alienation, sale, assignment, encumbrance, charge, pledge, or hypothecation; or
(c)	subject to execution, attachment, levy or similar process or assignment by operation of law,

	and any attempt to effect any such action shall be null and void and of no effect.
7.02	Amendment or Termination
	Subject to Section 7.03 (Effect of Amendment or Termination), this Plan may be amended in whole or in part from time to time or terminated by the Corporation. Any amendment or termination shall be binding on the Corporation, Entitled Employees, Eligible Employees and their respective beneficiaries.
7.03	Effect of Amendment or Termination
	Notwithstanding Section 7.02 (Amendment or Termination), no amendment or termination of any provision of this Plan shall directly or indirectly deprive any Entitled Employee or beneficiary of all or any portion of an Award Payment earned with respect to any Year ending prior to the date of the amendment or termination.

9

7.04	No Enlargement of Contractual Rights
	This Plan shall not give any Entitled Employee or Eligible Employee the right to be retained in the service of the Corporation nor shall it interfere with the right of the Corporation to terminate the employment of the Entitled Employee or Eligible Employee. Participation in this Plan shall not give any Entitled Employee or Eligible Employee any right or claim to any benefit, except to the extent provided in this Plan.
7.05	Interpretation
	This Plan shall be interpreted pursuant to the laws of the Province of Saskatchewan. Section headings are for convenience only and shall not be considered provisions of the Plan. Words in the singular shall include the plural, and vice versa, unless qualified by the context.
7.06	Withholding of Taxes
	The Corporation shall withhold all applicable taxes from any amounts paid pursuant to this Plan.
7.07	Binding on Successors
	This Plan shall be binding on any successor or successors of PCS Inc. whether by merger, consolidation or otherwise.
7.08	Currency
	The benefits payable pursuant to this Plan shall be paid in the same currency as the Entitled Employee receives his or her Salary.

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Appendix “A”—Award Percentage

					Award		Award
					Percentage When	Award Percentage	Percentage at
					CFR is Less	When CFR Equals	Maximum
		Target			Than Target	or is Greater Than	CFR (150% of
Tier	Group	Percentage			CFR	Target CFR	Target CFR)
1	Corporate President, and CEO		100	%	100% multiplied by ACFR	(200% multiplied by ACFR) minus 100%		200	%
2	Exec Level 7		70	%	70% multiplied by ACFR	(140% multiplied by ACFR) minus 70%		140	%
3	Exec Level 6		55	%	55% multiplied by ACFR	(110% multiplied by ACFR) minus 55%		110	%
4	Exec Levels 3, 4 & 5 Staff Hay Points 1900 +		40	%	40% multiplied by ACFR	(80% multiplied by ACFR) minus 40%		80	%
5	Selected Corporate VP’s		35	%	35% multiplied by ACFR	(70% multiplied by ACFR) minus 35%		70	%
6	Exec Level 2 Managing Dir., Trinidad Staff Hay Points 1600 to 1899		30	%	30% multiplied by ACFR	(60% multiplied by ACFR) minus 30%		60	%
7	Exec Level 1 Staff Hay Points 1300 to 1599		25	%	25% multiplied by ACFR	(50% multiplied by ACFR) minus 25%		50	%
8	Staff Hay Points 900 to 1299		20	%	20% multiplied by ACFR	(40% multiplied by ACFR) minus 20%		40	%
9	Staff Hay Points 775 to 899		15	%	15% multiplied by ACFR	(30% multiplied by ACFR) minus 15%		30	%
10	Staff Hay Points 366 to 774		10	%	10% multiplied by ACFR	(20% multiplied by ACFR) minus 10%		20	%
11	Staff Hay Points 0 to 365 Hourly employees		5	%	5% multiplied by ACFR	(10% multiplied by ACFR) minus 5%		10	%
12	Hourly Employees (No Manager +/- discretion)		5	%	5% multiplied by ACFR	(10% multiplied by ACFR) minus 5%		10	%

Notes:

1.	Where the ACFR is greater than 150 (i.e. the maximum CFR), the ACFR is deemed to be 150.
2.	Subject to Section 4.04 (Limitation of Award Payments and General Discretion) where the ACFR is less than 50, the ACFR is deemed to be zero (0).

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EX-10.R

Exhibit 10(r)

POTASH CORPORATION OF SASKATCHEWAN INC.

AMENDMENT TO THE

SUPPLEMENTAL EXECUTIVE RETIREMENT INCOME PLAN

     WHEREAS, the Potash Corporation of Saskatchewan Inc., a corporation organized under the laws of Canada (the “Corporation”), established the Supplemental Executive Retirement Income Plan on May 9, 1991, which was most recently amended and restated as of May 1, 2000 and subsequently amended on February 27, 2003 and March 22, 2004 (the “Supplemental Plan”);

     WHEREAS, the Corporation now desires to amend the Supplemental Plan to incorporate a new formula for computing Executives’ benefits under the Supplemental Plan with respect to services performed on and after July 1, 2009;

     NOW, THEREFORE, the Supplemental Plan is hereby amended, effective as of July 1, 2009, as follows (the “Amendment”):

     1. Paragraph 6 of the Supplemental Plan is hereby amended in its entirety to read as follows:

“6.	The annual retirement benefit payable under the Supplemental Plan shall be calculated as follows:
a.	the sum of i) and ii), where:

i)	is equal to 2% of the executive’s average three highest calendar years’ earnings
	multiplied by
	the executive’s years (including partial years calculated to the last full month completed) of Continuous Service (as defined under the Potash Corporation of Saskatchewan Inc. Pension Plan (the “Pension Plan”)) up to a maximum of 35 years, to the extent that such Continuous Service was completed before July 1, 2009; and
ii)	is equal to 2% of the executive’s average earnings for the three consecutive calendar years during which the executive’s earnings were the highest
	multiplied by
	the executive’s years (including partial years calculated to the last full month completed) of Continuous Service up to a maximum of 35 years, provided that (A) such Continuous Service was completed on and after July 1, 2009 and (B) the sum of the years of Continuous Service taken into

account under section (a)(i) and this section (a)(ii) does not exceed 35

                    minus

b. the annual retirement benefit which can be provided under the Pension Plan.”

     2. Section (a) of paragraph 7 of the Supplemental Plan is hereby amended in its entirety to read as follows:

“a.  100% of all bonuses paid or payable to the executive in a calendar year pursuant to the Corporation’s annual short-term incentive plan or any similar plan substituted therefor; provided, however, that for purposes of paragraph 6(a)(ii) of the Supplemental Plan, the bonus amount taken into account in calculating earnings shall not exceed the Executive’s annual base pay on which such bonus was based pursuant to the terms of the Corporation’s annual short-term incentive plan; and”

     3. In all other respects the Agreement remains unchanged.

IN WITNESS WHEREOF the Corporation has executed this Amendment this 23 day of February, 2009.

POTASH CORPORATION OF SASKATCHEWAN INC.
	/s/ Barbara Jane Irwin
By:	/s/ John W. Estey

EX-10.U

Exhibit 10(u)

POTASH CORPORATION OF SASKATCHEWAN INC.

AMENDMENT TO THE AGREEMENT

          WHEREAS, the Potash Corporation of Saskatchewan Inc., a corporation organized under the laws of Canada (the “Corporation”), entered into an agreement (the “Agreement”) that was most recently amended and restated as of February 20, 2007 with William J. Doyle of Northbrook, Illinois, an executive of the Corporation (the “Executive”), for the provision by the Corporation to the Executive (or, in the event of the Executive’s death, to the Executive’s designated beneficiary) of a supplemental retirement benefit;

          WHEREAS, the Corporation and the Executive now desire to amend the Agreement to conform its provisions to the requirements of the 409A Guidance (as hereinafter defined), effective as of January 1, 2005;

          NOW, THEREFORE, the Agreement is hereby amended, effective as of January 1, 2005, as follows:

1.	Paragraph 1 of the Plan is hereby amended by adding the following definitions at the end thereof to read as follows:
	“The term “Code” means the Internal Revenue Code of 1986, as amended.”
	“The term “409A Guidance” means Code section 409A and any guidance issued thereunder, including, without limitation, any proposed, temporary or final regulations or any other guidance issued by the Secretary of the U.S. Treasury or the Internal Revenue Service with respect thereto.”
	“For purposes of this Agreement, the term “Pension Plan” means the PCS Inc. Pension Plan and the PCS U.S. Employees’ Savings Plan, from which the Executive is entitled to benefits by reason of his service with the Corporation. For purposes of paragraph 4(c) hereof, (a) the annual retirement benefit which can be provided to the Executive under the PCS Inc. Pension Plan shall be determined based on the Executive’s account balance under such plan as of the payment date under paragraph 5(b) hereof, determined as if the Executive’s account had been invested in the Over 25 Years Conservative Fund, and (b) the annual retirement benefit which can be provided to the Executive under the PCS U.S. Employees’ Savings Plan shall be determined as of the payment date under paragraph 5(b) hereof as if 503,040.07 had been invested in the Fidelity Freedom 2015 Fund after December 31, 2004.”
	“The term “Separation from Service” means any termination of employment with the Corporation and all Affiliates for any reason; provided, however, that no Separation from Service is deemed to occur while the Executive is on military leave, sick leave or other bona fide leave of absence that does not exceed six (6) months, or if longer, the period during which the Executive’s right to reemployment with the Corporation is provided either by statute or by contract. For purposes of determining whether a Separation from Service from the Corporation has occurred, “Affiliate(s)” means any entity whose employees, together with the employees of the Corporation, are required by Code section 414(b) or (c) to be treated as if employed by a single employer, except that in applying Code section 1563(a)(1), (2), and (3) for purposes of Code section 414(b) or in applying Treas. Reg. §1.414(c)-2 for purposes of Code section 414(c), the language “at least 50 percent” shall be used

	instead of the language “at least 80 percent” each place it appears in such Code and regulations sections. Whenever this Agreement refers to a “termination of employment” or “retirement” or to the Executive’s terminating employment or retiring, such references shall mean “Separation from Service” or to “Separate from Service” (provided that in the case of “retirement”, the Executive’s Separation from Service must occur after the Executive has attained age 55 and completed at least five (5) years of Continuous Service). Whether the Executive has incurred a Separation from Service shall be determined in accordance with the 409A Guidance.”
2.	The first paragraph of section (b) of paragraph 5 of the Agreement is hereby amended, in its entirety, to read as follows:
	“The lump sum payment described in section (a) above shall be made to the Executive on the date that is six months following the date the Executive retires from the Corporation. Should the Executive die after retirement, but prior to receiving payment, such lump sum payment shall be made to the Executive’s Spouse or other beneficiary designated by the Executive, or otherwise to the Executive’s estate ninety (90) days after the Executive’s death.”
3.	Paragraph 5 of the Agreement is hereby amended by adding, immediately after section (b) thereof, a new section (c) to read as follows:

“(c)  Code Section 409A Distributions

If, due to the application of the 409A Guidance, all or any portion of the Executive’s benefit under this Agreement becomes taxable to the Executive prior to receipt, the Executive may apply to the Committee before a Change in Control, or the trustee of the trust after a Change in Control, for a distribution of that portion of his benefit that has become taxable pursuant to the 409A Guidance. Upon the approval of such an application, which approval shall not be unreasonably withheld (and, after a Change in Control, shall be granted), the Committee (or the trustee) shall distribute to the Executive immediately available funds in an amount equal to the taxable portion of his benefit (which amount shall not exceed the present value of the Executive’s benefit under the Plan). If the application is approved, the distribution shall be made within ninety (90) days of the date when the Executive’s application is approved. Such a distribution shall affect and reduce the benefits to be paid under this Plan.”

4. The Agreement is hereby amended by adding, immediately after paragraph 7 thereof, a new paragraph 8 to read as follows:

“8.  Section 409A

It is intended that the Agreement comply with the 409A Guidance to prevent the inclusion in gross income of any amount available to the Executive hereunder in a taxable year that is prior to the taxable year or years in which such amounts would otherwise be actually distributed or made available to the Executive. All provisions in the Agreement shall be interpreted in a manner consistent with the 409A Guidance. Notwithstanding the foregoing, the Corporation does not guarantee any tax consequences of the Executive’s entitlement to or receipt of payments under the Agreement, and the Executive shall be

solely responsible for payment of any tax obligations he may incur in connection with the benefits provided under the Agreement.”

5. In all other respects the Agreement remains unchanged.

EXECUTED on this 24^th day of December, 2008.

POTASH CORPORATION OF SASKATCHEWAN INC.
By:	/s/ John W. Estey
William J. Doyle
/s/ William J. Doyle

SIGNED SEALED AND DELIVERED in the presence of:

Barbara Jane Irwin

Name of Witness

/s/ Barbara Jane Irwin

Signature of Witness

EX-10.V

Exhibit 10(v)

POTASH CORPORATION OF SASKATCHEWAN INC.

AMENDMENT TO THE AGREEMENT

     WHEREAS, the Potash Corporation of Saskatchewan Inc., a corporation organized under the laws of Canada (the “Corporation”), entered into an agreement (the “Agreement”) that was most recently amended and restated as of February 20, 2007 and subsequently amended on May 16, 2000 and on December 24, 2008 with William J. Doyle of Northbrook, Illinois, an executive of the Corporation (the “Executive”), for the provision by the Corporation to the Executive (or, in the event of the Executive’s death, to the Executive’s designated beneficiary) of a supplemental retirement benefit;

     WHEREAS, the Corporation and the Executive now desire to amend the Agreement to incorporate a new formula for computing the Executive’s benefit under the Agreement with respect to services performed on and after July 1, 2009;

     NOW, THEREFORE, the Agreement is hereby amended, effective as of July 1, 2009, as follows (the “Amendment”):

     1. The definition of “Earnings” in paragraph 1 of the Plan is hereby amended by deleting the first sentence thereof and inserting in lieu thereof the following (taking into account the provisions of this Amendment set forth below):

“The term “Earnings” shall mean the Executive’s annual base pay plus:

(a) 100% of all bonuses paid or payable to the Executive in a calendar year pursuant to the Corporation’s annual short-term incentive plan or any similar plan substituted therefor; provided, however, that for purposes of section (b)(ii) of paragraph 4 of this Agreement, the bonus amount taken into account in calculating Earnings shall not exceed the Executive’s annual base pay on which such bonus was based pursuant to the terms of the Corporation’s annual short-term incentive plan; and

(b) any other payment made in a given year to the Executive which payment is specifically designated to be included in Earnings by the Compensation Committee of the Board of Directors of the Corporation.”

     2. Sections (a) and (b) of paragraph 4 of the Agreement are hereby amended in their entirety to read as follows:

“(a)	5% of the Executive’s average 3 highest calendar years’ Earnings
	multiplied by

	the Executive’s years (including partial years calculated to the last full month completed) of Continuous Service completed before July 1, 2009 up to a maximum of 10 years
	PLUS
(b)	the sum of (i) and (ii), where:

(i)	is equal to 2% of the Executive’s average 3 highest calendar years’ Earnings
	multiplied by
	the Executive’s years (including partial years calculated to the last full month completed) of Continuous Service in excess of 25 years to a maximum of 10 additional years, to the extent that such Continuous Service was completed before July 1, 2009; and
(ii)	is equal to 2% of the Executive’s average Earnings for the 3 consecutive calendar years during which the Executive’s Earnings were the highest
	multiplied by
	the Executive’s years (including partial years calculated to the last full month completed) of Continuous Service in excess of 25 years to a maximum of 10 additional years, provided that (A) such Continuous Service was completed on and after July 1, 2009, and (B) the sum of the years of Continuous Service taken into account under section (b)(i) and this section (b)(ii) does not exceed 10
	MINUS”

     3. In all other respects the Agreement remains unchanged.

- 2 -

IN WITNESS WHEREOF the Corporation has executed this Amendment by its duly authorized officers on its behalf and the Executive has executed this Amendment 23 day of February, 2009.

POTASH CORPORATION OF SASKATCHEWAN INC.
By:	/s/ Barbara Jane Irwin
William J. Doyle
/s/ William J. Doyle

SIGNED SEALED AND DELIVERED in the
presence of:

Joseph A. Podwika

Name of Witness

/s/ Joseph A. Podwika

Signature of Witness

EX-10.W

Exhibit 10(w)

POTASH CORPORATION OF SASKATCHEWAN INC.

AMENDMENT TO THE AGREEMENT

     WHEREAS, the Potash Corporation of Saskatchewan Inc., a corporation organized under the laws of Canada (the “Corporation”), entered into an agreement (the “Agreement”) that was most recently amended and restated as of August 2, 1996 and subsequently amended on May 19, 2000 with Wayne R. Brownlee of the City of Saskatoon, in the province of Saskatchewan, an executive of the Corporation (the “Executive”), for the provision by the Corporation to the Executive (or, in the event of the Executive’s death, to the Executive’s designated beneficiary) of a supplemental retirement benefit;

     WHEREAS, the Corporation and the Executive now desire to amend the Agreement to incorporate a new formula for computing the Executive’s benefit under the Agreement with respect to services performed on and after July 1, 2009;

     NOW, THEREFORE, the Agreement is hereby amended, effective as of July 1, 2009, as follows (the “Amendment”):

     1. The second sentence of paragraph 1 of the Agreement (the definition of “Earnings”) is hereby amended in its entirety to read as follows (taking into account the provisions of this Amendment set forth below):

“The term “Earnings” shall mean the Executive’s annual base pay plus 100% of all bonuses paid or payable to the Executive in a calendar year pursuant to the Corporation’s annual short-term incentive plan or any similar plan substituted therefor; provided, however, that for purposes of section (b)(ii) of paragraph 4 of this Agreement, the bonus amount taken into account in calculating Earnings shall not exceed the Executive’s annual base pay on which such bonus was based pursuant to the terms of the Corporation’s annual short-term incentive plan.”

     2. Sections (a) and (b) of paragraph 4 of the Agreement are hereby amended in their entirety to read as follows:

“(a)	5% of the Executive’s average 3 highest calendar years’ Earnings
	multiplied by
	the Executive’s years (including partial years calculated to the last full month completed) of Continuous Service completed before July 1, 2009 up to a maximum of 10 years
	PLUS

(b) the sum of (i) and (ii), where:

(i)	is equal to 2% of the Executive’s average 3 highest calendar years’ Earnings
	multiplied by
	the Executive’s years (including partial years calculated to the last full month completed) of Continuous Service in excess of 25 years to a maximum of 10 additional years, to the extent that such Continuous Service was completed before July 1, 2009; and
(ii)	is equal to 2% of the Executive’s average Earnings for the 3 consecutive calendar years during which the Executive’s Earnings were the highest
	multiplied by
	the Executive’s years (including partial years calculated to the last full month completed) of Continuous Service in excess of 25 years to a maximum of 10 additional years, provided that (A) such Continuous Service was completed on and after July 1, 2009, and (B) the sum of the years of Continuous Service taken into account under section (b)(i) and this section (b)(ii) does not exceed 10
	MINUS”

     3. In all other respects the Agreement remains unchanged.

IN WITNESS WHEREOF the Corporation has executed this Amendment by its duly authorized officers on its behalf and the Executive has executed this Amendment 23 day of February, 2009.

POTASH CORPORATION OF SASKATCHEWAN INC.
By:	/s/ Barbara Jane Irwin
Wayne R. Brownlee
/s/ Wayne R. Brownlee

EX-10.X

Exhibit 10(x)

POTASH CORPORATION OF SASKATCHEWAN INC.

AMENDMENT TO THE AGREEMENT

     WHEREAS, the Potash Corporation of Saskatchewan Inc., a corporation organized under the laws of Canada (the “Corporation”), entered into an agreement (the “Agreement”) that was most recently amended and restated as of August 2, 1996 and subsequently amended on May 17, 2000 with Garth W. Moore of the City of Saskatoon, in the province of Saskatchewan, an executive of the Corporation (the “Executive”), for the provision by the Corporation to the Executive (or, in the event of the Executive’s death, to the Executive’s designated beneficiary) of a supplemental retirement benefit;

     WHEREAS, the Corporation and the Executive now desire to amend the Agreement to incorporate a new formula for computing the Executive’s benefit under the Agreement with respect to services performed on and after July 1, 2009;

     NOW, THEREFORE, the Agreement is hereby amended, effective as of July 1, 2009, as follows (the “Amendment”):

     1. The second sentence of paragraph 1 of the Agreement (the definition of “Earnings”) is hereby amended in its entirety to read as follows (taking into account the provisions of this Amendment set forth below):

“The term “Earnings” shall mean the Executive’s annual base pay plus 100% of all bonuses paid or payable to the Executive in a calendar year pursuant to the Corporation’s annual short-term incentive plan or any similar plan substituted therefor; provided, however, that for purposes of section (b)(ii) of paragraph 4 of this Agreement, the bonus amount taken into account in calculating Earnings shall not exceed the Executive’s annual base pay on which such bonus was based pursuant to the terms of the Corporation’s annual short-term incentive plan.”

     2. Sections (a) and (b) of paragraph 4 of the Agreement are hereby amended in their entirety to read as follows:

“(a)   5% of the Executive’s average 3 highest calendar years’ Earnings
	multiplied by
	the Executive’s years (including partial years calculated to the last full month completed) of Continuous Service completed before July 1, 2009 up to a maximum of 10 years
	PLUS

(b) the sum of (i) and (ii), where:

(i)	is equal to 2% of the Executive’s average 3 highest calendar years’ Earnings
	multiplied by
	the Executive’s years (including partial years calculated to the last full month completed) of Continuous Service in excess of 25 years to a maximum of 10 additional years, to the extent that such Continuous Service was completed before July 1, 2009; and
(ii)	is equal to 2% of the Executive’s average Earnings for the 3 consecutive calendar years during which the Executive’s Earnings were the highest
	multiplied by
	the Executive’s years (including partial years calculated to the last full month completed) of Continuous Service in excess of 25 years to a maximum of 10 additional years, provided that (A) such Continuous Service was completed on and after July 1, 2009, and (B) the sum of the years of Continuous Service taken into account under section (b)(i) and this section (b)(ii) does not exceed 10
	MINUS”

     3. In all other respects the Agreement remains unchanged.

IN WITNESS WHEREOF the Corporation has executed this Amendment by its duly authorized officers on its behalf and the Executive has executed this Amendment 23 day of February, 2009.

POTASH CORPORATION OF SASKATCHEWAN INC.
By:	/s/ Barbara Jane Irwin
Garth W. Moore
/s/ Garth W. Moore

EX-10.Z

Exhibit 10(z)

POTASH CORPORATION OF SASKATCHEWAN INC.

AMENDMENT NO. 1 TO THE
PCS SUPPLEMENTAL RETIREMENT PLAN FOR U.S. EXECUTIVES

        The PCS Supplemental Retirement Plan for U.S. Executives, effective as of January 1, 1999 (the “Plan”) is hereby amended, effective as of January 1, 2005, as follows:

1. Section 2.1 of the Plan is hereby amended by adding, immediately after subsection (k) thereof, a new subsection (l) to read as follows:

“(l)  Separation from Service. The term “Separation from Service” or to “Separate from Service” means any termination of employment with the Company and all Related Organizations for any reason; provided, however, that no Separation from Service is deemed to occur while the Executive is on military leave, sick leave or other bona fide leave of absence that does not exceed six (6) months, or if longer, the period during which the Executive’s right to reemployment with the Company or Related Organizations is provided either by statute or by contract. For purposes of determining whether a Separation from Service has occurred, “Related Organizations” shall mean the Company and any entity whose employees, together with the employees of the Company, are treated under Code Section 414(b) or (c) as if employed by a single employer, except that in applying Code section 1563(a)(1), (2), and (3) for purposes of Code section 414(b) or in applying Treas. Reg. §1.414(c)-2 for purposes of Code section 414(c), the language “at least 50 percent” shall be used instead of the language “at least 80 percent” each place it appears in such Code and regulations sections. Whenever the Plan refers to a termination of employment, such reference shall mean “Separation from Service.” Whether the Executive has incurred a Separation from Service shall be determined in accordance with the 409A Guidance.”

2.	Subsections (l), (m), (n), (o) and (p) of section 2.1 of the Plan are hereby renumbered as subsections, respectively, (m), (n), (o), (p) and (q) thereof.
3.	Section 2.1 of the Plan is hereby amended, by adding immediately after subsection (q) thereof (i.e., the definition of “Related Organization”), a new subsection (r) to read as follows:

“(r)  Specified Employee. The term “Specified Employee” means a “specified employee” within the meaning of the 409A Guidance and determined pursuant to the identification methodology selected by the Committee from time to time.”

4.	Subsection (q) of Section 2.1 of the Plan (i.e., the definition of “Vesting Service”) is hereby renumbered as subsection (s) thereof.
5.	Section 4.3 of the Plan is hereby amended in its entirety to read as follows:

“4.3  Timing and Manner of Payment

(a) In General. A Participant’s Benefit under section 4.2 shall be payable in a lump sum amount as of the annuity starting date under the Pension Plan. Notwithstanding the foregoing, if a Participant Separates from Service after December 31, 2004, the Participant’s Benefit under this section 4.2 will be distributed in a lump sum amount thirty (30) days after the Participant’s Separation from Service, except as provided in section 4.3(c) or 5.2(b).

(b)	Delay for Specified Employees. If a Participant is a Specified Employee on the date of his Separation from Service occurring after December 31, 2004, payment of his vested Benefit will be made on the date that is six (6) months after the Participant’s Separation from Service (unless the Participant dies before such date, in which case the benefit will be paid in accordance with section 5.2(b)). The lump sum payment shall include an “earnings adjustment” to reflect the six-month delay described above. The appropriate earnings adjustment shall be determined by the Committee.
(c)	Section 409A Distributions. If, due to the application of the 409A Guidance, all or any portion of a Participant’s benefit under this Plan becomes taxable to the Participant prior to receipt, a Participant may apply to the Committee before a Change in Control, or the trustee of the trust after a Change in Control, for a distribution of that portion of his or her benefit that has become taxable pursuant to Code Section 409A. Upon the approval of such an application, which approval shall not be unreasonably withheld (and, after a Change in Control, shall be granted), the Committee (or the trustee) shall distribute to the Participant immediately available funds in an amount equal to the taxable portion of his or her benefit (which amount shall not exceed the present value of the Participant’s benefit under the Plan). If the application is approved, the distribution shall be made within 90 days of the date when the Participant’s application is approved. Such a distribution shall affect and reduce the benefits to be paid under this Plan.
(e)	No Change in Payment Form and Time. A Participant may not defer payment of any benefit to a later date and may not elect another form of payment.”

6. Section 5.1 of the Plan is hereby amended, in its entirety, to read as follows:

“5.1	Entitlement and Amount of the Death Benefit
(a)	Death before January 1, 2005. If, before January 1, 2005, a Participant dies after vesting under the Pension Plan but before the annuity starting date under the Pension Plan, the Participant’s beneficiary under the Pension Plan shall be entitled to a benefit equal to the lump sum Actuarial Equivalent of the excess of (1) over (2) where—

(1)	is the amount of the preretirement death benefit that would be payable to the beneficiary under the terms of the Pension Plan determined on the basis of the monthly amount described in section 4.2(a), and
(2)	is the amount of the preretirement death benefit that is payable to the beneficiary under the Pension Plan.

(b) Death after December 31, 2004. If, after December 31, 2004, a Participant dies after vesting under the Plan but before the benefit is paid to the Participant under the Plan, the Participant’s beneficiary (designated under the Pension Plan) shall be entitled to a Preretirement Death Benefit equal to the lump sum Actuarial Equivalent of the greater of (1) or (2) where—

(1) is the survivor benefit that would have been payable to a beneficiary had the Participant died after commencing his benefit calculated pursuant to section 4.2(a) and (b) in an Actuarially Equivalent joint and 50% survivor annuity form of payment; and

(2) is the survivor benefit that would have been payable to a beneficiary had the Participant died after commencing his benefit calculated pursuant to section 4.2(a) and (b) in an Actuarially Equivalent single life and ten (10) year certain form of payment.”

7. Section 5.2 of the Plan is hereby amended in its entirety to read as follows:

“5.2	Timing and Manner of Payment
(a)	Death before January 1, 2005. A Participant’s Preretirement Death benefit described in section 5.1(a) shall be payable as a lump sum amount as of the annuity starting date for the death benefit that is payable under the Pension Plan.
(b)	Death after December 31, 2004. A Participant’s Preretirement Death Benefit described in section 5.1(b) shall be paid as a lump sum amount on the ninetieth (90th) day after the Participant’s death.

The payment of the death benefit under this Article shall fully discharge the Plan’s obligation under the Plan to all persons with respect to the Participant’s benefit.”

8. Section 9 of the Plan is hereby amended by adding immediately to the end thereof a new paragraph to read as follows:

“In the event of the Plan termination, all benefits shall be distributed to the Participants as otherwise provided in the Plan; provided, however, that the Committee and the Board have reserved their right to accelerate payments of benefits to the Participant to the extent that and in a manner permitted by the 409A Guidance.”

9.	In all other respects the Plan remains unchanged.
	EXECUTED on this 24th day of December, 2008.

POTASH CORPORATION OF SASKATCHEWAN INC.
By:	/s/ Barbara Jane Irwin

SIGNED SEALED AND DELIVERED in the presence of:

David R. Haverick

Name of Witness

/s/ David R. Haverick

Signature of Witness

EX-10.AA

Exhibit 10(aa)

POTASH CORPORATION OF SASKATCHEWAN INC.

AMENDMENT NO. 2 TO THE

PCS SUPPLEMENTAL RETIREMENT PLAN FOR U.S. EXECUTIVES

     The PCS Supplemental Retirement Plan for U.S. Executives, effective as of January 1, 1999 (the “Plan”), as heretofore amended, is hereby further amended effective as specified herein as follows:

1. Section 4.2(a) of the Plan is hereby amended in its entirety to read as follows:

“(a)  is the monthly benefit that the Participant would have accrued under the Pension Plan had the monthly benefit been determined without regard to Code sections 401(a)(17) and 415; provided, however, that the accrued benefit attributable to service credited on and after July 1, 2009 shall be determined without regard to any bonus amounts paid or payable to the Executive for any calendar year under the Corporation’s annual short-term incentive plan to the extent that such amounts in the aggregate exceed the Executive’s annual base pay on which such bonus amounts were based.”

2.	In all other respects the Plan remains unchanged.
	EXECUTED on this 23 day of February, 2009.

POTASH CORPORATION OF SASKATCHEWAN INC.
	/s/ Barbara Jane Irwin
By:	/s/ John W. Estey

EX-10.JJ

Exhibit 10(jj)

U.S. PARTICIPANT ADDENDUM NO. 1

TO THE POTASH CORPORATION OF SASKATCHEWAN INC. DEFERRED SHARE UNIT PLAN
FOR NON-EMPLOYEE DIRECTORS

In order to comply with the provisions of Section 409A of the Code (as hereafter defined) as it relates to U.S. Participants (as hereafter defined), the Potash Corporation of Saskatchewan Inc. Deferred Share Unit Plan for Non-Employee Directors (the “Plan”) as it pertains to U.S. Participants is hereby amended, effective as of January 1, 2005, as follows:

1.	Section 4 of the Plan is hereby amended by adding a new sentence at the end thereof to read as follows:
	“Notwithstanding the foregoing, with respect to any Participant who is subject to U.S. income tax (“U.S. Participant”), the Participant’s election to defer any portion of the Annual Retainer Fee for the year in which the Participant became an employee shall remain in effect through the last day of such year.”
2.	The second paragraph of Section 5(b) of the Plan is hereby amended by adding, immediately before the period in the first sentence thereof, the following:
	“, which, in the case of any U.S. Participant, shall apply to the portion of the Annual Retainer Fee attributable to services performed after the election becomes irrevocable.”
3.	Section 8 of the Plan is hereby amended by adding, immediately after the third sentence thereof, a new sentence to read as follows:
	“Notwithstanding the foregoing, the Entitlement Date of any U.S. Participant shall be, and payment to any U.S. Participant shall be made within sixty (60) days after the last day of the calendar quarter in which his Termination of Board Service occurs. If a U.S. Participant is a Specified Employee (within the meaning of the regulations under Section 409A of the Internal Revenue Code, of 1986, as amended (“Code”)) on the date of his Termination of Board Service, payment to such Participant will be made on the first business day that is six months following his Termination of Board Service.”

EXECUTED on 19 day of December, 2008.

POTASH CORPORATION OF SASKATCHEWAN INC.
By:	/s/ Joseph A. Podwika
Title Senior Vice President, General Counsel & Secretary

EX-10.PP

EXHIBIT 10(pp)

POTASH CORPORATION OF SASKATCHEWAN INC.

AMENDMENT TO
THE
MEDIUM-TERM INCENTIVE PLAN
Effective for Performance Cycle January 1, 2006-December 31, 2008

        The Potash Corporation of Saskatchewan Inc. Medium-Term Incentive Plan (Effective for Performance Cycle January 1, 2006 — December 31, 2008) (“MTIP”) is hereby amended, effective as of January 1, 2006, as follows:

1. Section 2.20 of the MTIP is hereby amended by adding a new sentence to the end thereof to read as follows:

With respect to an Entitled Executive who is subject to U.S. income tax (“U.S. Executive”), “Permanent Disability” or “Permanently Disabled” means that a U.S. Executive is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months. A U.S. Executive will be deemed disabled if determined to be disabled in accordance with a disability insurance program maintained by the Corporation, to the extent the determination of Permanent Disability under such program is consistent with this Section.

2. Section 6.01 of the MTIP is hereby amended by adding the following to the end thereof:

Notwithstanding the foregoing, payment to a U.S. Executive shall occur on the sixtieth (60^th) day after the Performance Cycle. Notwithstanding the foregoing, if a U.S. Executive Retires, dies or is involuntarily terminated, payment to such U.S. Executive shall be made on the sixtieth (60^th) day after the date on which the U.S. Executive Retires, dies or is involuntarily terminated. If on the date of a U.S. Executive’s Retirement the U.S. Executive is a Specified Employee, payment following such Retirement will be made on the date that is six months after the date of the Executive’s Retirement, adjusted for interest at a rate to be determined by the Committee.

For purposes of this Section 6.01, the following terms have the following meanings:

     “Affiliate” means an entity whose employees, together with the employees of PCS Inc., are required, in accordance with Code Section 414(b) or (c) to be treated as employed by a single employer, except that for purposes of determining whether a Separation from Service from the Corporation has occurred, in applying Code section 1563(a)(1), (2), and (3) for purposes of Code section 414(b) or in applying Treas. Reg. §1.414(c)-2 for purposes of Code section 414(c), the language “at least 50 percent” shall be used instead of the language “at least 80 percent” each place it appears in such Code and regulations sections.

     “Code” means the Internal Revenue Code of 1986, as amended.

     “Retirement” means a U.S. Executive’s Separation from Service after attaining age 55 and completing 5 years of service.

     “Separation from Service” means any termination of employment with the Company and all Affiliates for any reason; provided, however, that no Separation from Service is deemed to occur while the Executive is on military leave, sick leave or other bona fide leave of absence that does not exceed six (6) months, or if longer, the period during which the Executive’s right to reemployment with the Company or Affiliates is provided either by statute or by contract. Whether the Executive has incurred a Separation from Service shall be determined in accordance with Code Section 409A and the IRS guidance issued thereunder (“409A Guidance”).

     “Specified Employee” means an individual who is identified as a “specified employee” (within the meaning of the 409A Guidance) in accordance with the procedures established by the Committee from time to time.

3. In all other respect the MTIP remains unchanged.

       EXECUTED on this 24^th day of December, 2008.

POTASH CORPORATION OF SASKATCHEWAN INC.
By:	/s/ Barbara Jane Irwin

EX-10.QQ

Exhibit 10(qq)

Medium-Term Incentive Plan

Potash Corporation of Saskatchewan Inc.

Effective for the Performance Cycle January 1, 2009 to December 31, 2011

Contents

SECTION 1—ESTABLISHMENT OF THE PLAN	1
1.01 PURPOSE	1
1.02 TERM	1
SECTION 2—DEFINITIONS	2
2.01 AFFILIATE	2
2.02 AWARD UNITS	2
2.03 BOARD	2
2.04 CODE	2
2.05 COMMITTEE	2
2.06 CORPORATE TSR	2
2.07 CORPORATE TSR AWARD UNITS	3
2.08 CORPORATION	3
2.09 EFFECTIVE DATE	3
2.10 ENTITLED EXECUTIVE	3
2.11 409A GUIDANCE	3
2.12 INDEX	3
2.13 INDEX CLOSING PRICE	3
2.14 INDEX DIVIDENDS	4
2.15 INDEX OPENING PRICE	4
2.16 INDEX TSR	4
2.17 INDEX TSR AWARD UNITS	4
2.18 JUST CAUSE	5
2.19 PCS INC. OPENING SHARE PRICE	5
2.20 PCS INC. CLOSING SHARE PRICE	5
2.21 PCS INC. DIVIDENDS	5
2.22 PERFORMANCE CYCLE	5
2.23 PERMANENT DISABILITY OR PERMANENTLY DISABLED	5

i

2.24 PLAN	6
2.25 RETIREMENT	6
2.26 SALARY	6
2.27 SEPARATION FROM SERVICE	6
2.28 SPECIFIED EMPLOYEE	6
2.29 TARGET PERCENTAGE	6
2.30 TIER GROUP	7
2.31 U.S. EXECUTIVE	7
2.32 VESTED PERCENTAGE	7
SECTION 3—PARTICIPATION	8
3.01 INITIAL PARTICIPATION	8
3.02 CONTINUED PARTICIPATION	8
SECTION 4—ALLOCATION OF AWARD UNITS	9
4.01 ALLOCATION	9
4.02 PROMOTION TO NEW TIER GROUP OR OTHER PROMOTION	9
4.03 CORPORATE TSR AWARD UNITS AND INDEX TSR AWARD UNITS	9
4.04 TARGET PERCENTAGE	10
SECTION 5—VESTING OF AWARD UNITS	11
5.01 VESTED PERCENTAGES	11
SECTION 6—REDEMPTION OF AWARD UNITS	12
6.01 REDEMPTION DATE	12
6.02 VALUE OF AWARD UNITS	13
6.03 EARLY REDEMPTION DATE	14
SECTION 7—ADMINISTRATION OF THE PLAN	15
7.01 POWERS OF THE COMMITTEE	15
7.02 NOTIFICATION TO ENTITLED EXECUTIVES	15
7.03 CALCULATION OF AWARD PAYMENTS	15
7.04 DELEGATION OF DUTIES	15
7.05 RECOUPMENT POLICY	15
7.06 SECTION 409A	15
SECTION 8—GENERAL PROVISIONS	17
8.01 ASSIGNMENT OR ALIENATION	17
8.02 AMENDMENT OR TERMINATION	17

ii

8.03 NO ENLARGEMENT OF CONTRACTUAL RIGHTS	17
8.04 WITHHOLDING OF TAXES	17
8.05 BINDING ON SUCCESSORS	17
8.06 CURRENCY	17
8.07 CERTAIN ADJUSTMENTS	18
8.08 GOVERNING LAW	18

iii

Section 1—Establishment of the Plan

1.01	Purpose
	This Medium-Term Incentive Plan is established for the purpose of:

(a)	providing competitive compensation for Entitled Executives;
(b)	rewarding Entitled Executives for improving Total Shareholder Return;
(c)	rewarding Entitled Executives for attaining a Total Shareholder Return that is in excess of the increase in the DAXglobal Agribusiness Index;
(d)	rewarding Entitled Executives for their efforts and contributions to the achievement of the long-term success of the business interests of the Corporation;
(e)	aligning the interests of Entitled Executives more closely with the shareholders of the Corporation; and,
(f)	enhancing the ability of the Corporation to recruit and retain high potential, high value executives.

1.02	Term
	Subject to Section 8.02 Amendment or Termination, this Plan shall be effective for the Performance Cycle January 1, 2009 to December 31, 2011.

1

Section 2—Definitions

2.01

Affiliate

“Affiliate” means, for purposes of compliance with the 409A Guidance, an entity whose employees, together with the employees of the Corporation are required, in accordance with Code Section 414(b) or (c) to be treated as employed by a single employer, except that for purposes of determining whether a Separation from Service from the Corporation has occurred, in applying Code Section 1563(a)(1), (2), and (3) for purposes of Code Section 414(b) or in applying Treas. Reg. Section 1.414(c)-2 for purposes of Code Section 414(c), the language “at least 50 percent” shall be used instead of the language “at least 80 percent” each place it appears in such Code and Regulations sections.

2.02	Award Units
	“Award Units” means, in respect of an Entitled Executive, the units allocated pursuant to Section 4 Allocation of Award Units.
2.03	Board
	“Board” means the Board of Directors of PCS Inc.
2.04	Code
	“Code” means the Internal Revenue Code of 1986, as amended.
2.05	Committee
	“Committee” means the Compensation Committee of the Board.
2.06	Corporate TSR
	“Corporate TSR” means the total shareholder return of PCS Inc. in the Performance Cycle, expressed as a percentage, and determined as follows:

(i)	PCS Inc. Closing Share Price
	MINUS
	PCS Inc. Opening Share Price
	PLUS

2

	PCS Inc. Dividends
	DIVIDED BY
(ii)	PCS Inc. Opening Share Price
	MULTIPLIED BY
(iii)	100

2.07	Corporate TSR Award Units
	“Corporate TSR Award Units” means, in respect of an Entitled Executive, one half of the Award Units allocated to the Entitled Executive pursuant to Section 4 Allocation of Award Units.
2.08	Corporation
	“Corporation” means Potash Corporation of Saskatchewan Inc. and its direct and indirect subsidiaries.
2.09	Effective Date
	“Effective Date” means January 1, 2009.
2.10	Entitled Executive
	“Entitled Executive” means an executive employee of the Corporation who is recommended by the CEO and approved by the Committee to participate in this Plan.
2.11	409A Guidance
	“409A Guidance” means Code Section 409A and the IRS guidance issued thereunder.
2.12	Index
	“Index” means the DAXglobal Agribusiness Index (DXAG).
2.13	Index Closing Price
	“Index Closing Price” means the average closing value of the Index, as reported by the Deutsche Börse Group, for the last 30 trading days of the Performance Cycle or, in the case of an Entitled Executive for whom an early redemption date applies pursuant to paragraph (a) of Section 6.03 Early Redemption Date, the above reference to “the last 30 trading days of the Performance Cycle” shall be substituted by “the last 30 trading days up to the date of the Entitled Executive’s retirement, disability, death or involuntary termination, as the case may be”.

3

2.14	Index Dividends
	“Index Dividends” means a cumulative amount derived from the return on dividends paid and reinvested by the companies in the Index, during the Performance Cycle or, in the case of an Entitled Executive for whom an early redemption date applies pursuant to paragraph (a) of Section 6.03 Early Redemption Date, a cumulative amount derived from the return on dividends paid and reinvested by the companies in the Index, during the Performance Cycle up to the date of the Entitled Executive’s retirement, disability, death or involuntary termination, as the case may be.
2.15	Index Opening Price
	“Index Opening Price” means the average closing value of the Index, as reported by the Deutsche Börse Group, for the last thirty trading days of 2008. Such value has been determined as U.S. $259.38.
2.16	Index TSR
	“Index TSR” means the total shareholder return of the Index in the Performance Cycle, expressed as a percentage, and determined as follows:

(i)	Index Closing Price
	MINUS
	Index Opening Price
	PLUS
	Index Dividends
	DIVIDED BY
(ii)	Index Opening Price
	MULTIPLIED BY
(iii)	100

2.17	Index TSR Award Units
	“Index TSR Award Units” means, in respect of an Entitled Executive, one half of the Award Units allocated to the Entitled Executive pursuant to Section 4 Allocation of Award Units.

4

2.18	Just Cause
	“Just Cause” has such meaning as determined by the Committee from time to time, consistent with the regular policies of the Corporation.
2.19	PCS Inc. Opening Share Price
	“PCS Inc. Opening Share Price” means the average closing price of the common stock of PCS Inc. as reported on the New York Stock Exchange, for the last thirty trading days of 2008. Such price has been determined as U.S. $64.936.
2.20	PCS Inc. Closing Share Price
	“PCS Inc. Closing Share Price” means the average closing price of the common stock of PCS Inc. as reported on the New York Stock Exchange, for the last 30 trading days of the Performance Cycle or, in the case of an Entitled Executive for whom an early redemption date applies pursuant to paragraph (a) of Section 6.03 Early Redemption Date, the above reference to “the last 30 trading days of the Performance Cycle” shall be substituted by “the last 30 trading days up to the date of the Entitled Executive’s retirement, disability, death or involuntary termination, as the case may be”.
2.21	PCS Inc. Dividends
	“PCS Inc. Dividends” means the cumulative amount of dividends paid by PCS Inc. on a common share of PCS Inc. during the Performance Cycle or, in the case of an Entitled Executive for whom an early redemption date applies pursuant to paragraph (a) of Section 6.03 Early Redemption Date, the cumulative amount of dividends paid by PCS Inc. on a common share of PCS Inc. during the Performance Cycle up to the date of the Entitled Executive’s retirement, disability, death or involuntary termination, as the case may be.”
2.22	Performance Cycle
	“Performance Cycle” means January 1, 2009 to December 31, 2011 inclusive.
2.23	Permanent Disability or Permanently Disabled
	“Permanent Disability” or “Permanently Disabled” means the permanent incapacity of an Entitled Executive, as determined in accordance with the disability plan to which the Entitled Executive is eligible to belong. With respect to a U.S. Executive, “Permanent Disability” or “Permanently Disabled” means that a U.S. Executive is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months. A U.S. Executive will be deemed disabled if determined to be disabled in accordance with a disability insurance program maintained by the Corporation, to the extent the determination of Permanent Disability under such program is consistent with this Section and the 409A Guidance.

5

2.24	Plan
	“Plan” means this Medium-Term Incentive Plan, as amended from time to time.
2.25	Retirement
	“Retirement” means, with respect to a U.S. Executive, the U.S. Executive’s Separation from Service after attaining age 55 and completing 5 years of service. Retirement with respect to any Entitled Executive who is not a U.S. Executive shall be determined in accordance with the general policies of the Corporation. Whenever a lower-case term “retirement” is used herein, such term with respect to a U.S. Executive shall have the meaning set forth in this Section.
2.26	Salary
	“Salary” means, in respect of an Entitled Executive, the Entitled Executive’s annual base salary in effect as of the date the Entitled Executive commenced participation in the Plan. However, if the Entitled Executive is promoted into a new Tier Group during the Performance Cycle or if the annual base salary of the Entitled Executive is significantly adjusted during the Performance Cycle as a result of a promotion, “Salary” for purposes of Section 4.02 Promotion to a New Tier Group or Other Promotion shall be the annual base salary in effect as of the date the Entitled Executive was promoted into a new Tier Group or otherwise promoted.
2.27	Separation from Service
	“Separation from Service” means any termination of a U.S. Executive’s employment with the Corporation and all Affiliates for any reason; provided, however, that no Separation from Service is deemed to occur while the U.S. Executive is on military leave, sick leave or other bona fide leave of absence that does not exceed six (6) months, or if longer, the period during which the U.S. Executive’s right to reemployment with the Corporation or Affiliates is provided either by statute or by contract. Whether the U.S. Executive has incurred a Separation from Service shall be determined in accordance with the 409A Guidance.
2.28	Specified Employee
	“Specified Employee” means a U.S. Executive who is identified as a “specified employee” within the meaning of the 409A Guidance and as determined in accordance with the identification methodology established by the Committee from time to time.
2.29	Target Percentage
	“Target Percentage” means the target percentage applicable to an Entitled Executive according to the Tier Group in which the Entitled Executive participates, as described in Section 4.04 Target Percentage.

6

2.30	Tier Group
	“Tier Group” means, in respect of an Entitled Executive, the Tier Group in which the Entitled Executive participates, for purposes of this Plan, as described in Section 4.04 (Target Percentage).
2.31	U.S. Executive
	“U.S. Executive” means an Entitled Executive who is subject to U.S. income tax.
2.32	Vested Percentage
	“Vested Percentage” means the vested percentage of an Entitled Executive’s Corporate TSR Units and Index TSR Units, as the case may be, as described in Section 5 Vesting of Award Units.

7

Section 3—Participation

3.01	Initial Participation
	Participation in the Plan is limited to Entitled Executives.
	Each Entitled Executive shall participate in the Plan as of the first day of the Performance Cycle, or on the date on which the Entitled Executive becomes an Entitled Executive, if later.
3.02	Continued Participation
	Each Entitled Executive shall continue participation in the Plan throughout the Performance Cycle, or until the Entitled Executive’s employment terminates for any reason, the Entitled Executive becomes Permanently Disabled, or upon the Entitled Executive no longer being designated as an Entitled Executive as recommended by the CEO and approved by the Committee, whichever first occurs.

8

Section 4—Allocation of Award Units

4.01	Allocation
	Each person who is an Entitled Executive as of the Effective Date or who becomes an Entitled Executive during the Performance Cycle but after the Effective Date shall be allocated Award Units. The number of Award Units shall be equal to:

(a)	the Entitled Executive’s Salary as of the Effective Date or the date the Entitled Executive commences participation in the Plan, whichever is later
	MULTIPLIED BY
(b)	the number of years and completed months (expressed as fractions of a year, to two decimal places) from the Effective Date or the date the Entitled Executive commences participation in the Plan, whichever is later, to the end of the Performance Cycle
	MULTIPLIED BY
(c)	the Target Percentage applicable to the Entitled Executive, as described in Section 4.04 below
	DIVIDED BY
(d)	the PCS Inc. Opening Share Price

4.02	Promotion to New Tier Group or Other Promotion
	In the event an Entitled Executive is promoted to a new Tier Group during the Performance Cycle or if the Salary of the Entitled Executive is significantly adjusted during the Performance Cycle as a result of a promotion, additional Award Units shall be allocated to the Entitled Executive reflecting the incremental effect of the Entitled Executive’s participation in the new Tier Group or new Salary, as the case may be, from the date such changes occurred to the end of the Performance Cycle.
4.03	Corporate TSR Award Units and Index TSR Award Units
	One half the Award Units allocated pursuant to Sections 4.01 and 4.02 above shall be Corporate TSR Award Units and one half shall be Index TSR Award Units.

9

4.04	Target Percentage
	The Target Percentage applicable to an Entitled Executive for purposes of this Plan shall be determined by the Tier Group in which the Entitled Executive participates, as follows:

Tier Group	Positions	Target Percentage
1	Corporation President and Chief Executive Officer		70	%
2	Executive Vice President and Chief Operating Officer; Executive Vice President and Chief Financial Officer		45	%
3	Selected Corporate Senior Vice Presidents (Administration; General Counsel); and Subsidiary Presidents (Potash; Phosphate and Nitrogen; Sales)		40	%
4	Selected Senior Vice Presidents (IT; Projects and Technical Services, Fertilizer); Corporate Vice Presidents; Selected Subsidiary Vice Presidents		30	%
5	Selected Subsidiary Vice Presidents Selected Corporate Executive Employees Selected Operations General Managers		25	%
6	Selected Operations General Managers Selected Subsidiary Vice Presidents Selected Senior Directors		20	%

10

Section 5—Vesting of Award Units

5.01	Vested Percentages
	The following Vested Percentages shall be used to determine the redemption of an Entitled Executive’s Corporate TSR Award Units and Index TSR Award Units pursuant to paragraphs (a) and (b) respectively of Section 6.02 Value of Award Units.

(a) Corporate TSR Vested Percentage

	Corporate TSR
Corporate TSR	Vested Percentage
5% or less		0	%
25%		50	%
50%		100	%
60%		125	%
75% or more		150	%

(b) Index TSR Vested Percentage

Corporate TSR	Index TSR
as % of Index TSR	Vested Percentage
Less than 100%		0	%
100%		50	%
130%		100	%
145% or more		150	%

All Corporate TSR and Corporate TSR as percentage of Index TSR performances between the percentages in the above tables will be interpolated in the manner adopted by the Corporation from time to time.

11

Section 6—Redemption of Award Units

6.01	Redemption Date
	Subject to the provisions of Section 6.03 below, the Award Units of each Entitled Executive shall be redeemed and paid out by the Corporation in a lump sum cash payment.

(a) All Entitled Executives Other than U.S. Executives

This payment to all Entitled Executives other than U.S. Executives shall occur as soon as practicable following the end of the Performance Cycle, or following the date of the Entitled Executive’s retirement, permanent disability, death or involuntary termination, if applicable, within ninety (90) days after the end of the year in which such Award Units first become payable.

(b) U.S. Executives

Payment to a U.S. Executive shall occur as provided in this Section 6.01(b):

(i)	If a U.S. Executive is employed by the Corporation of an Affiliate on the last day of the Performance Cycle, payment shall occur within ninety (90) days after the end of the Performance Cycle.
(ii)	Except as provided in (iii) below, if a U.S. Executive Retires, dies or is involuntarily terminated before the last day of the Performance Cycle, payment to such U.S. Executive shall be made within ninety (90) days after the date on which the U.S. Executive Retires, dies or is involuntarily terminated; provided, however, that in no event will the U.S. Executive have a right to designate the taxable year of the payment.
(iii)	If on the date of a U.S. Executive’s Retirement or involuntary termination the U.S. Executive is a Specified Employee, payment following such Retirement or involuntary termination will be made on the date that is six months after the date of the U.S. Executive’s Retirement, adjusted for interest at a rate to be determined by the Committee; provided, however, that if the U.S. Executive dies before such date, payment to the U.S. Executive’s beneficiary will be made in accordance with the provisions relating to payment upon death set forth in paragraph (ii) above.

12

6.02	Value of Award Units
	The value of an Entitled Executive’s Award Units shall be equal to the sum of the values of the Entitled Executive’s Corporate TSR Award Units and Index TSR Award Units, as follows:

(a)	Corporate TSR Award Units
	The value of an Entitled Executive’s Corporate TSR Award Units shall be equal to:

(i)	the number of Corporate TSR Award Units granted to the Entitled Executive, subject to the reduction or forfeiture of units described in Section 6.03, if applicable
	MULTIPLIED BY
(ii)	the Corporate TSR Vested Percentage
	MULTIPLIED BY
(iii)	PCS Inc. Closing Share Price, subject, however, to a maximum value of three times the PCS Inc. Opening Share Price

(b)	Index TSR Award Units
	The values of an Entitled Executive’s Index TSR Award Units shall be equal to:

(i)	the number of Index TSR Award Units granted to the Entitled Executive, subject to the reduction or forfeiture of units described in Section 6.03, if applicable
	MULTIPLIED BY
(ii)	the Index TSR Vested Percentage
	MULTIPLIED BY
(iii)	the PCS Inc. Closing Share Price, subject, however, to a maximum value of three times the PCS Inc. Opening Share Price

13

6.03 Early Redemption Date

(a)	Retirement, Permanent Disability, Death or Involuntary Termination Without Just Cause
	In the event an Entitled Executive retires, becomes Permanently Disabled or dies prior to the end of the Performance Cycle or in the event the Entitled Executive’s employment is involuntarily terminated by the Corporation without Just Cause, the number of Award Units allocated to the Entitled Executive pursuant to Section 4 Allocation of Award Units shall be reduced such that the calculation of years and completed months of participation as described in paragraph (b) of Section 4.01 Allocation shall end as of the date of the Entitled Executive’s retirement, Permanent Disability, death or involuntary termination, as the case may be.
	One half the Award Units reduced shall be Corporate TSR Award Units and one half shall be Index TSR Award Units.
	An Entitled Executive shall be required to provide at least 30 days prior written notice of retirement to the Corporation. In the event an Entitled Executive provides less than 30 days prior written notice of retirement, the value of award units calculation per Section 6.02 shall be performed as of the Entitled Executive’s retirement date and the date that is 30 days following the date the Entitled Executive provided written notice of retirement to the Corporation, and the Corporation shall provide the lower valued award to the Entitled Executive as determined by such two calculations.
(b)	Voluntary Termination or Involuntary Termination With Just Cause
	In the event an Entitled Executive voluntarily terminates employment prior to the end of the Performance Cycle or in the event the Entitled Executive’s employment is involuntarily terminated by the Corporation with Just Cause, the allocation of Award Units to the Entitled Executive pursuant to Section 4 Allocation of Award Units shall be forfeited as of the date of such termination of employment and the Entitled Executive shall not be entitled to any payment under this Plan.

14

Section 7—Administration of the Plan

7.01	Powers of the Committee
	The Committee shall have the discretionary power and authority to determine who shall be Entitled Executives, approve Target Percentages and generally administer the Plan. The Committee shall conclusively interpret the provisions of this Plan and decide all questions of fact arising in the application thereof.
7.02	Notification to Entitled Executives
	The Corporation will prepare a written notice to each Entitled Executive specifying his or her Target Percentage, the number of Award Units allocated and the terms of the Plan.
7.03	Calculation of Award Payments
	Management of the Corporation shall provide a report to the Committee within 30 days of the end of the Performance Cycle showing the calculations for determining award payments including the calculation of the Corporate TSR and Index TSR. Such calculations shall be subject to the review and confirmation of the Committee.
7.04	Delegation of Duties
	The Committee and/or the Board may delegate to any director or directors or any officer or officers of the Corporation such administrative duties and powers as it may see fit with respect to the Plan.
7.05	Recoupment Policy
	Any Award paid or payable under this Plan shall be subject to the terms and conditions of the Corporation’s Policy on Recoupment of Unearned Compensation (as previously adopted and, from time to time, amended by the Board) a copy of which shall be distributed to each Entitled Executive upon eligibility to participate in this Plan.
7.06	Section 409A
	It is intended that the Plan comply with the 409A Guidance to prevent the inclusion in gross income of any amount available to a U.S. Executive hereunder in a taxable year that is prior to the taxable year or years in which such amounts would otherwise be actually distributed or made available to the U.S. Executive. All provisions in the Plan shall be interpreted in a manner consistent with the 409A Guidance. Notwithstanding the foregoing, the Corporation

15

does not guarantee, nor shall indemnify for, any tax consequences of any Entitled Executive’s entitlement to or receipt of payments under the Plan, and each Entitled Executive shall be solely responsible for payment of any tax obligations incurred in connection with the benefits provided under the Plan.

16

Section 8—General Provisions

8.01	Assignment or Alienation
	Except as required by applicable laws, the right of an Entitled Executive to Award Units under this plan shall not be given as security, be subject to transfer, anticipation, commutation, alienation, sale, assignment, encumbrance, charge, pledge, or hypothecation, or be subject to execution, attachment, levy or similar process or assignment by operation of law, and any attempt to effect any such action will be null and void and of no effect.
8.02	Amendment or Termination
	This Plan may be amended in whole or in part from time to time or terminated by the Corporation. Any amendment or termination will be binding on the Corporation, Entitled Executives and their respective beneficiaries. Notice of termination or amendment will be provided to Entitled Executives and in the case of deceased Entitled Executives, their respective beneficiaries. However, no amendment or termination of any provision of this Plan shall directly or indirectly deprive any Entitled Executive or beneficiary of all or any portion of Award Units allocated to the date of the amendment or termination.
8.03	No Enlargement of Contractual Rights
	This Plan shall not give any Entitled Executive the right to be retained in the service of the Corporation nor will it interfere with the right of the Corporation to terminate the employment of the Entitled Executive. Participation in this Plan will not give any Entitled Executive any right or claim to any benefit, except to the extent provided in this Plan.
8.04	Withholding of Taxes
	The Corporation will withhold all applicable taxes from any amounts paid pursuant to this Plan.
8.05	Binding on Successors
	This Plan will be binding on any successor or successors of the Corporation whether by merger, consolidation or otherwise.
8.06	Currency
	The Award Units redeemed pursuant to this Plan will be paid in the same currency as the Entitled Executive receives his or her Salary. If the Salary of an Entitled Executive is paid in

17

	more than one currency during a Performance Cycle, the currency of his or her Award Payment for that Performance Cycle shall be determined by the Senior Vice-President, Administration.
8.07	Certain Adjustments
	In the event that, at any time during the Performance Cycle, there is any variation in the common shares of PCS Inc. or of any corporation within the Index by reason of (i) a stock split, reverse of stock split, stock dividend or other increase or decrease in the number of outstanding common shares, (ii) a merger, consolidation, recapitalization, amalgamation, plan of arrangement or similar statutory or corporate transaction or (iii) other event that the Committee determines, such as a sale of all or substantially all of any such corporation’s assets, the Committee shall make such adjustments to the Index Opening Price, PCS Inc. Opening Share Price, Index Closing Price or PCS Inc. Closing Share Price or to the calculation of the Corporate TSR or Index TSR with respect to such corporation and, in the case of any such event affecting the common shares of PCS Inc. the number of then outstanding Award Units as it deems necessary or appropriate to reflect such event.
8.08	Governing Law
	This Plan shall be governed by the laws of the Province of Saskatchewan. Section headings are for convenience only and shall not be considered provisions of the Plan. Words in the singular shall included the plural, and vice versa, unless qualified by the context.

Dated effective	January 1, 2009
/s/ John W. Estey
John Estey
Compensation Committee Chair
/s/ Barbara Jane Irwin
Barbara Jane Irwin
Senior Vice President Administration

18

EX-11

Exhibit 11

POTASH CORPORATION OF SASKATCHEWAN INC.
COMPUTATION OF PER SHARE EARNINGS
FOR THE YEARS ENDED DECEMBER 31

	2008			2007
A Net income as reported, Canadian GAAP ($ millions)		3,495.2			1,103.6
B Items adjusting net income ($ millions)		(100.0	)		(42.1	)
C Net income, US GAAP ($ millions)		3,395.2			1,061.5
D Weighted average number of shares outstanding		307,480,000			315,641,000
E Net additional shares issuable for diluted earnings per share calculation (Canadian GAAP)		9,958,000			8,667,000
F Net additional shares issuable for diluted earnings per share calculation (US GAAP)		9,954,000			8,651,000
CANADIAN GAAP
Basic earnings per share (A/D)		11.37			3.50
Diluted earnings per share (A/(D+E))		11.01			3.40
UNITED STATES GAAP
Basic earnings per share (C/D)		11.04			3.36
Diluted earnings per share (C/(D+F))		10.70			3.27

EX-12

Exhibit 12

Potash Corporation of Saskatchewan Inc.
Ratio of Earnings to Fixed Charges
(in millions of US dollars, except ratio amounts)
(unaudited)

	Year ended December 31
	2008			2007			2006			2005			2004
Canadian GAAP
Net income	$	3,495.2		$	1,103.6		$	631.8		$	542.9		$	298.6
Income taxes		1,077.1			416.2			158.1			267.4			131.7
Share of earnings of equity investees		(255.8	)		(76.2	)		(54.4	)		(52.1	)		(30.9	)
Fixed charges		187.1			187.5			183.5			149.1			132.4
Distributed income of equity investees		89.1			40.6			29.9			18.6			8.7
Interest capitalized		(42.9	)		(21.8	)		(19.1	)		(5.7	)		(2.5	)
Total Earnings Available for Fixed Charges	$	4,549.8		$	1,649.9		$	929.8		$	920.2		$	538.0
Fixed Charges
Interest expensed and capitalized	$	160.9		$	165.4		$	163.6		$	127.2		$	112.8
Amortization of debt issue costs		1.8			2.3			1.0			2.2			2.2
Estimated portion of rent expense representing interest		24.4			19.8			18.9			19.7			17.4
Total Fixed Charges	$	187.1		$	187.5		$	183.5		$	149.1		$	132.4
Ratio of Earnings to Fixed Charges		24.32			8.80			5.07			6.17			4.06
US GAAP
Net income	$	3,395.2		$	1,061.5		$	625.8		$	532.7		$	290.5
Income taxes		1,175.8			452.3			174.4			288.0			151.9
Share of earnings of equity investees		(254.8	)		(74.3	)		(54.9	)		(55.8	)		(30.9	)
Fixed charges		187.1			187.5			183.5			149.1			132.4
Distributed income of equity investees		89.1			40.6			29.9			18.6			8.7
Interest capitalized		(42.9	)		(21.8	)		(19.1	)		(5.7	)		(2.5	)
Total Earnings Available for Fixed Charges	$	4,549.5		$	1,645.8		$	939.6		$	926.9		$	550.1
Fixed Charges
Interest expensed and capitalized	$	160.9		$	165.4		$	163.6		$	127.2		$	112.8
Amortization of debt issue costs		1.8			2.3			1.0			2.2			2.2
Estimated portion of rent expense representing interest		24.4			19.8			18.9			19.7			17.4
Total Fixed Charges	$	187.1		$	187.5		$	183.5		$	149.1		$	132.4
Ratio of Earnings to Fixed Charges		24.32			8.78			5.12			6.22			4.15

EX-13

Exhibit 13

Supplying the World’s Need for More Potash

Potash is food for the plants that feed animals and people. It is known as the quality nutrient because it enhances crops’ size, color and flavor, increases protein, oil and vitamin C content, and improves storage and shipping qualities. It works with other nutrients to enhance the benefits they provide to crops.

The long-term drivers of the fertilizer business – potash in particular – are undeniable, even in the current difficult economic conditions. World population grows by approximately 75 million every year, and economic opportunities in developing regions are driving up demand for high-quality food. Farmers are awakening to the impact of proper fertility practices on their bottom line, giving them the incentive to invest in crop nutrients to improve yields.

At PotashCorp, we are preparing for the world’s demand for more fertilizer. With our resources, strategies and capability to deliver these vital products, we are an important part of bringing more food, more opportunity and more quality of life to the world.

INSIDE

Introduction
Letter from the CFO	2
Comparison to Peers	3
Management’s Discussion & Analysis
The Global Story	4
Company Overview	6
Factors That Shaped Our Business in 2008	10
Potash
Overview	13
Strategy	16
Capability to Deliver	17
Risks	18
Performance	18
Phosphate
Overview	21
Strategy	22
Capability to Deliver	24
Risks	24
Performance	24
Nitrogen
Overview	27
Strategy	30
Capability to Deliver	30
Risks	30
Performance	30

2009 Outlook	33
Key Performance Drivers	35
Rewarding Results	38
Risk Management	39
2008 Financial Overview	41
Expenses & Other Income	42
Quarterly Results	45
Key Earnings Sensitivities	47
Financial Structure
Financial Condition Review	47
Liquidity & Capital Resources	49
Capital Structure & Management	52
Market Risks	54
Related Party Transactions	54
Critical Accounting Estimates	54
Recent Accounting Changes	58
11 Year Report	61
Financials
Financial Performance Indicators	62
Management’s Responsibility for Financial Reporting	65
Independent Registered Chartered Accountants’ Reports	66
Consolidated Financial Statements	68
Appendix	119

LEARN MORE ONLINE

PotashCorp2008AR.com watch for our  Keywords  to guide you

2  Letter from the CFO

WAYNE BROWNLEE
EXECUTIVE VICE PRESIDENT AND CFO

No company, and no sector of the economy, was untouched by the financial crisis that gripped the world in the second half of 2008. While we don’t know when this crisis of economics and confidence will end, our business is tied to the world’s need for food – and when producing food, time is of the essence. Crops must be planted, fertilized and harvested.

In this economic downturn, the market has generally not differentiated between essential and non-essential businesses, between commodities and their underlying fundamentals, or among companies within a sector. But we think this will change and the strengths of PotashCorp will again be obvious. We believe premiums for quality will reappear.

Our resources, strategy and history of doing what we say we will do set our company apart. While we have world-class assets in phosphate and nitrogen, our emphasis on Potash First is the heart of our success. With an eye to long-term demand for this vital nutrient, PotashCorp, the largest producer, is in the best position to bring on the most new capacity in the least time. Expansions are underway at all of our operations, and we are primarily funding them from our cash flow. We are in this business for the long term and are confident our expanded potash capacity will be critical to meet future demand growth.

As we put our strengths to work for our stakeholders, we look for opportunities. Again we reinvested in what we believe are the world’s best potash assets – our own – through our share repurchase program. Like our previous share repurchases, this is a long-term investment that we expect will be recognized as an excellent creator of shareholder value. We also increased some of our offshore potash investments, and we continue to explore further opportunities that may become available. We believe decades of prudent balance sheet management will enable us to take advantage of those that fit our Potash First strategy. While this is not a forecast, we believe it is possible that we could far exceed our record potash gross margin of 2008 when we complete our expansion projects.

Our goal is always to maximize long-term value for our shareholders. While the current environment is a difficult one, we have achieved five consecutive years of record earnings growth and we continue to believe that PotashCorp is well positioned for future growth.

February 20, 2009

POTASHCORP 2008 FINANCIAL REVIEW

Comparison to Peers 3

Peers in Our Industry

In our efforts to achieve the highest sustainable results for our shareholders, management evaluated our 2008 performance against basic materials indices and our peers in the fertilizer sector. For 2009, our peer group has been expanded. Some of the key metrics tracked are set out on this page.

Comparability of Peer Information

This information is included for comparison only. All peer group financial information included in the performance summary was obtained from publicly available reports published by the respective companies. We have not independently verified and cannot guarantee the accuracy or completeness of such information.

Readers are cautioned that, other than PotashCorp and Agrium, none of the companies identified in this group prepares its financial statements (and accompanying notes) in accordance with accounting principles generally accepted in Canada (Canadian GAAP). Accounting principles generally accepted in the foreign jurisdictions in which these peers operate may vary in certain material respects from Canadian GAAP, and such differences (if and as applicable) have not been identified or quantified for this performance summary. For those companies with fiscal year-ends other than December 31, all financial information was based on the 12-month period comprising the most recent four fiscal quarters reported upon by such companies. In addition to the issues described above, the different reporting periods among the peer group may affect comparability of the information presented.

Note: Full-year comparable information for Intrepid not available due to IPO April 21, 2008.

Sources: Company financial reports

*	Capital expenditures = additions to property, plant and equipment
1	Year ended December 31, 2008
2	Most recent four fiscal quarters ended November 30, 2008
3	Most recent four fiscal quarters ended September 30, 2008
4	Most recent two fiscal halfs ended June 30, 2008 Uralkali net income, cash flow from operations and capital expenditures translated by half at: 2nd Half 2007 1 USD = RUB 25.0766; 1st Half 2008 1 USD = RUB 23.9366; average exchange rates in each half per Bloomberg
5	Yara net income, cash flow from operations and capital expenditures translated at 1 USD = NOK 5.6502, average exchange rate for 2008 as provided from company reports
6	K+S net income, cash flow from operations and capital expenditures translated by quarter at: Q4 2007 1 USD = EUR 0.6910; Q1 2008 1 USD = EUR 0.6678; Q2 2008 1 USD = EUR 0.6399; and Q3 2008 1 USD = EUR 0.6659; average exchange rates in each quarter per Bloomberg

POTASHCORP 2008 FINANCIAL REVIEW

4	Management’s Discussion & Analysis
	of Financial Condition and Results of Operations (in US Dollars)

The Global Story

Helping Produce More per Acre

The Long-Term Picture Does Not Change

The rapid decline in investor confidence in the latter half of 2008 may have temporarily shifted political and public attention away from global food issues, but it did not change long-term agricultural realities. The world needs every available arable acre to produce more food, and more fertilizer to keep those acres healthy. These needs drive the growth of our business and our industry.

The world depends on modern agriculture, which makes it possible to feed a rising population and help people in developing nations enjoy better, protein-rich diets as their incomes increase. Agriculture can help improve energy self-reliance, maintain a healthy environment and sustain the parks, gardens, rainforests and open spaces that enrich our lives and protect the planet.

Need for More Fertilizer on the Horizon

More than ever, farmers are challenged to respond to rising global needs for food, animal feed, fuel and fiber. Together with modern agricultural techniques, quality seeds and good weather, fertilizers make it possible for farmers to meet that challenge by maintaining soil fertility. Increased use of potash is especially important, since it works synergistically with nitrogen and phosphate and has historically been under-applied relative to the other two nutrients.

Research suggests that approximately 40 percent of the world’s food production is a direct result of fertilizer application. The value of PotashCorp products continues to increase as the need for food rises. We believe potash will become even more important to the agricultural picture, and we are ready to supply it.

More People and Less Land Require
More Food and More Fertilizer

1. Rising Population Parallels Income Growth

World population grows by approximately 75 million every year, mostly in developing nations. Despite the financial turmoil in 2008, China, India and other major emerging nations are expected to continue to drive global GDP growth, which the International Monetary Fund predicts will average 3.6 percent annually over the next five years. This will give increased purchasing power to millions of people.

POTASHCORP 2008 FINANCIAL REVIEW Keyword Online: Our Business

The following discussion and analysis is the responsibility of management and is as of February 20, 2009. The Board of Directors carries out its responsibility for review of this disclosure principally through its audit committee, comprised exclusively of independent directors. The audit committee reviews this disclosure and recommends its approval by the Board of Directors. Additional information relating to PotashCorp (which is not incorporated by reference herein) can be found on SEDAR at www.sedar.com and on EDGAR at www.sec.gov. 5

2. More and Better Food Is Wanted

Diets are changing around the world as people with rising incomes choose better-quality foods rich in protein. Grain-fed chicken, pork and beef are becoming more affordable in developing countries, and more meat is being produced and consumed there. Demand for fruits and vegetables is also rising, particularly in Asia, where they are displacing cereal crops. Substantially more fertilizer, especially potash, is needed to produce quality fruits and vegetables.

3. Arable Land per Capita Is Shrinking

As population rises, cities expand and industry and transportation infrastructure grow, farmland is being converted to other uses. By 2020, there are expected to be barely 0.2 hectares per person for animal and crop production – less than half what was available in 1950. Farmers must use proper fertility practices to produce enough food from this diminishing agricultural land base per capita.

4. Grain Stocks-to-Use Ratio Remains Below Average

Despite reduced grain buying in the second half of 2008 that left more in inventories, and a record grain harvest which met world demand for only the third time in a decade, stocks-to-use ratios remain near historical lows. Because of long-term population growth and rising consumer incomes, this is unlikely to change soon.

5. Strong Crop Prices Will Encourage Farmers

Although crop prices, like nearly all commodity prices, fell during the latter half of 2008 after setting records in the first half, they remain well above historical levels and approximately twice the levels of three years ago. The factors that drove up those prices – rising world demand, low stocks and competition for planted acreage – are expected to continue, giving farmers a strong incentive to increase production and motivating them to use proper fertilization.

6. Fertilizer Is Needed More than Ever, and It Pays

Record harvests like the one in 2008 pull vast amounts of crop nutrients from the soil, nutrients that must be replaced to feed the next crop. After years of under-applying fertilizer, especially potash, China, India, Brazil and other countries are beginning to improve their nutrient balance. Fertilizer typically generates a return of $3 for every $1 invested.

POTASHCORP 2008 FINANCIAL REVIEW

6 Company Overview

The Company With More

The World Needs More Fertilizer, and Fertilizer Is Our Business

The world needs more fertilizer to produce more crops in response to rising demand for food. Farmers want to increase their production to take advantage of higher prices, while those in developing regions, in particular, need to apply more fertilizer – especially potash – to correct soil nutrient imbalances brought about by historical under-application.

PotashCorp has built a thriving international fertilizer enterprise on world-class potash (K) resources, high-quality phosphate (P) and nitrogen (N) assets and strategic offshore potash investments.

We sell our products in three markets – fertilizer, focused on plant nutrition (N, P, K); feed supplements, focused on animal nutrition (mainly P, some N); and industrial, focused on products for high-grade food, technical and other applications (N, P as phosphoric acid, K). In 2008, fertilizer provided 70 percent of our sales and 82 percent of gross margin.

Offshore customers, primarily government agencies and private importers, accounted for half of our fertilizer sales in 2008 – including almost two-thirds of our potash sales. Approximately one-third of our sales volumes in each of the three nutrients was sold in North America to retailers, cooperatives and distributors that provide storage and application services to farmers. Feed and industrial customers consumed most of the remainder of our phosphate, and industrial customers the remainder of our nitrogen.

In both Northern and Southern hemispheres, fertilizers are mainly applied in spring and fall. Prices and profitability, choice of crop, soil quality and conditions, climate, weather, and government policies and subsidies influence customer purchases.

Among major world crops, rice, corn and wheat require all three nutrients, while soybeans need mainly potash and phosphate and oil palm uses mainly potash.

Keyword Online: Our Business

7

The Potash Business Has More Advantages

Higher Barriers to Entry, Less Government Involvement Are Important

Potash has structural and market advantages that we believe make it the best fertilizer business. Good deposits that are economical to mine are rare and barriers to entering the industry are high: significant upfront and continuing capital investment and at least seven years are required to bring a new conventional mine to production. Government involvement in and ownership of the industry are low, so economics, not politics, is more likely to drive business decisions.

And the world needs more potash. At PotashCorp, we are drawing on our unique strengths as we continue to prepare to respond to that need.

Potash Is the Core of Our Business

We Have Built the World’s Largest Fertilizer Company

PotashCorp began as a potash producer and, even after adding excellent phosphate and nitrogen businesses, the quality nutrient remains the heart of our company.

Anticipating today’s market conditions, we have used acquisitions and internal investments to build a company with almost one-quarter of global potash capacity: six large low-cost mines in Saskatchewan and New Brunswick and mineral rights at another Saskatchewan mine.

Potash is the biggest contributor to our earnings, generating 62 percent of our gross margin in 2008. Its position is strengthened by our interests in four offshore potash-related industry players: Arab Potash Company Ltd. (APC) in Jordan, Israel Chemicals Ltd. (ICL) in Israel, Sociedad Quimica y Minera de Chile S.A. (SQM) in Chile and Sinofert Holdings Limited (Sinofert) in China.

Our Strategies Focus on Earnings Quality

Emphasize Potash Growth, Minimize Volatility

For two decades, we have worked to maximize long-term value for our shareholders by following strategies that emphasize earnings growth and reduce the volatility inherent in our business.

More long-term growth, better earnings quality.

2008 At A Glance: The Potash Advantage

Our Potash First strategy is based on factors that give the nutrient a superior position in the fertilizer universe.
	Potash	Phosphate	Nitrogen
Base Product	Potassium chloride (KCl)	Phosphoric Acid (P2O5)	Ammonia (NH3)
Availability of Raw Materials 1	Very limited	Limited (phosphate rock)	Abundant (natural gas)
Cost of New Capacity 2 (excluding infrastructure outside plant gate)	CDN $2.8 billion* / 2 MMT KCl	$1.5 billion / 1 MMT P2O5	$1.4 billion** / 1 MMT NH3
Greenfield 3 Development Time 4 (including ramp-up)	Minimum 7 years*	3-4 years	3 years
Producing Countries 5	12	~ 40 (based on phosphoric acid)	~ 60
State- or Subsidy-Controlled Capacity 6	19%	46%	57%
Industry Operating Rate 7	86%	77%	83%
PotashCorp % of World Capacity 8	22	5	2
PotashCorp World Position by Capacity 9	#1	#3	#3
* Conventional greenfield mine in Saskatchewan
** Ammonia/urea complex
1-9, See Appendix – Footnotes, Page 119

POTASHCORP 2008 FINANCIAL REVIEW

8 Company Overview

Its significant increases in volumes and expanded margins make potash the best place for us to invest. We seek to minimize downside risk by following our long-held strategy of matching production to market demand, which helps reduce volatility in difficult market conditions such as those experienced in late 2008.

In our other nutrients, too, we focus on strengths that lead to higher margins and less cyclicality. In phosphate, we leverage our high-quality rock to produce a flexible range of products that lets us take advantage of shifting market conditions. Our focus in nitrogen is our lower-cost Trinidad production.

Phosphate and Nitrogen Add Strength and Depth

At 23 percent and 15 percent, respectively, phosphate and nitrogen were important contributors to PotashCorp’s gross margin in 2008.

We are the most diversified global phosphate company, economically making phosphoric acid, liquid and solid fertilizers, animal feed supplements and products used by industry, such as purified acid. We stress the product combination that offers the best returns with the least volatility.

Our nitrogen production in Trinidad benefits from long-term, lower-cost natural gas contracts, which together with our proximity to the United States provides significant cost advantages in the markets we serve. Our US nitrogen production emphasizes industrial products.

We Are Uniquely Prepared to Meet Rising Potash Demand

Capability to Deliver on Our Strategy

To ensure we can meet the needs of growing offshore markets, we are expanding our potash capacity significantly. By the end of 2012, we expect to have completed construction on projects that will bring our total capacity to 18 million tonnes. We are funding these Potash First expansions primarily through operating cash flow.

Beyond internal expansions, we are vigilant and disciplined in seeking to allocate our cash in ways that best benefit the company, always with the goal that cash flow return exceed the cost of capital. We continue to look for opportunities that expand our potash reach. We consider repurchases of our own stock an effective way to add long-term shareholder value. In 2008, for example, we spent $3.4 billion to repurchase 22.8 million of our shares at an average price of $147 per share. We also pay dividends quarterly, with $123 million paid in 2008.

POTASHCORP 2008 FINANCIAL REVIEW

9

Our Assets Let Us Deliver

Our unique assets enable us to deliver on our value proposition and support our vision and strategy. These include:

• An experienced management team able to conceive, develop and implement long-term strategies and commit the company to them

• Balance sheet strength over two decades that enables us to take advantage of opportunities and withstand short-term business fluctuations

• Substantial cash flow, which is both the result and the cause of our success

• A productive workforce, motivated sales teams and a coordinated transportation network to serve our target markets.

More potash to respond to world demand.

We Live by Our Core Values

Living by our core values means we strive always to build support and understanding among stakeholders, focus on creating long-term value for our shareholders, deepen our relationships with customers and improve quality of life in the communities in which our employees live and work. Our goal is no harm to people and no damage to the environment, and we are determined to achieve it.

10 Factors That Shaped Our Business in 2008

A Year of Crisis in Food and Finance

1. Economic Crisis Slowed Strongest Global Growth in 30 Years

In the first half of 2008, tight supplies of agricultural products led to restrictions on food exports and fears of increased world hunger. The overriding concern was how to produce more food. Then the focus shifted abruptly as the global financial crisis boiled over. In the deepening downturn, world economic growth dropped from an average of 4.9 percent in 2004-2007, the strongest four-year period in three decades, to 3.4 percent in 2008. By year-end, several mature economies were in recession; US growth fell from 2 percent in 2007 to 1.1 percent. The strong growth in emerging economies was moderated; China and India slowed from 13 percent and 9 percent, respectively, in 2007 to 9 percent and 7 percent in 2008.

2. Commodity Prices Were Highly Volatile

Spurred in the first half by robust demand from developing economies, prices for most commodities – from base metals to oil to soft commodities such as grains and oilseeds – were strong. However, as the economic crisis unfolded in the second half, many investors broadly liquidated their commodity holdings. We believe they acted first out of fear of slowing global growth, particularly in Asia, and then out of need to attain and preserve cash as prices fell across the board. Consistent with other commodities, prices for crop futures weakened considerably, although the ongoing balancing of supply and demand provided floor prices substantially above historical averages.

3. Highest Global Grain Demand – and Production – in History

Record grain demand for food and biofuels, plus a historically low stocks-to-use ratio, continued in the first half of 2008, challenging producers and helping to push crop prices to levels that encouraged maximum production. Farmers responded and, with excellent weather in key growing areas, produced the largest harvest in history. However, the increase to ending global grain inventories for crop year 2008/09 was slight. The stocks-to-use ratio is expected to be 19 percent, substantially below historical levels, and inventories still represent only 69 days at normal demand.

4. Farmers Postponed Fall Fertilizer Applications

Cool, wet weather and floods in several states delayed seeding throughout the US Midwest, causing late maturing of crops and late harvests. Little time was left for normal fall fertilizer application. By then, uncertainty caused by the growing world economic crisis and falling nitrogen and phosphate prices had made farmers around the world defer purchases of major inputs, including fertilizer.

5. Record Net Income Contributed to US Farmers’ Strong Balance Sheets

With strong crop prices and high production, US farmers achieved record net cash farm income of $93 billion in 2008, USDA reported. At year-end, they had strong balance sheets, with a debt-to-equity ratio of 10 percent, the lowest level ever reported.

POTASHCORP 2008 FINANCIAL REVIEW

11

6. Tight Global Potash Market Continued

In the first half of 2008, growth in global potash demand exceeded increases in supply, consuming all available production and leaving major markets short and on allocation. Increased shipments to markets in India, Southeast Asia and Latin America more than offset the reduction in shipments to China that resulted from lengthy contract negotiations with suppliers early in the year. India, with its nutrient-hungry soils and need to boost food production, increased imports by about 2 million tonnes, and record palm oil production supported healthy Southeast Asian demand. Brazil raised its purchases early in the year, but later, during its primary planting season, farmers’ concerns over credit availability and declining crop prices kept annual potash imports in line with the strong 2007 total. In the North American market, fourth-quarter shipments were reduced by a late harvest and economic uncertainty.

7. Potash Prices Rose Significantly

With tight producer supplies worldwide, offshore and North American potash prices increased significantly in 2008. Delivered prices in the major spot markets of Brazil and Southeast Asia rose by more than $600 per tonne. India paid an additional $355 per tonne and China’s annual contract price was up $400 per tonne. North American prices increased by approximately $600 per tonne. We believe improving prices also reflected market recognition of the need for reinvestment in capacity to meet future demand.

8. Food Security Concerns Led to Chinese Agriculture Programs

Increasing concern over food security led China to tax urea and phosphate fertilizer exports to ensure sufficient domestic supply. This reduced its exports of DAP/MAP from 4 million tonnes in 2007 to 2 million tonnes in 2008, and its urea exports from 6 million to 5 million tonnes. To encourage farmers to boost food production, farm subsidies were doubled from 2007 levels, crop prices were raised for 2009 and a program to allow farmers to use their land leases as equity was begun. These actions could lead to the use of enhanced farming technology and to increased fertilizer consumption over the long term.

9. India Was Major Buyer in Phosphate Markets

The government of India took steps to boost food production and improve food security. Subsidies to fertilizer producers and importers more than doubled DAP imports from 2.6 million tonnes in 2007 to 5.7 million tonnes, tightening the global DAP market and pushing up prices. Due to China’s reduced DAP/MAP sales, India’s high demand was satisfied largely from the US.

POTASHCORP 2008 FINANCIAL REVIEW

12 Factors That Shaped Our Business in 2008

10. Sulfur Market Was Volatile

High demand for phosphates early in 2007 through first-half 2008 drove up demand for sulfur, a byproduct of oil and gas production and a key input in phosphate production. With supplies constrained by unexpected refinery outages and delays in new refining and processing projects, sulfur prices soared. As approximately one tonne of sulfur is required to make a tonne of phosphoric acid, phosphate production costs were pushed up sharply. At their peak, international spot sulfur prices were more than eight times higher than they had been just one year before. Later in 2008, with a sharp decline in global phosphate production and more sulfur available from refineries, sulfur prices fell precipitously. This encouraged phosphate buyers to defer purchases as they waited to see if the lower sulfur costs would be passed along in the form of lower phosphate prices.

11. High Gas Costs Reduced Western Europe, Ukraine Competitiveness in Nitrogen

With natural gas costs averaging $13/MMBtu for 2008 – and reaching $16 late in the year – Western Europe, the high-cost global ammonia producer, was forced to shut down nitrogen capacity. Its demand for ammonia sourced from other regional suppliers increased. Natural gas costs also rose substantially in Ukraine, to $7.50/MMBtu, reducing nitrogen production and raising the global floor price for nitrogen exports.

12. In Troubled Environment, Potash Prices Held Firm

Tight supplies of phosphate and nitrogen fertilizers and China’s high export tariffs on these products increased prices during the first part of 2008, but they fell sharply when the global economy slowed. The decline in prices was exacerbated by the collapse in raw material costs and rising inventories.

Phosphate and nitrogen producers reacted by substantially lowering prices to move product or acquire cash, but it was evident through the second half of 2008 that the lowered prices did not result in increased demand. By year-end, approximately 50 percent of world phosphate production and significant global nitrogen capacity were curtailed.

The same global economic environment affected the market for potash quite differently. Inventories did not reach excessive levels due to inherently tight supply, a labor strike at three PotashCorp facilities and widespread production curtailments in response to the slowdown in global demand. As a result, potash prices did not fall.

POTASHCORP 2008 FINANCIAL REVIEW

		Highlights
#	1	IN GLOBAL PRODUCTION AND CAPACITY
10.1		MMT CAPACITY CONSTRUCTED THROUGH DEBOTTLENECK/EXPANSION PROJECTS FROM 2005 TO END OF 2012
$	7	BILLION (CDN) CAPITAL EXPENDITURES ON THESE PROJECTS

Potash OVERVIEW 13

OVERVIEW: More Potash Than Any Other Company

The Potash Leader

PotashCorp has potash assets unmatched by any other world producer, and we are expanding to build our competitive strength. We completed construction of an additional 1.5 million tonnes at our Lanigan operation in 2008. Between 2005 and the end of 2012, we will have added 10.1 million tonnes through debottlenecking and expansion, half of the industry projects being built worldwide in that time, with a total investment of CDN $7 billion.

We are also expanding our compaction capacity to produce more granular potash, which has a larger particle that can be easily blended with solid nitrogen and phosphate fertilizers for consistent application. This premium product is used in sophisticated agricultural markets and, increasingly, in developing nations, and we see it as the future of global farming practices. While more costly to produce, granular products provide higher margins and add flexibility to our potash operations.

Potash: The Ideal Fertilizer Enterprise

Potash has many advantages over the other primary nutrient businesses.

Significant potash production occurs in only 12 countries. Half of global reserves are located in the Canadian province of Saskatchewan, while Canada, Russia and Belarus together account for two-thirds of world production and more than 80 percent of reserves.

Most potash companies are publicly owned and traded, so business decisions in the industry are likely to be made for economic rather than political reasons. Only in Belarus, where the economy and GDP growth depend heavily on potash sales in US dollars, is there significant government ownership.

Entry into the potash business is difficult because quality deposits are rare and costs to build a new mine are substantial. A new conventional Saskatchewan mine would require an upfront capital investment of CDN $2.8 billion or more, excluding roads, rail, utilities, port facilities and other infrastructure outside the plant gate that could increase the cost significantly. It would take a minimum seven years to generate positive cash flow from when construction begins.

Greenfield Production At Least Seven Years Away

No significant greenfield projects are on the immediate potash horizon, and the long lead time for a new mine makes the completion of new competitive construction unlikely for at least seven years. While rising prices and profitability increase the likelihood of a future greenfield commitment, the cost and time required to establish a large-scale facility continue to be major impediments. However, if and when we determine that a greenfield project is appropriate, we have property at Bredenbury, Saskatchewan where, we believe, geological exploration is the most advanced of any prospective new mine, complete with previously drilled potential shaft pilot holes.

SNAPSHOT OF POTASH
Strategies	Risks	Mitigation	Capability to Deliver
As offshore demand grows, bring on capacity at much lower cost than greenfield	Reduced prices if supply rises faster than consumption or demand insufficient to consume new capacity	Pace internal growth to rising market demand, and match production to demand Work with partners to ensure adequate transportation infrastructure	Three expansion projects completed, five underway, providing 18 MMT of capacity constructed by end of 2012
	Short-term distribution problems could cause loss of sales		Canpotex and PotashCorp increasing distribution system capability
Match production to market demand to enhance stability	Lost production, higher operating costs	Structure operations so majority of costs are variable, and production costs can be varied economically	Of total potash operating costs, 70% are variable

Keyword Online: Potash   
POTASHCORP 2008 FINANCIAL REVIEW

14 Potash OVERVIEW

More Long-Term Growth

Expanding offshore markets, particularly in developing nations, provide most of our growth. In 2008, those markets purchased 65 percent of our potash for use on rice, wheat, soybeans, corn, oil palm, sugar, rubber, bananas, oranges, coffee and other agricultural commodities. Most of our remaining potash was sold in North America, a mature and stable agricultural market. A small amount – about 6 percent – was purchased by industrial customers in North America and offshore.

Offshore Sales and Logistics

Our company is the largest contributor (54 percent) to Canpotex Limited (Canpotex), which represents Saskatchewan’s three potash producers (PotashCorp, Mosaic, Agrium) in offshore markets. In the key markets of China, India, Brazil and Southeast Asia, Canpotex competes with global marketing agencies such as Belarusian Potash Company (for Belaruskali and Uralkali) and International Potash Company (for Silvinit), and producers such as ICL and K+S. Our New Brunswick facility has logistical advantages in supplying Brazil and other Latin American countries.

Purchasing methods vary among large offshore customers:

• China buys from Canpotex under three-year memoranda of understanding, with pricing and volumes negotiated annually. The current memorandum expires at the end of 2009;

• Japan and Korea buy from Canpotex under six-month price and volume contracts;

• India has traditionally bought from Canpotex as needed under six- to 12-month price and volume contracts;

• Brazil buys from Canpotex and PCS Sales, and Southeast Asian countries from Canpotex, on the spot market.

PotashCorp benefits from lower transportation and distribution costs by marketing through Canpotex. These costs can be considerable when shipping from Canada’s interior.

Approximately 25-35 percent of Canpotex customers buy at the port where the product is loaded and pay their own freight (FOB). Canpotex pays the freight for customers who buy on a delivered basis. As a result, ocean freight rates can affect margins significantly.

North America Sales and Logistics

Sales to the United States are typically made from Saskatchewan, particularly from our Rocanville plant, which is just 95 miles from the border. North American customers – primarily wholesalers, retailers and cooperatives that purchase on the spot market from PCS Sales – buy mainly on a delivered basis. We do not sell directly to farmers. We own or lease more than 100 distribution points in the US (mostly with variable cost leases, paid for only when used) and approximately 3,500 potash railcars.

Global and North American Competitors

The principal markets for both Canpotex and former Soviet Union (FSU) producers are China, India, Brazil and Southeast Asia. FSU producers also ship into the European Union. K+S customers are primarily in Europe and Brazil, while ICL ships to India, China, Southeast Asia, Brazil and Europe.

In North America, PotashCorp competes with Mosaic, Agrium and Intrepid. Our share of North American producers’ sales to this market was 37 percent in 2008.

POTASHCORP 2008 FINANCIAL REVIEW

Potash SWOT 15

STRENGTHS

• Can substantially raise capacity in less time than and at a significant discount to comparable greenfield capacity

• Low-cost, flexible production with small percentage of fixed costs

• Per-tonne fixed costs and mining taxes decrease as production increases

• Existing operations have significant reserves and mine lives

• Offshore investments add considerable global reach and profitability

• Depth and tested experience of management team

• Substantial barriers to entry, with high capital costs and long lead times

• Few world producers, little government ownership

• No known substitutes for potash

WEAKNESSES

• High rail and ocean freight delivery costs for Saskatchewan potash, potential for transportation bottlenecks

• Water inflow at New Brunswick increases costs, and risks loss of production

• Production costs exposed to Canadian dollar volatility

• High Saskatchewan resource taxes and federal and provincial income taxes relative to global competitors

OPPORTUNITIES

• Substantial and rising global demand for food and biofuels is accelerating long-term growth expectations for potash consumption

• Planned capacity additions could give us a larger share of a growing market, since competitors have limited expansion potential and regions with long-term capacity growth potential may be affected by heightened geopolitical risk and reduced access to credit

THREATS

• Demand can be temporarily affected by changes in consumption patterns in offshore markets

• Our strategy of matching production to market demand means PotashCorp can be disproportionately affected by market weakness, particularly in the short term

• Potash demand growth could exceed the company’s logistical capability to deliver in the short term

• Substantial upward pricing trend may attract greenfield projects

POTASHCORP 2008 FINANCIAL REVIEW

16    Potash  OVERVIEW  |  STRATEGY

Strategic Investments Broaden Our Potash Enterprise

Our investments in four potash-related companies give us strategic opportunities and enhance our bottom line. With 32 percent ownership, we have an influential position in SQM in Chile, the world’s leading producer of specialty potassium, iodine and lithium products. Our 28 percent ownership of APC in Jordan – which has a logistical advantage in delivering to Mediterranean and East Asian markets – enables us to appoint its top four management positions. In 2008, we increased our ownership of ICL in Israel to 11 percent and our investment in fertilizer distributor Sinofert in China to 22 percent. Sinofert – the biggest potash distributor in the world’s largest market - distributes 50-60 percent of the fertilizer imported into China. It has an 18 percent interest in, and handles all product of, Qinghai Salt Lake Potash Company (QSLP), the country’s largest potash producer.

The market value of our offshore investments was $4.6 billion at December 31, 2008.

More global exposure through offshore investments.

POTASHCORP’S STRATEGY

Increase Capacity as Demand Grows

PotashCorp amassed world-class potash assets with strategic purchases that first consolidated our Saskatchewan base and then added an operation in New Brunswick, the only potash facility on Canada’s East Coast. We are continuing to add capacity through expansions and debottlenecking for substantially less than the cost of equivalent greenfield construction.

At the same time, we constantly seek opportunities to add to our offshore potash investments, which have contributed strongly to our bottom line. Such opportunities must blend into our Potash First strategy.

Matching Our Added Capacity to Offshore Growth

We are timing our capacity additions to meet the expected growth in offshore demand for potash. Demand rarely moves in a straight line upward; it rises and falls with circumstances, as we saw in the second half of 2008. However, we believe it is better to be slightly ahead of the demand curve rather than risk capacity shortage as demand grows.

Produce to Meet Market Demand

We attempt to minimize downside risk by matching production to market demand. Short-term fluctuations in sales volumes may result, as temporary events can negatively affect short-term buying patterns. This is particularly true when most growth is in offshore markets.

POTASHCORP 2008 FINANCIAL REVIEW

Potash DELIVERING RESULTS 17

CAPABILITY TO DELIVER

We Can Deliver, Today and Tomorrow

Preparing for the Rising World Need for Potash

More than five years ago, we began preparing for the anticipated rise in global potash demand. Between 2005 and 2008, the first round of expansion/debottlenecking projects at our Rocanville, Allan and Lanigan operations in Saskatchewan were completed, adding 2.65 million tonnes of standard product capacity at a cost of CDN $750 million. We also added 2.75 million tonnes of compaction capacity.

Five more projects – a debottlenecking at Patience Lake, a debottleneck/expansion at Cory, an expansion at Allan, a replacement mine and expanded mill at New Brunswick and a mine and mill expansion at Rocanville – are underway.

These projects will add 7.46 million tonnes of standard product capacity, along with significant compaction capability, at a cost of CDN $6.2 billion. Construction is expected to be completed in 2009 (Patience Lake), 2010 (Cory I), 2011 (New Brunswick) and 2012 (Allan, Cory II, Rocanville).

At completion of construction, each facility will begin ramp-up, a process that includes commissioning a large, complex mill. Equipment, including mining machines, bins and conveyor systems, must be lowered to the mining level, assembled and positioned. Maintenance shops must be set up to serve the underground workings. Reaching full productive capability can take more than two years after construction completion.

All expansions will raise our constructed capacity to 18 million tonnes by the end of 2012 at a total cost of CDN $7 billion.

Skilled Labor Important to Production

Our potash mine employees had an average of 13.5 years of experience as of 2008. Labor typically represents about 21 percent of the company’s costs of potash production. Our Saskatchewan operations at Allan, Cory, Lanigan, Patience Lake and Rocanville are unionized. Our Sussex mine in New Brunswick is not unionized.

In 2008, a three-month strike at Allan, Cory and Patience Lake lowered our annual production. In November, the workers settled on a new three-year agreement retroactive to May 1, 2008. Contract negotiations at Lanigan began in early 2009. The Rocanville collective agreement expires on May 31, 2009.

Preparing the Transportation and
Distribution Infrastructure

Increasing world demand for potash and our rising capacity require us to invest in transportation and distribution infrastructure and ensure close cooperation with our rail transportation partners. To serve offshore markets, Canpotex plans to build a new port facility at Prince Rupert on Canada’s West Coast and is expanding its existing terminal in Vancouver. When both facilities are completed, the marketing agency will be able to move approximately 23 million tonnes of potash annually, nearly double its current capability.

To facilitate potash movement, Canpotex continues to invest in new railcars. It added 1,350 cars in 2008.

Our contract with Canadian National Railway continues until 2010, while the Canpotex CP Rail contract extends to 2012.

In Brazil, we are a shareholder in Perola S.A., and we use the bulk fertilizer terminal it leases at the Port of Santos.

POTASHCORP 2008 FINANCIAL REVIEW

18    Potash RISKS  |  PERFORMANCE

RISKS TO OUR POTASH STRATEGY

We pay particular attention to risks associated with our potash strategy, and act quickly to mitigate them. We considered the following risks of greatest potential impact in 2008:

New Supply Creates Market Imbalance

Rising prices have encouraged potash producers to increase production through expansion and development projects. If supply increases faster than world consumption, prices could be depressed for a prolonged period, negatively affecting our financial performance. While we anticipate that long-term growth in consumption will match or exceed the new supply, fluctuations in demand are characteristic of this market. We attempt to mitigate this risk and protect our margins by producing to meet market demand.

Global Demand Insufficient to Consume
PotashCorp Capacity

We are preparing for an anticipated increase in world potash demand by investing a total of CDN $7 billion in expansion and debottlenecking of existing facilities. As this new capacity is added, we believe we can capture a significant share of the expected demand growth, further strengthening our potash position and adding long-term shareholder value.

If our estimates of future potash demand prove to be overstated, our return on this investment would be lower than expected due to lower revenues and the related opportunity cost of outlaying significant capital before it was needed. We mitigate this risk somewhat because we are able to operate profitably at reduced rates, matching our production to market demand.

Lack of Adequate Transportation and
Distribution Infrastructure

We rely on a complex transportation and distribution infrastructure of railcars, barges, ocean freightliners, warehouse and port storage facilities to get potash to our customers quickly and efficiently. Short-term problems – such as railcar shortages, slow turn times and disruptions such as strikes, derailments or adverse weather – could lead to customer dissatisfaction, loss of sales and higher distribution costs, making it difficult to achieve our growth plans.

We attempt to mitigate this risk by working directly and through Canpotex to ensure sufficient investment is made in transportation infrastructure to help potash move as smoothly as possible. Internally, we continue to optimize our industry-leading distribution network in North America with predictable, consistent mine loading and delivery schedules.

Underground Mines Face Particular Risks

Water-bearing strata that carry the risk of water inflow often exist in the vicinity of underground mines. We are successfully managing water inflows at our New Brunswick operation. Our other conventional mines currently have no significant water inflows. At Esterhazy, where our mineral rights are being mined by another producer under a mining and processing agreement, water inflows are being managed.

All mining companies face the risk of unexpected rock falls that can result in life-threatening injuries. We have developed a mining machine canopy to protect workers, and our earth sciences group has developed ground-penetrating radar to help detect the anomalies that cause rock falls. Advanced geoseismic monitors record micro-events and provide information to help predict falls.

POTASH PERFORMANCE: 2008 VS 2007

• Record gross margin of $3,055.5 million, 235 percent higher than 2007

• Record 169 percent increase in realized sales prices caused by tight market supply and higher crop commodity prices for most of 2008

• Due mainly to Canpotex price increases to China, Brazil, India and Southeast Asia, average realized offshore prices were up 195 percent over 2007. Average realized North American prices rose 133 percent

• Average annual offshore prices surpassed North American prices for the first time since 2002. Driven by low global

	grain stocks and record-setting crop prices in key emerging markets, offshore price increases outpaced those in North America, particularly in the first half of the year
•	Sales volumes declined due to limited supply caused by labor disputes at three of our mines and reduced demand amidst uncertainty caused by the growing world economic crisis
•	Canpotex shipped 9.3 million tonnes in both 2008 and 2007. Sales to China were 13 percent of 2008 total (2007 – 26 percent), Brazil 20 percent (2007 – 21 percent) and India 16 percent (2007 – 10 percent). Our New Brunswick operations shipped 0.5 million tonnes offshore in 2008

POTASHCORP 2008 FINANCIAL REVIEW

Potash PERFORMANCE 19

	(31 percent to Brazil) vs 0.7 million tonnes in 2007 (44 percent to Brazil)
•	The pattern of offshore potash shipments was altered in 2008 by a late contract settlement between Canpotex and China. India benefited from China’s late entry to the market, receiving nearly 60 percent more potash from Canpotex than it had in the prior year
•	North American sales volumes fell 15 percent as farmers mostly passed on a normal fall application due to the late harvest and unfolding global financial concerns

• Due to reduced fourth-quarter demand, inventories rose to 844,000 tonnes, 24 percent higher than last year but 3 percent lower than the five-year average

• Cost of goods sold rose due to: increased royalties caused by higher sales prices ($5.50 per tonne or $47.0 million), increased brine inflow costs at New Brunswick ($3.50 per tonne or $29.3 million), strike-related costs ($2.00 per tonne or $19.6 million), a stronger Canadian dollar ($5.00 per tonne or $43.4 million) and increased fixed costs being distributed over fewer tonnes sold

Potash Results

							% Increase							% Increase										% Increase
	Dollars (millions)						(Decrease)				Tonnes (thousands)			(Decrease)				Average per Tonne						(Decrease)
		2008		2007		2006		2008		2007	2008	2007	2006		2008		2007		2008		2007		2006		2008	2007
Sales	$	4,068.1	$	1,797.2	$	1,227.5		126		46
Freight		167.3		178.1		130.5		(6	)	36
Transportation and distribution		42.1		39.1		38.8		8		1
Net sales	$	3,858.7	$	1,580.0	$	1,058.2		144		49
Manufactured product
Net sales
North American	$	1,307.5	$	656.9	$	470.5		99		40	2,962	3,471	2,785		(15	)	25	$	441.38	$	189.26	$	168.95		133	12
Offshore		2,526.8		909.6		576.0		178		58	5,585	5,929	4,411		(6	)	34	$	452.43	$	153.41	$	130.56		195	18
		3,834.3		1,566.5		1,046.5		145		50	8,547	9,400	7,196		(9	)	31	$	448.60	$	166.65	$	145.42		169	15
Cost of goods sold		783.8		658.8		489.3		19		35								$	91.69	$	70.09	$	67.99		31	3
Gross margin		3,050.5		907.7		557.2		236		63								$	356.91	$	96.56	$	77.43		270	25
Other miscellaneous and purchased product
Net sales		24.4		13.5		11.7		81		15
Cost of goods sold		19.4		8.9		7.8		118		14
Gross margin		5.0		4.6		3.9		9		18
Gross Margin	$	3,055.5	$	912.3	$	561.1		235		63								$	357.49	$	97.05	$	77.97		268	24

Note 19 to the consolidated financial statements provides information pertaining to our business segments.

Potash gross margin variance attributable to: Dollars (millions)

	2008 vs 2007
	Change in			Change in Prices/Costs
	Sales Volumes			Net Sales			Cost of Goods Sold			Total
Manufactured product
North American	$	(74.5	)	$	746.9		$	(63.6	)	$	608.8
Offshore		(37.2	)		1,670.0			(98.8	)		1,534.0
Change in market mix		7.0			(7.0	)		–			–
Total manufactured product	$	(104.7	)	$	2,409.9		$	(162.4	)		2,142.8
Other miscellaneous and purchased product											0.4
TOTAL										$	2,143.2

POTASHCORP 2008 FINANCIAL REVIEW

20    Potash PERFORMANCE

HIGHLIGHTS OF 2007 VS 2006

• Record gross margin of $912.3 million, 63 percent higher than 2006 and 29 percent above the 2005 record

• Record sales volumes of 9.4 million tonnes, 31 percent above 2006, due to exceptionally tight market conditions

• Products sold on allocation for most of the last half of 2007 (sold as ordered in 2006)

• Offshore sales up 34 percent from 2006, reflecting higher demand as farmers worked to correct decades of under-application and took advantage of higher commodity prices (grains, soybeans, corn and palm oil)

• Canpotex shipped 9.3 million tonnes in 2007 and 6.7 million tonnes in 2006 (PotashCorp’s share 55 percent); sales to Brazil were 21 percent (2006 – 15 percent) while China and India were 26 percent (2006 – 19 percent) and 10 percent (2006 – 10 percent), respectively. Our New Brunswick operation shipped 0.7 million tonnes offshore in both years with 44 percent to Brazil in 2007 and 53 percent in 2006

• North American sales up due to stronger dealer fill and field application caused by higher commodity prices and more acreage planted

• Year-end inventories of approximately 680,000 tonnes, 27 percent below 2006 and second lowest since 1991

• Offshore prices up 18 percent as Canpotex agreed to total per-tonne price increases with China ($5), Brazil ($175), India ($50) and Southeast Asia ($195) by the end of 2007

• North American prices up 12 percent due to price increases that totaled $82 per tonne by the end of 2007

• Gap between North American spot prices and contracted offshore prices due, in part, to lag between spot market and termed pricing in contracts, and different product mix

• Cost of goods sold up compared to 2006 because of higher production levels, higher brine inflow costs ($5.50 per tonne or $51.5 million), a stronger Canadian dollar ($3.00 per tonne) and 47 fewer shutdown weeks (2006 shutdown weeks higher due to matching production with demand)

Potash Production (million tonnes KCl)

			Production						Mine Site
	Capacity		2008		2007		2006		Employees
Lanigan SK		3.828		2.141		1.907		1.471		519
Rocanville SK		3.044		2.834		2.647		1.897		406
Allan SK		1.885		1.093		1.744		0.992		347
Cory SK		1.361		0.420		0.768		0.772		271
Patience Lake SK		1.033		0.282		0.257		0.190		75
Esterhazy SK *		1.313		1.125		1.043		0.953		0
New Brunswick NB		0.785		0.802		0.793		0.743		339
Total		13.249		8.697		9.159		7.018		1,957

* PotashCorp’s mineral rights at Esterhazy are mined by Mosaic Potash Esterhazy Canada Limited Partnership under a mining and processing long-term agreement. For calendar year 2009, our production allocation is 1.125 million tonnes.

POTASHCORP 2008 FINANCIAL REVIEW

		Highlights
#	3	IN GLOBAL CAPACITY
#	1	WORLD PRODUCER OF SPECIALTY PHOSPHATE PRODUCTS
		LARGEST, LOWEST-COST US ROCK DEPOSITS

Phosphate   OVERVIEW 21

OVERVIEW: The Flexible Phosphate Producer

Offering More Diversity in the Phosphate World

PotashCorp has built a diversified and flexible global phosphate business on integrated world-class operations in North Carolina and Florida. Our high-quality phosphate rock enables us to optimize our phosphoric acid to provide the most profitable combination of downstream products – liquid and solid fertilizers, feed supplements for livestock and poultry, and products used in industrial applications.

Good Rock Is the Basis of Success in Phosphate

Approximately 30 countries produce phosphate rock. China, the US and Morocco, the largest producers, together account for 67 percent of world production. Morocco alone accounts for almost half of phosphate rock exports. Producers without their own supply (non-integrated) must buy and process more expensive rock to produce downstream phosphate products.

Industry Enjoys Strong 2008 After 2007 Turnaround

Following significant increases driven by Morocco’s Office Cherifien de Phosphates (OCP) in 2007, phosphate rock prices continued to climb during early 2008, pushing up prices for all downstream products. Growing product inventories, declining raw material costs and demand deferral due to the economic crisis resulted in falling production costs and prices for these products in the second half of the year. Rock prices, however, remained relatively stable.

More high-quality phosphate rock means greater flexibility.

Extreme Volatility in Raw Material Costs in 2008

Sulfur, a byproduct of oil and gas production, is needed to convert phosphate rock into phosphoric acid, an intermediate product that can be sold or further processed. Strong demand and constrained supply drove sulfur prices dramatically higher in 2007 but they softened in the second half of 2008. In the fourth quarter, they fell faster than they had risen, due mainly to sharply reduced demand.

Significant volatility in the cost of ammonia, an important input in DAP and MAP production, also affected prices and profitability of those phosphate products.

Market Structure Can Lead to Higher Volatility

While it is much less of a pure commodity business than nitrogen, the phosphate industry still has many producers and considerable government ownership, as well as intermediaries to facilitate product movement. These situations make the marketplace potentially more volatile.

Limited New DAP Capacity Underway

No major additions to world capacity in solid phosphate fertilizers are expected until Saudi Arabia’s Ma’aden project is completed and its 3 million tonnes of DAP are ramped up, potentially by 2012. China is building some capacity for domestic consumption and Morocco plans to bring on phosphoric acid plant expansions in 2009 that will enable it to increase solid phosphate production. However, without any significant new capacity slated to come online in the immediate future, growth in demand for phosphate products is expected to keep global markets balanced to relatively tight.

SNAPSHOT OF PHOSPHATE
Strategy	Risk	Mitigation	Capability to Deliver
Optimize product mix to maximize gross margin and reduce volatility	Short-term cyclicality due to fluctuations in demand, competitive costs, availability of supply and government involvement in the industry	Leverage strengths in less-cyclical industrial and feed products, optimize fertilizer operations to minimize production costs	New permits expected at Aurora to allow for 37 years of mining Commissioning a new sulfuric acid plant in 2009 that will enable productive capability to meet stated phosphoric acid capacities

Keyword Online: Phosphate    
POTASHCORP 2008 FINANCIAL REVIEW

22    Phosphate   OVERVIEW  |  STRATEGY

Benefiting from Diversification

We have built our phosphate enterprise on a foundation of abundant and accessible phosphate rock reserves, with low levels of impurities and, therefore, low production costs. This high-quality rock enables us to produce phosphoric acid of equally high quality, and we use about 40 percent of it to make high-margin industrial and feed products outside the more cyclical solid fertilizer markets. We are also strong in liquid fertilizers, where there is increasing demand and we enjoy healthy gross margins on a P₂O₅ tonne basis. Our diversification strategy ensures that we are well-balanced in our exposure to both liquid and solid fertilizers.

Feed and Industrial Provide Stability

Feed and industrial sales have historically been less seasonal and cyclical, and therefore less volatile, than fertilizer sales, which increased the quality of earnings in these segments. We believe long-term global trends make these excellent businesses. However, they were not immune to the global economic crisis, and our performance – particularly in feed phosphates – suffered in the second half as our customers’ businesses were negatively impacted.

World meat producers and processors in general endured a difficult 2008, when increased grain prices led to substantially higher feed costs. Our primary feed customers are US bulk feed producers, while Latin America and Asia are our largest offshore markets. Dical and monocal are used primarily in beef, poultry and pork production. We have a competitive edge in producing DFP for poultry due to Aurora’s quality rock.

Industry uses phosphate in soft drinks, food, metal treatment and other products. We are a significant participant in the purified phosphoric acid business because of our wet process technology and our high-quality rock at Aurora. The US is our major market for industrial phosphate products, but rising incomes in developing countries are driving growth in offshore demand.

Phosphate Sales and Logistics

Roughly two-thirds of our phosphate sales volumes are sold in North America, where we typically benefit from higher realized prices. Depending on the product, sales are made on a spot or contract basis. Our North American business is handled by PCS Sales, while PhosChem, a US marketing association that includes Mosaic, sells our phosphate fertilizers offshore. PCS Sales handles our industrial sales in all markets.

Global and North American Competitors

Our major offshore fertilizer competitor is OCP, while in North America we compete with Mosaic, CF Industries, Mississippi Phosphate, Agrifos and Agrium. Innophos, ICL and Chinese imports vie with us for North American industrial sales, while Mosaic and Chinese producers compete with us for feed sales in both markets.

POTASHCORP STRATEGY

Maximize Returns and Stability Through Product Flexibility

The flexibility provided by our high-quality rock gives us an unmatched ability to optimize product mix, maximize gross margin on a long-term basis and thereby enhance earnings stability.

Our strategy in the stable US industrial phosphate business is to opportunistically capture new high-margin demand. We have expanded our purified acid capacity to gain market share as competitors closed high-cost, energy-intensive plants, thereby contributing to our phosphate gross margin. Profitability, not sales volumes, is our focus in phosphate feed supplements.

Our flexibility is particularly valuable in phosphate fertilizers because it enables us to respond to market demand. We allot phosphoric acid not suitable for feed and industrial products to the most profitable combination of liquid and solid fertilizers, which may change from year to year. Maintaining high operating rates results in lower per-tonne fixed costs.

POTASHCORP 2008 FINANCIAL REVIEW

Phosphate   SWOT 23

STRENGTHS

• Significant high-quality, low-cost phosphate rock reserves provide cost advantage over non-integrated producers

• Ability to direct rock with low levels of impurities to diversified product line to optimize margins

• Mining near processing facilities provides cost advantage over North American competitors

• Access to lower-cost North American liquid sulfur

• Strong position in North American purified acid, feed phosphate and liquid fertilizer markets

WEAKNESSES

• Transporting ammonia to solid fertilizer plants is becoming more difficult and costly

• Higher sulfur and ammonia costs can negatively impact margins

• Plants with high fixed costs may not perform profitably at lower operating rates

• Long-term sales contracts for industrial and some liquid fertilizer products can cause a lag in pricing in times of rising input costs, temporarily impacting margins

OPPORTUNITIES

• Balanced to tight phosphate rock, phosphoric acid and solid fertilizer fundamentals expected in the medium term

• Few companies globally with rock of sufficient quality to profitably produce purified acid

• Few greenfield projects give at least a three-year window on solid fertilizer supply, until Saudi Arabia’s Ma’aden project comes on stream

THREATS

• Significant government control in global phosphate supply and consumption decisions

• High barriers to exit because of significant environmental restoration and remediation costs

• Extensive environmental and permitting requirements

POTASHCORP 2008 FINANCIAL REVIEW

24    Phosphate   DELIVERING RESULTS  |  RISKS  |  PERFORMANCE

CAPABILITY TO DELIVER

Delivering Product Diversity

By the end of April 2009, we expect to have the federal and state permits that will allow us to continue mining at Aurora, our largest phosphate operation, for 37 years. This will be the culmination of nine years of effort.

Following our strategy of leveraging our rock quality to optimize our product diversity, we have a $260 million project underway at Aurora which primarily involves construction of a new sulfuric acid plant. It is expected to be commissioned in 2009, and will enable productive capability to meet stated annual phosphoric acid capacities without purchasing sulfuric acid. Thus we can make downstream products in any combination that maximizes phosphate gross margin.

RISK TO OUR PHOSPHATE STRATEGY

Risk of Cyclicality

Phosphate risk has historically been increased by short-term cyclicality due to fluctuations in demand, competitive costs, availability of supply and government involvement in the industry. Over the next few years, increased competitive supply of solid fertilizer may outpace growth in world consumption, potentially depressing prices and affecting our phosphate margins. To mitigate this risk, we are leveraging our strengths in less cyclical specialty industrial and feed products and streamlining fertilizer operations to minimize production costs.

More diversity means more options in difficult phosphate markets.

PHOSPHATE PERFORMANCE: 2008 VS 2007

• Record gross margin of $1,114.5 million exceeded 2007 record of $432.8 million

• Solid fertilizers generated $438.9 million of 2008 gross margin, liquid fertilizers $366.7 million, feed $203.0 million, industrial products $95.4 million

• Realized prices were up in all major product categories due to strong agricultural demand, a higher Chinese export tax and the global impact of higher costs for inputs such as sulfur, phosphate rock and ammonia

• Price increases in the industrial market trailed those of other markets because certain contracts have pricing that resets annually

• Sales volumes of all phosphate fertilizers declined. Poor weather delayed North American plantings and harvest; and both domestic and offshore demand fell significantly in the fourth quarter as the global economic crisis unfolded and buyers deferred purchases in anticipation of producers around the world dropping prices to move product or acquire cash

• Gross margin reduced by: $501.9 million in higher sulfur costs (caused by greater demand for most of 2008); $59.3 million in higher ammonia costs impacting solid fertilizers (caused by increased agricultural demand); and a 22 percent increase in rock costs caused by rock quality issues at White Springs and higher maintenance costs at Aurora

POTASHCORP 2008 FINANCIAL REVIEW

Phosphate   PERFORMANCE 25

Phosphate Results

							% Increase									% Increase											% Increase
	Dollars (millions)						(Decrease)					Tonnes (thousands)				(Decrease)					Average per Tonne						(Decrease)
		2008		2007		2006		2008		2007			2008	2007	2006		2008		2007			2008		2007		2006		2008	2007
Sales	$	2,880.7	$	1,637.1	$	1,255.1		76		30
Freight		101.1		112.4		88.5		(10	)	27
Transportation and distribution		39.4		33.4		43.1		18		(23	)
Net sales	$	2,740.2	$	1,491.3	$	1,123.5		84		33
Manufactured product
Net sales
Fertilizer – liquids	$	734.6	$	283.4	$	206.6		159		37			893	983	911		(9	)	8		$	823.17	$	288.37	$	226.89		185	27
Fertilizer – solids		996.8		607.5		391.6		64		55			1,069	1,623	1,634		(34	)	(1	)	$	932.44	$	374.22	$	239.64		149	56
Feed		492.9		272.7		238.4		81		14			654	814	778		(20	)	5		$	753.90	$	335.03	$	306.63		125	9
Industrial		471.0		277.4		239.7		70		16			706	731	647		(3	)	13		$	666.97	$	379.47	$	370.33		76	2
		2,695.3		1,441.0		1,076.3		87		34			3,322	4,151	3,970		(20	)	5		$	811.50	$	347.14	$	271.14		134	28
Cost of goods sold		1,591.3		1,019.5		958.7		56		6											$	479.17	$	245.60	$	241.52		95	2
Gross margin		1,104.0		421.5		117.6		162		258											$	332.33	$	101.54	$	29.62		227	243
Other miscellaneous
and purchased product
Net sales		44.9		50.3		47.2		(11	)	7
Cost of goods sold		34.4		39.0		39.5		(12	)	(1	)
Gross margin		10.5		11.3		7.7		(7	)	47
Gross Margin	$	1,114.5	$	432.8	$	125.3		158		245											$	335.49	$	104.26	$	31.56		222	230

Note 19 to the consolidated financial statements provides information pertaining to our business segments.

Phosphate gross margin variance attributable to: Dollars (millions)

	2008 vs 2007
	Change in			Change in Prices/Costs
	Sales Volumes			Net Sales			Cost of Goods Sold			Total
Manufactured product
Fertilizer – liquids	$	(18.0	)	$	477.5		$	(181.1	)	$	278.4
Fertilizer – solids		(128.9	)		596.4			(232.6	)		234.9
Feed		(33.5	)		273.9			(104.4	)		136.0
Industrial		(4.7	)		203.0			(164.0	)		34.3
Change in product mix		8.7			(8.4	)		(1.4	)		(1.1	)
Total manufactured product	$	(176.4	)	$	1,542.4		$	(683.5	)		682.5
Miscellaneous and purchased product											(0.8	)
Total										$	681.7

Phosphate Production (million tonnes product)

	Aurora									White Springs									Geismar
	Annual			Production						Annual			Production						Annual			Production
	Capacity			2008		2007		2006		Capacity			2008		2007		2006		Capacity			2008		2007		2006
Liquids: MGA 1		1.835			1.739		1.740		1.722		1.908			–		–		–		0.337			0.245		0.258		0.241
SPA		0.676			0.191		0.203		0.188		1.138			0.704		0.793		0.655		0.196			–		–		0.015
Solids (total)		1.247	DAP		0.445		0.548		0.609		0.710	DAP		0.226		0.375		0.495		–	DAP		–		–		–
			MAP		0.395		0.389		0.372			MAP		0.208		0.286		0.159			MAP		–		–		–
DAP/MAP (total)					0.840		0.937		0.981					0.434		0.661		0.654					–		–		–

1 A substantial portion is consumed internally in the production of downstream products. The balance is exported to phosphate fertilizer producers and sold domestically to dealers who custom-mix liquid fertilizer.

POTASHCORP 2008 FINANCIAL REVIEW

26    Phosphate PERFORMANCE

HIGHLIGHTS OF 2007 VS 2006

• Phosphate gross margin a record of $432.8 million, 245 percent higher than 2006

• Solid fertilizers generated $205.8 million of 2007 gross margin, liquid fertilizers $88.2 million, feed $67.3 million, industrial products $60.2 million

• Realized prices up in all major product categories due to strong agricultural demand and global impact of high demand for inputs

• Manufactured solid fertilizer sales volumes down 1 percent due to switch to high-demand liquid fertilizers, where sales volumes rose 8 percent

• Limited global sulfur supply, more demand for ammonia, higher rock costs, higher electrical and chemical processing costs at Aurora and White Springs and two planned dragline turnarounds at Aurora negatively impacted cost of goods sold

• Higher maintenance costs impacted feed and industrial; industrial was further impacted by higher electricity costs and a larger share of Geismar fixed costs allocated to it after the 2006 shutdown of two product lines there

• Transportation and distribution costs down 23 percent despite increased sales, due to focus on North American market

Rock and Acid Production

	Phosphate Rock Production (million tones)								Phosphoric Acid (million tones P2O5)
	Annual		Production						Annual		Production
	Capacity		2008		2007		2006		Capacity		2008		2007		2006		Employees
Aurora NC		6.000		4.027		4.086		4.577		1.202		1.054		1.083		1.080		1,064
White Springs FL		3.600		3.025		3.226		3.114		.966		0.741		.925		.881		901
Geismar LA		–		–		–		–		.202		0.147		.156		.147		75
Total		9.600		7.052		7.312		7.691		2.370		1.942		2.164		2.108		2,040

Phosphate Feed Production (million tones)

			Production
	Capacity		2008		2007		2006		Employees
Marseilles IL		0.278		0.117		0.132		0.119		26
White Springs FL (Monocal)		0.272		0.153		0.191		0.192		26
Weeping Water NE		0.209		0.100		0.110		0.117		35
Joplin MO		0.163		0.065		0.071		0.082		25
Aurora NC (DFP)		0.159		0.095		0.084		0.085		30
White Springs FL (DFP) 1		.100		–		–		–		0
Fosfatos do Brasil 2		0.110		0.043		0.056		0.049		0
Total		1.291		0.573		0.644		0.644		142

1	Ceased production July 31, 2005
2	Divested ownership September 29, 2008

Purified Acid Production (million tonnes P₂O₅)

	Annual		Production
	Capacity		2008		2007		2006
Aurora NC		0.333		0.254		0.268		0.245

Purified acid is a feedstock for production of downstream industrial products such as metal brighteners, cola drinks and pharmaceuticals.

Phosphate Products for Food and Technical Applications

Cincinnati, OH	2008	2007	2006
Purified acid feedstock utilized (tonnes P2O5)	13,459	13,465	13,303
Product tonnes processed:
Acid phosphates	18,308	17,473	17,253
Specialty phosphates	9,425	11,281	11,201

POTASHCORP 2008 FINANCIAL REVIEW

		Highlights
#	3	IN WORLD AMMONIA CAPACITY
	93	% AVERAGE TRINIDAD NATURAL GAS VOLUMES LOCKED IN THROUGH 2012, 71% THROUGH 2018
	60	% OF AMMONIA PRODUCED IN TRINIDAD

Nitrogen   OVERVIEW 27

OVERVIEW: PotashCorp Thrives on Trinidad Advantage

Offering More in the Nitrogen World

We produce 60 percent of our ammonia in Trinidad, which has extensive natural gas reserves and a stable government. Our US production is earmarked primarily for industry.

Low-Cost Natural Gas, Market Proximity
Keys to Success

For many producers, natural gas makes up approximately 90 percent of the cash cost of producing a tonne of ammonia. As a result, long-term access to lower-cost gas is a key determinant of sustainable success in the nitrogen business. China, the world’s largest ammonia producer, mainly uses gas made from coal.

Because ammonia requires costly pressurized railcars and refrigerated rail and ocean vessels for shipping, only 12 percent of global production trades across borders. Proximity to the end-user, therefore, is a second key factor in nitrogen success.

Low-Cost Gas Regions Potentially Impact Markets

All downstream nitrogen products are produced from ammonia, which can be manufactured wherever there is accessible natural gas. A country that does not consume all its natural gas may monetize it by converting it into a transportable nitrogen product or to liquefied natural gas (LNG), mainly for export.

Nitrogen Is Widely Produced and Used

Because natural gas is found in many regions of the world, the nitrogen business is subject to more volatility than potash and phosphate. With production in more than 60 countries, it is also more fragmented. China, Russia, India and the US are the largest producing countries. The largest private sector companies – in order of size: Yara, Terra, PotashCorp, Koch, Agrium and Togliatti - total only 13 percent of world ammonia capacity. China, the US and India are the largest consumers.

Governments Are Significantly Involved

With governments in control of more than half of the world’s ammonia capacity, investment and production decisions may be made for political reasons, negatively affecting global nitrogen markets and trade.

Nitrogen Markets Were Volatile

Higher global energy prices, significant Chinese taxes on urea exports and tight supply/demand fundamentals pushed nitrogen prices and margins to record heights during the third quarter of 2008. Markets softened considerably later in the year as the global economic crisis, uncertainty and falling prices caused buyers to defer purchases of fertilizer and other major inputs, and industrial demand slowed. Prices for all nitrogen products fell precipitously as a result, and producers around the world reacted by curtailing high-cost capacity.

SNAPSHOT OF NITROGEN
Strategies	Risks	Mitigation	Capability to Deliver
Maximize, leverage benefits of lower-cost Trinidad production	Governments with surplus low-cost natural gas may monetize it by converting it to nitrogen without considering demand	Maintain Trinidad’s cost advantage through gas contracts	Multi-year lower-cost gas contracts provide long-term advantage Long-term vessel leases secure delivery to US markets
Direct sales of US production to less-cyclical industrial customers	Competition from low-cost imports through the Gulf	Focus on customers that rely on long-term, secure supply	Industrial customers – some linked by pipeline – take more than 80% of US manufactured ammonia

Keyword Online: Nitrogen     
POTASHCORP 2008 FINANCIAL REVIEW

28    Nitrogen SWOT

STRENGTHS

• Long-term, lower-cost natural gas contracts in Trinidad

• 60 percent of our ammonia production in Trinidad, close to the US, the world’s largest importer

• US-manufactured ammonia operations somewhat geographically insulated, and make more than 80 percent of sales to less cyclical industrial customers

WEAKNESSES

• 40 percent of our ammonia production is in the US, using higher-cost natural gas

• Contractual commitments to US industrial customers may force us to temporarily operate unprofitably amid rising gas prices

OPPORTUNITIES

• Narrowing gap in global gas prices is raising floor price for nitrogen

• Europe now the swing supplier with higher gas costs, supporting a higher floor for US nitrogen prices

• LNG projects in low-cost gas regions provide alternatives for monetizing gas, reducing new supply pressures in nitrogen

• Higher construction costs, limited credit availability and geopolitical risk in most low-cost gas regions discourage greenfield plants

THREATS

• Low-cost natural gas in developing countries may be monetized as nitrogen products

• Significant government ownership and influence worldwide could lead to political rather than market-driven decisions

• Shorter construction period means new capacity can impact the market more quickly than for other nutrients

• Pending changes in transport regulations in North America could substantially increase the cost of shipping ammonia and difficulty in getting permits for terminals

POTASHCORP 2008 FINANCIAL REVIEW

Nitrogen   OVERVIEW 29

Nitrogen Offers Farmers Choices

Farmers choose a nitrogen fertilizer by considering cost, product availability, ease of transport, safety and ease of application, type of crop and effectiveness of seed/plant uptake.

Ammonia is the most efficient source of nitrogen, although it has a short window for successful application. Urea (granular or prilled) is the most widely applied form. It contains more N than nitrogen solutions, is easy to manufacture and transport and therefore more readily available, and is safer and easier to apply in a blend with P and K. Nitrogen solutions, which are easy to use and do not need moisture to dissolve, are an effective pre-plant and side-dress source of nitrogen on certain crops at certain stages of growth. Farmers can also apply phosphate fertilizers DAP and MAP as a nitrogen source.

PotashCorp, Emphasizing Trinidad and Industrial

We believe our nitrogen assets are among the best in the world, built on the two strengths that are necessary to sustained success in this business.

Our production in Trinidad benefits from long-term, lower-cost natural gas contracts indexed to ammonia prices. It is profitable even when gas prices in the US are high, since prices for nitrogen products typically rise at the same time. If ammonia prices fall, our indexed gas costs in Trinidad also fall, providing margin protection even in poor market conditions.

Our large operation in Trinidad is less than a week’s sailing time from the US, our primary nitrogen market, where we sell to both fertilizer and industrial buyers.

Our US production at Augusta and Lima is targeted mainly at industrial markets, traditionally more stable. Industrial

customers buy more than half of the urea and more than 80 percent of the ammonia we produce for sale in the US.

Nitrogen Sales and Logistics

PCS Sales sells our nitrogen products to North American customers on a spot or contract basis. Sales – particularly of ammonia – are generally regional due to logistics and transportation costs. Imports move more easily into the US Gulf than into the interior, where Augusta and Lima are located, and therefore affect our competitors close to the Gulf or the Mississippi River more than us.

Long-term leases of ammonia vessels at fixed prices enable us to lower transportation costs and ensure economical delivery of Trinidad product. With ownership or major supply contracts at six deepwater US ports, we have logistical strength and flexibility for these imports.

Most of our US-produced ammonia sales are delivered by pipeline to industrial customers that require reliable delivery for most efficient operation.

More lower-cost nitrogen through Trinidad operations.

POTASHCORP 2008 FINANCIAL REVIEW

30    Nitrogen   STRATEGY  |  DELIVERING RESULTS  |  RISKS  |  PERFORMANCE

POTASHCORP’S STRATEGY

Minimize Volatility Through Trinidad

Our nitrogen strategy is to maximize lower-cost Trinidad production and focus on stable US industrial sales, thus enhancing the overall growth and stability of our business.

Historically, gas prices and margin volatility have affected how we operate our US plants. When gas is high-priced, we may reduce operating rates and supplement our own production with purchased product to meet our customer commitments. In 2008, limited curtailments were required and each facility produced the combination of products that provided the highest overall gross margin in our history for our nitrogen segment.

CAPABILITY TO DELIVER

Delivering Products Efficiently

We have benefited significantly from debottlenecking our four Trinidad ammonia units in 2005 and 2006 and upgrades at our Lima operations in 2007. We achieved improved production and efficiency in 2008, which enabled us to generate record cash flows and margins in nitrogen.

We continue to evaluate the addition of capacity in Trinidad, with the deciding factors being whether we can achieve an acceptable return on investment and secure favorable long-term gas contracts.

RISK TO OUR NITROGEN STRATEGY

Risk of Cyclicality

Government involvement in nitrogen creates the risk that supply will be added without regard to demand, resulting in price cyclicality. We mitigate this risk by maximizing our Trinidad production while focusing on less cyclical US industrial markets. We employ gas price risk hedging strategies at our US plants and, during periods of high gas costs, reduce operating rates.

NITROGEN PERFORMANCE: 2008 VS 2007

• Nitrogen gross margin a record of $737.4 million, 38 percent higher than 2007

• 2008 gross margin consists of Trinidad ($372.4 million), US ($352.2 million) and natural gas hedging program ($12.8 million)

• Record prices were driven by strong agricultural demand for most of 2008, rising Chinese export taxes, higher energy costs and ammonia supply disruptions for major non-US producers. Market prices for nitrogen products fell sharply in the fourth quarter. The international ammonia market weakened considerably as large-scale cutbacks were made to operating rates in the phosphate and industrial sectors, leading to sizable curtailments in ammonia export supply, including a portion of our Trinidad operations

• Manufactured fertilizer sales volumes were down 13 percent as: (1) demand dropped off in the fourth quarter due to some US farmers foregoing normal fall application due, in part, to a late harvest and expectations that nitrogen prices would fall against a backdrop of declining raw material prices and growing inventories in uncertain economic conditions; and (2) less Trinidad product was available than in 2007 due to turnarounds during the year

• Manufactured cost of goods sold was up 41 percent as our average natural gas cost was $7.54 per MMBtu, or 75 percent higher than 2007. In the production of ammonia, our natural gas prices in Trinidad are linked to the ammonia sales price and, combined with inefficiencies arising from lower production rates compared to 2007, led to the price variance in cost of goods sold for ammonia being higher than other products

POTASHCORP 2008 FINANCIAL REVIEW

Nitrogen   PERFORMANCE 31

Nitrogen Results

							% Increase												% Increase											% Increase
	Dollars (millions)						(Decrease)						Tonnes (thousands)						(Decrease)					Average per Tonne						(Decrease)
	2008		2007		2006		2008			2007			2008		2007		2006		2008			2007		2008		2007		2006		2008		2007
Sales	$	2,497.7	$	1,799.9	$	1,284.1		39			40
Freight		56.5		55.6		36.8		2			51
Transportation and distribution		50.9		51.6		52.2		(1	)		(1	)
Net sales	$	2,390.3	$	1,692.7	$	1,195.1		41			42
Manufactured product
Net sales
Ammonia	$	999.5	$	664.3	$	499.7		50			33			1,794		2,132		1,695		(16	)		26	$	557.05	$	311.55	$	294.84		79		6
Urea		633.1		468.6		317.8		35			47			1,186		1,333		1,199		(11	)		11	$	533.77	$	351.63	$	264.97		52		33
Nitrogen solutions, nitric acid, ammonium nitrate		577.9		437.8		305.4		32			43			2,062		2,266		1,781		(9	)		27	$	280.34	$	193.21	$	171.45		45		13
		2,210.5		1,570.7		1,122.9		41			40			5,042		5,731		4,675		(12	)		23	$	438.43	$	274.07	$	240.16		60		14
Cost of goods sold		1,485.1		1,055.6		821.2		41			29													$	294.56	$	184.19	$	175.63		60		5
Gross margin		725.4		515.1		301.7		41			71													$	143.87	$	89.88	$	64.53		60		39
Other miscellaneous and purchased product
Net sales		179.8		122.0		72.2		47			69
Cost of goods sold		167.8		101.0		58.3		66			73
Gross margin		12.0		21.0		13.9		(43	)		51
Gross Margin	$	737.4	$	536.1	$	315.6		38			70													$	146.25	$	93.54	$	67.51		56		39

Note 19 to the consolidated financial statements provides information pertaining to our business segments.

Nitrogen gross margin variance attributable to: Dollars (millions)

				2008 vs 2007
	Change in			Change in Prices/Costs
	Sales Volumes			Net Sales			Cost of Goods Sold			Total
Manufactured product
Ammonia	$	(53.6	)	$	439.7		$	(248.0	)	$	138.1
Urea		(38.4	)		216.0			(111.0	)		66.6
Solutions, nitric acid, ammonium nitrate		(19.7	)		179.4			(110.6	)		49.1
Hedge		—			—			(46.2	)		(46.2	)
Change in product mix		7.5			(6.3	)		1.5			2.7
Total manufactured product	$	(104.2	)	$	828.8		$	(514.3	)		210.3
Other miscellaneous and purchased product											(9.0	)
Total										$	201.3

POTASHCORP 2008 FINANCIAL REVIEW

32    Nitrogen   PERFORMANCE

HIGHLIGHTS OF 2007 VS 2006

• Nitrogen gross margin a record $536.1 million, 70 percent higher than 2006

• Trinidad generated $298.9 million in 2007 gross margin, US facilities $178.2 million, natural gas hedging program $59.0 million

• Prices increased for all major products except ammonium nitrate. Realized prices for: urea were up 33 percent on strong agricultural demand, production disruption in the Middle East and delays in new capacity early in 2007; ammonia and nitrogen solutions were up due to strong agricultural demand and low inventories; ammonium nitrate prills were down 9 percent because of a time lag in natural gas price changes being reflected in price contracts with certain customers

• Manufactured fertilizer sales volumes up by 39 percent with higher demand and more product available from the completion of debottlenecking projects

• North American sales volumes rose, particularly ammonia and urea

• Transportation and distribution costs declined despite higher sales, due to change in sales volumes with certain customers

• Manufactured cost of goods sold rose 29 percent due to higher natural gas prices, including hedge, production start-ups in Trinidad and mechanical problems in Lima

Nitrogen Production (million tonnes)

	Annual		Production
	Capacity		2008		2007		2006
Ammonia 1
Trinidad		2.177		1.785		2.077		1.932
Augusta GA		0.7132		0.674		0.610		0.633
Lima OH		0.588		0.538		0.531		0.339
TOTAL		3.478		2.997		3.218		2.904
Urea Solids
Trinidad		0.709		0.633		0.710		0.688
Augusta GA		0.431		0.358		0.312		0.323
Lima OH		0.353		0.314		0.292		0.186
Geismar LA		—		—		—		—
TOTAL		1.493		1.305		1.314		1.197
Nitrogen Solutions 3
Trinidad		—		—		—		—
Augusta GA		0.581		0.317		0.239		0.197
Lima OH		0.227		0.078		0.082		0.071
Geismar LA		1.028		0.477		0.520		0.098
TOTAL		1.836		0.872		0.841		0.366
Nitric Acid 1,4
Trinidad		—		—		—		—
Augusta GA		0.592		0.592		0.525		0.529
Lima OH		0.100		0.097		0.100		0.098
Geismar LA		0.844		0.599		0.699		0.531
TOTAL		1.536		1.288		1.324		1.158
Ammonium Nitrate Solids
Trinidad		—		—		—		—
Augusta GA		0.576		0.576		0.540		0.536
Lima OH		—		—		—		—
Geismar LA		—		—		—		—
TOTAL		0.576		0.576		0.540		0.536
Employees
Trinidad		418
Augusta GA		124
Lima OH		119
Geismar LA		64
TOTAL		7255

1	A substantial portion is upgraded to value-added products.
2	Ammonia capacity increased by 25,000 tonnes
3	Based on 32% N content.
4	As 100% HNO3 tonnes.
5	413 contract employees work at the nitrogen plants, for a total workforce of 1,138.

POTASHCORP 2008 FINANCIAL REVIEW

2009 Outlook 33

The World Needs More Food from Every Acre

The duration and depth of the global economic crisis are impossible to predict, with governments, industries and individuals trying to understand and react. However, this situation does not alter the fundamentals that drive long-term growth in fertilizer demand. With world population at 6.8 billion and growing, the ongoing need for more food production is equally urgent.

1. Economy

The International Monetary Fund projects the ongoing impact of the global economic crisis will hold world growth to 0.5 percent in 2009, rising thereafter. Asian economies are expected to continue their strong growth, although at lower levels than recently. This should enable their people to continue to enjoy better diets and add modern products to their lifestyles.

2. Agriculture

Although agriculture is affected by the global economic crisis, the food challenge posed by rising population and demand for meat continues. Farmers are under pressure to increase planted acreage and improve yields, making proper fertilization imperative. However, they are being extremely cautious in their seeding plans and fertilizer purchases, reflecting what we believe is largely a psychological barrier at a time when agriculture economics are favorable. For example, because key buying decisions were late, we expect below-normal US fertilizer use in the 2008/09 fertilizer year relative to seeded acreage. Farmers in major growing regions in Europe, the FSU and Asia are equally cautious, but we expect countries with governments directly involved in agriculture production, such as China and India, will be more focused on growing the needed food. In Brazil, the recent weakening of its currency, the real, and the rise in soybean prices are positive for agricultural exports but cannot compensate for missed fertilizer applications.

3. Crop Prices

With widespread reduced fertilizer application in fall 2008 and fewer planted acres in some countries, 2009 crop supplies are expected to be tight. Historically low stocks-to-use ratios are projected. These factors should positively affect crop prices. Good economics for corn and other crops should encourage farmers to purchase needed inputs for future crops.

Keyword Online: Outlook  
POTASHCORP 2008 FINANCIAL REVIEW

34 2009 Outlook

4. Potash

While we expect slow potash markets early in 2009, the pace should intensify in the second quarter. Expected demand growth and significant production cuts should tighten markets, strengthening second-half 2009 as well as 2010. North American farmers deferred fertilizer purchases in the fall when at least 40 percent of potash applications traditionally occur, but we expect above-normal spring application. China did not enter the potash market until late in 2008, so soil nutrients used by its record crop will need to be replaced. Its agronomic needs are high, and we expect it will import at least 25 percent more potash than in 2008. Food requirements should continue to drive India’s robust demand, while we anticipate that Brazil will recover from recent credit issues with potash imports near 2008 levels. Southeast Asian countries enjoying strong palm oil prices are expected to maintain stable potash demand in 2009. Long-term potash fundamentals remain strong.

5. Phosphate

Despite short-term weakness in solid phosphate fertilizers due to high global inventories, prices for phosphate rock are historically strong. We expect that capacity curtailments worldwide and strong underlying rock prices will strengthen solid fertilizer markets once demand returns. Prices for sulfur and ammonia inputs are projected to be considerably below 2008 levels, but strong rock prices are expected to continue to pressure non-integrated producers.

6. Natural Gas

The futures market projects medium-term US natural gas prices will remain relatively strong. With higher gas prices, Western European nitrogen producers are expected to continue as the high-cost global suppliers. Nitrogen product from Ukraine, where gas prices have more than tripled, is not expected to compete in the US. We expect Russian producers to lose their substantial discount on gas prices within five years, moving to global parity.

7. Nitrogen

World nitrogen demand is expected to be soft in first-half 2009 due to curtailed production of solid phosphate fertilizer (made with ammonia), farmers’ deferral of fertilizer purchases and the effect of the economic crisis on industrial demand. However, with substantial capacity offline and questions about natural gas reliability in some key producing regions, conditions could improve quickly, especially as crop prices have rebounded. Meeting pent-up demand may lead to logistical problems, product shortages and higher prices – particularly as phosphate and nitrogen fertilizers are likely to be needed at nearly the same time.

8. N, P and K

Growth in world demand for nutrients is expected to be moderately lower in the fertilizer year 2008/09 than the average over the previous five years, as the financial crisis may lead growers in certain markets to take a cautious approach. Thereafter, consultants project the five-year growth rates for potash, phosphate and nitrogen to be 3-4 percent, 2.5-3 percent and 2-2.5 percent, respectively.

POTASHCORP 2008 FINANCIAL REVIEW

Key Performance Drivers 35

Goals, Targets and Results

Each year we set corporate-level targets – key performance indicators (KPIs) – to advance our goals and drive desired results. Throughout the organization and in the spirit of growth and continuing improvement, these indicators of performance are regularly measured and monitored, with timely feedback provided about progress toward achieving our goals. The following outlines our key corporate goals, targets and results.

ACHIEVED      PARTIALLY ACHIEVED      DID NOT ACHIEVE

Goal Be the preferred supplier to the markets we serve

2008 Target	2008 Results
Outperform competitors on quality and service as measured by customer surveys.		We outperformed competitors in both quality and overall customer service in all four product groups surveyed.

2009 Target

1 Outperform competitors on quality and service as measured by customer surveys.

Goal Maximize long-term shareholder value

2008 Targets	2008 Results
Exceed total shareholder return for our sector** and companies on the DJUSBM* for 2008.		We achieved total shareholder return in 2008 of - -49 percent, below the -41 percent generated by our sector** and above the -52 percent return of the DJUSBM.
Remain in the top quartile of governance practices as measured by external reviews.		We achieved this target and also tied for the highest ranking in the Globe and Mail’s annual corporate governance review of Canadian companies.

2009 Targets

1	Exceed total shareholder return performance for our sector*** and the DAXglobal Agribusiness Index.
2	Exceed cash flow return on investment for our sector***.
3	Remain in the top quartile of governance practices as measured by predetermined external reviews.

*	Dow Jones US Basic Materials Index
**	Sector (2008): Market weighted average for Agrium, ICL, K+S, Mosaic, SQM and Yara
***	Sector (2009): Market weighted average for Agrium, APC, CF Industries, ICL, Intrepid, K+S, Mosaic, SQM, Terra, Uralkali and Yara

Keyword Online: KPD      
POTASHCORP 2008 FINANCIAL REVIEW

36 Key Performance Drivers

ACHIEVED      PARTIALLY ACHIEVED      DID NOT ACHIEVE

Goal Build strong relationships with and improve the socioeconomic well-being
of our communities

2008 Targets	2008 Results
Achieve 4 out of 5 on each community leaders’ survey.		4 out of 5 achieved in two of the three community leaders’ surveys.
Achieve a 10 percent increase in individual participation in the matching gift program and a 20 percent increase in total donations from 2007 levels. Meet our annual philanthropic donations target of 1 percent of after-tax earnings on a five-year rolling average.		Achieved a 2 percent increase in individual participation in the matching gift program and a 66 percent increase in total matching donations. Our annual philanthropic donations exceeded 1 percent of the rolling five-year average of after-tax earnings.
Achieve a local purchasing level of 60 percent, excluding purchases of energy, transportation and raw materials.		Achieved a level of 59 percent, excluding purchases of energy, transportation and raw materials.

2009 Targets

1	Achieve 4 (performing well) out of 5 on community leaders’ surveys.
2	Achieve a 10 percent increase in employee participation in the matching gift program and a 10 percent increase in matching gift donations from 2008 levels.
3	Invest up to 1 percent of after-tax earnings (on a five-year rolling average) in communities and other philanthropic programs.
4	Achieve a local spending level of 60 percent on competitive terms, excluding purchases for major expansions, energy, transportation and raw materials.

Goal Attract and retain talented, motivated and productive employees who are committed
to our long-term goals

2008 Targets	2008 Results
Achieve an average employee engagement score that is in the top quartile as determined by the annual employee engagement survey.		Engagement survey score in the top quartile (79 percent), meaning that all employees surveyed had an average engagement with the company of 79 percent.
Fill at least 75 percent of senior staff openings with internal candidates.		73 percent of senior staff openings were filled with internal candidates.

2009 Targets

1	Achieve an employee engagement score of at least 75 percent on the annual survey.
2	Fill at least 75 percent of senior staff openings with internal candidates.
3	Fill all staff-level job openings within an average of 30 days.

POTASHCORP 2008 FINANCIAL REVIEW

Key Performance Drivers 37

ACHIEVED      PARTIALLY ACHIEVED      DID NOT ACHIEVE

Goal Prevent harm to people and damage to the environment

2008 Targets	2008 Results
Continue safety initiatives to reduce severity and lost-time injury rates to zero. Reduce recordable injury rates by 15 percent from 2007 level. Reduce lost-time injury rates by 20 percent from 2007 level.		Recordable injury rate increased by 9 percent and lost-time injury rate was up 84 percent.
Reduce company-wide greenhouse gas emissions per tonne of product by 10 percent by the end of 2012, compared to 2007.		On schedule. We have committed to installing greenhouse gas emissions controls at our Geismar facility, which are expected to reduce company-wide emissions by about 7 percent. We are also evaluating other opportunities.
Maintain energy usage per tonne of product produced at 2007 levels.		Energy usage per tonne of product increased by 2 percent in 2008 due to temporary shutdowns at production facilities.
Reduce reportable releases and permit excursions by 15 percent from 2007 levels.		Total reportable releases and permit excursions were reduced 35 percent.

2009 Targets

1	Reduce total site* severity injury rate** by 25 percent by the end of 2011 from 2008 levels.
2	Achieve zero life-altering injuries at our sites*.
3	Reduce company-wide greenhouse gas emissions per tonne of product by 10 percent by end of 2012, compared to 2007.
4	Reduce total reportable releases, permit excursions and spills by 15 percent from 2008 levels.

*	Total site includes PotashCorp employees, contract employees and all others on site.
**	Severity injury rate is total of lost-time injuries and modified work injuries for every 200,000 hours worked.

POTASHCORP 2008 FINANCIAL REVIEW

38 Rewarding Results

Our Philosophy, Reward Structure and Oversight

Our executive compensation policies are designed to attract and keep world-class talent that drives PotashCorp forward and maximizes long-term shareholder value. In accordance with the underlying “pay for performance” principle, most compensation is variable and fluctuates according to individual and corporate performance. An annual study by Watson Wyatt in 2008 found that over the previous three years, consistent with PotashCorp’s performance, the realized pay of our executive officers was within the top quartile of our peer group.

Executive compensation is comprised of base salary, short-term incentives, performance units granted under a Medium-Term Incentive Plan (MTIP) and performance stock options. About 60 percent of the compensation package is medium-and long-term variable components

like the MTIP and performance stock options; short-term incentives account for about 15 percent and base salary 25 percent. We do not have non-qualified arrangements that allow management to elect to defer compensation.

The compensation committee, comprised of independent directors, oversees our executive compensation program. It carefully monitors the proportion of remuneration that is performance-related on a short-, medium- and long-term basis, as well as the total value of all forms of compensation.

Performance stock options are awarded once per year, following shareholder approval of the plan and with an exercise price no lower than the closing market price on the day before the options are granted.

COMPENSATION ELEMENT	FORM	ELIGIBILITY	PERFORMANCE PERIOD	DETERMINATION
Base salary	Cash	All salaried employees	Annual	•     For executive officers, targets are set to the median of comparable companies, adjusted to reflect individual responsibility and performance.
Short-term incentives	Cash	All executives, most salaried staff and hourly union and non-union employees	1 year	•     Based on achieving predetermined goals for corporate performance or a combination of corporate and operating group performance. •     Can be adjusted (± 20%) to recognize individual performance. •     Beginning January 1, 2008, this annual cash bonus plan was extended to all Canadian and US hourly employees (union and non-union), providing a strong incentive for them to focus on achieving operational and corporate goals.
Medium-term incentives	Performance share units	All executives and senior management (66 people)	3 years	•     Units issued at our 30-day average share price on award date. •     Units vest and are paid out at the end of the three-year performance period, calculated whereby half the units vest based on total shareholder return (TSR)1and half based on our TSR relative to the TSR of a selected peer group2. •     Payout value is equal to the number of vested units multiplied by our 30-day average share price at the end of the performance period (subject to a maximum of three times the initial unit price).
Long-term incentives	Performance options	All executives, senior management and other selected management (258 people)	3 years (vesting) 10 years (option term)	•     Performance options incorporate a performance-based vesting schedule measuring the three-year average excess of cash flow return over our weighted average cost of capital. •     Vested share value is based on our share price appreciation within the option term. See Performance Options on next page.

1	TSR is the total shareholder return on an investment in PotashCorp stock from the time the investment is made.
	TSR has two components: (1) growth in share price and (2) related dividend income on the shares.
2	January 1, 2006 - December 31, 2008: Dow Jones US Basic Materials Index
	January 1, 2009 - December 31, 2011: DAXglobal Agribusiness Index

POTASHCORP 2008 FINANCIAL REVIEW

Rewarding Results 39

Performance Options: Aligning Executive
Compensation, Shareholder Interests

We emphasize pay-for-performance, with “at risk” components of total compensation linked directly to the enhancement of cash flow return and total shareholder return. The following chart is an example of the performance conditions that must be achieved before vesting will occur in our performance option plans. For additional information, please see our 2009 proxy circular on our website.

Performance Measure	Vesting Scale
3-Year Average Excess of Cash Flow Return on Investment over Weighted Average Cost of Capital	Percentage of Stock Option Grant Vesting
<0%	0%
0.20%	30%
1.20%	70%
2.20%	90%
2.50%	100%

Risk Management

Managing Risks to Our Fertilizer Enterprise

Execution of our corporate strategy requires effective management of the risks associated with our business goals. We evaluate risks for severity and likelihood to adversely affect PotashCorp, then prioritize them to select the most appropriate mitigation response – accept, control, share, transfer, diversify or avoid.

The following is a broad discussion of PotashCorp’s approach to risk and risk management. Identification of risks specific to our operating segments is found

in their respective sections within this document (Pages 18, 24, 30).

Risk to Reputation

We recognize damage to reputation as the most severe risk PotashCorp faces. Our efforts to mitigate reputation risks include continual building of goodwill by effective communication with stakeholders, commitment to sustainability, transparency, leading-edge corporate governance and best practices.

POTASHCORP’S GLOBAL RISK ENVIRONMENT

POTASHCORP 2008 FINANCIAL REVIEW

40 Risk Management

Risk Management Methodology

Risks within PotashCorp’s business are integrated and affect each other. By understanding the inherent and residual risks within the risk categories, and the relationships among them, we can design and implement risk mitigation activities that enable us to execute our strategies and meet our business goals within acceptable risk.

Matrix for Ranking Risks

We assign risks identified in our global environment to six categories: markets/business, distribution, operational, financial and information technology, regulatory and integrity/empowerment.

Once an inherent risk is identified, we assess it against our risk ranking matrix as if no mitigation measures had been taken. We use the matrix to weigh the severity and likelihood of such a potential event, and establish relative risk levels from A through E to guide the nature and extent of our mitigation activities.

A	Extreme: Initiate risk mitigation activities immediately to reduce risk. If such activities cannot sufficiently reduce risk level,
	consider discontinuation of the applicable business operation to avoid the risk.
B	Major: Initiate risk mitigation activities at next available opportunity to reduce risk. If such activities cannot sufficiently
	reduce risk level, board approval is required to confirm acceptance of this major risk level.
C	Acceptable: Level of risk is acceptable within tolerances of the Risk Management Policy. Additional risk mitigation
	activities may be considered if benefits significantly exceed cost.
D	Low: Monitor risk according to Risk Management Policy requirements, but no additional activities required.
E	Negligible: Consider discontinuing any related risk mitigation activities in order to direct resources to higher-value
	activities, providing such discontinuance does not adversely affect any other risk areas.

We can lower risk by reducing the likelihood of the initiating event occurring or by reducing the significance of the consequence if it does occur.

After we apply mitigation and control measures to an identified inherent risk, we are left with residual risk. We strive to ensure that we are fully aware of all potential inherent risks that could adversely affect PotashCorp, and to choose appropriately the levels of residual risk we accept.

A Continual and Dynamic Risk Management Process

We continually evaluate risk. The risk management committee reports formally every quarter to the Board of Directors through the audit committee on the activities and status of the risk management program. We address new risks that result from changes in operations or external factors as well as increases in risks previously identified.

POTASHCORP 2008 FINANCIAL REVIEW

2008 Financial Overview 41

This section provides an overview of our financial performance based on our consolidated financial statements on Pages 68 to 117. We report our results of operations in three business segments: potash, phosphate and nitrogen. These segments are differentiated by the chemical nutrient contained in the product that each produces. Our reporting structure reflects how we manage our business and how we classify our operations for planning and measuring performance.

We include net sales in our segment disclosures in the consolidated financial statements pursuant to Canadian generally accepted accounting principles (Canadian GAAP), which requires segmentation based upon our internal organization and reporting of revenue and profit measures derived from internal accounting methods. Net sales (and the related per-tonne amounts) are primary revenue measures we use and review in making decisions about operating matters on a business segment basis. These decisions include assessments about performance and the resources to be allocated to these segments. We also use net sales (and the related per-tonne amounts) for business planning and monthly forecasting. Net sales are calculated as sales revenues less freight, transportation and distribution expenses. Detailed financial analyses of our three business segments are set out on Page 18 for potash, Page 24 for phosphate and Page 30 for nitrogen. The following financial overview evaluates the company on a non-segment basis, except for fourth-quarter analysis.

All references to per-share amounts pertain to diluted net income per share (EPS). Certain of the prior years’ figures have been reclassified to conform with the current year’s presentation.

	Dollars (millions, except per-share amounts)						% Increase
		2008		2007		2006		2008	2007
Sales	$	9,446.5	$	5,234.2	$	3,766.7		80	39
Gross Margin		4,907.4		1,881.2		1,002.0		161	88
Operating Income		4,635.1		1,588.5		875.5		192	81
Net Income		3,495.2		1,103.6		631.8		217	75
Net Income per Share – Diluted		11.01		3.40		1.98		224	72

2008 Earnings Compared to Guidance

The company’s initial midpoint estimate for 2008 EPS, based on the Outlook and assumptions described in our 2007 Financial Review Annual Report, was approximately $6.75. The final result was $11.01. The primary causes of this variance from our guidance midpoint were:

Cause	Effect on EPS
Potash offshore realized prices	$	2.21
Potash North American realized prices		0.47
Potash sales volumes		(0.93	)
Decreased potash costs due to foreign exchange		0.07
Increased royalties and brine inflow costs		(0.09	)
Increased other potash costs		(0.19	)
Higher provincial mining taxes		(0.53	)
Subtotal potash		1.01
Phosphate realized prices		2.21
Phosphate sales volumes		(0.43	)
Increased input costs for sulfur		(0.27	)
Increased input costs for ammonia		(0.09	)
Increased input costs for rock		(0.09	)
Increased other phosphate costs		(0.03	)
Subtotal phosphate		1.30
Nitrogen realized prices		1.20
Manufactured nitrogen sales volumes		(0.18	)
Increased cost of natural gas		(0.51	)
Increased other nitrogen costs (exclusive of cost of natural gas)		(0.21	)
Subtotal nitrogen		0.30
Increase in other income		0.33
Decrease in selling and administrative		0.03
Increase in interest expense		(0.10	)
Foreign exchange variance		0.27
Subtotal other		0.53
Subtotal of the above		3.14
Reduction in weighted average number of shares outstanding		0.37
Lower effective income tax rate		0.75
Total variance from 2008 diluted EPS guidance	$	4.26

2008 Earnings Compared to 2007

The company’s EPS for 2007 was $3.40. The final EPS for 2008 was $11.01. The primary causes of this increase from last year’s actuals were:

Cause	Effect on EPS
Potash offshore realized prices	$	3.75
Potash North American realized prices		1.69
Potash sales volumes		(0.25	)
Increased potash costs due to foreign exchange		(0.10	)
Increased royalties		(0.09	)
Increased brine inflow costs		(0.04	)
Increased other potash costs		(0.16	)
Higher provincial mining taxes		(0.91	)
Subtotal potash		3.89
Phosphate realized prices		3.50
Phosphate sales volumes		(0.42	)
Increased input costs for sulfur		(1.18	)
Increased input costs for ammonia		(0.12	)
Increased input costs for rock		(0.07	)
Increased other phosphate costs		(0.18	)
Subtotal phosphate		1.53
Nitrogen realized prices		1.84
Manufactured nitrogen sales volumes		(0.22	)
Increased cost of natural gas		(0.89	)
Increased other nitrogen costs (exclusive of cost of natural gas)		(0.28	)
Subtotal nitrogen		0.45
Increase in other income		0.48
Decrease in selling and administrative		0.05
Foreign exchange variance		0.44
Subtotal other		0.97
Subtotal of the above		6.84
Reduction in weighted average number of shares outstanding		0.22
Lower effective income tax rate		0.55
Total variance from 2007 diluted EPS	$	7.61

POTASHCORP 2008 FINANCIAL REVIEW

42 Expenses & Other Income

	Dollars (millions)								% Increase (Decrease)
		2008			2007		2006			2008		2007
Selling and administrative	$	188.4		$	212.6	$	158.4			(11	)	34
Provincial mining and other taxes		543.4			135.4		66.5			301		104
Foreign exchange (gain) loss		(126.0	)		70.2		(4.4	)		n/m		n/m
Other income		333.5			125.5		94.0			166		34
Interest expense		62.8			68.7		85.6			(9	)	(20	)
Income tax expense		1,077.1			416.2		158.1			159		163

n/m = not meaningful

2008 vs 2007

Selling and administrative expenses include costs related to certain performance-based compensation plans (which are linked in part to the company’s share price performance), which decreased during the year due to our declining share price in 2008 compared to a rising share price in both 2007 and 2006.

Provincial mining and other taxes increased principally due to higher potash profit per tonne. Saskatchewan’s Potash Production Tax is comprised of a base tax per tonne of product sold and an additional tax based on mine profits. The profit tax is calculated on a per-tonne basis and is reduced by capital expenditures (substantially all of which are grossed up by 20 percent for profit tax purposes). The profit tax component increased $347.2 million in 2008 compared to 2007, as a result of substantial potash price increases. The increase would have been even higher were it not for the significant capital expenditures (to expand our mines in Saskatchewan) incurred during the year, which were used to offset a portion of the profit tax. In addition, gross potash revenue on a per-tonne basis was higher in 2008 than in 2007. The company is also subject to the Saskatchewan Corporation Capital Tax (calculated as a percentage of Saskatchewan sales), which increased 132 percent or $61.6 million from 2007.

Foreign exchange gains of $126.0 million were recorded during 2008. A weaker Canadian dollar relative to the US dollar on the period-end translation of Canadian dollar denominated monetary items on the Consolidated Statements of Financial Position and a reduction in our monetary position resulted in a gain that was partially offset by losses on foreign exchange forward contracts. In comparison, the Canadian dollar strengthened in 2007, resulting in losses that were partially offset by foreign exchange forward contract gains, contributing to foreign exchange losses of $70.2 million that year.

Other income grew $208.0 million or 166 percent. Our share of earnings from equity investments in APC and SQM increased $179.6 million in 2008 compared to 2007, while dividend income from our investments in ICL and Sinofert contributed an additional $48.9 million compared to last year. Partially offsetting these increases was an $88.8 million provision for other-than-temporary impairment of auction rate securities recorded in other income in 2008, of which $50.0 million represented a reclassification from other comprehensive income (OCI) of items considered temporarily impaired as of December 31, 2007. In 2007, the provision for other-than-temporary impairment of auction rate securities was $26.5 million (while $50.0 million of unrealized losses was recorded in other comprehensive income). Other income in 2008 also includes a $25.3 million gain on the settlement of the forward purchase contract for shares in Sinofert, and a $21.4 million gain on the sale of certain phosphate feed plant assets in Brazil.

The interest expense category declined $5.9 million. Weighted average balances of debt obligations outstanding and the associated interest rates were as follows:

Dollars (millions), except percentage amounts

								%
	2008		2007		Change			Change
Long-term debt obligations, including current portion
Weighted average outstanding	$	1,387.8	$	1,557.3	$	(169.5	)		(11	)
Weighted average interest rate		6.5%		6.6%		(0.1%)			(2	)
Short-term debt obligations Weighted average outstanding	$	798.5	$	95.7	$	702.8			734
Weighted average interest rate		2.4%		5.4%		(3.0%)			(56	)

An additional $21.1 million of interest was capitalized in 2008 compared to 2007 as a result of significant mine expansion projects in Saskatchewan, reducing the interest

POTASHCORP 2008 FINANCIAL REVIEW

Expenses & Other Income 43

expense category. The lower average balance of long-term debt obligations outstanding for 2008 resulted in interest expense on long-term debt being $16.7 million lower than in 2007, which was more than offset by an increase of $19.8 million in short-term interest expense caused by a higher balance in short-term debt obligations in 2008. Interest income decreased $12.1 million compared to 2007 due to lower average outstanding cash balances in 2008.

The company’s effective income tax rate for 2008 was 24 percent (2007 – 27 percent). A scheduled 1.5 percentage point reduction in the Canadian federal income tax rate applicable to resource companies, along with the elimination of the 1 percent surtax, became effective at the beginning of 2008. There was also a significant increase in permanent deductions in the US. In addition, there were the following discrete tax adjustments that impacted the rates:

• In 2008, income tax recoveries of $71.1 million (of which $29.1 million was current and $42.0 million was future) were recorded that related to an increase in permanent deductions in the US from prior years.

• Future income tax assets were written down by $11.0 million during 2008.

• The $25.3 million gain that was recognized in 2008 as a result of the change in fair value of the forward purchase contract for shares in Sinofert was not taxable.

• During the fourth quarter of 2007, the Government of Canada enacted a reduction of the federal corporate income tax rate from 21 percent in 2007 to 15 percent by 2012. In addition, a small change was enacted in the second quarter of 2007. The federal corporate income tax changes reduced the company’s future income tax liability by $40.1 million in 2007.

For 2008, 90 percent of the income tax rate pertained to current income taxes and 10 percent related to future income taxes (excluding the effect of the income tax recoveries and future income tax asset writedowns). The increase in the current tax provision from 65 percent last year (excluding the effect of the Canadian tax rate changes on the company’s future income tax liability recognized during 2007) is largely due to the use of certain US federal income tax loss carryforwards in the first three quarters of 2007 to reduce the current rate. Since the income tax loss carryforwards were used by the end of 2007, 2008 earnings were fully taxable.

2007 vs 2006

Selling and administrative expenses increased as higher expenses associated with certain of our performance-based compensation plans (which are linked in part to the company’s share price performance or earnings performance) and higher stock option expense (as costs associated with the 2005, 2006 and 2007 Performance Option Plans were recognized during 2007 compared to only the 2005 and 2006 Performance Option Plans during 2006) were recognized during 2007.

Provincial mining and other taxes increased principally due to higher potash profit per tonne and potash sales volumes impacting our Saskatchewan Potash Production Tax and corporate capital tax. The profit tax component increased $59.3 million in 2007 compared to 2006 as a result of higher potash per-tonne profit, caused by higher potash prices and lower fixed costs per tonne (volumes were 31 percent higher in 2007 than 2006). The 40 percent or $13.3 million increase in corporate capital tax expense resulted from higher potash sales revenues and was partially offset by changes enacted by the Province of Saskatchewan during the second quarter of 2006 to reduce the capital tax resource surcharge from 3.6 percent to 3 percent over the next three years, with a 0.3 and a 0.2 percentage point reduction effective each of July 1, 2006 and July 1, 2007, respectively.

The impact of a stronger Canadian dollar relative to the US dollar on the period-end translation of Canadian dollar denominated monetary items on the Consolidated Statements of Financial Position, partially offset by treasury gains, contributed to foreign exchange losses of $70.2 million in 2007. The Canadian dollar gained strength against the US dollar over the course of 2007, particularly in the last three quarters. In comparison, in 2006, the Canadian dollar strengthened over the first half of the year then weakened during the second half, contributing to a foreign exchange gain of $4.4 million in that period.

Other income grew $31.5 million or 34 percent. Our share of earnings from equity investments in APC and SQM increased $21.8 million in 2007 compared to 2006, while dividend income from our investments in ICL and Sinofert contributed an additional $37.0 million compared to 2006. Other income was partially offset by a $26.5 million provision for other-than-temporary impairment of auction rate securities.

POTASHCORP 2008 FINANCIAL REVIEW

44 Expenses & Other Income

The interest expense category declined $16.9 million. Weighted average balances of debt obligations outstanding and the associated interest rates were as follows:

Dollars (millions), except percentage amounts

								%
	2007		2006		Change			Change
Long-term debt obligations, including current portion
Weighted average outstanding	$	1,557.3	$	1,296.7	$	260.6			20
Weighted average interest rate		6.6%		6.9%		(0.3%)			(4	)
Short-term debt obligations Weighted average
outstanding	$	95.7	$	518.8	$	(423.1	)		(82	)
Weighted average interest rate		5.4%		5.2%		0.2%			4

The lower average balance of short-term debt obligations outstanding for 2007 resulted in interest expense on short-term debt being $25.8 million lower than in 2006. The effect of higher interest income due to higher average balances of cash and other short-term investments during 2007 compared to 2006 was partially offset by interest income recognized on income tax refunds during 2006. Declines in net interest expense during 2007 were offset in part by the higher average balance of long-term debt obligations outstanding. The overlap of $500.0 million of notes in December 2006, prior to the repayment of $400.0 million of notes in June 2007, increased interest expense $14.0 million compared to 2006.

The company’s effective income tax rate for 2007 was 27 percent (2006 – 20 percent). A scheduled 2 percentage point reduction in the Canadian federal income tax rate applicable to resource companies, effective at the beginning of 2007, and a reduction of the future income tax rate enacted during the fourth quarter of 2007 were offset by a higher percentage of consolidated income earned in higher-tax jurisdictions during 2007 compared to 2006. In addition, there were the following discrete tax adjustments that impacted the rates:

• During the fourth quarter of 2007, the Government of Canada enacted a reduction of the federal corporate income tax rate from 21 percent in 2007 to 15 percent by 2012. In addition, there was a small change enacted in the second quarter of 2007. The federal corporate income tax changes reduced the company’s future income tax liability by $40.1 million. In 2006, changes were enacted by the Government of Canada to reduce the federal corporate income tax rate and the federal corporate surtax, reducing our future income tax liability by $22.9 million at that time.

• During 2006, the Province of Saskatchewan enacted changes to the corporate income tax that resulted in a $21.9 million reduction in our future income tax liability in that year.

• In 2006, income tax refunds totaling $34.1 million were recorded.

Impact of Foreign Exchange

Due to the international nature of our operations, we incur costs and expenses in a number of foreign currencies other than the US dollar. The exchange rates of such currencies have varied substantially over the last three years. The sharp movements in the US dollar have had a significant impact on costs and expenses incurred in other currencies, which are translated into US dollars for financial reporting purposes. In Canada, our revenue is earned and received in US dollars while the cost base for our potash operations is in Canadian dollars.

We are also affected by the period-end change in foreign exchange rate on the translation of our monetary net assets and liabilities, and on treasury activities.

The following table shows the impact of foreign exchange on net income.

Impact on net income

Dollars (millions), except per-share amounts

		2008			2007
Foreign exchange impact on operating costs before income taxes1	$	(28.1	)	$	40.5
Foreign exchange impact on conversion of balance sheet and treasury activities before income taxes		(126.0	)		70.2
Net income (decrease) increase		(154.1	)		110.7
Diluted net income per share (decrease) increase		(0.49	)		0.34

¹ Assumes the 2008 exchange rate had remained at the 2007 year-end rate of 0.9881 (compared to 1.2246 at December 31, 2008), and the 2007 exchange rate remained at the 2006 year-end rate of 1.1653.

POTASHCORP 2008 FINANCIAL REVIEW

Quarterly Results 45

Quarterly Results and Review of Fourth-Quarter Performance

(unaudited, in millions of US dollars except per-share amounts)

	2008										2007
	Q1		Q2		Q3		Q4		Total		Q1		Q2		Q3		Q4		Total
Sales	$	1,890.6	$	2,621.0	$	3,064.3	$	1,870.6	$	9,446.5	$	1,154.7	$	1,353.1	$	1,295.0	$	1,431.4	$	5,234.2
Less: Freight		102.4		103.4		81.4		37.7		324.9		81.9		92.3		80.6		91.3		346.1
Transportation and distribution		32.3		33.3		31.6		35.2		132.4		31.0		32.6		31.0		29.5		124.1
Cost of goods sold		899.9		1,047.0		1,210.3		924.6		4,081.8		672.1		726.8		708.3		775.6		2,882.8
Gross margin		856.0		1,437.3		1,741.0		873.1		4,907.4		369.7		501.4		475.1		535.0		1,881.2
Operating income		749.0		1,296.0		1,714.7		875.4		4,635.1		308.3		422.3		406.2		451.7		1,588.5
Net income		566.0		905.1		1,236.1		788.0		3,495.2		198.0		285.7		243.1		376.8		1,103.6
Net income per share – basic		1.79		2.91		4.07		2.63		11.37		0.63		0.91		0.77		1.19		3.50
Net income per share – diluted		1.74		2.82		3.93		2.56		11.01		0.62		0.88		0.75		1.16		3.40
Potash gross margin		514.6		886.4		909.7		744.8		3,055.5		174.2		260.4		221.3		256.4		912.3
Phosphate gross margin		156.0		340.9		507.2		110.4		1,114.5		64.2		96.8		129.9		141.9		432.8
Nitrogen gross margin		185.4		210.0		324.1		17.9		737.4		131.3		144.2		123.9		136.7		536.1

Net income per share for each quarter has been computed based on the weighted average number of shares issued and outstanding during the respective quarter; therefore, quarterly amounts may not add to the annual total. Per-share calculations are based on full dollar and share amounts.

Certain aspects of our business can be impacted by seasonal factors. Fertilizers are sold primarily for spring and fall application in both Northern and Southern hemispheres. However, planting conditions and the timing of customer purchases will vary each year and fertilizer sales can be expected to shift from one quarter to another. Most feed and industrial sales are by contract and are more evenly distributed throughout the year.

Although the global economic crisis led to slower demand for all three nutrients and lower prices for phosphate and nitrogen, our potash operations drove fourth-quarter gross margin to $873.1 million, 63 percent above the $535.0 million generated in the same period last year. Included in fourth-quarter results is $88.9 million in writedowns of year-end nitrogen and phosphate inventory values, which reduced earnings by $0.22 per share in the quarter. Cash flow from operations of $763.3 million was the third-highest quarterly total in company history (only the second and third quarters of 2008 were higher), while the $3,013.2 million achieved for the year exceeded the 2007 record by 78 percent.

Highlights of our 2008 fourth quarter include:

• Potash gross margin of $744.8 million was almost three times higher than the $256.4 million generated in the same quarter last year. Total realized prices climbed to $625 per tonne, a 235 percent increase over fourth-quarter 2007 levels. The offshore realized price of $583 per tonne was 242 percent higher than in last year’s fourth quarter, and reflected a larger proportion of sales directed to contract markets with lower netbacks based on prices established earlier in the year. Realized prices in the North American spot market reached $740 per tonne, up 246 percent from last year and 32 percent from the trailing quarter, as a September 2008 price increase

was realized. Potash sales volumes of 1.4 million tonnes were 37 percent lower than in the same period last year. Our offshore sales volumes of 1.1 million tonnes were down 27 percent compared to the same quarter last year. During the quarter, Canpotex shipped approximately 340,000 tonnes to China and 475,000 tonnes to India, the two largest contract markets; 45 percent lower and 107 percent higher, respectively, than shipments in the same quarter last year. Spot market sales volumes to Brazil declined 91 percent in the fourth quarter of 2008 versus the same quarter last year. North American potash volumes were down 54 percent from last year’s fourth quarter. Potash cost of goods sold was $33 per tonne higher quarter over quarter, primarily the result of increased royalties paid in Saskatchewan and New Brunswick, as well as strike and other labor costs that mainly resulted from work stoppages. A total of 20 mine shutdown weeks were taken in the quarter as a result of strikes at our Allan, Cory and Patience Lake facilities.

•

Due to substantially lower sales volumes, phosphate gross margin of $110.4 million was 22 percent below the $141.9 million of last year’s fourth quarter. However, our unique ability to allocate phosphoric acid feedstock to higher-netback downstream products proved beneficial in

POTASHCORP 2008 FINANCIAL REVIEW

46 Quarterly Results

the quarter’s difficult market conditions. Liquid fertilizers generated $92.9 million of phosphate gross margin, industrial products added $20.0 million and feed phosphate $18.2 million. With rapidly deteriorating market demand and prices, solid fertilizers incurred a loss of $21.8 million, inclusive of a writedown of $52.9 million of inventory on hand at year-end that was produced earlier in the quarter with higher-cost sulfur and ammonia. Higher-priced sales early in the quarter led to increases in quarter-over-quarter realized prices for liquid fertilizer (+220 percent), solid fertilizers (+145 percent), feed (+153 percent) and industrial products (+91 percent). By the end of the quarter, prices for all products were negatively affected by market conditions, including rapidly declining spot prices for raw material inputs. Weakened prices were especially evident in the solid fertilizer sector, demonstrating the importance of our diverse phosphate product mix. Solid fertilizer sales volumes fell 81 percent, while liquid fertilizer sales volumes dropped 42 percent. Feed sales volumes declined 53 percent as the beef, pork and poultry industries continued to suffer, distillers’ dried grains with solubles was used as a substitute and many feed mills remained shut down. Sales volumes for industrial products, traditionally a more stable area of the phosphate business, declined a comparatively small 17 percent.

•

Nitrogen contributed $17.9 million of gross margin in the fourth quarter, compared to $136.7 million in the fourth quarter of 2007, reflecting the rapid decline in sales volumes, along with a $36.0 million writedown of inventories produced with higher-cost natural gas early in the quarter. Market prices for nitrogen products fell dramatically over the quarter. However, with most of our fourth-quarter nitrogen volumes sold early in the quarter when prices were at their peak, realized prices for ammonia were 42 percent above the same quarter last year. Urea prices were flat while prices for nitrogen solutions rose 78 percent on early fourth-quarter business. The international ammonia market weakened considerably during the fourth quarter as large-scale cutbacks were made to operating rates in the phosphate and industrial sectors, which account for a significant portion of global ammonia import demand. Our ammonia sales volumes fell 23 percent from the same quarter last year, while urea sales volumes were 14 percent lower. Sales volumes for nitrogen solutions were down 59 percent from the fourth quarter of 2007. Our total average natural gas cost, including our hedge, was $6.16 per MMBtu, a 40 percent increase over last year.

• Selling and administrative expenses were lower in 2008, due primarily to reduced medium-term incentive plan accruals and valuation of deferred share units that were directly impacted by the significant downward movement in our share price during the quarter.

• Provincial mining and other taxes increased $68.9 million year over year due primarily to a $64.3 million increase in Saskatchewan Potash Production Tax, which was attributable to potash profit per tonne increasing substantially from the prior year.

• Approximately $62.8 million of foreign exchange gains resulted from the Canadian dollar weakening significantly against the US dollar during the fourth quarter of 2008, gains on the translation of Canadian dollar denominated monetary items and offset by foreign exchange forward contract losses. A foreign exchange loss of $2.8 million resulted last year when the Canadian dollar marginally strengthened.

• Other income increased $64.1 million over 2007 as dividend income increased $32.4 million and our share of earnings from equity investees contributed an additional $44.8 million. Also included in other income was an $88.8 million provision for other-than-temporary impairment in auction rate securities, compared to a provision of $26.5 million in the fourth quarter of 2007.

• Interest expense more than doubled compared to 2007 due to a significant increase in short-term debt.

• The effective income tax rate was 8 percent (2007 — 15 percent) due to the cumulative adjustment for a reduction in the rate during the quarter. The decrease was mainly due to lower earnings than expected from the US operations without a corresponding drop in US permanent deductions.

POTASHCORP 2008 FINANCIAL REVIEW

Key Earnings Sensitivities 47

A number of factors affect the earnings of the company’s three nutrient segments. The table below shows the key factors and their approximate effect on EPS based on the assumptions used in the 2009 earnings guidance of $10.00 to $12.00 per share.

Input Cost Sensitivities		Effect on EPS		Price and Volume Sensitivities	Effect on EPS
NYMEX gas price	Nitrogen	+ 0.07	Price	Potash changes by $20/tonne	± 0.30
increases by				DAP/MAP changes by $20/tonne	± 0.05
$1/MMBtu	Potash	- 0.02		Ammonia increases by $20/tonne
				• Nitrogen • Phosphate Urea changes by $20/tonne	+ 0.06 - - 0.01
Sulfur changes by $20/long ton	Phosphate	± 0.07			± 0.06
Canadian to US dollar	Canadian operating
strengthens by $0.01	expenses net of	- 0.01
	provincial taxes		Volume	Potash changes by 100,000 tonnes	± 0.12
				Nitrogen changes by 50,000 N tonnes	± 0.02
	Translation gain/loss	- 0.02		Phosphate changes by 50,000 P2O5 tonnes	± 0.08

The above sensitivities affect cash flow as well, except the translation gain/loss which is primarily non-cash.

Financial Condition Review

Towards the last half of 2008, global financial markets and economies fell significantly, resulting in declines in prices of publicly traded securities and reduced demand for our products. As a result, we evaluated selected aspects of our business and financial condition that could be affected.

The effect of record potash, phosphate and nitrogen prices during 2008 exceeded the effect of declines in all segment sales volumes and generated record cash flows from operations for the company. While we expect cash flows for the 2009 fiscal year to be sufficient to fund operations and capital expansions for the year, expected declines in first-quarter sales due to current economic conditions may necessitate the use of additional debt. Although access to the commercial paper market was limited during the second half of 2008, we were able to finance short-term needs through other borrowings. At December 31, 2008, working capital was negative by $348.6 million. With available credit facilities of $760.4 million, we expect liquidity to be sufficient to fund operations, capital expenditures and other investing activities as required. The company continues to have access to debt financing under existing bank credit facilities. The current ratings on our long-term debt are Baa1 with a stable outlook from Moody’s and A- with a stable outlook from Standard & Poor’s.

Although the values of our investments in other publicly traded companies have decreased from previous highs during the year, the market values continue to exceed cost. Investments also continue to generate earnings and/or dividends for the company, as applicable. Investments in auction rate securities continue to remain illiquid and the fair value declined $38.8 million during the year ($76.5 million in 2007), resulting in a carrying balance of $17.2 million at December 31, 2008.

The decline in plan asset valuations in the company’s defined benefit pension plans will require additional future increases in contributions from the company. Recommended contributions as determined by actuarial valuation calculations have increased but are expected to be funded through operations and other sources of financing, if necessary.

The company evaluates the creditworthiness of our major customers on an ongoing basis and there were no significant changes to such customers’ ability to pay for product orders during the year. For 2008, $5.0 million of provision for doubtful accounts was recorded while actual bad debts experienced was $3.2 million. Given the slowdown in demand for all three nutrients, we will continue to manage our credit risk relating to trade receivables through our credit management program, and customers that fail to meet specified benchmark credit standards may be required to transact with us on a prepayment basis or some other form of credit support.

POTASHCORP 2008 FINANCIAL REVIEW

48 Financial Condition Review

The carrying values of our inventories were considered in the context of our accounting policy to record inventories at the lower of average cost and net realizable value. As a result, phosphate and nitrogen inventories were written down by $88.9 million.

Despite declines in phosphate and nitrogen prices, no impairments of long-lived assets or goodwill were recorded for the year ended December 31, 2008.

In the event natural gas prices continue to fall, the company will be required to increase cash deposits to counterparties as required under our agreements. We considered the impact by which our cash flow may be affected and determined that cash flow from operations and financing sources are sufficient to meet our obligations.

Liquidity and capital resources and capital structure and management are discussed in more detail in the following section.

Total assets were $10,248.8 million at December 31, 2008, an increase of $532.2 million or 5 percent over December 31, 2007. Total liabilities increased by $1,962.0 million from December 31, 2007 to $5,659.9 million at December 31, 2008. Total shareholders’ equity declined by $1,429.8 million during the same period to $4,588.9 million.

The largest contributors to the increase in assets during 2008 were additions to property, plant and equipment, increases in accounts receivable and inventories, offset by a decrease in the fair value of available-for-sale securities and cash equivalents. Potash mine expansions were the primary reason for the $924.8 million increase in property, plant and equipment. Although sales for the month of December 2008 declined 4 percent over December 2007, the impact of average realized potash and phosphate prices more than doubling and slower repayments from some customers affected by the economic conditions this year caused accounts receivable to almost double, increasing to $1,189.9 million. Our credit effectiveness index (the industry measure for assessing collection effectiveness) was over 99 percent at December 31, 2008 and 95 percent at February 20, 2009. While our index indicates a very high proportion of our receivables are current, conditions could change as customers adversely affected by the economic crisis could take longer to pay. Inventories increased $286.8 million

as demand for all three nutrients declined during the fourth quarter of 2008. Consistent with broad declines in the stock market, the fair value adjustments in Sinofert and ICL caused investments to decline by $830.8 million. We spent $435.4 million to increase our ownership interests in Sinofert and ICL during 2008. Cash and cash equivalents declined $442.7 million and is further discussed on Page 51.

Liabilities increased mainly due to increases in our short-term debt ($1,233.9 million) and long-term debt ($400.1 million), which were used to fund our share repurchases. Accounts payable and accrued charges increased $272.1 million as income taxes payable were up $280.7 million due to our increased net earnings; potash production taxes payable were up $19.6 million due to higher potash profits; and accrued payroll was up $25.3 million due to more employees being eligible for the short-term incentive program and due to higher incentive accruals associated with the medium-term incentive program which is paid out every three years. The increase in accounts payable and accrued charges was partially offset as hedge margin deposits, which were $33.9 million last year, were repaid to counterparties as a result of the decline in natural gas prices, and trade payables decreased $34.9 million.

The reduction in shareholders’ equity was caused by a $1,521.0 million decline in accumulated other comprehensive income largely stemming from the $1,336.9 million decline in unrealized gains on available-for-sale securities, and a shift from unrealized gains on cash flow hedges of $73.5 million as of December 31, 2007 to unrealized losses of $100.6 million at the end of 2008. Net earnings of $3,495.2 million increased retained earnings while dividends declared of $122.2 million and the $3,250.3 million impact of share repurchases reduced retained earnings. Share capital was affected by both the exercise of stock options and the cancellation of repurchased shares, resulting in a net decrease of $58.8 million.

POTASHCORP 2008 FINANCIAL REVIEW

Liquidity & Capital Resources 49

The following section explains how we manage our cash and capital resources to carry out our strategy and deliver results.

Liquidity risk arises from our general funding needs and in the management of our assets, liabilities and optimal capital structure. We manage liquidity risk to maintain sufficient liquid financial resources to fund our financial position and meet our commitments and obligations in the most cost-effective manner possible.

Cash Requirements

The following aggregated information about our contractual obligations and other commitments aims to provide insight into our short- and long-term liquidity and capital resource requirements. The information presented in the table below does not include obligations that have original maturities of less than one year, planned capital expenditures or potential share repurchases.

Contractual Obligations and Other Commitments Dollars (millions)

	December 31, 2008
	Payments Due by Period
	Total		Within 1 year		1 to 3 years		3 to 5 years		Over 5 years
Long-term debt obligations	$	1,758.2	$	0.2	$	782.1	$	475.9	$	500.0
Estimated interest payments on long-term debt obligations		1,046.7		102.7		175.7		90.5		677.8
Operating leases		678.4		102.6		169.2		143.9		262.7
Purchase obligations		773.4		150.6		244.1		135.7		243.0
Other commitments		55.6		17.7		17.6		6.1		14.2
Other long-term liabilities		1,201.4		128.4		128.4		106.8		837.8
Total	$	5,513.7	$	502.2	$	1,517.1	$	958.9	$	2,535.5

Long-Term Debt

Long-term debt consists of $1,350.0 million of senior notes that were issued under US shelf registration statements, $400.0 million of long-term debt outstanding under credit facilities, a net of $5.9 million under back-to-back loan arrangements (described in Note 13 to the consolidated financial statements) and other commitments of $2.3 million payable over the next five years.

The senior notes represent 77 percent of our total long-term debt portfolio and are unsecured. Of the senior notes outstanding, $600.0 million bear interest at 7.750 percent and mature in 2011, $250.0 million bear interest at 4.875 percent and mature in 2013 and $500.0 million bear interest at 5.875 percent and mature in 2036. The company has two long-term revolving credit facilities, a $750.0 million facility which expires May 31, 2013 and a $180.0 million facility which expires December 21, 2010. Interest rates on credit facilities range from 0.85 percent to 3.47 percent. As of December 31, 2008, $220.0 million was outstanding under the 2013 facility and $180.0 million was outstanding under the 2010 facility.

There are no sinking fund requirements. The senior notes are not subject to any financial test covenants but are

subject to certain customary covenants (including limitations on liens and sale and leaseback transactions) and events of default, including an event of default for acceleration of other debt in excess of $50.0 million. The other long-term debt instruments are not subject to any financial test covenants but are subject to certain customary covenants and events of default, including, for other long-term debt, an event of default for non-payment of other debt in excess of $25.0 million. Non-compliance with such covenants could result in accelerated payment of the related debt. The company was in compliance with all covenants as at December 31, 2008. Under certain conditions related to a change in control, the company is required to make an offer to purchase all, or any part, of the senior notes due 2036 at 101 percent of the principal amount of the senior notes repurchased, plus accrued interest. Principal covenants and events of default under the credit facilities are the same as those under the line of credit.

The estimated interest payments on long-term debt in the above table include our cumulative scheduled interest payments on fixed and variable rate long-term debt. Interest on variable rate debt is based on interest rates prevailing at December 31, 2008.

POTASHCORP 2008 FINANCIAL REVIEW

50 Liquidity & Capital Resources

Operating Leases

We have long-term operating lease agreements for land, buildings, port facilities, equipment, ocean-going transportation vessels and railcars, the latest of which expires in 2038. The most significant operating leases consist of two items. The first is our lease of railcars, which extends to approximately 2025. The second is the lease of four vessels for transporting ammonia from Trinidad. One vessel agreement runs until 2018; the others terminate in 2016.

Purchase Obligations

We have long-term agreements for the purchase of sulfur for use in the production of phosphoric acid, which provide for minimum purchase quantities and certain prices based on market rates at the time of delivery. Purchase obligations and other commitments included in the table on Page 49 are based on expected contract prices.

We have entered into long-term natural gas contracts with the National Gas Company of Trinidad and Tobago Limited, the latest of which expires in 2018. The contracts provide for prices that vary primarily with ammonia market prices, escalating floor prices and minimum purchase quantities. The commitments included in the table on Page 49 are based on floor prices and minimum purchase quantities.

We also have long-term agreements for the purchase of phosphate rock used at our Geismar facility. The

commitments included in the table on Page 49 are based on the expected purchase quantity and current net base prices.

Other Commitments

Other operating commitments consist principally of amounts relating to various rail freight contracts, the latest of which expires in 2010, and mineral lease commitments, the latest of which expires in 2029.

Other Long-Term Liabilities

Other long-term liabilities consist primarily of accrued pension and other post-retirement benefits, future income taxes, environmental costs and asset retirement obligations.

Future income tax liabilities may vary according to changes in tax laws, tax rates and the operating results of the company. Since it is impractical to determine whether there will be a cash impact in any particular year, all long-term future income tax liabilities have been reflected in the “over 5 years” category in the table on Page 49.

Capital Expenditures

Based on our current exchange rate expectations, during 2009 we expect to incur capital expenditures, including capitalized interest, of approximately $1,630 million for opportunity capital, approximately $460 million to sustain operations at existing levels and approximately $55 million for site improvements.

Investment Liquidity

Investments

Investments include auction rate securities with maturities extending through 2046. The securities include credit-linked notes with a face value of $48.3 million and collateralized debt obligations with a face value of $84.2 million. All investments were rated AAA when acquired. The face value, carrying value and corresponding investment ratings are:

Face Value – Dollars (millions)	$	5.0	$	20.0	$	28.3	$	25.0	$	34.4	$	19.8
Carrying Value – Dollars (millions) (December 31, 2008)		0.6		4.8		7.2		1.2		2.0		1.4
Credit Rating Agency 1 (February 20, 2009)	Aa3, C/W		BBB		BBB-		Caa3, C/W		Caa2, C/W		Ca
Credit Rating Agency 2 (February 20, 2009)	AAA		A		BBB		CC		AAA, C/W		CC

C/W = on Credit Watch with negative implications

As of December 31, 2008, the balance recorded in investments related to these auction rate securities was $17.2 million (face value $132.5 million). The impairment represents the company’s estimate of other-than-temporary decline in value as of year-end resulting from the current lack of liquidity for these investments and the challenging subprime mortgage and housing markets, which create uncertainty as to the ultimate recoverability. We have commenced an arbitration proceeding against the investment firm that purchased the securities for our account without our authorization, and we intend to pursue our claim vigorously.

POTASHCORP 2008 FINANCIAL REVIEW

Liquidity & Capital Resources 51

Sources and Uses of Cash

The company’s cash flows from operating, investing and financing activities, as reflected in the Consolidated Statements of Cash Flow, are summarized in the following table:

Dollars (millions) except percentage amounts
										% Increase (Decrease)
		2008			2007			2006			2008			2007
Cash provided by operating activities	$	3,013.2		$	1,688.9		$	696.8			78			142
Cash used in investing activities		(1,647.3	)		(758.1	)		(839.7	)		117			(10	)
Cash (used in) provided by financing activities		(1,808.6	)		(537.0	)		374.7			237			n/m
(Decrease) increase in cash and cash equivalents	$	(442.7	)	$	393.8		$	231.8			(212	)		70
n/m = not meaningful
Dollars (millions) except ratio and percentage amounts
	December 31			December 31			December 31			% Increase (Decrease)
	2008			2007			2006			2008			2007
Current assets	$	2,267.2		$	1,811.3		$	1,310.2			25			38
Current liabilities		(2,615.8	)		(1,001.9	)		(1,103.5	)		161			(9	)
Working capital		(348.6	)		809.4			206.7			(143	)		292
Current ratio		0.87			1.81			1.19			(52	)		52

Our liquidity needs can be met through a variety of sources, including cash generated from operations, short-term borrowings against our line of credit and commercial paper program, long-term debt issued under our US shelf registration statement, and debt drawn down under our credit facilities. Our primary uses of funds are operational expenses, sustaining and opportunity capital spending, intercorporate investments, dividends, interest and principal payments on our debt securities, and share repurchases.

Cash provided by operating activities grew to $3,013.2 million in 2008, representing an increase of 78 percent compared to 2007, largely attributable to net income of $3,495.2 million, which was $2,391.6 million higher than in 2007. The change in accounts receivable reduced 2008 cash provided by operating activities by $593.7 million and reduced cash flows by $439.1 million compared to 2007, while higher inventories further reduced cash provided by operating activities by $324.4 million in 2008, a decline of $384.7 million compared to 2007. The provision for future income taxes increased the reconciliation of net income to cash provided by operating activities by $82.2 million, $37.4 million lower than last year due to the higher proportion of income tax expense that is current in 2008. The foreign exchange gains on future income tax reduced the reconciliation by $106.4 million in 2008 compared to $52.4 million in 2007, reflecting the more significant weakening in the Canadian dollar during 2008. Higher undistributed earnings from our equity investees during 2008 negatively impacted cash flow from operations by $131.1 million more than in 2007.

Cash used in investing activities increased $889.2 million year over year. The most significant cash outlays included:

• Our spending on property, plant and equipment was $1,198.3 million in 2008, an increase of $591.1 million over 2007. Approximately 69 percent (2007 – 56 percent) of our consolidated capital expenditures related to the potash segment.

• During 2008, $173.7 million was paid to settle the company’s forward purchase contract for shares of Sinofert. During 2008, we purchased an additional 191,620,000 shares of Sinofert for cash consideration of $145.3 million. Net of the ownership interest dilution that resulted from the issuance of shares of Sinofert, the acquisitions increased our ownership interest in Sinofert to 22 percent. Also in 2008, we purchased an additional 14,288,705 shares of Israel Chemicals Ltd. for cash consideration of $116.4 million, which increased our ownership interest to 11 percent.

Cash used in financing activities increased $1,271.6 million during 2008 compared to 2007. During 2008, we repurchased $3,356.4 million of our common shares under our normal course issuer bid. To assist with the share repurchase, proceeds of $1,233.9 million were raised through short-term borrowings and $400.0 million through long-term borrowings. In June 2007, we repaid $400.0 million of 10-year bonds that matured.

We believe that internally generated cash flow, supplemented by borrowing from existing financing sources if necessary, will be sufficient to meet our anticipated capital expenditures and other cash requirements in 2009, exclusive of any possible acquisitions. At this time, we do not reasonably expect any presently known trend or uncertainty to affect our ability to access our historical sources of cash.

POTASHCORP 2008 FINANCIAL REVIEW

52 Capital Structure & Management

Capital Structure Dollars (millions), except as noted

	December 31			December 31
		2008			2007
Short-term debt obligations	$	1,324.8		$	90.0
Current portion of long-term debt		0.2			0.2
Long-term debt obligations		1,758.0			1,358.3
Deferred debt costs and swap gains		(19.4	)		(18.9	)
Total debt		3,063.6			1,429.6
Shareholders’ equity	$	4,588.9		$	6,018.7
Total debt to capital		40%			19%
Fixed rate debt obligations as a percentage of total debt obligations		44%			93%
Common shares outstanding		295,200,987			316,411,209
Stock options outstanding		12,849,356			14,006,984
Dividend payout ratio		4%			10%

Principal Debt Instruments Dollars (millions) at December 31, 2008

	Total			Amount Outstanding			Amount
	Amount			and Committed			Available
Credit facilities	$	1,930.0	1,2	$	1,724.6	1	$	205.4	1
Line of credit		75.0			20.0	3		55.0

1	The amount available under the $750.0 million commercial paper program is limited to the availability of backup funds under the credit facilities. Included in the amount outstanding and committed is $324.6 million of commercial paper. Per the terms of the agreements, the commercial paper outstanding and committed, as applicable, is based on the US dollar balance or equivalent thereof in lawful money of other currencies at the time of issue; therefore, subsequent changes in the exchange rate applicable to Canadian dollar denominated commercial paper have no impact on this balance.
2	Subsequent to year-end, effective January 21, 2009, $500.0 million of capacity was added to the 364-day facility.
3	Letters of credit committed.

We use a combination of short-term and long-term debt to finance our operations. We typically pay floating rates of interest on our short-term debt and credit facilities and fixed rates on our senior notes. As of December 31, 2008, interest rates ranged from 1.9 percent to 2.9 percent on outstanding commercial paper denominated in Canadian dollars and 1.0 percent to 3.8 percent on outstanding commercial paper denominated in US dollars. Interest rates on borrowings under the credit facilities ranged from 1.4 percent to 2.5 percent.

Although the commercial paper market is constrained, the company continues to have access to debt financing under existing bank credit facilities. We have two syndicated credit facilities and one bilateral credit facility that provide for unsecured advances. The first credit facility is a $750.0 million facility that is available through May 31, 2013. The second credit facility is a $750.0 million 364-day facility entered into on May 29, 2008 and amended, as of July 29, 2008, to increase the facility to $1,000.0 million. In January 2009, this facility was amended to increase the available borrowings to $1,500.0 million and extend the term to May 2010. The bilateral credit facility provides for borrowings of up to $180.0 million and is available for a two-year period ending December 2010. The amount available to us under the credit facilities is the total facilities amount less direct borrowings and amounts committed

in respect of commercial paper outstanding. We also have a $75.0 million line of credit that is effective through May 2009. Outstanding letters of credit and direct borrowings reduce the amount available. The line of credit and credit facilities have financial tests and other covenants with which we must comply at each quarter-end. Principal covenants under the credit facilities and line of credit require a debt-to-capital ratio of less than or equal to 0.60:1, a long-term debt-to-EBITDA (defined in the respective agreements as earnings before interest, income taxes, provincial mining and other taxes, depreciation, amortization and other non-cash expenses, and unrealized gains and losses in respect of hedging instruments) ratio of less than or equal to 3.5:1, tangible net worth greater than or equal to $1,250.0 million and debt of subsidiaries not to exceed $650.0 million. The credit facilities and line of credit are also subject to other customary covenants and events of default, including an event of default for non-payment of other debt in excess of CDN $40.0 million. Non-compliance with any of the above covenants could result in accelerated payment of amounts borrowed under the credit facilities and line of credit, and termination of lenders’ further funding obligations under the credit facilities and line of credit. We were in compliance with all covenants as of December 31, 2008.

POTASHCORP 2008 FINANCIAL REVIEW

Capital Structure & Management 53

Commercial paper is normally a source of same-day cash for the company. Access to this source of short-term financing depends primarily on conditions in the money markets and maintaining our R1 low credit rating by DBRS. The interest rates at which we issue long-term debt are partly based on the quality of our credit ratings, which are all investment grade. The company’s investment grade rating as measured by Moody’s senior debt ratings remained unchanged from December 31, 2007 at Baa1 with a stable outlook. Our investment grade rating as measured by Standard & Poor’s senior debt ratings was upgraded in August 2008 from BBB+ with a positive outlook to A- with a stable outlook.

Our $1,350.0 million of senior notes were issued under US shelf registration statements under which no additional amounts are available for issuance. On December 12, 2007, we filed a US shelf registration statement under which we may issue and sell up to $2,000.0 million of additional debt securities, subject to market conditions.

For 2008, our weighted average cost of capital was 12.0 percent (2007 – 10.0 percent), of which 95 percent represented equity (2007 – 96 percent).

Outstanding Share Data

We had 295,200,987 common shares issued and outstanding at December 31, 2008, compared to 316,411,209 common shares issued and outstanding at December 31, 2007. During 2008, the company issued 1,638,978 common shares pursuant to the exercise of stock options and our dividend reinvestment plan.

During the second quarter, the 2008 Performance Option Plan was approved by our shareholders. It permits the grant to eligible employees of options to purchase common shares of the company at an exercise price based on the closing price of the shares on the day prior to the grant. In general, options will vest, if at all, according to a schedule based on the three-year average excess of the company’s consolidated cash flow return on investment over the weighted average cost of capital.

At December 31, 2008, there were options to purchase 12,849,356 common shares outstanding under the company’s six stock option plans, as compared to options to purchase 14,006,984 common shares outstanding under five stock option plans at December 31, 2007.

Off-Balance Sheet Arrangements

In the normal course of operations, PotashCorp engages in a variety of transactions that, under Canadian GAAP, are either not recorded on our Consolidated Statements of Financial Position or are recorded on our Consolidated Statements of Financial Position in amounts that differ from the full contract amounts. Principal off-balance sheet activities we undertake include issuance of guarantee contracts, certain derivative instruments and long-term fixed price contracts. We do not reasonably expect any presently known trend or uncertainty to affect our ability to continue using these arrangements. These types of arrangements are discussed below.

Guarantee Contracts

Refer to Note 31 to the consolidated financial statements for information pertaining to our guarantees.

Derivative Instruments

We use derivative financial instruments to manage exposure to commodity price, interest rate and foreign exchange rate fluctuations. Regardless of whether the derivatives are designated as hedges for Canadian GAAP purposes, they are recorded on the Consolidated Statements of Financial Position at fair value and marked-to-market each reporting period, except for certain non-financial derivatives that have qualified for and for which we have documented a normal purchase or normal sale exception in accordance with the accounting standards.

Long-Term Fixed Price Contracts

Certain of our long-term raw materials agreements contain fixed price components. Our significant agreements, and the related obligations under such agreements, are discussed in Cash Requirements on Page 49.

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54 Market Risks

Market Risks Associated with
Financial Instruments

Market risk is the potential for loss from adverse changes in the market value of financial instruments. The level of market risk to which we are exposed varies depending on the composition of our derivative instrument portfolio, as well as current and expected market conditions. A discussion

of enterprise-wide risk management can be found on Pages 39 and 40 and risk management discussion specific to potash, phosphate and nitrogen operations can be found on Pages 18, 24 and 30, respectively. A discussion of price risk, interest rate risk, foreign exchange risk, credit risk and liquidity risk, including risk sensitivities, can be found in Note 28 to the consolidated financial statements.

Related Party Transactions

The company sells potash from our Saskatchewan mines for use outside of North America exclusively to Canpotex. Sales for the year ended December 31, 2008 were $2,257.1 million

(2007 – $782.7 million; 2006 – $467.1 million). Sales to Canpotex are at prevailing market prices and are settled on normal trade terms.

Critical Accounting Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with Canadian GAAP. These principles differ in certain significant respects from US GAAP, and these differences are described and quantified in Note 33 to the consolidated financial statements.

Our significant accounting policies are contained in Note 2 to the consolidated financial statements. Certain of these policies involve critical accounting estimates because they require us to make particularly subjective or complex judgments about matters that are inherently uncertain and because of the likelihood that materially different amounts could be reported under different conditions or using different assumptions. We have discussed the development, selection and application of our key accounting policies, and the critical accounting estimates and assumptions they involve, with the audit committee of the Board of Directors, and it has reviewed the disclosures described in this section.

The following section discusses the critical accounting estimates and assumptions that management has made and how they affect the amounts reported in the consolidated financial statements. We consider these estimates to be an important part of understanding our financial statements.

Variable Interest Entities

In the normal course of business, we may enter into arrangements that need to be examined to determine whether they fall under the variable interest entity (VIE) accounting guidance. Management needs to exercise significant judgment to determine if entities are VIEs and, if so, whether such VIE relationships are required to be consolidated. This process involves first understanding the arrangements to determine whether the entity is considered a VIE under the accounting rules. We use a variety of complex estimating processes that may consider both qualitative and quantitative factors, and may involve the use of assumptions about the business environment in which an entity operates and analysis and calculation of its expected losses and its expected residual returns where necessary. These quantitative processes involve estimating the future cash flows and performance of the entity, analyzing the variability in those cash flows and allocating the losses and returns among the identified parties holding variable interests. Where an entity is determined to be a VIE, our interests are compared to those of the unrelated outside parties to identify the party that is the primary beneficiary, and thus should consolidate the entity. In addition to the areas of judgment mentioned above, there is a significant amount of judgment exercised in interpreting the provisions of the accounting guidance and applying them to our specific transactions.

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Critical Accounting Estimates 55

Pension and Other Post-Retirement Costs

We sponsor plans that provide pensions and other post-retirement benefits for most of our employees. We believe the accounting estimates related to our employee benefit plan costs are critical accounting estimates because: (1) the amounts are based on complex actuarial calculations using several assumptions; and (2) given the magnitude of our estimated costs, differences in actual results or changes in assumptions could materially affect our consolidated financial statements.

Due to the long-term nature of these plans, the calculation of expenses and obligations depends on various assumptions such as discount rates, expected rates of return on assets, health-care cost trend rates, projected salary increases, retirement age, mortality and termination rates. These assumptions are determined by management and are reviewed annually by our actuaries. The discount rate reflects the weighted average interest rate at which the pension and other post-retirement liabilities could be effectively settled using high-quality bonds at the measurement date. The rate varies by country. We determine the discount rate using a yield curve approach. Based on the respective plans’ demographics, expected future pension benefit and medical claims payments are measured and discounted to determine the present value of the expected future cash flows. The cash flows are discounted using yields on high-quality AA-rated non-callable bonds with cash flows of similar timing. The expected rate of return on plan assets assumption is based on expected returns for the various asset classes. Other assumptions are based on actual experience and our best estimates. Actual results that differ from the assumptions are accumulated and amortized over future periods and, therefore, generally affect recognized expense and the recorded obligation in future periods. We have included a table in Note 15 to the consolidated financial statements that quantifies the impact of these differences in each of the last three years. These differences relate primarily to: (1) actual versus expected return on plan assets; (2) actual actuarial gains/losses incurred on the benefit obligation versus those expected and recognized in the consolidated financial statements; and (3) actual past service costs incurred as a result of plan amendments versus those expected and recognized in the consolidated financial statements.

The following table provides the sensitivity of benefit obligations and expense for our major plans to changes in the discount rate, expected long-term rate of return on plan assets, rate of compensation increase and medical trend rate assumptions. A lower discount rate results in a higher benefit obligation and a lower funded status. Similarly, poor fund performance results in a lower fair value of plan

assets and a lower funded status. In either situation, we may have to increase cash contributions to the benefit plans. The sensitivity analysis should be used with caution as the changes are hypothetical and the impact of changes in each key assumption may not be linear. For further details on our annual expense and obligation, see Note 15 to the consolidated financial statements.

Impact of a 0.5% Change in Key Assumptions

Dollars (millions)
	Pension Plans						Other Plans
	Obligation			Expense			Obligation			Expense
Discount rate
Decrease in assumption	$	43.9		$	4.1		$	19.8		$	2.0
Increase in assumption		(39.8	)		(4.7	)		(18.3	)		(1.9	)
Expected long-term rate of return
Decrease in assumption		n/a			2.4			n/a			n/a
Increase in assumption		n/a			(2.4	)		n/a			n/a
Rate of compensation increase
Decrease in assumption		(8.1	)		(1.6	)		(0.1	)		—
Increase in assumption		8.3			1.6			0.1			0.1
Medical trend rate
Decrease in assumption		n/a			n/a			(17.0	)		(3.0	)
Increase in assumption		n/a			n/a			19.9			3.5

n/a = not applicable

Asset Retirement Obligations and Other Environmental Costs

We have significant liabilities relating to asset retirement obligations and other environmental matters. The major categories of our asset retirement obligations include reclamation and restoration costs at our potash and phosphate mining operations (mostly phosphate mining). Other environmental liabilities typically relate to regulatory compliance, environmental management associated with ongoing operations other than mining, and site assessment and remediation of contamination related to the activities of the company and its predecessors.

We believe the accounting estimates related to asset retirement obligations and other environmental costs are critical accounting estimates because: (1) we will not incur most of these costs for a number of years, requiring us to make estimates over a long period; (2) environmental laws and regulations and interpretations by regulatory authorities could change or circumstances affecting our operations could change, either of which could result in significant changes to our current plans; and (3) given the magnitude of our estimated costs, changes in any or all of these estimates could have a material impact on our consolidated financial statements.

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56 Critical Accounting Estimates

Accruals for asset retirement obligations and other environmental matters totaled $145.6 million at December 31, 2008 (2007 – $134.7 million). In arriving at this amount, we considered the nature, extent and timing of current and proposed reclamation and closure techniques in view of present environmental laws and regulations. It is reasonably possible that the ultimate costs could change in the future and that changes to these estimates could have a material effect on our consolidated financial statements.

Fair Value

We have significant financial instruments recorded at fair value on the balance sheet. Financial assets classified as held-for-trading are recorded at fair value with realized and unrealized gains and losses reported in net income, and financial assets classified as available-for-sale or as hedging derivatives are recorded at fair value with unrealized gains and losses reported in accumulated other comprehensive income unless any unrealized losses are considered other-than-temporary, in which case they are recognized in net income. Financial liabilities classified as held-for-trading are recorded at fair value with realized and unrealized gains and losses reported in net income.

We have classified investments in ICL, Sinofert and auction rate securities as available-for-sale; physical natural gas purchase contracts, natural gas options and foreign exchange forward contracts as held-for-trading; and natural gas futures and swaps as hedging derivatives. All of these are therefore recorded on the balance sheet at fair value. Fair value represents point-in-time estimates that may change in subsequent reporting periods due to market conditions or other factors. Estimated fair values are designed to approximate amounts at which the financial instruments could be exchanged in a current transaction between willing parties. Multiple methods exist by which fair value can be determined, which can cause values (or a range of reasonable values) to differ. There is no universal model that can be broadly applied to all items being valued. Further, assumptions underlying the valuations may require estimation of costs/prices over time, discount rates, inflation rates and other relevant variables.

There is currently no active market for our auction rate securities and, therefore, fair value is determined using valuation techniques. Valuation techniques may include use of observable inputs such as recent arm’s-length market transactions if available; reference to the current market value of a substantially similar instrument; discounted cash flow analysis; and pricing models. If observable inputs are not available, such as a situation in which there is little, if any, market activity for the asset (or similar assets) at the measurement date, unobservable

inputs are considered. The unobservable inputs used in the pricing model reflect the company’s own expectations about the assumptions that market participants would use in pricing the asset in a current transaction (including assumptions about risk). Fair value for investments in auction rate securities in the company’s trading account, which represent debt securities designated as available-for-sale that are currently considered to be illiquid, is based on valuation techniques which reflect the company’s own expectations about the assumptions that market participants would use in pricing the asset in a current transaction (information on the expected cash flows based on position of priority within the tranches, information on the expected cash flows based on information available regarding the underlying securities, and assumptions about risk) as of the balance sheet date. Fair value for our investments in Sinofert and ICL is based on the closing bid price as of the balance sheet date. The fair value of derivative instruments traded in active markets (such as natural gas futures and exchange-traded options) is based on quoted market prices at the date of the balance sheet. The fair value of derivative instruments that are not traded in an active market (such as natural gas swaps, over-the-counter option contracts, foreign currency forward contracts and other forward contracts) is determined by using valuation techniques.

Fair values are also used in the assessment of asset impairment, as discussed further below.

Income Taxes

We operate in a specialized industry and in several tax jurisdictions. As a result, our income is subject to various rates of taxation. The breadth of the company’s operations and the global complexity of tax regulations require assessments of uncertainties and judgments in estimating the taxes we will ultimately pay. The final taxes paid are dependent upon many factors, including negotiations with taxing authorities in various jurisdictions, outcomes of tax litigation and resolution of disputes arising from federal, provincial, state and local tax audits. The resolution of these uncertainties and the associated final taxes may result in adjustments to our tax assets and tax liabilities.

We estimate future income taxes based upon temporary differences between the assets and liabilities that we report in our consolidated financial statements and the tax basis of our assets and liabilities as determined under applicable tax laws. We record a valuation allowance against our future income tax assets when we believe, based on all available evidence, that it is not “more likely than not” that all of our future income

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Critical Accounting Estimates 57

tax assets recognized will be realized. The amount of the future income tax asset recognized and considered realizable could, however, be reduced if projected income is not achieved.

Asset Impairment

We review long-lived assets and intangible assets with finite lives whenever events or changes in circumstances indicate that the carrying amount of such assets may not be fully recoverable. Determination of recoverability is based on an estimate of undiscounted future cash flows, and measurement of an impairment loss is based on the fair value of the assets. We believe that the accounting estimate related to asset impairment is a critical accounting estimate because: (1) it is highly susceptible to change from period to period as it requires management to make assumptions about future sales, margins and market conditions over the long-term life of the assets; and (2) the impact that recognizing an impairment would have on our financial position and results of operations may be material. As at December 31, 2008, we determined that there were no triggering events requiring impairment analysis.

Goodwill is not amortized, but is assessed for impairment at the reporting unit level annually, or more frequently if events or changes in circumstances indicate that the carrying amount could exceed fair value. Goodwill is assessed for impairment using a two-step approach, with the first step being to assess whether the fair value of the reporting unit to which the goodwill is associated is less than its carrying value. If this is the case, a second impairment test is performed that requires a comparison of the fair value of goodwill to its carrying amount. If fair value is less than carrying value, goodwill is considered impaired and an impairment charge must be recognized immediately. The fair value of our reporting units is determined from internally developed valuation models that consider various factors such as normalized and projected earnings, present value of future cash flows and discount rates. In each of the last two years, we tested goodwill for impairment, and in each year we determined that, based on our assumptions, the fair value of our reporting units exceeded their carrying amounts and therefore we did not recognize impairment.

Investments that are classified as available-for-sale, carried at cost or accounted for using the equity method are also reviewed to determine whether fair value is below carrying value. Factors and judgments we consider in determining whether a loss is temporary as compared to other-than-temporary include the length of time and extent to which fair value has been below cost; financial condition

and near-term prospects of the investee; and our ability and intent to hold the investment for a period of time sufficient to allow for any anticipated recovery. We determined the fair value of the auction rate securities held in the company’s trading account to be $17.2 million as of December 31, 2008, representing an impairment of $115.3 million as compared to the par value of the securities. The total impairment has been classified as other-than-temporary. The securities were reviewed on an individual basis to determine whether the impairment was temporary or other-than-temporary; all of the securities were identified as being other than temporarily impaired based on the underlying securities and complexity of the structures. The entire impairment was therefore classified as other-than-temporary. None of our other investments were considered impaired, either temporarily or other-than-temporarily, as of December 31, 2008.

We cannot predict if an event that triggers impairment will occur, when it will occur or how it will affect the asset amounts we have reported. Although we believe our estimates are reasonable and consistent with current conditions, internal planning and expected future operations, such estimates are subject to significant uncertainties and judgments. As a result, it is reasonably possible that the amounts reported for asset impairments could be different if we were to use different assumptions or if market and other conditions were to change. The changes could result in non-cash charges that could materially affect our consolidated financial statements.

Stock-Based Compensation

We account for stock-based compensation in accordance with the fair value recognition provisions of Canadian GAAP. As such, stock-based compensation expense for equity-settled plans is measured at the grant date based on the fair value of the award and is recognized as an expense over the vesting period. Determining the fair value of such stock-based awards at the grant date requires judgment, including estimating the expected term of stock options, the expected volatility of our stock and expected dividends. In addition, judgment is required to estimate the number of stock-based awards that are expected to be forfeited.

For those awards with performance conditions that determine the number of options or units to which our employees will be entitled, measurement of compensation cost is based on our best estimate of the outcome of the performance conditions. If actual results differ significantly from these estimates, stock-based compensation expense and our results of operations could be materially impacted.

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58 Critical Accounting Estimates

Depreciation and Amortization

We depreciate certain mining and milling assets and pre-stripping costs using the units-of-production method based on the shorter of estimates of reserve or service lives. We have other assets that we depreciate on a straight-line basis over their estimated useful lives.

We perform assessments of our existing assets and depreciable lives in connection with the review of mine operating plans. When we determine that assigned asset lives do not reflect the expected remaining period of benefit, we make prospective changes to their depreciable lives. There are a number of uncertainties inherent in estimating reserve quantities, particularly as they relate to assumptions regarding future prices, the geology of our mines, the mining methods we use and the related costs we incur to develop and mine

our reserves. Changes in these assumptions could result in material adjustments to our reserve estimates, which could result in changes to units-of-production depreciation expense in future periods. Although some degree of variability is expected, we believe the extent of our technical data and operating experience mitigates the potential for significant changes in reserve estimates.

As discussed on Page 57, we review and evaluate our long-lived assets for impairment when events or changes in circumstances indicate that the related carrying amounts may not be recoverable. We believe it is unlikely that revisions to our estimates of reserves would give rise to an impairment of our assets because of their significant size in relation to our asset-carrying values.

Recent Accounting Changes

Recent Accounting Changes and Effective Dates

Refer to Note 3 to the consolidated financial statements for information pertaining to accounting changes effective in 2008, and Notes 2 and 33 to the consolidated financial statements for information on issued accounting pronouncements that will be effective in future years.

Of particular note is the area of International Financial Reporting Standards (IFRSs). In April 2008, the CICA published the exposure draft, “Adopting IFRSs in Canada”. The exposure draft proposes to incorporate the IFRSs into the CICA Accounting Handbook effective for interim and annual financial statements relating to fiscal years beginning on or after January 1, 2011. At this date, publicly accountable enterprises will be required to prepare financial statements in accordance with IFRSs. The exposure draft makes possible the early adoption of IFRSs by Canadian entities.

In June 2008, the Canadian Securities Administrators (CSA) published a staff notice which stated that it is prepared to recommend exemptive relief on a case-by-case basis to permit a domestic Canadian issuer to prepare its financial statements in accordance with IFRSs for a financial period beginning before January 1, 2011. The US Securities and Exchange Commission (SEC) issued a final rule in January 2008 that would allow some foreign private issuers to use IFRSs, without reconciliation to US GAAP, effective for certain 2007 financial statements. In November 2008, the SEC issued a proposed roadmap for the potential mandatory adoption of IFRSs by issuers in the US and a proposed rule that

would allow the optional use of IFRSs by certain qualifying domestic issuers. Provided it is appropriate to do so, we anticipate adopting IFRSs earlier than the CICA’s mandatory adoption deadline of January 1, 2011.

The company has commenced the process to transition from current Canadian GAAP to IFRSs. We have established a project team that is led by finance management, and will include representatives from various areas of the organization as necessary to plan for and achieve a smooth transition to IFRSs. Regular progress reporting to the audit committee of the Board of Directors on the status of the IFRSs implementation project has been instituted.

The implementation project consists of three primary phases, which in certain cases will be in process concurrently as IFRSs are applied to specific areas from start to finish:

• Scoping and diagnostic phase – This phase involves performing a high-level impact assessment to identify key areas that may be impacted by the transition to IFRSs. As a result of these procedures, the potentially affected areas are ranked as high, medium or low priority.

• Impact analysis, evaluation and design phase – In this phase, each area identified from the scoping and diagnostic phase will be addressed in order of descending priority, with project teams established as deemed necessary. This phase involves specification of changes required to existing

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Recent Accounting Changes 59

accounting policies, information systems and business processes, together with an analysis of policy alternatives allowed under IFRSs and development of draft IFRSs financial statement content.

•

Implementation and review phase – This phase includes execution of changes to information systems and business processes, completing formal authorization processes to approve recommended accounting policy changes and training programs for the company’s finance and other staff, as necessary. It will culminate in the collection of financial information necessary to compile IFRSs-compliant financial statements, embedding IFRSs in business processes, elimination of any unnecessary data collection processes and audit committee approval of IFRSs financial statements. Implementation also involves delivery of further training to staff as revised systems begin to take effect.

The company completed the scoping and diagnostic phase in June 2008, and is now in the impact analysis, evaluation and design phase. Our analysis of IFRSs and comparison with currently applied accounting principles have identified a number of differences. Many of the differences identified are not expected to have a material impact on the reported results and financial position. However, there may be significant changes following from the IFRSs accounting principles and provisions for first-time adoption of IFRSs on certain areas. The company has not yet determined the full accounting effects of adopting IFRSs. However, we do not expect the adoption of IFRSs to impact the underlying cash flows or profitability trends of our operating performance.

Most adjustments required on transition to IFRSs will be made, retrospectively, against opening retained earnings as of the date of the first comparative balance sheet presented based on standards applicable at that time. Transitional adjustments relating to those standards where comparative figures are not required to be restated will only be made as of the first day of the year of adoption.

IFRS 1, “First-Time Adoption of International Financial Reporting Standards”, provides entities adopting IFRSs for the first time with a number of optional exemptions and mandatory exceptions, in certain areas, to the general requirement for full retrospective application of IFRSs. The company is analyzing the various accounting policy choices available and will implement those determined to be most appropriate in our circumstances.

Set out below are the key areas where changes in accounting policies are expected that may impact the company’s consolidated financial statements. The list and comments should not be regarded as a complete list of

changes that will result from transition to IFRSs. It is intended to highlight those areas we believe to be most significant; however, analysis of changes is still in process and not all decisions have been made where choices of accounting policies are available. We note that the standard-setting bodies that promulgate Canadian GAAP and IFRSs have significant ongoing projects that could affect the ultimate differences between Canadian GAAP and IFRSs and their impact on the company’s consolidated financial statements in future years. The future impacts of IFRSs will also depend on the particular circumstances prevailing in those years. The differences described below are those existing based on Canadian GAAP and IFRSs at year-end. At this stage, the company is not able to reliably quantify the impacts expected on our consolidated financial statements for these differences.

Impairment of Assets

Canadian GAAP generally uses a two-step approach to impairment testing: first comparing asset carrying values with undiscounted future cash flows to determine whether impairment exists; and then measuring any impairment by comparing asset carrying values with fair values. International Accounting Standard (IAS) 36, “Impairment of Assets”, uses a one-step approach for both testing for and measurement of impairment, with asset carrying values compared directly with the higher of fair value less costs to sell and value in use (which uses discounted future cash flows). This may potentially result in more writedowns where carrying values of assets were previously supported under Canadian GAAP on an undiscounted cash flow basis, but could not be supported on a discounted cash flow basis.

However, the extent of any new writedowns may be partially offset by the requirement under IAS 36 to reverse any previous impairment losses where circumstances have changed such that the impairments have been reduced. Canadian GAAP prohibits reversal of impairment losses.

Employee Benefits

IAS 19, “Employee Benefits”, requires the past service cost element of defined benefit plans to be expensed on an accelerated basis, with vested past service costs expensed immediately and unvested past service costs recognized on a straight-line basis until the benefits become vested. Under Canadian GAAP, past service costs are generally amortized on a straight-line basis over the average remaining service period of active employees expected under the plan. In addition, actuarial gains and losses are permitted under IAS 19 to be recognized directly in equity rather than through profit or loss. IFRS 1, “First-Time Adoption of International Financial Reporting

POTASHCORP 2008 FINANCIAL REVIEW

60 Recent Accounting Changes

Standards”, also provides an option to recognize all cumulative actuarial gains and losses existing at the date of transition immediately in retained earnings.

Share-Based Payments

IFRS 2, “Share-Based Payments”, requires that cash-settled share-based payments to employees be measured (both initially and at each reporting date) based on fair values of the awards. Canadian GAAP on the other hand requires that such payments be measured based on intrinsic values of the awards. This difference is expected to impact the accounting measurement of some of our cash-settled employee incentive plans, such as our performance unit incentive plan.

Provisions (Including Asset Retirement Obligations)

IAS 37, “Provisions, Contingent Liabilities and Contingent Assets”, requires a provision to be recognized when: there is a present obligation as a result of a past transaction or event; it is probable that an outflow of resources will be required to settle the obligation; and a reliable estimate can be made of the obligation. “Probable” in this context means more likely than not. Under Canadian GAAP, the criterion for recognition in the financial statements is “likely”, which is a higher threshold than “probable”. Therefore, it is

possible that there may be some contingent liabilities which would meet the recognition criteria under IFRSs that were not recognized under Canadian GAAP.

Other differences between IFRSs and Canadian GAAP exist in relation to the measurement of provisions, such as the methodology for determining the best estimate where there is a range of equally possible outcomes (IFRSs uses the mid-point of the range, whereas Canadian GAAP uses the low end of the range), and the requirement under IFRSs for provisions to be discounted where material.

Income Taxes

IAS 12, “Income Taxes”, currently requires income tax to be charged (or credited) directly to equity (OCI) if the tax relates to items that are credited (or charged), in the same or a different period, directly to equity. Under Canadian GAAP, only the income tax relating to items credited (or charged) directly to equity in the same period is charged (or credited) directly to equity. This change may result in some income tax effects being recognized directly in equity rather than through net income or loss. This GAAP difference is currently being addressed as part of the International Accounting Standards Board’s project on Income Tax.

Forward-Looking Statements

This 2008 Financial Review, including the “Key Earnings Sensitivities” and “Outlook” sections of Management’s Discussion & Analysis of Financial Condition and Results of Operations, contains forward-looking statements. These statements can be identified by expressions of belief, expectation or intention, as well as those statements that are not historical fact. These statements are based on certain factors and assumptions as set forth in this 2008 Financial Review, including foreign exchange rates, expected growth, results of operations, performance, business prospects and opportunities, and effective income tax rates. While the company considers these factors and assumptions to be reasonable based on information currently available, they may prove to be incorrect. Several factors could cause actual results to differ materially from those in the forward-looking statements, including, but not limited to: fluctuations in supply and demand in fertilizer, sulfur, transportation and petrochemical markets; changes in competitive pressures, including pricing pressures; the current global financial crisis and conditions and changes in credit markets; the results of negotiations with China

and India; timing and amount of capital expenditures; risks associated with natural gas and other hedging activities; changes in capital markets and corresponding effects on the company’s investments; changes in currency and exchange rates; unexpected geological or environmental conditions, including water inflow; strikes or other forms of work stoppage or slowdowns; changes in, and the effects of, government policy and regulations; and earnings, exchange rates and the decisions of taxing authorities, all of which could affect our effective tax rates. Additional risks and uncertainties can be found in our Form 10-K for the fiscal year ended December 31, 2008 under the captions “Forward-Looking Statements” and “Item 1A – Risk Factors” and in our filings with the US Securities and Exchange Commission and the Canadian provincial securities commissions. Forward-looking statements are given only as at the date of this report and the company disclaims any obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

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11 Year Report 61

FINANCIAL DATA (in millions of US dollars except share, per-share and percentage amounts)
	2008		2007	2006	2005	2004	2003		2002	2001	2000		1999		1998
Sales Potash	4,068.1		1,797.2	1,227.5	1,341.1	1,056.1	758.7		669.0	655.2	710.3		688.6		663.3
Phosphate	2,880.7		1,637.1	1,255.1	1,137.3	977.9	883.9		714.0	732.1	868.1		922.3		1,099.5
Nitrogen	2,497.7		1,799.9	1,284.1	1,368.8	1,210.4	1,156.4		841.4	993.5	964.5		744.7		844.2
Total sales	9,446.5		5,234.2	3,766.7	3,847.2	3,244.4	2,799.0		2,224.4	2,380.8	2,542.9		2,355.6		2,607.0
5-year CAGR 1	27.5%
10-year CAGR 1	13.7%
Gross margin
Potash	3,055.5		912.3	561.1	707.4	422.8	203.7		218.0	248.1	307.4		304.2		319.2
Phosphate	1,114.5		432.8	125.3	98.9	15.8	(16.5	)	41.9	64.5	76.8		130.5		230.1
Nitrogen	737.4		536.1	315.6	318.7	242.8	193.2		47.4	94.7	104.7		(21.4	)	64.8
Total gross margin	4,907.4		1,881.2	1,002.0	1,125.0	681.4	380.4		307.3	407.3	488.9		413.3		614.1
5-year CAGR 1	66.8%
10-year CAGR 1	23.1%
Depreciation and amortization
Potash	82.0		71.7	58.3	64.5	66.4	52.4		46.3	34.1	40.9		37.2		36.2
Phosphate	140.5		121.1	94.6	95.6	84.4	78.9		76.8	72.0	68.1		61.8		59.1
Nitrogen	97.1		88.2	77.6	72.0	79.7	86.4		88.0	72.8	66.1		83.5		86.7
Other	7.9		10.3	11.9	10.3	9.5	9.7		8.0	6.8	11.9		8.6		8.9
Total depreciation and amortization	327.5		291.3	242.4	242.4	240.0	227.4		219.1	185.7	187.0		191.1		190.9
Operating income (loss)	4,635.1		1,588.5	875.5	892.6	514.3	(55.6	)	166.9	269.7	326.8		(353.0	)	442.3
Net income (loss)* 2	3,495.2		1,103.6	631.8	542.9	298.6	(126.3	)	53.6	121.2	198.0		(412.0	)	261.0
6-year CAGR 1,3	100.6%
10-year CAGR 1	29.6%
Net income (loss) per share — basic	11.37		3.50	2.03	1.67	0.92	(0.40	)	0.17	0.39	0.63		(1.27	)	0.80
Net income (loss) per share — diluted	11.01		3.40	1.98	1.63	0.90	(0.40	)	0.17	0.39	0.63		(1.27	)	0.80
Dividends per share	0.40		0.35	0.20	0.20	0.18	0.17		0.17	0.17	0.17		0.17		0.16
Cash provided by operating activities	3,013.2		1,688.9	696.8	865.1	658.3	385.5		316.4	75.7	480.4		343.6		578.0
Working capital	(348.6	)	809.4	206.7	14.7	539.9	176.1		8.6	47.1	(148.7	)	(104.8	)	329.2
Total assets	10,248.8		9,716.6	6,217.0	5,357.9	5,126.8	4,567.3		4,685.6	4,597.3	4,145.7		3,916.8		4,534.3
Long-term debt obligations 4	1,758.0		1,358.3	1,357.1	1,257.6	1,258.6	1,268.6		1,019.9	1,013.7	413.7		437.0		933.3
Shareholders’ equity	4,588.9		6,018.7	2,780.3	2,132.5	2,385.6	1,973.8		2,092.5	2,086.5	2,012.1		1,962.4		2,453.8
Shares outstanding at the end of the year (thousands) 5	295,201		316,411	314,403	310,782	331,893	318,672		312,468	311,712	311,046		322,164		325,464
OPERATING DATA (thousands)
	2008		2007	2006	2005	2004	2003		2002	2001	2000		1999		1998
Employees at year-end (actual #)	5,301		5,003	4,871	4,879	4,906	4,904		5,199	4,997	5,338		5,498		5,744
Potash production (KCI) tonnage	8,697		9,159	7,018	8,816	7,914	7,094		6,447	6,128	7,149		6,388		6,995
Phosphate production (P2O5) tonnage	1,942		2,164	2,108	2,097	1,962	1,861		1,512	1,573	2,042		2,124		2,363
Nitrogen production (N) tonnage	2,780		2,986	2,579	2,600	2,558	2,619		2,990	3,032	2,706		3,138		3,121
Potash sales — manufactured KCI tonnes	8,547		9,400	7,196	8,164	8,276	7,083		6,327	6,243	6,912		6,474		6,283
Phosphate sales — manufactured product tonnes	3,322		4,151	3,970	3,860	3,675	3,560		2,809	2,987	3,861		4,002		4,627
Nitrogen sales — manufactured product tonnes	5,042		5,731	4,675	4,843	4,734	5,367		5,911	5,753	5,864		6,271		6,032

1	Compound annual growth rate expressed as a percentage.
2	There were no extraordinary items or discontinued operations in any of the accounting periods.
3	2003 result was negative, therefore six-year CAGR used.
4	Represents long-term debt obligations and does not include unamortized costs. (See Note 13 to the company’s consolidated financial statements for description of such amounts.)
5	Common shares were repurchased in 2008, 2005, 2000 and 1999 in the amounts of 22.849 million, 28.500 million, 6.210 million and 1.890 million, respectively.
The consolidated financial statements of the company have been prepared in accordance with Canadian generally accepted accounting principles. These principles differ in certain material respects from those applicable in the United States. (See Note 33 to the company’s consolidated financial statements.) Certain of the prior years’ figures have been reclassified to conform with the current year’s presentation.

*Additional Information:	After-tax effects of items affecting net income	2008			2007		2006		2004			2003		2000			1999
	Impairment of property, plant and equipment	$	—		$	—	$	4.5	$	—		$	89.7	$	14.5		$	513.8
	Impairment of auction rate securities		66.6			18.6		—		—			—		—			—
	Plant shutdown and closure		—			—		—		6.2			113.5		—			24.1
	Office consolidation		—			—		—		—			—		3.3			9.2
	Gain on sale of assets		(15.6	)		—		—		(37.0	)		—		(16.3	)		—
	Total after-tax effects on net income	$	51.0		$	18.6	$	4.5	$	(30.8	)	$	203.2	$	1.5		$	547.1

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62 Financial Performance Indicators

SUMMARY (in millions of US dollars except share, per-share and percentage amounts)
	2008		2007		2006		2005		2004		2003		2002		2001		2000		1999		1998
Net income (loss) 1	3,495.2		1,103.6		631.8		542.9		298.6		(126.3	)	53.6		121.2		198.0		(412.0	)	261.0
Net income (loss) per share — diluted	11.01		3.40		1.98		1.63		0.90		(0.40	)	0.17		0.39		0.63		(1.27	)	0.80
EBITDA 2	4,962.6		1,879.8		1,117.9		1,135.0		754.3		171.8		386.0		455.4		513.8		(161.9	)	633.2
Cash flow prior to working capital changes 3	3,780.7		1,525.3		940.8		860.3		538.3		368.5		289.2		345.8		405.1		319.6		556.2
Cash provided by operating activities	3,013.2		1,688.9		696.8		865.1		658.3		385.5		316.4		75.7		480.4		343.6		578.0
Return on assets	34.1%		11.4%		10.2%		10.1%		5.8%		(2.8%	)	1.1%		2.6%		4.8%		(10.5%	)	5.8%
Cash flow return 4	43.5%		20.2%		14.5%		14.7%		11.1%		2.9%		6.3%		8.5%		10.5%		(3.7%	)	12.6%
Weighted average cost of capital	12.0%		10.0%		8.8%		8.3%		8.4%		7.3%		7.3%		7.7%		8.7%		8.7%		8.3%
Total shareholder return	(48.9%	)	201.6%		79.6%		(2.7%	)	93.4%		37.5%		5.2%		(20.4%	)	64.6%		(23.0%	)	(21.9%	)
Total debt to capital	40.0%		19.2%		40.8%		41.5%		36.4%		42.3%		41.7%		42.1%		31.1%		31.9%		29.5%
Net debt to capital 5	37.8%		10.6%		36.4%		39.9%		27.5%		42.2%		41.3%		41.3%		28.7%		30.8%		28.1%
RECONCILIATIONS AND CALCULATIONS (in millions of US dollars except share, per-share and tonnage amounts)
	2008		2007		2006		2005		2004		2003		2002		2001		2000		1999		1998
Net income (loss) 1	3,495.2		1,103.6		631.8		542.9		298.6		(126.3	)	53.6		121.2		198.0		(412.0	)	261.0
Income taxes	1,077.1		416.2		158.1		267.4		131.7		(20.6	)	30.2		68.2		67.2		7.5		117.5
Interest expense	62.8		68.7		85.6		82.3		84.0		91.3		83.1		80.3		61.6		51.5		63.8
Depreciation and amortization	327.5		291.3		242.4		242.4		240.0		227.4		219.1		185.7		187.0		191.1		190.9
EBITDA 2	4,962.6		1,879.8		1,117.9		1,135.0		754.3		171.8		386.0		455.4		513.8		(161.9	)	633.2
5-year CAGR 7	95.9%
10-year CAGR 7	22.9%
Cash flow prior to working capital changes 3	3,780.7		1,525.3		940.8		860.3		538.3		368.5		289.2		345.8		405.1		319.6		556.2
Accounts receivable	(593.7	)	(154.6	)	11.0		(107.6	)	(51.9	)	(39.5	)	(11.1	)	69.9		(52.2	)	33.8		48.8
Inventories	(324.4	)	60.3		13.9		(119.9	)	(10.5	)	11.8		(18.2	)	(76.1	)	(27.4	)	(16.1	)	(7.9	)
Prepaid expenses and other current assets	(23.7	)	7.0		0.2		(5.8	)	(6.3	)	11.4		(3.9	)	2.3		(3.1	)	3.2		(16.6	)
Accounts payable and accrued charges	174.3		250.9		(269.1	)	238.1		188.7		33.3		60.4		(266.2	)	158.0		3.1		(2.5	)
Changes in non-cash operating working capital	(767.5	)	163.6		(244.0	)	4.8		120.0		17.0		27.2		(270.1	)	75.3		24.0		21.8
Cash provided by operating activities	3,013.2		1,688.9		696.8		865.1		658.3		385.5		316.4		75.7		480.4		343.6		578.0
Net income (loss)	3,495.2		1,103.6		631.8		542.9		298.6		(126.3	)	53.6		121.2		198.0		(412.0	)	261.0
Total assets	10,248.8		9,716.6		6,217.0		5,357.9		5,126.8		4,567.3		4,685.6		4,597.3		4,145.7		3,916.8		4,534.3
Return on assets	34.1%		11.4%		10.2%		10.1%		5.8%		(2.8%	)	1.1		2.6%		4.8%		(10.5%	)	5.8
Net income (loss)	3,495.2		1,103.6		631.8		542.9		298.6		(126.3	)	53.6		121.2		198.0		(412.0	)	261.0
Income taxes	1,077.1		416.2		158.1		267.4		131.7		(20.6	)	30.2		68.2		67.2		7.5		117.5
Change in unrealized loss (gain) on derivatives included in net income	68.8		(16.9	)	–		–		–		–		–		–		–		–		–
Interest expense	62.8		68.7		85.6		82.3		84.0		91.3		83.1		80.3		61.6		51.5		63.8
Current income taxes	(994.9	)	(296.6	)	(108.1	)	(227.3	)	(105.4	)	—		(24.2	)	(20.5	)	(32.6	)	(14.7	)	(19.4	)
Depreciation and amortization	327.5		291.3		242.4		242.4		240.0		227.4		219.1		185.7		187.0		191.1		190.9
Cash flow 4	4,036.5		1,566.3		1,009.8		907.7		648.9		171.8		361.8		434.9		481.2		(176.6	)	613.8
Total assets	10,248.8		9,716.6		6,217.0		5,357.9		5,126.8		4,567.3		4,685.6		4,597.3		4,145.7		3,916.8		4,534.3
Cash and cash equivalents	(276.8	)	(719.5	)	(325.7	)	(93.9	)	(458.9	)	(4.7	)	(24.5	)	(45.3	)	(100.0	)	(44.0	)	(68.0	)
Fair value of derivative assets	(17.9	)	(135.0	)	—		—		—		—		—		—		—		—		—
Accumulated depreciation of property, plant and equipment	2,526.6		2,280.7		2,073.8		1,927.7		1,754.9		1,576.2		1,454.7		1,274.3		1,111.8		951.0		812.4
Net unrealized gains on available-for-sale securities	(885.7	)	(2,284.1	)	—		—		—		—		—		—		—		—		—
Accumulated amortization of other assets and intangible assets	73.4		59.0		72.6		66.4		65.1		70.1		59.1		42.0		38.0		42.0		49.2
Accumulated amortization of goodwill	7.3		7.3		7.3		7.3		7.3		7.3		7.3		7.3		4.3		1.4		27.4
Accounts payable and accrued charges	(1,183.6	)	(911.5	)	(545.2	)	(842.7	)	(599.9	)	(380.3	)	(347.0	)	(271.4	)	(525.9	)	(349.1	)	(349.7	)
Adjusted assets	10,492.1		8,013.5		7,499.8		6,422.7		5,895.3		5,835.9		5,835.2		5,604.2		4,673.9		4,518.1		5,005.6
Average adjusted assets	9,252.8		7,756.7		6,961.3		6,159.0		5,865.6		5,835.6		5,719.7		5,139.1		4,596.0		4,761.9		4,884.4
Cash flow return 4	43.6%		20.2%		14.5%		14.7%		11.1%		2.9%		6.3%		8.5%		10.5%		(3.7%	)	12.6%

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Financial Performance Indicators 63

RECONCILIATIONS AND CALCULATIONS continued	(in millions of US dollars except share, per-share and tonnage amounts)
		2008		2007		2006		2005		2004		2003		2002		2001		2000		1999		1998
Weighted average cost of capital		12.0%		10.0%		8.8%		8.3%		8.4%		7.3%		7.3%		7.7%		8.7%		8.7%		8.3%
End of year closing price (dollars)		73.22		143.96		47.83		26.74		27.69		14.41		10.60		10.23		13.05		8.03		10.65
Beginning of year opening price (dollars)		143.96		47.83		26.74		27.69		14.41		10.60		10.23		13.05		8.03		10.65		13.83
Change in share price (dollars)		(70.74	)	96.13		21.09		(0.95	)	13.28		3.81		0.37		(2.82	)	5.02		(2.62	)	(3.18	)
Dividends paid per share (dollars)		0.40		0.30		0.20		0.20		0.18		0.17		0.17		0.17		0.17		0.17		0.16
Total shareholder return		(48.9%	)	201.6%		79.6%		(2.7%	)	93.4%		37.5%		5.3%		(20.3%	)	64.6%		(23.0%	)	(21.8%	)
Short-term debt		1,323.9		90.0		157.9		252.2		93.5		176.2		473.0		501.1		488.8		474.5		94.9
Current portion of long-term debt		0.2		0.2		400.4		1.2		10.3		1.3		3.4		–		5.7		7.4		0.4
Long-term debt		1,739.5		1,339.4		1,357.1		1,257.6		1,258.6		1,268.6		1,019.9		1,013.7		413.7		437.0		933.3
Total debt		3,063.6		1,429.6		1,915.4		1,511.0		1,362.4		1,446.1		1,496.3		1,514.8		908.2		918.9		1,028.6
Cash and cash equivalents		(276.8	)	(719.5	)	(325.7	)	(93.9	)	(458.9	)	(4.7	)	(24.5	)	(45.3	)	(100.0	)	(44.0	)	(68.0	)
Net debt 5		2,786.8		710.1		1,589.7		1,417.1		903.5		1,441.4		1,471.8		1,469.5		808.2		874.9		960.6
Shareholders’ equity		4,588.9		6,018.7		2,780.3		2,132.5		2,385.6		1,973.8		2,092.5		2,086.5		2,012.1		1,962.4		2,453.8
Total debt to capital		40.0%		19.2%		40.8%		41.5%		36.4%		42.3%		41.7%		42.1%		31.1%		31.9%		29.5%
Net debt to capital 5		37.8%		10.6%		36.4%		39.9%		27.5%		42.2%		41.3%		41.3%		28.7%		30.8%		28.1%
Current assets		2,267.2		1,811.3		1,310.2		1,110.8		1,243.6		733.9		832.0		819.6		871.7		726.2		774.2
Current liabilities		(2,615.8	)	(1,001.9	)	(1,103.5	)	(1,096.1	)	(703.7	)	(557.8	)	(823.4	)	(772.5	)	(1,020.4	)	(831.0	)	(445.0	)
Working capital		(348.6	)	809.4		206.7		14.7		539.9		176.1		8.6		47.1		(148.7	)	(104.8	)	329.2
Cash and cash equivalents		(276.8	)	(719.5	)	(325.7	)	(93.9	)	(458.9	)	(4.7	)	(24.5	)	(45.3	)	(100.0	)	(44.0	)	(68.0	)
Short-term debt		1,323.9		90.0		157.9		252.2		93.5		176.2		473.0		501.1		488.8		474.5		94.9
Current portion of long-term debt		0.2		0.2		400.4		1.2		10.3		1.3		3.4		–		5.7		7.4		0.4
Non-cash operating working capital		698.7		180.1		439.3		174.2		184.8		348.9		460.5		502.9		245.8		333.1		356.5
Sales		9,446.5		5,234.2		3,766.7		3,847.2		3,244.4		2,799.0		2,224.4		2,380.8		2,542.9		2,355.6		2,607.0
Freight		324.9		346.1		255.8		249.7		238.7		234.5		215.2		216.7		222.1		212.5		216.5
Transportation and distribution		132.4		124.1		134.1		121.9		104.3		98.7		80.5		83.3		83.1		77.0		77.9
Net sales 6		8,989.2		4,764.0		3,376.8		3,475.6		2,901.4		2,465.8		1,928.7		2,080.8		2,237.7		2,066.1		2,312.6
Potash net sales North American		1,307.5		656.9		470.5		495.6		347.5		230.6		215.3		232.1		237.8		237.4		227.6
Offshore		2,526.8		909.6		576.0		668.3		504.6		336.2		300.7		293.4		340.9		325.9		317.9
Miscellaneous and purchased product		24.4		13.5		11.7		13.0		42.7		52.3		28.5		6.3		3.4		2.3		2.9
Total		3,858.7		1,580.0		1,058.2		1,176.9		894.8		619.1		544.5		531.8		582.1		565.6		548.4
Potash sales (thousands KCl tonnes) North American		2,962		3,471		2,785		3,144		3,246		2,870		2,780		2,894		2,939		2,871		2,702
Offshore		5,585		5,929		4,411		5,020		5,030		4,213		3,547		3,349		3,973		3,603		3,581
Total		8,547		9,400		7,196		8,164		8,276		7,083		6,327		6,243		6,912		6,474		6,283
Weighted average shares outstanding
Basic (thousands)		307,480		315,641		311,880		325,704		323,901		313,380		312,126		311,274		314,460		325,380		325,062
Diluted (thousands)		317,438		324,308		318,689		333,234		332,217		313,380		313,896		313,116		316,218		325,380		327,009

Certain of the prior years’ figures have been reclassified to conform with the current year’s presentation.

See footnotes on Page 64

POTASHCORP 2008 FINANCIAL REVIEW

64 Financial Performance Indicators

Non-GAAP Financial Measures and Footnotes to Reconciliations and Calculations

(in millions of US dollars except share, per-share and tonnage amounts)

The following information is included for convenience only. Generally, a non-GAAP financial measure is a numerical measure of a company’s performance, financial position or cash flows that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with generally accepted accounting principles (“GAAP”). EBITDA, adjusted EBITDA, cash flow prior to working capital changes, cash flow, cash flow return, net debt, net debt to capital and consolidated net sales are not measures of financial performance (nor do they have standardized meanings) under either Canadian GAAP or US GAAP. In evaluating these measures, investors should consider that the methodology applied in calculating such measures may differ among companies and analysts. The company uses both GAAP and certain non-GAAP measures to assess performance. Management believes these non-GAAP measures provide useful supplemental information to investors in order that they may evaluate PotashCorp’s financial performance using the same measures as management. Management believes that, as a result, the investor is afforded greater transparency in assessing the financial performance of the company. These non-GAAP financial measures should not be considered as a substitute for, nor superior to, measures of financial performance prepared in accordance with GAAP.

1 After-tax effects of items affecting net income are as follows:

	2008			2007		2006		2004			2003		2000			1999
Impairment of property, plant and equipment	$	–		$	–	$	4.5	$	–		$	89.7	$	14.5		$	513.8
Impairment of auction rate securities		66.6			18.6		–		–			–		–			–
Plant shutdown and closure		–			–		–		6.2			113.5		–			24.1
Office consolidation		–			–		–		–			–		3.3			9.2
Gain on sale of assets		(15.6	)		–		–		(37.0	)		–		(16.3	)		–
Total after-tax effects on net income	$	51.0		$	18.6	$	4.5	$	(30.8	)	$	203.2	$	1.5		$	547.1

2

PotashCorp uses EBITDA and adjusted EBITDA as supplemental financial measures of its operational performance. Management believes EBITDA and adjusted EBITDA to be important measures as they exclude the effects of items which primarily reflect the impact of long-term investment decisions, rather than the performance of the company’s day-to-day operations. As compared to net income (loss) according to GAAP, these measures are limited in that they do not reflect the periodic costs of certain capitalized tangible and intangible assets used in generating revenues in the company’s business, or the non-cash charges associated with impairments and shutdown-related costs, or gain on sale of long-term investments. Management evaluates such items through other financial measures such as capital expenditures and cash flow provided by operating activities. The company believes that these measurements are useful to measure a company’s ability to service debt and to meet other payment obligations or as a valuation measurement.

EBITDA has not been adjusted for the non-cash effects of the following items:

	2008			2007		2006		2004			2003		2000			1999
Impairment of property, plant and equipment	$	–		$	–	$	6.3	$	–		$	132.4	$	14.5		$	530.4
Impairment of auction-rate securities		88.8			26.5		–		–			–		–			–
Plant shutdown and closure		–			–		–		6.2			113.5		–			24.1
Office consolidation		–			–		–		–			–		–			9.2
Gain on sale of assets		(21.4	)		–		–		(37.0	)		–		(20.1	)		–
Total non-cash items included in EBITDA		67.4			26.5		6.3		(30.8	)		245.9		(5.6	)		563.7
EBITDA		4,962.6			1,879.8		1,117.9		754.3			171.8		513.8			(161.9	)
Adjusted EBITDA	$	5,030.0		$	1,906.3	$	1,124.2	$	723.5		$	417.7	$	508.2		$	401.8

3 Cash flow prior to working capital changes is defined as the cash provided by operating activities, exclusive of changes in non-cash operating working capital. PotashCorp uses cash flow prior to working capital changes as a supplemental financial measure in its evaluation of liquidity. Management believes that adjusting principally for the swings in non-cash working capital items due to seasonality assists management in making long-term liquidity assessments. The company also believes that this measurement is useful as a measure of liquidity or as a valuation measurement.

4	PotashCorp uses cash flow and cash flow return as supplemental measures to evaluate the performance of the company’s assets in terms of the cash flow they have generated. Calculated on the total cost basis of the company’s assets rather than on the depreciated value, these measures reflect cash returned on the total investment outlay. The company believes these measures are one of the best predictors of shareholder value. As such, management believes this information to be useful to investors.
5	Management believes that net debt and net-debt-to-capital ratio are useful to investors because they are helpful in determining the company’s leverage. It also believes that, since the company has the ability to and may elect to use a portion of cash and cash equivalents to retire debt or to incur additional expenditures without increasing debt, it is appropriate to apply cash and cash equivalents to debt in calculating net debt and net debt to capital. PotashCorp believes that this measurement is useful as a financial leverage measure.
6	Management includes net sales in its segment disclosures in the consolidated financial statements pursuant to Canadian GAAP, which requires segmentation based upon the company’s internal organization and reporting of revenue and profit measures derived from internal accounting methods. Net sales (and related per-tonne amounts and other ratios) are primary revenue measures it uses and reviews in making decisions about operating matters on a business segment basis. These decisions include assessments about potash, nitrogen and phosphate performance and the resources to be allocated to these segments. It also uses net sales (and related per-tonne amounts and other ratios) for business segment planning and monthly forecasting. Net sales are calculated as sales revenues less freight, transportation and distribution expenses. Net sales presented on a consolidated basis rather than by business segment is considered a non-GAAP financial measure.
7	Compound annual growth rate expressed as a percentage.

Financial Terms

Adjusted EBITDA = EBITDA + impairment charges + non-cash shutdown / closure-related costs and office consolidation costs – gain on sale of assets

Average adjusted assets = simple average of the current year’s adjusted assets and the previous year’s adjusted assets, except when a material acquisition occurred, in which case the weighted average rather than the simple average is calculated; the last material acquisition was in 1997

Cash flow = net income or loss + income taxes + change in unrealized loss/(gain) on derivatives included in net income + interest – current income taxes + depreciation and amortization

Cash flow return = cash flow / average (total assets – cash and cash equivalents – fair value of derivative assets + accumulated depreciation and amortization – net unrealized gains on available-for-sale securities – accounts payable and accrued charges)

Current income taxes = income tax expense (recovery) – provision for (recovery of) future income tax

EBITDA = earnings (net income or loss) before interest, taxes, depreciation and amortization

Market value of total capital = market value of total debt – cash and cash equivalents + market value of equity

Net debt to capital = (total debt – cash and cash equivalents) / (total debt – cash and cash equivalents + total shareholders’ equity)

Return on assets = net income or loss / total assets

Total debt to capital = total debt / (total debt + total shareholders’ equity)

Total shareholder return = (change in market price per common share + dividends per share) / beginning market price per common share

Weighted average cost of capital = simple quarterly average of ((market value of total debt – cash and cash equivalents) / market value of total capital x after-tax cost of debt + market value of equity / market value of total capital x cost of equity)

POTASHCORP 2008 FINANCIAL REVIEW

Management’s Responsibility 65

MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL REPORTING

Management’s Report on Financial Statements

The accompanying consolidated financial statements and related financial information are the responsibility of PotashCorp management and have been prepared in accordance with accounting principles generally accepted in Canada and include amounts based on estimates and judgments. Financial information included elsewhere in this report is consistent with the consolidated financial statements.

Our independent registered chartered accountants, Deloitte & Touche LLP, provide an audit of the consolidated financial statements, as reflected in their report for 2008 included on Page 67.

The consolidated financial statements are approved by the Board of Directors on the recommendation of the audit committee.

The audit committee of the Board of Directors is composed of directors who are not officers or employees of PotashCorp. PotashCorp’s interim condensed consolidated financial statements and MD&A are discussed and analyzed by the audit committee with management and the independent registered chartered accountants before such information is approved by the committee and submitted to securities commissions or other regulatory authorities. The annual consolidated financial statements and MD&A are also analyzed by the audit committee together with management and the independent registered chartered accountants and are approved by the board.

In addition, the audit committee has the duty to review critical accounting policies and significant estimates and judgments underlying the consolidated financial statements as presented by management, and to approve the fees of the independent registered chartered accountants.

Deloitte & Touche LLP, the independent registered chartered accountants, have full and independent access to the audit committee to discuss their audit and related matters.

Management’s Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining an adequate system of internal control over financial reporting. During the past year, we have directed efforts to improve and document our internal control over financial reporting. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external reporting purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Management has assessed the effectiveness of the company’s internal control over financial reporting based on the framework in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and concluded that the company’s internal control over financial reporting was effective as of December 31, 2008. The effectiveness of the company’s internal control over financial reporting as of December 31, 2008 has been audited by Deloitte & Touche LLP, as reflected in their report for 2008 included on Page 66.

W. Doyle	W. Brownlee
President and	Executive Vice President and
Chief Executive Officer	Chief Financial Officer
February 20, 2009

Keyword Online: Financials
POTASHCORP 2008 FINANCIAL REVIEW

66 Accountants’ Reports

REPORT OF INDEPENDENT REGISTERED CHARTERED ACCOUNTANTS

To the Board of Directors and Shareholders of Potash Corporation of Saskatchewan Inc.

We have audited the internal control over financial reporting of Potash Corporation of Saskatchewan Inc. and subsidiaries (the “Company”) as of December 31, 2008, based on the criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2008, based on the criteria established in Internal Control - - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial statement schedules of the Company as of and for the year ended December 31, 2008 and our report dated February 20, 2009 expressed an unqualified opinion on these consolidated financial statements (which includes an explanatory paragraph referring to changes in the Company’s accounting for inventories).

Independent Registered Chartered Accountants
Saskatoon, Canada

February 20, 2009

POTASHCORP 2008 FINANCIAL REVIEW Keyword Online : Financials                

Accountants’ Reports 67

REPORT OF INDEPENDENT REGISTERED CHARTERED ACCOUNTANTS

To the Board of Directors and Shareholders of Potash Corporation of Saskatchewan Inc.

We have audited the accompanying consolidated statements of financial position of Potash Corporation of Saskatchewan Inc. and subsidiaries (the “Company”) as of December 31, 2008 and 2007, the related consolidated statements of operations and retained earnings and cash flow for each of the three years in the period ended December 31, 2008, and the related consolidated statements of comprehensive (loss) income for the years ended December 31, 2008 and 2007, and the related consolidated statements of accumulated other comprehensive income as of December 31, 2008 and 2007. 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 the standards of the Public Company Accounting Oversight Board (United States). 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, such consolidated financial statements present fairly, in all material respects, the financial position of Potash Corporation of Saskatchewan Inc. and subsidiaries as of December 31, 2008 and 2007, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2008, in conformity with Canadian generally accepted accounting principles.

As discussed in Note 2 to the consolidated financial statements, in 2008 the Company changed its method of accounting for inventories to conform to Canadian Institute of Chartered Accountants Handbook Section 3031 Inventories.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2008, based on the criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 20, 2009 expressed an unqualified opinion on the Company’s internal control over financial reporting.

Independent Registered Chartered Accountants
Saskatoon, Canada

February 20, 2009

POTASHCORP 2008 FINANCIAL REVIEW

68 Consolidated Financial Statements

Consolidated Statements of Financial Position
As at December 31		in millions of US dollars except share amounts
Notes				2008		2007
	Assets
	Current assets
	Cash and cash equivalents		$	276.8	$	719.5
Note 3	Accounts receivable			1,189.9		596.2
Note 4	Inventories			714.9		428.1
Note 5	Prepaid expenses and other current assets			79.2		36.7
Note 6	Current portion of derivative instrument assets			6.4		30.8
				2,267.2		1,811.3
Note 6	Derivative instrument assets			11.5		104.2
Note 7	Property, plant and equipment			4,812.2		3,887.4
Note 8	Investments			2,750.7		3,581.5
Note 9	Other assets			288.7		210.7
Note 10	Intangible assets			21.5		24.5
Note 10	Goodwill			97.0		97.0
			$	10,248.8	$	9,716.6
	Liabilities
	Current liabilities
Note 11, 13	Short-term debt and current portion of long-term debt		$	1,324.1	$	90.2
Note 12	Accounts payable and accrued charges			1,183.6		911.5
Note 6	Current portion of derivative instrument liabilities			108.1		0.2
				2,615.8		1,001.9
Note 13	Long-term debt			1,739.5		1,339.4
Note 6	Derivative instrument liabilities			120.4		–
Note 25	Future income tax liability			794.2		988.1
Note 15	Accrued pension and other post-retirement benefits			253.4		244.8
Note 16	Accrued environmental costs and asset retirement obligations			133.4		121.0
	Other non-current liabilities and deferred credits			3.2		2.7
				5,659.9		3,697.9
Note 14	Commitments
Note 30	Contingencies
Note 31	Guarantees
	Shareholders’ Equity
Note 17	Share capital			1,402.5		1,461.3
	Unlimited authorization of common shares without par value; issued and outstanding 295,200,987 and 316,411,209 shares at December 31, 2008 and 2007, respectively
	Unlimited authorization of first preferred shares; none outstanding
Note 18	Contributed surplus			126.2		98.9
	Accumulated other comprehensive income			657.9		2,178.9
	Retained earnings			2,402.3		2,279.6
				4,588.9		6,018.7
			$	10,248.8	$	9,716.6

(See Notes to the Consolidated Financial Statements)

Approved by the Board of Directors,

Director	Director

POTASHCORP 2008 FINANCIAL REVIEW Keyword Online : Financials                

Consolidated Financial Statements 69

Consolidated Statements of Operations and Retained Earnings
For the years ended December 31		in millions of US dollars except per-share amounts
Notes			2008			2007			2006
Note 19	Sales	$	9,446.5		$	5,234.2		$	3,766.7
	Less:  Freight		324.9			346.1			255.8
	Transportation and distribution		132.4			124.1			134.1
Note 20	Cost of goods sold		4,081.8			2,882.8			2,374.80
	Gross Margin		4,907.4			1,881.2			1,002.0
Note 21	Selling and administrative		188.4			212.6			158.4
Note 22	Provincial mining and other taxes		543.4			135.4			66.5
	Foreign exchange (gain) loss		(126.0	)		70.2			(4.4	)
Note 23	Other income		(333.5	)		(125.5	)		(94.0	)
			272.3			292.7			126.5
	Operating Income		4,635.1			1,588.5			875.5
Note 24	Interest Expense		62.8			68.7			85.6
	Income before Income Taxes		4,572.3			1,519.8			789.9
Note 25	Income Taxes		1,077.1			416.2			158.1
	Net Income		3,495.2			1,103.6			631.8
	Retained Earnings, Beginning of Year		2,279.6			1,286.4			716.9
Note 17	Repurchase of Common Shares		(3,250.3	)		–			–
	Change in Accounting Policy		–			0.2			–
	Dividends		(122.2	)		(110.6	)		(62.3	)
	Retained Earnings, End of Year	$	2,402.3		$	2,279.6		$	1,286.4
Note 26	Net Income per Share – Basic	$	11.37		$	3.50		$	2.03
Note 26	Net Income per Share – Diluted	$	11.01		$	3.40		$	1.98
	Dividends per Share	$	0.40		$	0.35		$	0.20

(See Notes to the Consolidated Financial Statements)

POTASHCORP 2008 FINANCIAL REVIEW

70 Consolidated Financial Statements

Consolidated Statements of Cash Flow
For the years ended December 31	in millions of US dollars
		2008		2007		2006
Operating Activities
Net income	$	3,495.2	$	1,103.6	$	631.8
Adjustments to reconcile net income to cash provided by operating activities

Depreciation and amortization	327.5		291.3		242.4
Stock-based compensation	36.2		38.6		29.5
(Gain) loss on disposal of property, plant and equipment and long-term investments	(27.1	)	7.9		(8.6	)
Provision for auction rate securities and plant shutdowns	88.8		26.5		6.3
Foreign exchange on future income tax	(106.4	)	52.4		0.5
Provision for future income tax	82.2		119.6		50.0
Undistributed earnings of equity investees	(166.7	)	(35.6	)	(24.5	)
Loss (gain) on derivative instruments	48.7		(21.1	)	–
Other long-term liabilities	2.3		(57.9	)	13.4

Subtotal of adjustments 285.5 421.7 309.0

Changes in non-cash operating working capital
Accounts receivable	(593.7	)	(154.6	)	11.0
Inventories	(324.4	)	60.3		13.9
Prepaid expenses and other current assets	(23.7	)	7.0		0.2
Accounts payable and accrued charges	174.3		250.9		(269.1	)

Subtotal of changes in non-cash operating working capital		(767.5	)		163.6			(244.0	)
Cash provided by operating activities		3,013.2			1,688.9			696.8
Investing Activities
Additions to property, plant and equipment		(1,198.3	)		(607.2	)		(508.6	)
Purchase of long-term investments		(445.6	)		(30.7	)		(352.5	)
Purchase of investments in auction rate securities		–			(132.5	)		–
Proceeds from disposal of property, plant and equipment and long-term investments		43.2			4.5			22.0
Other assets and intangible assets		(46.6	)		7.8			(0.6	)
Cash used in investing activities		(1,647.3	)		(758.1	)		(839.7	)
Cash before financing activities		1,365.9			930.8			(142.9	)
Financing Activities
Proceeds from long-term debt obligations		400.0			1.5			483.9
Repayment and issue costs of long-term debt obligations		(0.2	)		(403.6	)		(1.3	)
Proceeds from (repayment of) short-term debt obligations		1,233.9			(67.9	)		(94.3	)
Dividends		(122.6	)		(93.6	)		(60.9	)
Repurchase of common shares		(3,356.4	)		–			–
Issuance of common shares		36.7			26.6			47.3
Cash (used in) provided by financing activities		(1,808.6	)		(537.0	)		374.7
(Decrease) Increase in Cash and Cash Equivalents		(442.7	)		393.8			231.8
Cash and Cash Equivalents, Beginning of Year		719.5			325.7			93.9
Cash and Cash Equivalents, End of Year	$	276.8		$	719.5		$	325.7
Cash and cash equivalents comprised of:
Cash	$	29.9		$	23.1		$	7.9
Short-term investments		246.9			696.4			317.8
	$	276.8		$	719.5		$	325.7
Supplemental cash flow disclosure
Interest paid	$	82.8		$	93.9		$	106.8
Income taxes paid	$	669.9		$	221.0		$	226.8

(See Notes to the Consolidated Financial Statements)

POTASHCORP 2008 FINANCIAL REVIEW

Consolidated Financial Statements 71

Consolidated Statements of Comprehensive (Loss) Income

For the years ended December 31	in millions of US dollars
(Net of related income taxes)		2008			2007
Net Income	$	3,495.2		$	1,103.6
Other comprehensive (loss) income
Net (decrease) increase in unrealized gains on available-for-sale securities 1		(1,336.9	)		1,309.1
Net (losses) gains on derivatives designated as cash flow hedges 2		(166.0	)		34.6
Reclassification to income of net gains on cash flow hedges 3		(8.1	)		(40.5	)
Unrealized foreign exchange (losses) gains on translation of self-sustaining foreign operations		(10.0	)		6.7
Other Comprehensive (Loss) Income	$	(1,521.0	)	$	1,309.9
Comprehensive Income	$	1,974.2		$	2,413.5

1	Available-for-sale securities are comprised of shares in Israel Chemicals Ltd., Sinofert Holdings Limited and investments in auction rate securities, and are net of income taxes of $(61.5) (2007 – $87.1).
2	Cash flow hedges are comprised of natural gas derivative instruments, and are net of income taxes of $(100.8) (2007 – $14.8).
3	Net of income taxes of $4.8 (2007 – $17.3).

Consolidated Statements of Accumulated Other Comprehensive Income

As at December 31	in millions of US dollars
(Net of related income taxes)		2008			2007
Net unrealized gains on available-for-sale securities 1	$	761.8		$	2,098.7
Net unrealized (losses) gains on derivatives designated as cash flow hedges 2		(100.6	)		73.5
Unrealized foreign exchange (losses) gains on self-sustaining foreign operations 3		(3.3	)		6.7
Accumulated other comprehensive income		657.9			2,178.9
Retained earnings		2,402.3			2,279.6
Accumulated Other Comprehensive Income and Retained Earnings	$	3,060.2		$	4,458.5

1	$885.7 before income taxes (2007 – $2,284.1).
2	$(160.2) before income taxes (2007 – $119.6).
3	$(3.3) before income taxes (2007 – $6.7).

(See Notes to the Consolidated Financial Statements)

POTASHCORP 2008 FINANCIAL REVIEW

Notes

Note 1	Description of Business	72
Note 2	Basis of Presentation	72
Note 3	Accounts Receivable	74
Note 4	Inventories	74
Note 5	Prepaid Expenses and
	Other Current Assets	75
Note 6	Derivative Financial Instruments	75
Note 7	Property, Plant and Equipment	77
Note 8	Investments	77
Note 9	Other Assets	79
Note 10	Intangible Assets and Goodwill	80
Note 11	Short-Term Debt	80
Note 12	Accounts Payable and
	Accrued Charges	81
Note 13	Long-Term Debt	81
Note 14	Commitments	82
Note 15	Pension and Other
	Post-Retirement Benefits	83
Note 16	Environmental Costs and Asset
	Retirement Obligations	87
Note 17	Share Capital	89
Note 18	Contributed Surplus	89
Note 19	Segment Information	90
Note 20	Cost of Goods Sold	93
Note 21	Selling and Administrative	93
Note 22	Provincial Mining and
	Other Taxes	93
Note 23	Other Income	93
Note 24	Interest Expense	93
Note 25	Income Taxes	94
Note 26	Net Income per Share	96
Note 27	Stock-Based Compensation	96
Note 28	Financial Instruments and
	Related Risk Management	99
Note 29	Capital Disclosures	104
Note 30	Contingencies	105
Note 31	Guarantees	107
Note 32	Related Party Transactions	108
Note 33	Reconciliation of Canadian and
	United States Generally Accepted
	Accounting Principles	108
Note 34	Comparative Figures	117

72   IN MILLIONS OF US DOLLARS EXCEPT SHARE AND PER-SHARE AMOUNTS

Note 1 DESCRIPTION OF BUSINESS

With its subsidiaries, Potash Corporation of Saskatchewan Inc. (“PCS”) – together known as “PotashCorp” or “the company” except to the extent the context otherwise requires – forms an integrated fertilizer and related industrial and feed products company. The company has producing assets in the following locations:

• Potash

– five mines and mills and mining rights to potash reserves at a sixth location, all in the province of Saskatchewan

– one mine and mill in the province of New Brunswick

• Phosphate

– a mine and processing plants in the state of North Carolina

– a mine and two processing plants in the state of Florida

– a processing plant in the state of Louisiana

– phosphate feed plants in five states

– an industrial phosphoric acid plant in the state of Ohio

• Nitrogen

– three plants in the states of Georgia, Louisiana and Ohio

– large-scale operations in Trinidad

In Canada and the United States, the company owns or leases 172 terminal and warehouse facilities, some of which have multi-product capability, for a total of 203 distribution points, and services customers with a fleet of approximately 9,600 railcars. In the offshore market, the company leases one warehouse in China and leases one in Brazil through a joint venture. PotashCorp sells potash from its Saskatchewan mines for use outside North America exclusively to Canpotex Limited (“Canpotex”). Canpotex, a potash export, sales and marketing company owned in equal shares by the three potash producers in the province of Saskatchewan (including the company), resells potash to offshore customers. PCS Sales (Canada) Inc. and PCS Sales (USA), Inc., wholly owned subsidiaries of PCS, execute marketing and sales for the company’s potash, phosphate and nitrogen products in North America, and execute offshore marketing and sales for the company’s New Brunswick potash. Phosphate Chemicals Export Association, Inc. (“PhosChem”), an unrelated phosphate export association established under United States law, is the principal vehicle through which the company executes offshore marketing and sales for its phosphate fertilizers. PCS Sales (USA), Inc. generally executes offshore marketing and sales for the company’s nitrogen products.

Note 2 BASIS OF PRESENTATION

The company’s accounting policies are in accordance with Canadian generally accepted accounting principles (“Canadian GAAP”). These policies are consistent with accounting principles generally accepted in the United States (“US GAAP”) in all material respects except as outlined in Note 33.

The preparation of consolidated financial statements in accordance 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 consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period.

Key areas where management has made complex or subjective judgments (often as a result of matters that are inherently uncertain) include, among others, the fair value of certain assets; recoverability of investments, long-lived assets and goodwill; mineral reserves; variable interest entities (“VIEs”); derivative instruments; litigation; environmental and asset retirement obligations; pensions and other post-retirement benefits; stock-based compensation; and income taxes. Actual results could differ from these and other estimates, the impact of which would be recorded in future periods.

The following accounting policies are considered to be significant:

Principles of Consolidation

The consolidated financial statements include the accounts of PotashCorp and its subsidiaries, and any material VIEs for which the company is the primary beneficiary. Principal operating subsidiaries include:

• PCS Sales (Canada) Inc.

– PCS Joint Venture, Ltd. (“PCS Joint Venture”)

• PCS Sales (USA), Inc.

• PCS Phosphate Company, Inc. (“PCS Phosphate”)

– PCS Purified Phosphates

• White Springs Agricultural Chemicals, Inc. (“White Springs”)

• PCS Nitrogen Fertilizer, L.P.

• PCS Nitrogen Ohio, L.P.

• PCS Nitrogen Trinidad Limited

• PCS Cassidy Lake Company (“PCS Cassidy Lake”)

All significant intercompany balances and transactions have been eliminated.

NOTES TO THE POTASHCORP 2008 CONSOLIDATED FINANCIAL STATEMENTS

IN MILLIONS OF US DOLLARS EXCEPT SHARE AND PER-SHARE AMOUNTS 73

Note 2 BASIS OF PRESENTATION (continued)

Foreign Exchange Transactions

The company’s functional currency is the US dollar.

The majority of the company’s operations are considered integrated and are translated into US dollars using the temporal method. Under this method, Canadian, Trinidadian and Chilean dollar operating transactions are translated to US dollars at the average exchange rate for the previous month. Monetary assets and liabilities are translated at period-end exchange rates. Non-monetary assets owned at December 31, 1994 have been translated under the translation of convenience method at the December 31, 1994 year-end exchange rate of US $1.00 = CDN $1.4028. Additions subsequent to December 31, 1994 are translated at the exchange rate prevailing at the time of the transaction. Translation exchange gains and losses of integrated foreign operations are reflected in earnings.

The company’s Brazilian operations are considered self-sustaining and are translated into US dollars using the current rate method whereby assets and liabilities are translated at period-end exchange rates and transactions are translated at the rates in effect at the time. The gain or loss on translation is reflected in other comprehensive income.

Cash Equivalents

Highly liquid investments with a maturity of three months or less from the date of purchase are considered to be cash equivalents.

Asset Impairment

The company reviews both long-lived assets to be held and used and identifiable intangible assets with finite lives whenever events or changes in circumstances indicate that the carrying amount of such assets may not be fully recoverable. Determination of recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the asset and its eventual disposition. Measurement of an impairment loss for long-lived assets and certain identifiable intangible assets that management expects to hold and use is based on the fair value of the assets, whereas such assets to be disposed of are reported at the lower of carrying amount or fair value less costs to sell.

Goodwill impairment is assessed at the reporting unit level at least annually (in April), or more frequently if events or circumstances indicate there may be an impairment. Reporting units comprise business operations with similar economic characteristics and strategies and may represent either a business segment or a business unit within a business segment. Potential impairment is identified when the carrying value of a reporting unit, including the allocated goodwill, exceeds its fair value. Goodwill impairment is measured as the excess of the carrying amount of the reporting unit’s allocated goodwill over the implied fair value of the goodwill, based on the fair value of the assets and liabilities of the reporting unit.

The fair values for non-financial instruments are estimated using accepted valuation methodologies such as discounted future net cash flows, earnings multiples or prices for similar assets, whichever is most appropriate under the circumstances.

Specific Accounting Policies

To facilitate a better understanding of our consolidated financial statements, we have disclosed our significant accounting policies throughout the following notes with the related financial disclosures by major caption:

Note		Topic	Page
	2	Basis of Presentation		72
	2	Cash Equivalents		73
	2	Asset Impairment		73
	4	Inventories		74
	5	Prepaid Expenses		75
	6	Derivative Financial Instruments		75
	6	Fair Value of Derivative Financial Instruments		76
	7	Property, Plant and Equipment		77
	8	Investments		77
	8	Fair Value of Investments		78
	9	Other Assets		79
	10	Intangible Assets		80
	10	Goodwill		80
	13	Long-Term Debt		81
	14	Leases		82
	15	Pension and Other Post-Retirement Benefits		83
	16	Environmental Costs and Asset Retirement Obligations		87
	19	Revenue Recognition		90
	25	Income Taxes		94
	27	Stock-Based Compensation		96
	28	Fair Value of Financial Instruments		99

Change in Accounting Policy

Inventories

Effective January 1, 2008, the company adopted the Canadian Institute of Chartered Accountants (“CICA”) Section 3031, “Inventories”, which replaces Section 3030 and harmonizes the Canadian standard related to inventories with International Financial Reporting Standards (“IFRSs”). This standard provides more extensive guidance on the determination of cost, including allocation of overhead; narrows the permitted cost formulas; restricts the classification of spare and replacement parts as inventory; requires impairment testing; requires the reversal of writedowns when circumstances which caused the writedown no longer exist; and expands the disclosure requirements to increase transparency. This standard has been applied prospectively. Accordingly, comparative amounts for prior periods have not been restated. The adoption of this

NOTES TO THE POTASHCORP 2008 CONSOLIDATED FINANCIAL STATEMENTS

74   IN MILLIONS OF US DOLLARS EXCEPT SHARE AND PER-SHARE AMOUNTS

Note 2 BASIS OF PRESENTATION (continued)

standard resulted in a reclassification of certain spare and replacement parts to property, plant and equipment. The effects of the adjustment were to decrease inventory by $21.5 at January 1, 2008 and to increase property, plant and equipment by the same amount. Since there was no difference in the measurement of the assets, no adjustment to opening retained earnings was necessary.

Recent Accounting Pronouncements

Capital Disclosures

Effective January 1, 2008, the company adopted the CICA Section 1535, “Capital Disclosures”. This pronouncement increases harmonization with IFRSs by establishing standards for disclosing information about an entity’s capital and capital management. The company’s adoption of Section 1535 has resulted in the capital management disclosure set forth in Note 29.

Financial Instruments

Effective January 1, 2008, the company adopted CICA Section 3863, “Financial Instruments – Presentation” and CICA Section 3862, “Financial Instruments – Disclosures”, which increase harmonization with IFRSs. Section 3863 establishes standards for presentation of financial instruments and non-financial derivatives. It deals with the classification of financial instruments, from the perspective of the issuer, between liabilities and equity; the classification of related interest, dividends, losses and gains; and the circumstances in which financial assets and financial liabilities are offset. Section 3862 provides expanded disclosure requirements that call for additional detail by financial asset and liability categories. The applicable disclosures required under these standards are included in Note 28.

Goodwill and Intangible Assets

In February 2008, the CICA issued Section 3064, “Goodwill and Intangible Assets”, which replaces Section 3062, “Goodwill and Other Intangible

Assets”, and Section 3450, “Research and Development Costs”. The purpose of this section is to provide more specific guidance on the recognition of internally developed intangible assets, and requires that research and development expenditures be evaluated against the same criteria as expenditures for intangible assets. The section substantially harmonizes Canadian standards with IFRSs and applies to annual and interim financial statements relating to fiscal years beginning on or after October 1, 2008.

Also in February 2008, the CICA amended portions of Section 1000, “Financial Statement Concepts”, which the CICA concluded permitted deferral of costs that did not meet the definition of an asset. The amendments apply to annual and interim financial statements relating to fiscal years beginning on or after October 1, 2008.

Upon adoption of Section 3064 and the amendments to Section 1000, capitalized amounts that no longer meet the definition of an asset will be expensed retrospectively. The company is currently reviewing the standards to determine the potential impact, if any, on its consolidated financial statements.

International Financial Reporting Standards

In April 2008, the CICA published the exposure draft “Adopting IFRSs in Canada”. The exposure draft proposes to incorporate IFRSs into the CICA Accounting Handbook effective for interim and annual financial statements relating to fiscal years beginning on or after January 1, 2011. At this date, publicly accountable enterprises will be required to prepare financial statements in accordance with IFRSs. The company is currently reviewing the standards to determine the potential impact on its consolidated financial statements.

Note 3 ACCOUNTS RECEIVABLE

		2008			2007
Trade accounts – Canpotex	$	691.2		$	124.3
– Other		342.7			424.9
Non-trade accounts		72.6			52.9
Margin deposits on derivative instruments		91.1			—
		1,197.6			602.1
Less allowance for doubtful accounts		(7.7	)		(5.9	)
	$	1,189.9		$	596.2

Note 4 INVENTORIES

Inventories of finished products, raw materials, intermediate products and materials and supplies are valued at the lower of cost and net realizable value. Costs, allocated to inventory using the weighted average cost method, include direct costs related to the units of production as well as a systematic allocation of fixed and variable production overhead. Net realizable value for finished products, raw materials and intermediate products is generally considered to be the selling price in the ordinary course of business less the estimated costs of completion and estimated costs to make the sale. In certain circumstances, particularly pertaining to the company’s materials and supplies inventories, replacement cost is considered to be the best available measure of net realizable value.

NOTES TO THE POTASHCORP 2008 CONSOLIDATED FINANCIAL STATEMENTS

IN MILLIONS OF US DOLLARS EXCEPT SHARE AND PER-SHARE AMOUNTS 75

Note 4 INVENTORIES (continued)

Inventory is reviewed monthly to ensure the carrying value does not exceed net realizable value. The reversal of a writedown may occur if the circumstances which caused the writedown no longer exist.

		20081		2007
Finished products	$	421.8	$	186.6
Intermediate products		117.1		70.7
Raw materials		67.8		68.0
Materials and supplies		108.2		102.8
	$	714.9	$	428.1

¹ See change in accounting policy (Note 2).

During the year ended December 31, 2008, inventories of $3,803.9 (2007 – $2,806.4; 2006 – $2,330.0) were expensed through cost of goods sold. Writedowns of finished product and reserves for obsolete materials and supplies of $89.9 and $3.2, respectively, were included in cost of goods sold during the year (2007 – $NIL and $4.7, respectively; 2006 – $NIL and $2.4, respectively). No reversals of writedowns were recorded during the year ended December 31, 2008. The carrying amount of inventory recorded at net realizable value was $181.3 at December 31, 2008, with the remaining inventory recorded at cost.

Note 5 PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses include prepaid freight and other transportation and distribution costs relating to product inventory stored at warehouse and terminal facilities.

		2008		2007
Prepaid freight	$	24.3	$	14.2
Prepaid transportation and distribution		15.4		7.7
Other prepaid expenses		20.6		14.8
		60.3		36.7
Current portion of future income tax asset		18.9		–
	$	79.2	$	36.7

Note 6 DERIVATIVE FINANCIAL INSTRUMENTS

Derivative financial instruments are used by the company to manage its exposure to exchange rate, interest rate and commodity price fluctuations. The company recognizes its derivative instruments at fair value on the Consolidated Statements of Financial Position where appropriate. Contracts to buy or sell a non-financial item that can be settled net in cash or another financial instrument, or by exchanging financial instruments, as if the contracts were financial instruments (except contracts that were entered into and continue to be held for the purpose of the receipt or delivery of a non-financial item in accordance with expected purchase, sale or usage requirements), are accounted for as derivative financial instruments.

The accounting for changes in the fair value (i.e. gains or losses) of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship. For strategies designated as fair value hedges, the effective portion of the change in the fair value of the derivative is offset in income against the change in fair value, attributed to the risk being hedged, of the underlying hedged asset, liability or firm commitment. For cash flow hedges, the effective portion

of the change in the fair value of the derivative is accumulated in other comprehensive income (“OCI”) until the variability in cash flows being hedged is recognized in earnings in future accounting periods. Ineffective portions of hedges are recorded in earnings in the current period. The change in fair value of derivative instruments not designated as hedges is recorded in income in the current period. For transitional purposes, the company has elected to record embedded derivatives only for contracts entered into or substantively modified on or after January 1, 2003.

The company’s policy is not to use derivative financial instruments for trading or speculative purposes, although it may choose not to designate a relationship as an accounting hedge. The company formally documents all relationships between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking the hedge transaction. This process includes linking derivatives to specific assets and liabilities or to specific firm commitments or forecast transactions. The company also assesses, both at the hedge’s inception and on an ongoing basis, whether the derivatives used in hedging transactions are highly effective in offsetting changes in fair values of

NOTES TO THE POTASHCORP 2008 CONSOLIDATED FINANCIAL STATEMENTS

76   IN MILLIONS OF US DOLLARS EXCEPT SHARE AND PER-SHARE AMOUNTS

Note 6 DERIVATIVE FINANCIAL INSTRUMENTS (continued)

hedged items. Hedge effectiveness related to the company’s natural gas hedges is assessed on a prospective and retrospective basis using regression analyses. A hedging relationship may be terminated because the hedge ceases to be effective; the underlying asset or liability being hedged is derecognized; or the derivative instrument is no longer designated as a hedging instrument. In such instances, the difference between the fair value and the accrued value of the hedging derivatives upon termination is deferred and recognized into earnings on the same basis that gains, losses, revenue and expenses of the previously hedged item are recognized. If a hedging relationship is terminated because it is no longer probable that the anticipated transaction will occur, then the net gain or loss accumulated in OCI is recognized into earnings in the current period.

Significant recent derivatives include the following:

• Natural gas futures, swaps and option agreements to manage the cost of natural gas, generally designated as cash flow hedges of anticipated transactions. The portion of gain or loss on derivative instruments designated as cash flow hedges that are deferred in accumulated other comprehensive income (“AOCI”) is reclassified into cost of goods sold when the product containing the hedged item impacts earnings. Any hedge ineffectiveness is recorded in cost of goods sold in the current period.

• Foreign currency forward contracts for the primary purpose of limiting exposure to exchange rate fluctuations relating to expenditures denominated in currencies other than the US dollar. These contracts are not designated as hedging instruments for accounting purposes. Accordingly, they are marked-to-market with changes in fair value recognized through foreign exchange gain or loss in earnings.

• Agreement for the forward purchase of shares of Sinofert Holdings Limited (“Sinofert”) at a fixed Hong Kong dollar amount per share. This contract was not designated as a hedging instrument for accounting purposes. Accordingly, changes in fair value were recognized through other income in earnings.

• Interest rate swaps designated as fair value hedges to manage the interest rate mix of the company’s total debt portfolio and related overall cost of borrowing. Hedge accounting treatment results in interest expense on the related debt being reflected at hedged rates rather than original contractual interest rates.

Estimated fair values for financial instruments are designed to approximate amounts at which the instruments could be exchanged in a current transaction between willing parties. The fair value of derivative instruments traded in active markets (such as natural gas futures and exchange-traded options) is based on quoted market prices at the date of the balance sheet.

The fair value of derivative instruments that are not traded in an active market (such as natural gas swaps, over-the-counter option contracts, foreign currency forward contracts and other forward contracts) is determined by using valuation techniques. The company uses a variety of methods and makes assumptions that are based on market conditions

existing at each balance sheet date. Natural gas swap valuations are based on a discounted cash flows model. The inputs used in the model include contractual cash flows based on prices for natural gas futures contracts, fixed prices and notional volumes specified by the swap contracts, the time value of money, liquidity and credit risk. Certain of the futures contract prices are supported by prices quoted in an active market and others are not based on observable market data. The fair value of swap contracts is especially sensitive to changes in futures contract prices. The interest rates used to discount estimated cash flows were between 0.44 percent and 4.45 percent (2007 – between 3.82 and 4.70) depending on the settlement date. Over-the-counter option contracts are valued based on quoted market prices for similar instruments where available or an option valuation model. The fair value of foreign currency forward contracts is determined using quoted forward exchange rates at the balance sheet date. The fair value for other forward contracts with underlyings that are exchange-traded is determined based on these prices.

	2008
	Assets			Liabilities			Net
Natural gas hedging	$	11.6		$	170.6		$	(159.0	)
Natural gas non-hedging		–			–			–
Foreign currency forward contracts		6.3			57.9			(51.6	)
Total		17.9			228.5			(210.6	)
Less current portion		(6.4	)		(108.1	)		(101.7	)
Long-term portion	$	11.5		$	120.4		$	(108.9	)

	2007
	Assets			Liabilities			Net
Natural gas hedging	$	127.6		$	0.1		$	127.5
Natural gas non-hedging		0.1			0.1			–
Foreign currency and other forward purchase contracts		7.3			–			7.3
Total		135.0			0.2			134.8
Less current portion		(30.8	)		(0.2	)		(30.6	)
Long-term portion	$	104.2		$	–		$	104.2

As at December 31, 2008, the company had derivatives qualifying for hedge accounting in the form of swaps which represented a notional amount of 135.4 million MMBtu with maturities in 2009 through 2018. For the year ended December 31, 2008, gains of $22.8 were recognized in cost of goods sold excluding ineffectiveness, which reduced these gains by $9.9 for the year. Of the gains and losses at December 31, 2008, approximately $48.8 of losses will be reclassified to cost of goods sold within the next 12 months. No gains or losses from settled hedging transactions were deferred in inventory for the years ended December 31, 2008 and 2007.

NOTES TO THE POTASHCORP 2008 CONSOLIDATED FINANCIAL STATEMENTS

IN MILLIONS OF US DOLLARS EXCEPT SHARE AND PER-SHARE AMOUNTS 77

Note 7 PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment (which includes certain mine development costs and pre-stripping costs) are carried at cost. Costs of additions, betterments, renewals and interest during construction are capitalized.

Maintenance and repair expenditures that do not improve or extend productive life are expensed in the year incurred.

Certain mining and milling assets are depreciated using the units-of-production method based on the shorter of estimates of reserves or service lives. Pre-stripping costs are amortized on a units-of-production basis over the ore mined from the mineable acreage stripped. Other asset classes are depreciated or amortized on a straight-line basis as follows: land improvements 5 to 40 years, buildings and improvements 6 to 40 years and machinery and equipment (comprised primarily of plant equipment) 20 to 40 years.

	2008 1
			Accumulated
			Depreciation and			Net Book
	Cost		Amortization			Value
Land and improvements	$	321.6		$	58.1	$	263.5
Buildings and improvements		950.2			235.8		714.4
Machinery and equipment		5,842.2			2,160.3		3,681.9
Mine development costs		224.8			72.4		152.4
	$	7,338.8		$	2,526.6	$	4,812.2

¹ See change in accounting policy (Note 2).

	2007
			Accumulated
			Depreciation and			Net Book
	Cost		Amortization			Value
Land and improvements	$	248.9		$	53.9	$	195.0
Buildings and improvements		647.9			220.5		427.4
Machinery and equipment		5,074.5			1,937.3		3,137.2
Mine development costs		196.8			69.0		127.8
	$	6,168.1		$	2,280.7	$	3,887.4

Depreciation and amortization of property, plant and equipment included in cost of goods sold and in selling and administrative expenses was $313.2 (2007 – $279.8; 2006 – $226.3). The net carrying amount of property, plant and equipment not being amortized at December 31, 2008 because it was under construction or development was $1,433.0 (2007 – $608.8).

During 2008, the company recorded no impairment charge (2007 – $NIL; 2006 – $6.3) relating to property, plant and equipment. Interest capitalized to property, plant and equipment during the year was $42.9 (2007 – $21.8; 2006 – $19.1).

The opening balance of pre-stripping costs at January 1, 2008 was $33.4 (2007 – $28.5), additions during 2008 were $27.4 (2007 – $24.8) and amortization was $23.6 (2007 – $19.9), for a balance at December 31, 2008 of $37.2 (2007 – $33.4).

Acquiring or constructing property, plant and equipment by incurring a liability does not result in a cash outflow for the company until the liability is paid. In the period the related liability is incurred, the change in operating accounts payable on the Consolidated Statements of Cash Flow is typically reduced by such amount. In the period the liability is paid, the amount is reflected as a cash outflow for investing activities. The applicable net change in operating accounts payable that was reclassified from (to) investing activities on the Consolidated Statements of Cash Flow in 2008 was $61.9 (2007 – $59.8, 2006 – $(2.6)).

Note 8 INVESTMENTS

Investments in which the company exercises significant influence (but does not control) are accounted for using the equity method. The proportionate share of any net income or losses from investments accounted for using the equity method, and any gain or loss on disposal, are recorded in other income. The fair value for investments designated as available-for-sale is recorded in the Consolidated

Statements of Financial Position, with unrealized gains and losses, net of related income taxes, recorded in AOCI. The cost of securities sold is based on the weighted average method. Realized gains and losses, including any other-than-temporary decline in value, on these debt and equity securities are removed from AOCI and recorded in net income.

NOTES TO THE POTASHCORP 2008 CONSOLIDATED FINANCIAL STATEMENTS

78  IN MILLIONS OF US DOLLARS EXCEPT SHARE AND PER-SHARE AMOUNTS

Note 8 INVESTMENTS (continued)

An investment is considered impaired if its fair value falls below its cost and the decline is considered other-than-temporary. Factors the company considers in determining whether a decline is temporary include the length of time and extent to which fair value has been below cost, the financial condition and near-term prospects of the investee, and the company’s ability and intent to hold the investment for a period of time sufficient to allow for any anticipated recovery. When there has been a decline in value that is other-than-temporary, the carrying value of the investment is appropriately reduced to fair value.

Fair value of investments in equity securities and other investments designated as available-for-sale is based on the closing bid price as of the balance sheet date. The fair value of auction rate securities at December 31, 2008 was determined using a valuation methodology developed with the assistance of a valuation specialist. Due to the failed auction status and lack of liquidity in the market for such securities, the valuation methodology included certain assumptions that were not supported by prices from observable current market transactions in the same instruments nor were they based on observable market data. With the assistance of a valuation specialist, the company estimated the fair value of the auction rate securities based on the following: (1) the underlying structure of each security; (2) the present value of future principal and interest payments discounted at rates considered to reflect current market conditions; (3) consideration of the probabilities of default, passing auction or earning the maximum rate for each period; and (4) estimates of the recovery rates in the event of default for each security. These estimated fair values could change significantly based on future market conditions.

		2008		2007
Investments at equity
Sociedad Quimicay Minera
de Chile S.A. (“SQM”)
– 32 percent ownership; quoted market value of $1,677.0	$	647.2	$	550.0
Arab Potash Company (“APC”)
– 28 percent ownership; quoted market value of $1,156.3		321.6		231.2
Other		19.8		18.8
Available-for-sale investments
Sinofert – 22 percent ownership		746.8		1,081.2
Israel Chemicals Limited (“ICL”)
– 11 percent ownership		998.1		1,644.3
Auction rate securities		17.2		56.0
	$	2,750.7	$	3,581.5

In January 2008, the company settled its forward purchase contract, which was denominated in Hong Kong dollars, to acquire an additional 194,290,175 shares of Sinofert for cash consideration of $173.7. A tax-exempt gain of $25.3 was recognized during 2008 as a result of the change in fair value of the contract from December 31, 2007 to the settlement date. During 2008, the company purchased an additional 191,620,000 shares in Sinofert for cash consideration of $145.3. Net of the ownership interest dilution that resulted from the issuance of shares of Sinofert, the acquisitions increased the company’s ownership interest in Sinofert to approximately 22 percent. Also, in October 2008, the company purchased an additional 14,288,705 shares of ICL for cash consideration of $116.4, which increased the company’s ownership interest to 11 percent.

At December 31, 2008, the difference between the carrying value of SQM and the proportionate share of net book value was $196.3 (2007 – $196.9). The differences were allocated to the company’s portion of the fair value of the reserves and mining concessions of SQM and will be recognized as a reduction in the future share of earnings from SQM on a units-of-production basis. The difference between the carrying value of APC and the proportionate share of net book value remaining to be amortized at year-end was $58.7 (2007 – $65.4). Differences were allocated to the fair value of fixed assets and mining concessions and will be recognized as a reduction in the future share of earnings from APC on a units-of-production basis.

As noted in the above table, certain of the company’s investments in international entities are accounted for under the equity method. Accounting principles generally accepted in those foreign jurisdictions may vary in certain important respects from Canadian GAAP. The company’s share of earnings of these equity investees under the applicable foreign GAAP has been adjusted for the significant effects of conforming to Canadian GAAP.

The company’s share of earnings of equity investees of $255.8 (2007 – $76.2; 2006 – $54.4) is included in other income (see Note 23). Dividends received from equity investees were $89.1 (2007 - $40.6; 2006 – $29.9).

Investments include auction rate securities that are classified as available-for-sale. The company has determined that the fair value of the auction rate securities was $17.2 at December 31, 2008 (face value $132.5) as compared to $56.0 at December 31, 2007. The changes in fair value, status of impaired investments and related accounting since December 31, 2007 were as follows:

NOTES TO THE POTASHCORP 2008 CONSOLIDATED FINANCIAL STATEMENTS

IN MILLIONS OF US DOLLARS EXCEPT SHARE AND PER-SHARE AMOUNTS 79

Note 8 INVESTMENTS (continued)

				# Investments		Impacts of			Impacts of
				Considered Other-		Impairments			Impairments Recorded
				Than-Temporarily		Recorded in			in Retained Earnings
	Fair Value			Impaired (of 6 Total)		AOCI and OCI			and Net Income
Balance, December 31, 2007	$	56.0			2	$	50.0		$	26.5
Less: Reductions in value of investments considered temporarily impaired at beginning of year		(23.1	)		–		23.1			–
Less: Reductions in value of investments considered other-than-temporarily impaired at beginning of year		(15.7	)		–		–			15.7
Transfer of investment impairments at end of year from temporarily impaired to other-than-temporarily impaired		–			4		(73.1	)		73.1
Balance, December 31, 2008	$	17.2			6	$	–		$	115.3

Auction rate securities have original maturities in excess of three months. Interest rates are typically reset every 28 days through the sale of the securities in a dutch auction process; however, in the event of market illiquidity, the interest rate is reset based on a spread to LIBOR. As a result of negative conditions in the global credit markets, auctions for the auction rate securities held in the company’s account failed to settle on their respective settlement dates and consequently became illiquid. The company will not be able to access these funds until a future auction of these securities is successful, a buyer is found outside of the auction process, the company settles an outstanding claim in respect of the investments, or upon maturity. Maturity dates for these investments range from 2017 to 2046 with principal distributions occurring on several securities prior to maturity. The investments are classified as long-term since they are not expected to be realizable within one year from the date of the Consolidated Statements of Financial Position. Interest income of $4.8 relating to auction rate securities was recorded during the year (2007 – $8.3).

Note 9 OTHER ASSETS

Preproduction costs are capitalized to deferred charges and represent costs incurred prior to obtaining commercial production at new facilities, net of revenue earned, and are amortized on either a straight-line or units-of-production basis over a maximum of 10 years.

The costs of constructing bases for gypsum stacks and settling ponds are capitalized to deferred charges and are amortized on a straight-line basis over their estimated useful lives of 3 to 5 years.

The costs of certain ammonia catalysts are capitalized to other assets and are amortized, net of salvage value, on a straight-line basis over their estimated useful lives of 3 to 10 years.

Costs of readying sites for future mining activities are capitalized to other assets and are amortized on a units-of-production basis over a maximum of 40 years. In addition, certain upfront lease costs are capitalized to other assets and amortized over the life of the leases, the latest of which extends through 2038.

		2008		2007
Accrued pension benefit asset	$	131.7	$	111.7
Ammonia catalysts – net of accumulated amortization of $2.7 (2007 – $NIL)		37.0		–
Deferred charges – net of accumulated amortization of $20.9 (2007 – $16.9)		36.2		24.0
Upfront lease costs – net of accumulated amortization of $3.4 (2007 – $2.2)		23.6		24.7
Other – net of accumulated amortization of $14.6 (2007 – $12.0)		60.2		50.3
	$	288.7	$	210.7

Amortization of other assets included in cost of goods sold and in selling and administrative expenses was $10.4 (2007 – $5.4; 2006 – $9.2).

NOTES TO THE POTASHCORP 2008 CONSOLIDATED FINANCIAL STATEMENTS

80   IN MILLIONS OF US DOLLARS EXCEPT SHARE AND PER-SHARE AMOUNTS

Note 10 INTANGIBLE ASSETS AND GOODWILL

Intangible Assets

Intangible assets relate primarily to production and technology rights and computer software. Finite-lived intangible assets are amortized on a straight-line basis over their estimated useful lives as follows: production and technology rights 25 to 30 years and computer software up to 5 years.

Goodwill

All business combinations are accounted for using the purchase method. Identifiable intangible assets are recognized separately from goodwill. Goodwill is carried at cost, is not amortized and represents the excess of the purchase price and related costs over the fair value assigned to the net identifiable assets of a business acquired.

		2008		2007
Intangible assets – net of accumulated amortization of $31.8 (2007 – $27.9)	$	21.5	$	24.5
Goodwill – net of accumulated amortization of $7.3 (2007 – $7.3)	$	97.0	$	97.0

Other than goodwill, the company has not recognized any intangible assets with indefinite useful lives. Total amortization expense relating to finite-lived intangible assets for 2008 was $3.9 (2007 – $6.1; 2006 – $6.9). Amortization expense in each of the next five years calculated upon such assets held as at December 31, 2008 is estimated to be $3.9 for 2009, $3.4 for 2010, $1.0 for 2011, $0.8 for 2012 and $0.8 for 2013.

Substantially all of the company’s recorded goodwill relates to the nitrogen segment.

Note 11 SHORT-TERM DEBT

		2008			2007
Commercial paper	$	324.8		$	90.0
Credit facility		1,000.0			–
		1,324.8			90.0
Less net unamortized debt cost		(0.9	)		–
	$	1,323.9		$	90.0

The company has an unsecured line of credit available for short-term financing (net of letters of credit of $20.0 and direct borrowings of $NIL) in the amount of $55.0 at December 31, 2008 (2007 – $51.1). The line of credit was renewed in September 2007 for the period to May 2009; it will be renewable annually each May beginning in 2009. The company also has a $1,000.0 364-day credit facility entered into on May 29, 2008 and amended on July 29, 2008. As of December 31, 2008, $1,000.0 of borrowings were outstanding under this facility. Subsequent to year-end, effective January 21, 2009, this facility was amended to increase the available borrowings to $1,500.0 and extend the maturity date to May 28, 2010. In addition, the company is authorized to borrow a further $205.4 under its commercial paper program.

The line of credit and the credit facility are subject to financial tests and other covenants. The principal covenants require a debt-to-capital ratio of less than or equal to 0.60:1, a long-term debt-to-EBITDA (as defined in the agreement to be earnings before interest, income taxes, provincial mining and other taxes, depreciation, amortization and other non-cash expenses, and unrealized gains and losses in respect of hedging instruments) ratio of less than or equal to 3.5:1, tangible net worth in an amount greater than or equal to $1,250.0 and debt of subsidiaries not to exceed $650.0. The line of credit and credit facility are subject to other customary covenants and events of default, including an event of default for non-payment of other debt in excess of CDN $40.0. Non-compliance with such covenants could result in accelerated payment of amounts due under the line of credit and credit facility, and their termination. The company was in compliance with the above-mentioned covenants at December 31, 2008.

As at December 31, 2008, interest rates ranged from 1.88 percent to 2.90 percent on outstanding commercial paper denominated in Canadian dollars, and 1.05 percent to 3.77 percent on outstanding commercial paper denominated in US dollars. Interest rates on borrowings under the credit facility ranged from 1.41 percent to 2.48 percent.

NOTES TO THE POTASHCORP 2008 CONSOLIDATED FINANCIAL STATEMENTS

IN MILLIONS OF US DOLLARS EXCEPT SHARE AND PER-SHARE AMOUNTS 81

Note 12 ACCOUNTS PAYABLE AND ACCRUED CHARGES

		2008		2007
Income taxes	$	469.1	$	188.4
Trade accounts		359.5		371.0
Accrued compensation		118.9		94.0
Other taxes		51.1		32.2
Deferred revenue		48.0		42.1
Dividends		29.9		32.0
Accrued interest		26.8		29.2
Accrued deferred share units		13.8		29.7
Current portion accrued environmental costs and asset retirement obligations		12.2		13.7
Current portion pension and other post-retirement benefits		8.2		7.9
Margin deposits on derivative instruments		–		33.9
Other payables and other accrued charges		46.1		37.4
	$	1,183.6	$	911.5

Note 13 LONG-TERM DEBT

Issue costs of long-term obligations and gains and losses on interest rate swaps are capitalized to long-term obligations and are amortized to expense over the term of the related liability using the effective interest rate method.

	2008				2007
				Effective
				Interest Rate 1
Senior Notes
7.750% notes due May 31, 2011	$	600.0		7.65%	$	600.0
4.875% notes due March 1, 2013		250.0		5.08%		250.0
5.875% notes due December 1, 2036		500.0		6.11%		500.0
The above series of senior notes are unsecured and there are no sinking fund requirements prior to maturity. The 2011, 2013 and 2036 notes are redeemable, in whole or in part, at the company’s option at any time prior to maturity for a price not less than the principal amount of the notes to be redeemed, plus accrued interest. Under certain conditions related to a change in control, the company is required to make an offer to purchase all, or any part, of the 2036 notes at 101 percent of the principal amount of the notes repurchased, plus accrued interest.
Credit facilities		400.0		1.98%		–
Other		8.2		5.32%		8.5
		1,758.2				1,358.5
Less net unamortized debt costs		(22.8	)			(24.6	)
Add unamortized interest rate swap gains		3.9				5.3
		1,739.3				1,339.2
Less current maturities		(0.2	)			(0.2	)
Add current portion of amortization		0.4				0.4
	$	1,739.5			$	1,339.4

¹ The effective interest rate by instrument includes the impact of swap gains and debt costs.

The company has entered into back-to-back loan arrangements involving certain financial assets and financial liabilities. The company has presented financial assets of $505.1 and financial liabilities of $511.0 on a net basis related to these arrangements because a legal right to set-off exists, and the company intends to settle with the same party on a net basis. Other long-term debt in the above table includes a net financial liability of $5.9 (2007 – $5.9) pursuant to these arrangements.

NOTES TO THE POTASHCORP 2008 CONSOLIDATED FINANCIAL STATEMENTS

82   IN MILLIONS OF US DOLLARS EXCEPT SHARE AND PER-SHARE AMOUNTS

Note 13 LONG-TERM DEBT (continued)

The company has two long-term revolving credit facilities that provide for unsecured advances. The first is a $750.0 facility that provides for unsecured advances through May 31, 2013. As of December 31, 2008, $220.0 of borrowings was outstanding under this facility. The second facility is a $180.0 facility entered into during December 2008 with a maturity date of December 21, 2010. As at December 31, 2008, $180.0 of borrowings was outstanding under this facility. Principal covenants and events of default under the credit facilities’ requirements are the same as those under the line of credit and credit facility described in Note 11.

The notes payable are not subject to any financial test covenants but are subject to certain customary covenants (including limitations on liens and sale and leaseback transactions) and events of default, including an event of default for acceleration of other debt in excess of $50.0. The other long-term debt instruments are not subject to any financial test

covenants but are subject to certain customary covenants and events of default, including, for other long-term debt, an event of default for non-payment of other debt in excess of $25.0. Non-compliance with such covenants could result in accelerated payment of the related debt. The company was in compliance with the above-mentioned covenants at December 31, 2008.

Long-term debt obligations at December 31, 2008 will mature as follows:

2009	$	0.2
2010		181.8
2011		600.3
2012		5.9
2013		470.0
Subsequent years		500.0
	$	1,758.2

Note 14 COMMITMENTS

Leases entered into are classified as either capital or operating leases. Leases that transfer substantially all of
the benefits and risks of ownership of property to the company are accounted for as capital leases. Equipment acquired under capital leases is depreciated over the period of expected use on the same basis as other similar property, plant and equipment. Gains or losses resulting from sale/leaseback transactions are deferred and amortized in proportion to the amortization of the leased asset. Rental payments under operating leases are expensed as incurred.

Lease Commitments

The company has various long-term operating lease agreements for land, buildings, port facilities, equipment, ocean-going transportation vessels and railcars, the latest
of which expires in 2038. Rental expense for operating leases for the years ended December 31, 2008, 2007 and 2006 was $97.4, $79.3 and $75.4, respectively.

Purchase Commitments

The company has long-term agreements for the purchase
of sulfur for use in the production of phosphoric acid. These agreements provide for minimum purchase quantities and certain prices are based on market rates at the time of delivery. The commitments included in the table below are based on expected contract prices.

The company has entered into long-term natural gas contracts with the National Gas Company of Trinidad and Tobago Limited, the latest of which expires in 2018. The contracts provide for prices that vary

primarily with ammonia market prices, escalating floor prices and minimum purchase quantities. The commitments included in the table below are based on floor prices and minimum purchase quantities.

The company also has long-term agreements for the purchase of phosphate rock used at its Geismar facility. The commitments included in the table below are based on the expected purchase quantity and current net base prices.

Other Commitments

Other operating commitments consist principally of various rail freight contracts, the latest of which expires in 2010, and mineral leases, the latest of which expires in 2029.

Minimum future commitments under these contractual arrangements for the next five years and thereafter are shown below.

	Operating		Purchase		Other
	Leases		Commitments		Commitments		Total
2009	$	102.6	$	150.6	$	17.7	$	270.9
2010		89.4		131.7		14.2		235.3
2011		79.8		112.4		3.4		195.6
2012		76.1		75.4		3.2		154.7
2013		67.8		60.3		2.9		131.0
Thereafter		262.7		243.0		14.2		519.9
Total	$	678.4	$	773.4	$	55.6	$	1,507.4

NOTES TO THE POTASHCORP 2008 CONSOLIDATED FINANCIAL STATEMENTS

 IN MILLIONS OF US DOLLARS EXCEPT SHARE AND PER-SHARE AMOUNTS 83

Note 15 PENSION AND OTHER POST-RETIREMENT BENEFITS

The company offers a number of benefit plans that provide pension and other benefits to qualified employees. These plans include defined benefit pension plans, supplemental pension plans, defined contribution plans and health, disability, dental and life insurance plans.

The company accrues its obligations under employee benefit plans and the related costs, net of plan assets. The cost of pensions and other retirement benefits earned by employees is generally actuarially determined using the projected benefit method, prorated based on service and management’s best estimate of expected plan investment performance, salary escalation, retirement ages of employees and expected health-care costs. For the purpose of calculating the expected return on plan assets, such assets are valued at fair value. Prior service costs from plan amendments are deferred and amortized on a straight-line basis over the average remaining service period of employees active at the date of amendment. Actuarial gains (losses) arise from the difference between the actual rate of return on plan assets for a period and the expected long-term rate of return on plan assets for that period, or from changes in actuarial assumptions used to determine the accrued benefit obligation. The excess of the net accumulated actuarial gain (loss) over 10 percent of the greater of the benefit obligation and the fair value of plan assets is amortized over the average remaining service period of active employees. When the restructuring of a benefit plan gives rise to both a curtailment and a settlement of obligations, the curtailment is accounted for prior to the settlement. Actuaries perform valuations on a regular basis to determine the actuarial present value of the accrued pension and other post-retirement benefits.

Pension and other post-retirement benefit expense includes, as applicable, the net of management’s best estimate of the cost of benefits provided, interest cost of projected benefits, return on plan assets, amortization of experience gains or losses and plan amendments, and changes in the valuation allowance.

Defined contribution plan costs are recognized in earnings for services rendered by employees during the period.

Pension Plans

Canada

Substantially all employees of the company are participants in either a defined contribution or a defined benefit pension plan.

The company has established a supplemental defined benefit retirement income plan for senior management that is unfunded, non-contributory and provides a supplementary pension benefit. The plan is provided for by charges to earnings sufficient to meet the projected benefit obligation.

United States

Substantially all employees of the company are participants in either a defined contribution or a defined benefit pension plan. Benefits are based on a combination of years of service and compensation levels, depending on the plan. Contributions to the US plans are made to meet or exceed minimum funding requirements of the Employee Retirement Income Security Act of 1974 (“ERISA”) and associated Internal Revenue Service regulations and procedures.

Trinidad

The company has contributory defined benefit pension plans that cover a substantial majority of its employees. Benefits are based on a combination of pay and service. The plans’ assets consist mainly of local government and other bonds, local mortgage and mortgage-backed securities, fixed income deposits and cash.

Other Post-Retirement Plans

The company provides certain contributory health-care plans and non-contributory life insurance benefits for retired employees. These plans contain certain cost-sharing features such as deductibles and coinsurance, and are unfunded, with benefits subject to change.

Defined Benefit Plans

The components of net expense for the company’s pension and other post-retirement benefit plans, computed actuarially, were as follows:

NOTES TO THE POTASHCORP 2008 CONSOLIDATED FINANCIAL STATEMENTS

84   IN MILLIONS OF US DOLLARS EXCEPT SHARE AND PER-SHARE AMOUNTS

Note 15 PENSION AND OTHER POST-RETIREMENT BENEFITS (continued)

	Pension									Other
		2008			2007			2006			2008			2007			2006
Costs arising in the period
Service cost for benefits earned during the year	$	15.1		$	15.3		$	14.2		$	5.7		$	6.1		$	4.7
Interest cost on projected benefit obligations		39.9			36.5			33.5			15.9			14.9			12.4
Actual loss (return) on plan assets		157.7			(44.3	)		(42.1	)		–			–			–
Actuarial loss (gain)		46.7			(33.5	)		8.9			3.1			(12.0	)		18.4
Plan amendments		8.1			0.3			1.4			1.4			–			(1.7	)
Change in valuation allowance		(0.3	)		–			2.0			–			–			–
Costs arising in the period		267.2			(25.7	)		17.9			26.1			9.0			33.8
Difference between costs arising in the period and costs recognized in the period in respect of:
(Loss) return on plan assets		(208.8	)		1.5			3.9			–			–			–
Actuarial (gain) loss		(42.8	)		40.8			(1.7	)		(0.1	)		16.4			(16.4	)
Plan amendments		(5.9	)		1.5			1.0			(4.2	)		(2.9	)		(1.1	)
Transitional obligation		1.6			0.9			1.6			0.4			0.2			0.4
Net expense	$	11.3		$	19.0		$	22.7		$	22.2		$	22.7		$	16.7

The assumptions used to determine the benefit obligation and expense for the company’s significant plans were as follows (weighted average as of December 31):

	Pension				Other
		2008	2007	2006		2008	2007	2006
Discount rate – obligation, %		6.25	6.50	5.85		6.25	6.50	5.85
Discount rate – expense, %		6.50	5.85	5.70		6.50	5.85	5.70
Long-term rate of return on assets, %		8.00	8.00	8.00		n/a	n/a	n/a
Rate of increase in compensation levels, %		4.00	4.00	4.00		n/a	n/a	n/a

n/a = not applicable

The average remaining service period of the active employees covered by the company’s pension plans is 12.4 years (2007 – 12.0 years). The average remaining service period of the active employees covered by the company’s other benefits plans is 11.8 years (2007 – 12.1 years).

The assumed health-care cost trend rates are as follows:

	2008	2007	2006
Health-care cost trend rates assumed for next year, %	6.00	6.00	6.00
Ultimate health-care cost trend rate assumed, %	6.00	6.00	6.00
Year that the rate reaches the ultimate trend rate	2008	2007	2006

Effective January 1, 2004, the company’s largest retiree medical plan limits the company’s share of annual medical cost increases to 75 percent of the first 6 percent of total medical inflation for recent and future non-union retirees. Any cost increases in excess of this amount are funded by increased retiree contributions.

The company’s discount rate assumption reflects the weighted average interest rate at which the pension and other post-retirement liabilities could be effectively settled using high-quality bonds at the measurement date. The rate varies by country. The company determines the discount rate using a yield curve approach. Based on the plan’s demographics, expected future pension benefit and medical claims, payments are measured and discounted to determine the present value of the expected future cash flows. The cash flows are discounted using yields on high-quality AA-rated non-callable bonds with cash flows of similar timing. The equivalent level discount rate is then used as input by the company to determine the final discount rate. The rate selected for the December 31, 2008 measurement date will be used to determine expense for fiscal 2009.

NOTES TO THE POTASHCORP 2008 CONSOLIDATED FINANCIAL STATEMENTS

IN MILLIONS OF US DOLLARS EXCEPT SHARE AND PER-SHARE AMOUNTS 85

Note 15 PENSION AND OTHER POST-RETIREMENT BENEFITS (continued)

The expected long-term rate of return on assets assumption is determined using a building block approach. The expected real rate of return for each individual asset class is determined based on expected future performance. These rates are weighted based on the current asset portfolio. A separate determination is made of the underlying impact of expenses, inflation, rebalancing, diversification and the actively managed portfolio premium. The resulting total expected asset return is compared to the historical returns achieved by the portfolio. Based on these input items, a final rate is selected by the company.

The company uses a December 31 measurement date. The most recent actuarial valuations of the majority of the pension plans for funding purposes were as of January 1, 2008, and the next required valuations are as of January 1, 2009. The change in benefit obligations and the change in plan assets for the above pension and other post-retirement plans were as follows:

	Pension						Other						Total
		2008			2007			2008			2007			2008			2007
Change in benefit obligations
Balance, beginning of year	$	623.4		$	626.4		$	251.8		$	247.4		$	875.2		$	873.8
Service cost		15.1			15.3			5.7			6.1			20.8			21.4
Interest cost		39.9			36.5			15.9			14.9			55.8			51.4
Participants’ contributions		–			0.3			–			–			–			0.3
Actuarial loss (gain)		46.7			(33.5	)		3.1			(12.0	)		49.8			(45.5	)
Foreign exchange rate changes		(3.5	)		6.4			(3.4	)		3.6			(6.9	)		10.0
Plan amendments		8.1			0.3			1.4			–			9.5			0.3
Benefits paid		(31.7	)		(28.3	)		(8.5	)		(8.2	)		(40.2	)		(36.5	)
Balance, end of year		698.0			623.4			266.0			251.8			964.0			875.2
Change in plan assets
Fair value, beginning of year		638.2			519.9			–			–			638.2			519.9
Actual (loss) return on plan assets		(157.7	)		44.3			–			–			(157.7	)		44.3
Employer contributions		28.0			99.6			8.5			8.2			36.5			107.8
Participants’ contributions		–			0.3			–			–			–			0.3
Foreign exchange rate changes		2.9			2.4			–			–			2.9			2.4
Benefits paid		(31.7	)		(28.3	)		(8.5	)		(8.2	)		(40.2	)		(36.5	)
Fair value, end of year		479.7			638.2			–			–			479.7			638.2
Funded status		(218.3	)		14.8			(266.0	)		(251.8	)		(484.3	)		(237.0	)
Valuation allowance		(15.8	)		(16.1	)		–			–			(15.8	)		(16.1	)
Unamortized net actuarial loss		326.9			76.9			42.4			42.0			369.3			118.9
Unamortized prior service cost		9.4			3.6			(11.3	)		(15.0	)		(1.9	)		(11.4	)
Unamortized transitional obligation		2.8			4.2			–			0.4			2.8			4.6
Accrued pension and other post-retirement benefit asset (liability)	$	105.0		$	83.4		$	(234.9	)	$	(224.4	)	$	(129.9	)	$	(141.0	)
Amounts included in:
Other assets (Note 9)	$	131.4		$	111.4		$	0.3		$	0.3		$	131.7		$	111.7
Liabilities
Current (Note 12)		–			–			(8.2	)		(7.9	)		(8.2	)		(7.9	)
Long-term		(26.4	)		(28.0	)		(227.0	)		(216.8	)		(253.4	)		(244.8	)
	$	105.0		$	83.4		$	(234.9	)	$	(224.4	)	$	(129.9	)	$	(141.0	)

Letters of credit secured certain of the unfunded defined benefit plans as at December 31, 2008 and 2007.

The company is a sponsor of certain US post-retirement health-care plans that were impacted by the US Medicare Prescription Drug, Improvement and Modernization Act of 2003. This legislation expanded Medicare to include (for the first time) coverage for prescription drugs and introduced a prescription drug benefit and federal subsidy to sponsors of retiree health-care benefit plans that provide benefits at least “actuarially equivalent”

NOTES TO THE POTASHCORP 2008 CONSOLIDATED FINANCIAL STATEMENTS

86  IN MILLIONS OF US DOLLARS EXCEPT SHARE AND PER-SHARE AMOUNTS

Note 15 PENSION AND OTHER POST-RETIREMENT BENEFITS (continued)

to Medicare Part D. The company accounted for the impact of the legislation prospectively as of July 1, 2004. The federal subsidy had the effect of reducing the company’s accumulated post-retirement benefit obligation by $23.2 and reducing the net periodic post-retirement benefit cost for the year by $3.7 (2007 – $4.2).

The accumulated benefit obligation for all defined benefit pension plans was $631.7 and $562.7 at December 31, 2008 and 2007, respectively. The aggregate projected benefit obligation, accumulated benefit obligation and fair value of plan assets for pension plans with accumulated benefit obligations in excess of plan assets were as follows:

		2008		2007
Projected benefit obligation	$	661.5	$	91.3
Accumulated benefit obligation		610.0		85.0
Fair value of plan assets		416.1		59.7

Sensitivity of Assumptions

The effect of a change in the health-care cost trend rate on the other post-retirement benefit obligation and the aggregate of service and interest cost would have been as follows:

		2008			2007			2006
As reported:
Benefit obligation	$	266.0		$	251.8		$	247.4
Aggregate of service and interest cost		21.6			21.0			17.1
Impact of increase of 1.0 percentage point:
Benefit obligation		41.1			36.9			36.7
Aggregate of service and interest cost		3.8			3.9			2.8
Impact of decrease of 1.0 percentage point:
Benefit obligation		(32.9	)		(29.7	)		(29.2	)
Aggregate of service and interest cost		(3.0	)		(3.0	)		(2.2	)

The above sensitivities are hypothetical and should be used with caution. Changes in amounts based on a 1.0 percentage point variation in assumptions generally cannot be extrapolated because the relationship of the change in assumption to the change in amounts may not be linear. The sensitivities have been calculated independently of changes in other key variables. Changes in one factor may result in changes in another, which could amplify or reduce certain sensitivities.

Plan Assets

Approximate asset allocations, by asset category, of the company’s significant pension plans were as follows at December 31:

Asset Category	Target			2008			2007
Equity securities		65	%		57	%		64	%
Debt securities		35	%		43	%		36	%
Real estate		–			–			–
Other		–			–			–
Total		100	%		100	%		100	%

The company employs a total return on investment approach whereby a mix of equities and fixed income investments is used to maximize the long-term return of plan assets for a prudent level of risk. Risk tolerance is established through careful consideration of plan liabilities, plan funded status and corporate financial condition. The investment portfolio contains a diversified blend of equity and fixed income investments. The company expects to use 2009 cash contributions to rebalance assets towards their target.

Furthermore, equity investments are diversified across US and non-US stocks, as well as growth, value and small and large capitalizations. US equities are also diversified across actively managed and passively invested portfolios. Other assets such as private equity, real estate and hedge funds are not used at this time. Investment risk is measured and monitored on an ongoing basis through quarterly investment portfolio reviews, annual liability measurements and periodic asset/liability studies. The investment strategy in Trinidad is largely dictated by local investment restrictions (maximum of 50 percent in equities and 20 percent foreign) and asset availability since the local equity market is small and there is little secondary market activity in debt securities.

Defined Contribution Plans

All of the company’s US employees may participate in defined contribution savings plans. These plans are subject to US federal tax limitations and provide for voluntary employee salary deduction contributions. The company contribution provides a minimum of zero percent (to a maximum of six percent) of salary depending on employee contributions and company performance. The company’s 2008 contributions were $7.9 (2007 – $6.4; 2006 – $6.2).

All of the company’s Canadian salaried employees and certain hourly employees participate in the PCS Inc. Savings Plan and may make voluntary contributions. The company contribution provides a minimum of three percent (to a maximum of six percent) of salary based on company performance. The company’s contributions in 2008 were $5.3 (2007 – $4.8; 2006 – $3.9).

NOTES TO THE POTASHCORP 2008 CONSOLIDATED FINANCIAL STATEMENTS

IN MILLIONS OF US DOLLARS EXCEPT SHARE AND PER-SHARE AMOUNTS 87

Note 15 PENSION AND OTHER POST-RETIREMENT BENEFITS (continued)

Certain of the company’s Canadian employees participate in the contributory PCS Inc. Pension Plan. The member contributes to the plan at the rate of 5.5 percent of the member’s earnings, or such other percentage amount as may be established by a collective agreement, and the company contributes for each member at the same rate. The member may also elect to make voluntary additional contributions. The company’s contributions in 2008 were $6.6 (2007 – $5.7; 2006 – $5.0).

Cash Payments

Total cash payments for pensions and other post-retirement benefits for 2008, consisting of cash contributed by the company to its funded pension plans, cash payments directly to beneficiaries for its unfunded other benefit plans and cash contributed to its defined contribution plans, were $56.2 (2007 – $124.8). Approximately $137.0 is expected to be contributed by the company to all plans during 2009.

Estimated Future Benefit Payments

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid from either corporate assets or the qualified pension trusts:

			Other
					Reduction due
					to Medicare
	Pension		Gross		Part D Subsidy		Net
2009	$	34.6	$	10.8	$	1.1	$	9.7
2010		34.1		11.9		1.2		10.7
2011		36.4		13.0		1.4		11.6
2012		40.4		13.9		1.6		12.3
2013		42.3		15.0		1.8		13.2
2014-2018		258.2		93.6		12.2		81.4

Note 16 ENVIRONMENTAL COSTS AND ASSET RETIREMENT OBLIGATIONS

Environmental costs that relate to current operations are expensed or capitalized as appropriate. Environmental costs are capitalized if the costs extend the life of the property, increase its capacity, mitigate or prevent contamination from future operations, or relate to legal asset retirement obligations. Costs that relate to existing conditions caused by past operations and that do not contribute to current or future revenue generation are expensed. Provisions for estimated costs are recorded when environmental remedial efforts are likely and the costs can be reasonably estimated. In determining the provisions, the company uses the most current information available, including similar past experiences, available technology, regulations in effect, the timing of remediation and cost-sharing arrangements.

The company recognizes its obligations to retire certain tangible long-lived assets. The fair value of a liability for an asset retirement obligation is recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset and then amortized over its estimated useful life. In subsequent periods, the asset retirement obligation is adjusted for the passage of time and any changes in the amount or timing of the

underlying future cash flows through charges to earnings. A gain or loss may be incurred upon settlement of the liability.

The company records an asset and related retirement obligation for the costs associated with the retirement of long-lived tangible assets when a legal liability to retire such assets exists. The major categories of asset retirement obligations include: reclamation and restoration costs at the company’s potash and phosphate mining operations (most particularly phosphate mining), including management of materials generated by mining and mineral processing, such as various mine tailings and gypsum; land reclamation and revegetation programs; decommissioning of underground and surface operating facilities; general clean-up activities aimed at returning the areas to an environmentally acceptable condition; and post-closure care and maintenance.

The estimation of asset retirement obligation costs depends on the development of environmentally acceptable closure and post-closure plans. In some cases, this may require significant research and development to identify preferred methods for such plans that are economically sound and that, in most cases, may not be implemented for several decades. The company has continued to utilize appropriate

NOTES TO THE POTASHCORP 2008 CONSOLIDATED FINANCIAL STATEMENTS

88   IN MILLIONS OF US DOLLARS EXCEPT SHARE AND PER-SHARE AMOUNTS

Note 16 ENVIRONMENTAL COSTS AND ASSET RETIREMENT OBLIGATIONS (continued)

technical resources, including outside consultants, to develop specific site closure and post-closure plans in accordance with the requirements of the various jurisdictions in which it operates. The estimated cash flows required to settle the asset retirement obligation have been discounted at credit-adjusted risk-free rates ranging from 5.9 percent to 7.6 percent. Other than certain land reclamation programs, settlement of the obligations is typically correlated with mine life estimates. Cash flow payments are expected to occur principally over the next 100 years for the company’s phosphate operations. Payments relating to certain potash operations are not expected to occur until after that time. The present value of the company’s asset retirement obligations at December 31, 2008 totaled $127.5 (2007 – $116.6). The asset retirement obligations are generally incurred over an extended period of time. The current portion totaled $8.7 (2007 – $10.2).

Certain of the company’s facilities have asbestos-containing materials which the company will be obligated to remove and dispose of in a required manner should the asbestos become friable (i.e., readily crumbled or powdered) or should the property be demolished. As of December 31, 2008, the company has not recognized a conditional asset retirement obligation in its consolidated financial statements for certain locations where asbestos exists, because it does not have sufficient information to estimate the fair value of the obligation. As a result of the longevity of these facilities (due in part to maintenance procedures) and the fact that the company does not have plans for major changes that would require the removal of this asbestos, the timing of the removal of asbestos is indeterminable and the time over which the company may settle the obligation cannot be reasonably estimated as at December 31, 2008. The company would recognize a liability in the period in which sufficient information is available to reasonably estimate its fair value, as it has done for certain of its other facilities.

Other environmental liabilities typically relate to regulatory compliance, environmental management practices associated with ongoing operations other than mining, site assessment and remediation of environmental contamination related to the activities of the company and its predecessors, including waste disposal practices and ownership and operations of real property and facilities.

Site Assessment and Remediation Costs

The company has accrued $18.1 (2007 – $18.1) for costs associated with site assessment and remediation, including consulting fees, related to the clean-up of contaminated sites currently or formerly associated with the company or its predecessors’ businesses. The current portion of these costs totaled $3.5 (2007 – $3.5). See Note 30, under Legal and Other Matters, for a more detailed discussion of site assessment and remediation costs.

Environmental Operating Costs and Capital Expenditures

The company’s operating expenses, other than costs associated with asset retirement obligations, relating to compliance with environmental laws and regulations governing ongoing operations for 2008 were approximately $123.3 (2007 – $104.8; 2006 – $92.6). These amounts include environmental operating expenses related primarily to the production of phosphoric acid, fertilizer, feed and other products.

The company routinely undertakes environmental capital projects. In 2008, capital expenditures of $89.6 (2007 – $44.2) were incurred to meet pollution prevention and control objectives and $0.5 (2007 – $0.5) were incurred to meet other environmental objectives.

Following is a reconciliation of asset retirement and other environmental obligations as at December 31:

		2008			2007
Asset retirement obligations, beginning of year	$	116.6		$	100.7
Liabilities incurred		6.7			6.8
Liabilities settled		(7.5	)		(4.5	)
Accretion expense		5.7			4.9
Revisions in timing and amount of estimated cash flows		6.0			8.7
Asset retirement obligations, end of year		127.5			116.6
Other environmental liabilities		18.1			18.1
Less current portion (Note 12)		(12.2	)		(13.7	)
	$	133.4		$	121.0

NOTES TO THE POTASHCORP 2008 CONSOLIDATED FINANCIAL STATEMENTS

IN MILLIONS OF US DOLLARS EXCEPT SHARE AND PER-SHARE AMOUNTS 89

Note 17 SHARE CAPITAL

Authorized

The company is authorized to issue an unlimited number of common shares without par value and an unlimited number of first preferred shares. The common shares are not redeemable or convertible. The first preferred shares may be issued in one or more series with rights and conditions to be determined by the company’s Board of Directors. No first preferred shares have been issued.

	2008			2007		2006
Issued	Consideration			Consideration		Consideration
Issued, beginning of year	$	1,461.3		$	1,431.6	$	1,379.3
Shares issued under option plans		45.4			28.6		50.9
Shares issued for dividend reinvestment plan		1.9			1.1		1.4
Shares repurchased		(106.1	)		–		–
Issued, end of year	$	1,402.5		$	1,461.3	$	1,431.6
	2008			2007		2006
	Number of			Number of		Number of
	Common Shares			Common Shares		Common Shares
Issued, beginning of year		316,411,209			314,403,147		310,781,376
Shares issued under option plans		1,627,378			1,995,460		3,581,424
Shares issued for dividend reinvestment plan		11,600			12,602		40,347
Shares repurchased		(22,849,200	)		–		–
Issued, end of year		295,200,987			316,411,209		314,403,147

Normal Course Issuer Bid

On January 23, 2008, the company’s Board of Directors authorized a share repurchase program of up to 15,820,000 common shares (approximately 5 percent of issued and outstanding common shares) through a normal course issuer bid. As of September 9, 2008, the company had repurchased the maximum allowable number of shares under the program. On September 11, 2008, the company’s Board of Directors approved an increase in the share repurchase program of an additional 15,680,000 common shares (approximately 5 percent of issued and outstanding common shares). Shares could be repurchased from time to time on the open market through January 30, 2009 at prevailing market prices. The timing and amount of purchases under the program were dependent upon the availability and alternative uses of capital, market conditions and other factors.

During 2008, the company repurchased for cancellation 22,849,200 common shares under the program, at a cost of $3,356.4 and an average price per share of $146.89. The repurchase resulted in a reduction of share capital of $106.1, and the excess of net cost over the average book value of the shares of $3,250.3 has been recorded as a reduction of retained earnings.

Note 18 CONTRIBUTED SURPLUS

		2008		2007		2006
Balance, beginning of year	$	98.9	$	62.3	$	36.3
Stock-based compensation		27.3		36.6		26.0
Balance, end of year	$	126.2	$	98.9	$	62.3

NOTES TO THE POTASHCORP 2008 CONSOLIDATED FINANCIAL STATEMENTS

90   IN MILLIONS OF US DOLLARS EXCEPT SHARE AND PER-SHARE AMOUNTS

Note 19 SEGMENT INFORMATION

Sales revenue is recognized when the product is shipped, the sales price is determinable and collectability is reasonably assured. Revenue is recorded based on the FOB mine, plant, warehouse or terminal price, except for certain vessel sales or specific product sales that are shipped on a delivered basis. Transportation costs are recovered from the customer through sales pricing.

The company has three reportable business segments: potash, phosphate and nitrogen. These business segments are differentiated by the chemical nutrient contained in the product that each produces. Inter-segment sales are made under terms that approximate market value. The accounting policies of the segments are the same as those described in Note 2 and other relevant notes.

2008
	Potash		Phosphate		Nitrogen		All others		Consolidated
Sales	$	4,068.1	$	2,880.7	$	2,497.7	$	–	$	9,446.5
Freight		167.3		101.1		56.5		–		324.9
Transportation and distribution		42.1		39.4		50.9		–		132.4
Net sales – third party		3,858.7		2,740.2		2,390.3		–
Cost of goods sold		803.2		1,625.7		1,652.9		–		4,081.8
Gross margin		3,055.5		1,114.5		737.4		–		4,907.4
Inter-segment sales		–		23.1		173.6		–		–
Depreciation and amortization		82.0		140.5		97.1		7.9		327.5
Goodwill		–		–		96.6		0.4		97.0
Assets		3,350.0		2,283.0		1,593.6		3,022.2		10,248.8
Additions to property, plant and equipment		831.1		268.5		94.5		4.2		1,198.3

2007
	Potash		Phosphate		Nitrogen		All others		Consolidated
Sales	$	1,797.2	$	1,637.1	$	1,799.9	$	–	$	5,234.2
Freight		178.1		112.4		55.6		–		346.1
Transportation and distribution		39.1		33.4		51.6		–		124.1
Net sales – third party		1,580.0		1,491.3		1,692.7		–
Cost of goods sold		667.7		1,058.5		1,156.6		–		2,882.8
Gross margin		912.3		432.8		536.1		–		1,881.2
Inter-segment sales		–		1.9		112.3		–		–
Depreciation and amortization		71.7		121.1		88.2		10.3		291.3
Goodwill		–		–		96.6		0.4		97.0
Assets		1,809.6		1,955.4		1,646.4		4,305.2		9,716.6
Additions to property, plant and equipment		338.2		176.2		89.7		3.1		607.2

NOTES TO THE POTASHCORP 2008 CONSOLIDATED FINANCIAL STATEMENTS

IN MILLIONS OF US DOLLARS EXCEPT SHARE AND PER-SHARE AMOUNTS 91

Note 19 SEGMENT INFORMATION (continued)

2006
	Potash		Phosphate		Nitrogen		All others		Consolidated
Sales	$	1,227.5	$	1,255.1	$	1,284.1	$	–	$	3,766.7
Freight		130.5		88.5		36.8		–		255.8
Transportation and distribution		38.8		43.1		52.2		–		134.1
Net sales – third party		1,058.2		1,123.5		1,195.1		–
Cost of goods sold		497.1		998.2		879.5		–		2,374.8
Gross margin		561.1		125.3		315.6		–		1,002.0
Inter-segment sales		5.7		7.2		112.4		–		–
Depreciation and amortization		58.3		94.6		77.6		11.9		242.4
Goodwill		–		–		96.6		0.4		97.0
Assets		1,478.0		1,753.9		1,480.7		1,504.4		6,217.0
Additions to property, plant and equipment		293.2		119.7		75.5		20.2		508.6

As described in Note 1, PhosChem and Canpotex execute offshore marketing, sales and distribution functions for certain of the company’s products.

Financial information by geographic area is summarized in the following table:

	Country of Origin
	Canada		United States		Trinidad		Other		Consolidated
2008
Sales to customers outside the company
Canada	$	150.6	$	210.2	$	–	$	–	$	360.8
United States		1,353.1		2,992.3		899.4		–		5,244.8
PhosChem (PhosChem’s 2008 sales were made to:
India 73%, China 0%, other Asian countries 10%, Latin America 14%, other countries 3%)		–		713.6		–		–		713.6
Canpotex (Canpotex’s 2008 sales were made to:
China 13%, India 16%, other Asian countries 39%, Brazil 20%, other countries 12%)		2,257.1		–		–		–		2,257.1
Mexico		51.2		145.0		10.5		–		206.7
Brazil		105.3		14.9		–		47.5		167.7
Colombia		47.0		10.9		66.5		–		124.4
Other Latin America		100.8		73.3		62.7		–		236.8
Other		3.0		68.2		63.4		–		134.6
	$	4,068.1	$	4,228.4	$	1,102.5	$	47.5	$	9,446.5
Operating income	$	2,684.2	$	1,279.3	$	366.3	$	305.3	$	4,635.1
Capital assets and goodwill	$	2,307.2	$	1,993.4	$	577.0	$	31.6	$	4,909.2

NOTES TO THE POTASHCORP 2008 CONSOLIDATED FINANCIAL STATEMENTS

92   IN MILLIONS OF US DOLLARS EXCEPT SHARE AND PER-SHARE AMOUNTS

Note 19 SEGMENT INFORMATION (continued)

	Country of Origin
	Canada		United States		Trinidad		Other		Consolidated
2007
Sales to customers outside the company
Canada	$	88.0	$	127.0	$	–	$	–	$	215.0
United States		764.7		2,065.6		661.6		–		3,491.9
PhosChem (PhosChem’s 2007 sales were made to:
India 51%, China 6%, other Asian countries 8%, Latin America 31%, other countries 4%)		–		264.6		–		–		264.6
Canpotex (Canpotex’s 2007 sales were made to:
China 26%, Brazil 21%, India 10%, other Asian countries 33%, other countries 10%)		782.7		–		–		–		782.7
Mexico		23.1		81.8		–		–		104.9
Brazil		70.3		–		–		23.1		93.4
Colombia		26.2		10.4		46.8		–		83.4
Other Latin America		42.2		21.5		63.1		–		126.8
Other		–		35.5		36.0		–		71.5
	$	1,797.2	$	2,606.4	$	807.5	$	23.1	$	5,234.2
Operating income	$	537.8	$	652.5	$	296.9	$	101.3	$	1,588.5
Capital assets and goodwill	$	1,504.3	$	1,848.6	$	587.2	$	44.3	$	3,984.4

	Country of Origin
	Canada		United States		Trinidad		Other		Consolidated
2006
Sales to customers outside the company
Canada	$	65.7	$	92.0	$	–	$	–	$	157.7
United States		557.5		1,454.9		530.2		–		2,542.6
PhosChem (PhosChem’s 2006 sales were made to:
India 40%, China 19%, other Asian countries 14%, Latin America 22%, other countries 5%)		–		232.2		–		–		232.2
Canpotex (Canpotex’s 2006 sales were made to:
China 19%, India 10%, other Asian countries 41%, Brazil 15%, other countries 15%)		467.1		–		–		–		467.1
Mexico		7.3		72.1		5.1		–		84.5
Brazil		68.7		–		–		16.2		84.9
Colombia		20.2		7.5		32.3		–		60.0
Other Latin America		41.0		19.2		38.3		–		98.5
Other		–		37.9		1.3		–		39.2
	$	1,227.5	$	1,915.8	$	607.2	$	16.2	$	3,766.7
Operating income	$	426.9	$	216.4	$	171.8	$	60.4	$	875.5
Capital assets and goodwill	$	1,207.7	$	1,761.3	$	610.4	$	43.4	$	3,622.8

NOTES TO THE POTASHCORP 2008 CONSOLIDATED FINANCIAL STATEMENTS

IN MILLIONS OF US DOLLARS EXCEPT SHARE AND PER-SHARE AMOUNTS 93

Note 20 COST OF GOODS SOLD

The primary components of cost of goods sold are labor, employee benefits, services, raw materials (including inbound freight and purchasing and receiving costs), operating supplies, energy costs, property and miscellaneous taxes, depreciation and amortization, and provision for plant shutdowns.

Provision for Plant Shutdowns – Phosphate Segment – 2006

In July 2006, the company indefinitely suspended production of superphosphoric acid and ammonium polyphosphate products at Geismar, Louisiana. Management determined that the carrying amounts of the long-lived assets related to the production facilities were not fully recoverable, and an impairment loss of $6.3 was recognized.

Note 21 SELLING AND ADMINISTRATIVE

The primary components of selling and administrative are compensation, employee benefits, supplies, communications, travel, professional services, and depreciation and amortization.

Note 22 PROVINCIAL MINING AND OTHER TAXES

		2008		2007		2006
Potash Production Tax	$	431.3	$	84.2	$	28.6
Saskatchewan corporate capital taxes and other		112.1		51.2		37.9
	$	543.4	$	135.4	$	66.5

Note 23 OTHER INCOME

		2008			2007			2006
Share of earnings of equity investees	$	255.8		$	76.2		$	54.4
Dividend income		107.0			58.1			21.1
Gain on forward purchase contract for shares in Sinofert (Note 8)		25.3			–			–
Other		34.2			17.7			18.5
Provision for auction rate securities (Note 8)		(88.8	)		(26.5	)		–
	$	333.5		$	125.5		$	94.0

Sale of Property, Plant and Equipment – Phosphate Segment – 2008

Included in the Other category is a gain on sale of the assets of the company’s Brazilian phosphate feed plant and inland potash and feed warehouse in the amount of $21.4. The property, plant and equipment had a carrying value of $9.1. In conjunction with the sale of the assets on September 29, 2008, all employees were terminated by the company and rehired by the buyer. Brazilian law requires payment of severance to any employees involuntarily terminated and, as a result, severance payments of $0.9 were also recorded in the Other category.

Note 24 INTEREST EXPENSE

		2008			2007			2006
Interest expense on
Short-term debt	$	28.5		$	8.7		$	34.5
Long-term debt		94.9			111.6			97.6
Interest capitalized to property, plant and equipment		(42.9	)		(21.8	)		(19.1	)
Interest income		(17.7	)		(29.8	)		(27.4	)
	$	62.8		$	68.7		$	85.6

NOTES TO THE POTASHCORP 2008 CONSOLIDATED FINANCIAL STATEMENTS

94   IN MILLIONS OF US DOLLARS EXCEPT SHARE AND PER-SHARE AMOUNTS

Note 25 INCOME TAXES

Taxation on earnings comprises current and future income tax. Taxation is recognized in the statement of operations except to the extent that it relates to items recognized directly in OCI, in which case the tax is recognized in OCI.

Current income tax is the expected income tax payable on the taxable income for the year using rates enacted or substantively enacted at the year-end, and includes any adjustment to income tax payable in respect of previous years. Future income tax is provided using the asset and liability method whereby future income tax assets and liabilities are recognized for temporary differences between financial statement carrying amounts of assets and liabilities and their respective income tax bases. The tax effect of certain temporary differences is not recognized, principally with respect to temporary differences relating to investments in subsidiaries, jointly controlled entities and associates to the extent that the company is able to control the reversal of the temporary difference and the temporary difference is not expected to reverse in the foreseeable future. The amount of future income tax recognized is based on the expected manner and timing of realization or settlement of the carrying amount of assets and liabilities. Future income tax assets are recorded in the financial statements if realization is considered more likely than not. A valuation allowance is established, if necessary, to reduce any future income tax asset to an amount that is more likely than not to be realized. Future income tax assets and liabilities are offset to the extent that they relate to income taxes levied on the same taxable entity by the same taxation authority. The current portion of the future income tax asset is presented with other current assets.

As the company operates in a specialized industry and in several tax jurisdictions, its income is subject to various rates of taxation.

The provision for income taxes differs from the amount that would have resulted from applying the Canadian statutory income tax rates to income before income taxes as follows:

		2008			2007			2006
Income before income taxes
Canada	$	2,579.7		$	495.5		$	338.2
United States		1,359.7			589.4			219.3
Trinidad		341.2			268.6			148.5
Other		291.7			166.3			83.9
	$	4,572.3		$	1,519.8		$	789.9
Federal and provincial statutory tax rates		32.07%			35.55%			39.25%
Tax at statutory rates	$	1,466.3		$	540.3		$	310.0
Adjusted for the effect of:
Recoveries upon Canadian tax rate reductions		–			(40.1	)		(44.8	)
Refunds upon deduction of Saskatchewan resource surcharge		–			–			(34.1	)
Production-related deductions		(96.1	)		(17.6	)		–
Adjustment to prior years’ production-related deductions		(71.1	)		–			–
Stock-based compensation		(22.8	)		(0.1	)		(5.8	)
Additional tax deductions		(13.4	)		(14.8	)		(15.5	)
Difference between Canadian rate and rates applicable to subsidiaries in other countries		(27.6	)		(44.8	)		(50.5	)
Foreign exchange adjustment		(111.4	)		30.3			(23.3	)
Other		(46.8	)		(37.0	)		22.1
Income tax expense	$	1,077.1		$	416.2		$	158.1

NOTES TO THE POTASHCORP 2008 CONSOLIDATED FINANCIAL STATEMENTS

IN MILLIONS OF US DOLLARS EXCEPT SHARE AND PER-SHARE AMOUNTS 95

Note 25 INCOME TAXES (continued)

Details of income tax expense are as follows:

		2008			2007			2006
Canada
Current	$	516.3		$	154.1		$	51.8
Future		137.5			(17.6	)		(4.3	)
United States – Federal
Current		303.7			32.4			2.3
Future		(49.6	)		137.6			43.7
United States – State
Current		45.9			12.8			2.6
Future		(13.9	)		0.7			5.7
Trinidad and other
Current		129.0			97.3			51.4
Future		8.2			(1.1	)		4.9
Income tax expense	$	1,077.1		$	416.2		$	158.1

The tax effects of temporary differences that give rise to significant portions of the net future income tax liability are:

		2008			2007
Future income tax assets:
Loss and credit carryforwards	$	68.0		$	92.5
Accrued pension and other post-retirement benefits		15.3			51.5
Basis difference in investments		41.1			26.9
Basis difference in cash flow hedges		59.1			–
Basis difference in inventories		37.8			4.9
Other		20.0			59.8
Total future income tax assets		241.3			235.6
Future income tax liabilities:
Basis difference in fixed assets		801.4			731.3
Basis difference in long-term debt		41.3			75.6
Basis difference in investments		108.7			213.8
Basis difference in cash flow hedges		–			50.3
Other		65.2			152.7
Total future income tax liabilities		1,016.6			1,223.7
Net future income tax liability	$	775.3		$	988.1
Amounts included in:
Prepaid expenses and other current assets (Note 5)	$	(18.9	)	$	–
Future income tax liability		794.2			988.1
	$	775.3		$	988.1

At December 31, 2008, the company has income tax operating losses carried forward of $154.1 that do not expire. As well, it has realized income tax capital losses carried forward of $154.2 that do not expire. The company also has $506.3 of unused capital losses and deductible temporary differences, which have been offset by a valuation allowance. As a result, no future income tax asset has been recognized on these differences.

The company has determined that it is more likely than not that the future income tax assets, net of the valuation allowance, will be realized through a combination of future reversals of temporary differences and taxable income.

NOTES TO THE POTASHCORP 2008 CONSOLIDATED FINANCIAL STATEMENTS

96   IN MILLIONS OF US DOLLARS EXCEPT SHARE AND PER-SHARE AMOUNTS

Note 26 NET INCOME PER SHARE

		2008		2007		2006
Basic net income per share 1
Net income available to common shareholders	$	3,495.2	$	1,103.6	$	631.8
Weighted average number of common shares		307,480,000		315,641,000		311,880,000
Basic net income per share	$	11.37	$	3.50	$	2.03
Diluted net income per share 1
Net income available to common shareholders	$	3,495.2	$	1,103.6	$	631.8
Weighted average number of common shares		307,480,000		315,641,000		311,880,000
Dilutive effect of stock options		9,958,000		8,667,000		6,809,000
Weighted average number of diluted common shares		317,438,000		324,308,000		318,689,000
Diluted net income per share	$	11.01	$	3.40	$	1.98

¹ Net income per share calculations are based on full dollar and share amounts.

Diluted net income per share is calculated based on the weighted average number of shares issued and outstanding during the year. The denominator is: (1) increased by the total of the additional common shares that would have been issued assuming exercise of all stock options with exercise prices at or below the average market price for the year; and (2) decreased by the number of shares that the company could have repurchased if it had used the assumed proceeds from the exercise of stock options to repurchase them on the open market at the average share price for the year. For performance-based stock option plans, the number of contingently issuable common shares included in the calculation is based on the number of shares that would be issuable based on period-to-date (rather than anticipated) performance, if the effect is dilutive.

Excluded from the calculation of diluted net income per share were average options outstanding of 485,975 relating to the 2008 Performance Option Plan (2007 – NIL; 2006 – NIL) as the options’ exercise price was greater than the average market price of common shares for the year.

Note 27 STOCK-BASED COMPENSATION

Grants under the company’s stock-based compensation plans are accounted for in accordance with the fair value-based method of accounting. For stock option plans that will settle through the issuance of equity, the fair value of stock options is determined on their grant date using a valuation model and recorded as compensation expense over the period that the stock options vest, with a corresponding increase to contributed surplus. Forfeitures are estimated throughout the vesting period based on past experience and future expectations, and trued up upon actual option vesting. When stock options are exercised, the proceeds, together with the amount recorded in contributed surplus, are recorded in share capital.

Stock-based plans that are likely to settle in cash or other assets are accounted for as liabilities based on the intrinsic value of the awards. The compensation expense is accrued over the vesting period of the award, based on the difference between the market value of the underlying stock and the exercise price of the award, if any. Fluctuations in the market value of the underlying stock, as determined based on the closing price of the stock on the last day of each reporting period, will result in a change to the accrued compensation expense, which is recognized in the period in which the fluctuation occurs.

NOTES TO THE POTASHCORP 2008 CONSOLIDATED FINANCIAL STATEMENTS

IN MILLIONS OF US DOLLARS EXCEPT SHARE AND PER-SHARE AMOUNTS 97

Note 27 STOCK-BASED COMPENSATION (continued)

The company has eight stock-based compensation plans, which are described below. The compensation cost charged against income for those plans in 2008 was $33.4 (2007 – $84.0; 2006 – $44.3).

Stock Option Plans

The company has six stock option plans.

Under the Officers and Employees Plan, the company could, after February 3, 1998, issue up to 41,556,750 common shares pursuant to the exercise of options. Under the Directors Plan, the company could, after January 24, 1995, issue up to 2,736,000 common shares pursuant to the exercise of options. Under both plans, the exercise price is the quoted market closing price of the company’s common shares on the last trading day immediately preceding the date of the grant and an option’s maximum term is 10 years. All options granted to date under these plans have provided that one-half of the options granted in a year will vest one year from the date of the grant, with the other half vesting the following year. No stock options have been granted under the Directors Plan or the Officers and Employees Plan since November 2002 and November 2003, respectively, and the company’s Board of Directors determined in 2003 to discontinue granting stock options to directors. Effective November 2006, the company’s Board of Directors formally terminated these plans in respect of any future option grants.

Under the 2005 Performance Option Plan, the company could, after February 28, 2005 and before January 1, 2006, issue options to acquire up to 3,600,000 common shares. Under the 2006 Performance Option Plan, the company could, after February 27, 2006 and before January 1, 2007, issue options to acquire up to 4,200,000 common shares. Under the 2007 Performance Option Plan, the company could, after February 20, 2007 and before January 1, 2008, issue options to acquire up to 3,000,000 common shares. Under the 2008 Performance Option Plan, which was approved by the company’s shareholders on May 8, 2008, the company could, after February 20, 2008 and before January 1, 2009, issue options to acquire up to 1,000,000 common shares. Under the performance plans, the exercise price shall not be less than the quoted market closing price of the company’s common shares on the last trading day immediately preceding the date of the grant and an option’s maximum term is 10 years. The key design difference between the Performance Option Plans and the company’s other stock option plans is the performance-based vesting feature. In general, options granted under the Performance Option Plans will vest, if at all, according to a schedule based on the three-year average excess of the company’s consolidated cash flow return on investment over the weighted average cost of capital.

The company issues new common shares to satisfy stock option exercises. Options granted to Canadian employees are granted in Canadian dollars.

A summary of the status of the plans as of December 31, 2008, 2007 and 2006 and changes during the years ending on those dates is presented as follows:

Number of Shares Subject to Option

	Performance Option Plans									Officers, Employees and Directors Plans
		2008			2007			2006			2008			2007			2006
Outstanding, beginning of year		7,896,600			6,199,800			3,558,000			6,110,384			8,105,844			11,687,268
Granted		486,450			1,730,550			2,684,700			–			–			–
Exercised		(823,136	)		–			–			(804,242	)		(1,995,460	)		(3,581,424	)
Forfeited		(16,700	)		(33,750	)		(42,900	)		–			–			–
Expired		–			–			–			–			–			–
Outstanding, end of year		7,543,214			7,896,600			6,199,800			5,306,142			6,110,384			8,105,844
Weighted Average Exercise Price
	Performance Option Plans									Officers, Employees and Directors Plans
		2008			2007			2006			2008			2007			2006
Outstanding, beginning of year	$	40.08		$	31.38		$	30.03		$	13.48		$	12.68		$	12.80
Granted		198.07			62.75			33.67			–			–			–
Exercised		30.94			–			–			12.63			13.31			13.31
Forfeited		57.42			39.26			30.30			–			–			–
Expired		–			–			–			–			–			–
Outstanding, end of year	$	48.01		$	40.08		$	31.38		$	12.29		$	13.48		$	12.68

The aggregate grant-date fair value of all options granted during the year was $36.4 (2007 – $39.2; 2006 – $34.5).

NOTES TO THE POTASHCORP 2008 CONSOLIDATED FINANCIAL STATEMENTS

98   IN MILLIONS OF US DOLLARS EXCEPT SHARE AND PER-SHARE AMOUNTS

Note 27 STOCK-BASED COMPENSATION (continued)

The following table summarizes information about stock options outstanding at December 31, 2008:

	Options Outstanding						Options Exercisable
Range of			Weighted Average		Weighted Average				Weighted Average
Exercise Prices	Number		Remaining Life in Years		Exercise Price		Number		Exercise Price
Officers and Employees and Directors Plans
$7.00 to $10.50		1,142,790		2	$	10.21		1,142,790	$	10.21
$10.51 to $14.00		3,181,702		4	$	12.47		3,181,702	$	12.47
$14.01 to $17.50		981,650		4	$	14.15		981,650	$	14.15
		5,306,142		4	$	12.29		5,306,142	$	12.29
Performance Option Plans
$29.00 to $39.00		5,343,664		7	$	31.10		2,683,864	$	29.57
$55.00 to $65.00		1,714,050		8	$	60.98		–	$	–
$160.00 to $170.00		141,000		9	$	163.07		–	$	–
$190.00 to $200.00		344,500		9	$	198.77		–	$	–
		7,543,214		7	$	48.01		2,683,864	$	29.57
		12,849,356		6	$	33.26		7,990,006	$	18.09

The foregoing options have expiry dates ranging from November 2009 to May 2018.

The fair value of each option grant was estimated as of the grant date using the Black-Scholes-Merton option-pricing model. The following weighted average assumptions were used in arriving at the grant-date fair values associated with stock options for which compensation cost was recognized during 2008, 2007 and 2006:

	Year of Grant
		2008		2007		2006		2005
Expected dividend	$	0.40	$	0.40	$	0.20	$	0.20
Expected volatility		34%		29%		30%		28%
Risk-free interest rate		3.30%		4.48%		4.90%		3.86%
Expected life of options in years		5.8		6.4		6.5		6.5

The expected dividend on the company’s stock was based on the current annualized dividend rate as of the date of grant. Expected volatility was based on historical volatility of the company’s stock over a period commensurate with the expected term of the stock option. The risk-free interest rate for the expected life of the option was based, as applicable, on the implied yield available on zero-coupon government issues with an equivalent remaining term at the time of the grant. Historical data were used to estimate the expected life of the option.

A summary of the status of the company’s non-vested shares subject to option as of December 31, 2008 and changes during the year then ended is presented below:

	Number of			Weighted Average
	Shares Subject			Grant-Date
	to Option			Fair Value
Non-vested at January 1, 2008		7,896,600		$	13.70
Granted		486,450			74.76
Vested		(3,507,000	)		9.94
Forfeited		(16,700	)		21.26
Non-vested at December 31, 2008		4,859,350		$	22.50

As of December 31, 2008, 4,859,350 options remained unvested and there was $15.0 of total unrecognized compensation cost related to the company’s stock option plans. This cost is expected to be recognized over the period through December 31, 2010.

Cash received from stock option exercises for the year ended December 31, 2008 was $36.7 (2007 – $26.6).

Deferred Share Unit and Other Plans

The company offers a deferred share unit plan to non-employee directors, which allows each director to choose to receive, in the form of deferred share units (“DSUs”), all or a percentage of the director’s fees, which would otherwise be payable in cash. The plan also provides for discretionary grants of additional DSUs by the company’s Board of Directors, a practice which the Board discontinued on January 24, 2007 in connection with an increase in the annual retainer. Each DSU fully vests upon award, but is distributed only when the director has ceased to be a member of the Board of Directors of the company. Vested units

NOTES TO THE POTASHCORP 2008 CONSOLIDATED FINANCIAL STATEMENTS

IN MILLIONS OF US DOLLARS EXCEPT SHARE AND PER-SHARE AMOUNTS 99

Note 27 STOCK-BASED COMPENSATION (continued)

are settled in cash based on the common share price at that time. As of December 31, 2008, the total number of DSUs held by participating directors was 188,392 (2007 – 206,251; 2006 – 213,849).

The company offers a performance unit incentive plan to senior executives and other key employees. The performance objectives under the plan are designed to further align the interests of executives and key employees with those of shareholders by linking the vesting of awards to the total return to shareholders over the three-year performance period ending December 31, 2008. Total shareholder return measures the capital appreciation in the company’s common shares, including dividends paid over the performance period. Vesting of one-half of the

awards is based on increases in the total shareholder return over the three-year performance period. Vesting of the remaining one-half of the awards is based on the extent to which the total shareholder return matches or exceeds the total shareholder return of the common shares of a pre-defined peer group. Vested units are settled in cash based on the common share price generally at the end of the performance period. Compensation expense for this program is recorded over the three-year performance cycle of the program. The amount of compensation expense is adjusted over the three-year performance cycle to reflect the current market value of common shares and the number of shares vested in accordance with the vesting schedule based upon total shareholder return, and such return compared to the company’s peer group.

Note 28 FINANCIAL INSTRUMENTS AND RELATED RISK MANAGEMENT

Financial assets and financial liabilities are recognized initially at fair value, normally being the transaction price plus directly attributable transaction costs. Transaction costs related to financial assets or financial liabilities classified as held for trading are recognized immediately in income. Regular way purchases and sales of financial assets are accounted for on the trade date.

Financial Risks

The company is exposed in varying degrees to a variety of financial risks from its use of financial instruments: credit risk, liquidity risk and market risk. The source of risk exposure and how each is managed is outlined below.

Credit Risk

The company is exposed to credit risk on its cash and cash equivalents, accounts receivable, derivative instrument assets and auction rate securities. The maximum exposure to credit risk, as represented by the carrying amount of the financial assets, was:

		2008
Cash and cash equivalents	$	276.8
Accounts receivable		1,189.9
Derivative instrument assets		17.9
Available-for-sale securities – auction rate securities		17.2

The company manages its credit risk on cash and cash equivalents, derivative instrument assets and auction rate securities through practices guiding:

• Acceptable minimum counterparty credit ratings relating to the natural gas and foreign currency derivative instrument assets, and cash and cash equivalents

• Daily counterparty settlement on natural gas derivative instruments based on prescribed credit thresholds

• Exposure thresholds by counterparty on cash and cash equivalents

Derivative instrument assets are comprised of natural gas hedging instruments and foreign currency forward contracts. At December 31, 2008, the company held no cash margin deposits as collateral relating to these derivative financial instruments. All of the counterparties to the contracts comprising the derivative financial instruments in an asset position are of investment grade quality.

Accounts receivable is comprised of trade accounts, non-trade accounts and margin deposits on derivative instruments. Trade accounts receivable are recognized initially at fair value and subsequently measured at amortized cost less allowance for doubtful accounts. An allowance for doubtful accounts is established when there is a reasonable expectation that the company will not be able to collect all amounts due according to the original terms of the receivables. The carrying amount of the trade accounts receivable is reduced through the use of the allowance account, and the amount of any increase in the allowance is recognized in the statement of operations. When a trade receivable is uncollectible, it is written off against the allowance account for trade receivables. Subsequent recoveries of amounts previously written off are credited to the statement of operations.

The company seeks to manage the credit risk relating to its trade receivables through a credit management program. Credit approval policies and procedures are in place guiding the granting of credit to new customers as well as the continued extension of credit for existing customers. Existing customer accounts are reviewed every 12-18 months.

NOTES TO THE POTASHCORP 2008 CONSOLIDATED FINANCIAL STATEMENTS

100   IN MILLIONS OF US DOLLARS EXCEPT SHARE AND PER-SHARE AMOUNTS

Note 28 FINANCIAL INSTRUMENTS AND RELATED RISK MANAGEMENT (continued)

Credit for international customers is extended based upon an evaluation of both customer and country risk. The company utilizes both credit agency reports, where available, and an assessment of other relevant information such as current financial statements and/or credit references before assigning credit limits to customers. Customers that fail to meet specified benchmark creditworthiness may transact with the company on a prepayment basis.

The company does not hold any collateral as security. If appropriate, the company may request guarantees or standby letters of credit to mitigate credit risk on trade receivables. The company also obtains export insurance from Export Development Canada (covering 90 percent of each balance) for international potash sales from the company’s New Brunswick operation, and from the Foreign Credit Insurance Association (covering 90 percent of each balance) for international sales from the US. A total of $122.0 in receivables at December 31, 2008 is covered, representing 97 percent of offshore receivables. Canpotex also obtains export insurance from Export Development Canada for its receivables (covering 90 percent of most balances).

The credit period on sales is generally 15 days for fertilizer customers, 30 days for industrial and feed customers and up to 180 days for select export sales customers. Interest at 1.5 percent per month is charged on balances remaining unpaid at the end of the sale terms. The company has historically experienced minimal customer defaults and, as a result, it considers the credit quality of the trade receivables at

December 31, 2008 that are not past due to be high. The aging of trade receivables that were past due but not impaired was as follows:

		2008		2007
1 – 30 days	$	33.3	$	40.8
31 – 60 days		8.7		0.9
Greater than 60 days		1.7		2.6
	$	43.7	$	44.3

A reconciliation of the accounts receivable allowance for doubtful accounts is as follows:

		2008			2007
Balance – beginning of period	$	5.9		$	4.7
Provision for receivables impairment		5.0			1.9
Receivables written off during the period as uncollectible (primarily related to offshore receivables)		(3.2	)		(0.7	)
	$	7.7		$	5.9

The company sells potash from its Saskatchewan mines for use outside Canada and the US exclusively to Canpotex. Sales to Canpotex are at prevailing market prices and are settled on normal trade terms. There are no amounts past due or impaired relating to amounts owing to the company from Canpotex.

Liquidity Risk

Liquidity risk arises from the company’s general funding needs and in the management of its assets, liabilities and optimal capital structure. The company manages its liquidity risk to maintain sufficient liquid financial resources to fund its operations and meet its commitments and obligations in a cost-effective manner. In managing its liquidity risk, the company has access to a range of funding options. The table below outlines its available debt instruments as of December 31, 2008:

	Total			Amount Outstanding			Amount
	Amount			and Committed			Available
Credit facilities	$	1,930.0	1,2		$ 1,724.6	1	$	205.4	1
Line of credit		75.0			20.0	3		55.0

1	The company has $750.0 available under a commercial paper program which is limited to the availability of back-up funds under the credit facility. Included in the amount outstanding and committed is $324.6 of commercial paper. Per the terms of the agreements, the commercial paper outstanding and committed, as applicable, is based on the US dollar balance or equivalent thereof in lawful money of other currencies at the time of issue; therefore, subsequent changes in the exchange rate applicable to Canadian dollar denominated commercial paper have no impact on this balance.
2	Subsequent to year-end, effective January 21, 2009, $500.0 of capacity was added to the 364-day facility, as described in Note 11.
3	Letters of credit as described in Note 11.

On December 12, 2007, the company filed a US shelf registration statement under which it may issue and sell up to $2,000.0 of additional debt securities subject to market conditions.

The company’s investment grade rating as measured by Moody’s senior debt ratings remained unchanged from December 31, 2007 at Baa1 with a stable outlook. Its investment grade rating as measured by Standard & Poor’s senior debt ratings was upgraded in May 2008, from BBB+ with a stable outlook to BBB+ with a positive outlook, and again in August 2008 to A- with a stable outlook.

NOTES TO THE POTASHCORP 2008 CONSOLIDATED FINANCIAL STATEMENTS

IN MILLIONS OF US DOLLARS EXCEPT SHARE AND PER-SHARE AMOUNTS 101

Note 28 FINANCIAL INSTRUMENTS AND RELATED RISK MANAGEMENT (continued)

The table below presents a maturity analysis of the company’s financial liabilities based on the expected cash flows from the date of the balance sheet to the contractual maturity date. The amounts are the contractual undiscounted cash flows.

	Carrying Amount
	of Liability at		Contractual			Within 1			1 to 3		3 to 5		Over 5
	December 31, 2008		Cash Flows			Year			Years		Years		Years
Short-term debt obligations 1	$	1,324.8	$	1,337.1		$	1,337.1		$	–	$	–	$	–
Accounts payable and accrued charges 2		565.3		565.3			565.3			–		–		–
Long-term debt obligations 1		1,758.2		2,804.9			102.9			957.8		566.4		1,177.8
Derivative financial instrument liabilities
Foreign currency forward contracts		57.9
Outflow				720.5			720.5			–		–		–
Inflow				(662.6	)		(662.6	)		–		–		–
Natural gas hedging derivatives		170.6		186.0			50.8			55.1		24.7		55.4

1	Contractual cash flows include contractual interest payments related to debt obligations. Interest rates on variable rate debt are based on prevailing rates at December 31, 2008.
2	Excludes taxes, accrued interest, deferred revenues and current portions of accrued environmental costs and asset retirement obligations and accrued pension and other post-retirement benefits. This also excludes derivative financial instrument liabilities which have been presented separately.

Market Risk

Market risk is the risk that financial instrument fair values will fluctuate due to changes in market prices. The significant market risks to which the company is exposed are foreign exchange risk, interest rate risk and price risk (related to commodity and equity securities).

Foreign Exchange Risk

The company is exposed to foreign exchange risk primarily relating to operating and capital expenditures, income and resource taxes, dividends and capital expenditures denominated in currencies other than the US dollar, primarily the Canadian dollar. To manage foreign exchange risk related to these non-US dollar expenditures, the company may enter into foreign currency forward contracts. Its treasury risk management policies allow such exposures to be hedged within certain prescribed limits for both forecast operating and approved capital expenditures. The foreign currency forward contracts are not currently designated as hedging instruments for accounting purposes.

As at December 31, 2008, the company had entered into foreign currency forward contracts to sell US dollars and receive Canadian dollars in the notional amount of $873.0 (2007 – $60.0) at an average exchange rate of 1.1522 (2007 – 1.0176) per US dollar. It had also entered into other small forward contracts in other currencies. Maturity dates for all forward contracts are within 2009.

The company has certain available-for-sale investments listed on foreign stock exchanges and denominated in currencies other than the US dollar for which it is exposed to foreign exchange risk. These investments are held for long-term strategic purposes.

NOTES TO THE POTASHCORP 2008 CONSOLIDATED FINANCIAL STATEMENTS

102   IN MILLIONS OF US DOLLARS EXCEPT SHARE AND PER-SHARE AMOUNTS

Note 28 FINANCIAL INSTRUMENTS AND RELATED RISK MANAGEMENT (continued)

The following table shows the company’s exposure to exchange risk and the pre-tax effects on income and OCI of reasonably possible changes in the relevant foreign currency. This analysis assumes all other variables remain constant.

	Carrying Amount			Foreign Exchange Risk
	of Asset (Liability)			5% increase in US$						5% decrease in US$
	2008			Income			OCI			Income			OCI
Cash and cash equivalents denominated in Canadian dollars	$	(5.3	)	$	0.3		$	–		$	(0.3	)	$	–
Accounts receivable denominated in Canadian dollars		12.0			(0.6	)		–			0.6			–
Available-for-sale investments
ICL denominated in New Israeli shekels		998.1			–			(49.9	)		–			49.9
Sinofert denominated in Hong Kong dollars		746.8			–			(37.3	)		–			37.3
Short-term debt denominated in Canadian dollars		(159.8	)		8.0			–			(8.0	)		–
Accounts payable denominated in Canadian dollars		(105.1	)		5.3			–			(5.3	)		–
Derivative instruments
Foreign currency forward contracts		(51.6	)		(41.3	)		–			41.3			–

Interest Rate Risk

Fluctuations in interest rates impact the future cash flows and fair values of various financial instruments. With respect to the company’s debt portfolio, it addresses interest rate risk by using a diversified portfolio of fixed and floating rate instruments. This exposure is also managed by aligning current and long-term assets with demand and fixed-term debt and by monitoring the effects of market changes in interest rates. Interest rate swaps can and have been used by the company to further manage its interest rate exposure.

The company is also exposed to changes in interest rates related to its investments in marketable securities and auction rate securities. With respect to marketable securities, included in cash and cash equivalents, the company’s primary objective is to ensure the security of principal amounts invested and provide for a high degree of liquidity, while achieving a satisfactory return. Its treasury risk management policies specify various investment parameters including eligible types of investment, maximum maturity dates, maximum exposure by counterparty and minimum credit ratings.

The following table shows the company’s exposure to interest rate risk and the pre-tax effects on net income and other comprehensive income of reasonably possible changes in the relevant interest rates. This analysis assumes all other variables remain constant.

	Carrying Amount			Interest Rate Risk
	of Asset (Liability)			1% decrease in interest rates					1% increase in interest rates
	2008			Income			OCI		Income			OCI
Fixed-rate instruments
Long-term debt obligations 1	$	(1,352.3	)	$	–		$	–	$	–		$	–
Variable rate instruments
Cash and cash equivalents		276.8			(2.8	)		–		2.8			–
Available-for-sale investments – auction rate securities		17.2			(1.3	)		–		1.3			–
Long-term debt obligations		(405.9	)		4.1			–		(4.1	)		–
Short-term debt obligations		(1,324.8	)		4.2			–		(4.2	)		–

¹ The company does not measure any fixed rate debt at fair value. Therefore, changes in interest rates will not affect income or OCI as there is no change in the carrying value of fixed-rate debt, and interest payments are fixed.

Price Risk

The company is exposed to commodity price risk resulting from its natural gas requirements. Its natural gas strategy is based on diversification for its total gas requirements (which represent the forecast consumption of natural gas volumes by its manufacturing and mining facilities). Its objective is to acquire a reliable supply of natural gas feedstock and fuel on a location-adjusted, cost-competitive basis in a manner that minimizes volatility without undue risk. The company employs derivative commodity instruments related to a portion of its natural gas requirements (primarily futures, swaps and options) for the purpose of managing its exposure to commodity price risk in the purchase of natural gas, not for speculative or trading purposes. The company has an Advisory Committee, comprised of members from senior management, responsible for developing policies and

NOTES TO THE POTASHCORP 2008 CONSOLIDATED FINANCIAL STATEMENTS

IN MILLIONS OF US DOLLARS EXCEPT SHARE AND PER-SHARE AMOUNTS 103

Note 28 FINANCIAL INSTRUMENTS AND RELATED RISK MANAGEMENT (continued)

establishing procedural requirements relating to its natural gas activities. Such policies include the establishment of limits for the portion of its natural gas requirements that will be hedged, as well as the types of instruments that may be utilized for such hedging activities.

The company is also exposed to equity securities price risk because of its exchange-traded available-for-sale securities. These investments, other than the auction rate securities, are held for long-term strategic purposes. The price risk related to auction rate securities results from the current lack of an active market in which the company is able to liquidate such securities and from credit risk as discussed previously.

The following table shows the company’s exposure to price risk and the pre-tax effects on net income and other comprehensive income of reasonably possible changes in the relevant commodity or securities prices. This analysis assumes all other variables remain constant.

	Carrying Amount			Price Risk
	of Asset (Liability)			10% decrease in prices					10% increase in prices
	2008			Income		OCI			Income		OCI
Derivative instruments
Natural gas hedging derivatives 1	$	(159.0	)1	$	–	$	(85.8	)	$	–	$	85.8
Available-for-sale investments
Intercorporate investments		1,744.9			–		(174.5	)		–		174.5
Auction rate securities 2		17.2			n/a		n/a			n/a		n/a

1	Amount is net of $11.6 of derivative instrument assets.
2	Due to the current lack of an active market for these securities, price sensitivities are not determinable.

The sensitivity analyses included in the tables above should be used with caution as the changes are hypothetical and are not predictive of future performance. The above sensitivities are calculated with reference to period-end balances and will change due to fluctuations in the balances throughout the year. In addition, for the purpose of the sensitivity analyses, the effect of a variation in a particular assumption on the fair value of the financial instrument was calculated independently of any change in another assumption. Actual changes in one factor may contribute to changes in another factor, which may magnify or counteract the effect on the fair value of the financial instrument.

Fair Value

Fair value represents point-in-time estimates that may change in subsequent reporting periods due to market conditions or other factors.

Presented below is a comparison of the fair value of each financial instrument to its carrying value.

	2008						2007
	Carrying Amount			Fair Value of			Carrying Amount			Fair Value of
	of Asset (Liability)			Asset (Liability)			of Asset (Liability)			Asset (Liability)
Cash and cash equivalents	$	276.8		$	276.8		$	719.5		$	719.5
Accounts receivable		1,189.9			1,189.9			596.2			596.2
Derivative financial instruments		(210.6	)		(210.6	)		134.8			134.8
Investments		2,750.7			4,615.2			3,581.5			5,673.5
Short-term debt obligations		(1,323.9	)		(1,323.9	)		(90.0	)		(90.0	)
Accounts payable and accrued charges		(1,183.6	)		(1,183.6	)		(911.5	)		(911.5	)
Long-term debt		(1,758.2	)		(1,730.3	)		(1,358.5	)		(1,364.8	)

Due to their short-term nature, the fair value of cash and cash equivalents, accounts receivable, short-term debt, and accounts payable and accrued charges is assumed to approximate carrying value. The effective interest rate on the investments in auction rate securities held within the company’s trading account at December 31, 2008 was 17.08 percent (2007 – 13.40 percent). The effective interest rate on its short-term debt at December 31, 2008 was 2.33 percent (2007 – 5.17 percent). The fair value of its senior notes at December 31, 2008 reflects the current yield valuation based on observed market prices. The current yield on the notes payable ranges from 5.05 percent to 6.73 percent (2007 – 4.64 percent to 6.45 percent). The fair value of the company’s other long-term debt instruments approximated carrying value.

NOTES TO THE POTASHCORP 2008 CONSOLIDATED FINANCIAL STATEMENTS

104   IN MILLIONS OF US DOLLARS EXCEPT SHARE AND PER-SHARE AMOUNTS

Note 29 CAPITAL DISCLOSURES

The company’s objectives when managing its capital are to maintain financial flexibility while managing its cost of and optimizing access to capital. In order to achieve these objectives, the company’s strategy, which was unchanged from 2007, was to maintain its investment grade credit rating.

The company includes net debt and adjusted shareholders’ equity as components of its capital structure. The calculation of net debt, adjusted shareholders’ equity and adjusted capital are set out in the following table:

	2008		2007
Short-term debt and current portion of long-term debt	$	1,324.1	$	90.2
Long-term debt		1,739.5		1,339.4
Total debt		3,063.6		1,429.6
Less: cash and cash equivalents		276.8		719.5
Net debt		2,786.8		710.1
Shareholders’ equity		4,588.9		6,018.7
Less: accumulated other comprehensive income		657.9		2,178.9
Adjusted shareholders’ equity		3,931.0		3,839.8
Adjusted capital 1	$	6,717.8	$	4,549.9

¹ Adjusted capital = (total debt – cash and cash equivalents) + (shareholders’ equity – accumulated other comprehensive income)

The company monitors capital on the basis of a number of factors, including the ratios of: adjusted earnings before interest expense, income taxes, depreciation and amortization, provision for auction rate securities, and gain on sale of assets (“adjusted EBITDA”) to adjusted interest expense; net debt to adjusted EBITDA and net debt to adjusted capital. Adjusted EBITDA to adjusted interest expense and net debt to adjusted EBITDA are calculated utilizing twelve-month trailing adjusted EBITDA and adjusted interest expense.

	2008		2007
Components of ratios
Adjusted EBITDA	$	5,030.0	$	1,906.3
Net debt	$	2,786.8	$	710.1
Adjusted interest expense	$	105.7	$	90.5
Adjusted capital	$	6,717.8	$	4,549.9
Ratios
Adjusted EBITDA to adjusted interest expense 1		47.6		21.1
Net debt to adjusted EBITDA 2		0.6		0.4
Net debt to adjusted capital 3		41.5%		15.6%

1	Adjusted EBITDA to adjusted interest expense = adjusted EBITDA (twelve months ended) / adjusted interest expense (twelve months ended)
2	Net debt to adjusted EBITDA = (total debt – cash and cash equivalents) / adjusted EBITDA (twelve months ended)
3	Net debt to adjusted capital = (total debt – cash and cash equivalents) / (total debt – cash and cash equivalents + total shareholders’ equity – accumulated other comprehensive income)

The company monitors its capital structure and, based on changes in economic conditions, may adjust the structure through adjustments to the amount of dividends paid to shareholders, repurchase of shares, issuance of new shares or issuance of new debt.

The increase in adjusted EBITDA to adjusted interest expense is a result of an increase in adjusted EBITDA. The net-debt-to-adjusted-EBITDA ratio remained constant as an increase in adjusted EBITDA was offset by an increase in net debt. The increase in net debt led to the increase in the net-debt-to-adjusted-capital ratio.

	2008			2007
Net income	$	3,495.2		$	1,103.6
Income taxes		1,077.1			416.2
Interest expense		62.8			68.7
Depreciation and amortization		327.5			291.3
Provision for auction rate securities		88.8			26.5
Gain on sale of assets (Note 23)		(21.4	)		—
Adjusted EBITDA	$	5,030.0		$	1,906.3
	2008			2007
Interest expense	$	62.8		$	68.7
Interest capitalized to property, plant and equipment		42.9			21.8
Adjusted interest expense	$	105.7		$	90.5

NOTES TO THE POTASHCORP 2008 CONSOLIDATED FINANCIAL STATEMENTS

IN MILLIONS OF US DOLLARS EXCEPT SHARE AND PER-SHARE AMOUNTS 105

Note 30 CONTINGENCIES

Canpotex

PCS is a shareholder in Canpotex, which markets potash offshore. Should any operating losses or other liabilities be incurred by Canpotex, the shareholders have contractually agreed to reimburse it for such losses or liabilities in proportion to their productive capacity. There were no such operating losses or other liabilities in 2008, 2007 or 2006.

Mining Risk

In common with other companies in the industry, the company is unable to acquire insurance for underground assets.

Investment in APC

The company is party to a shareholders agreement with Jordan Investment Company (“JIC”) with respect to its investment in APC. The terms of the shareholders agreement provide that, from October 17, 2006 to October 16, 2009, JIC may seek to exercise a put option (the “Put”) to require the company to purchase JIC’s remaining common shares in APC. If the Put were exercised, the company’s purchase price would be calculated in accordance with a specified formula based, in part, on earnings of APC. The amount, if any, which the company may have to pay for JIC’s remaining common shares if there were to be a valid exercise of the Put would be determinable at the time JIC provides appropriate notice to the company pursuant to the terms of the agreement.

Legal and Other Matters

Significant matters of note include the following:

• In 1998, the company, along with other parties, was notified by the US Environmental Protection Agency (“USEPA”) of potential liability under the US federal Comprehensive Environmental Response, Compensation and Liability Act of 1980 (“CERCLA”) with respect to certain soil and groundwater conditions at a PCS Joint Venture blending facility in Lakeland, Florida and certain adjoining property. In 1999, PCS Joint Venture signed an Administrative Order and Consent with the USEPA pursuant to which PCS Joint Venture agreed to conduct a Remedial Investigation and Feasibility Study (“RI/FS”) of these conditions. PCS Joint Venture and another party are sharing the costs of the RI/FS, which is now complete. A Record of Decision (“ROD”) based upon the RI/FS was issued on September 27, 2007. The ROD provides for a remedy that requires excavation of impacted soils and interim treatment of groundwater. The total remedy cost is estimated in the ROD to be $8.5. Soil excavation activities are expected to begin in the first quarter of 2009. PCS Joint Venture and additional potentially responsible parties are negotiating with the USEPA a Remedial Design/Remedial Action Consent Decree, pursuant to which the parties will perform the ROD remedy. In addition, negotiations are underway regarding the appropriate share of the cost of the remedy that should be borne by each party. Although PCS Joint Venture sold the Lakeland property in July 2006, it has retained the above-described

	remediation responsibilities and has indemnified the third-party purchaser for the costs of remediation and certain related claims.
•	The USEPA has identified PCS Nitrogen, Inc. (“PCS Nitrogen”) as a potentially responsible party with respect to a former fertilizer blending operation in Charleston, South Carolina, known as the Planters Property or Columbia Nitrogen site, formerly owned by a company from which PCS Nitrogen acquired certain other assets. The USEPA has requested reimbursement of $3.0 of previously incurred response costs and the performance or financing of future site investigation and response activities from PCS Nitrogen and other named potentially responsible parties. In September 2005, Ashley II of Charleston, L.L.C., the current owner of the Planters Property, filed a complaint in the United States District Court for the District of South Carolina (the “Court”) seeking a declaratory judgment that PCS Nitrogen is liable to pay environmental response costs that Ashley II of Charleston, L.L.C. alleges it has incurred and will incur in connection with response activities at the site. The Court entered an order bifurcating the case into two phases. In the third quarter of 2007, the Court issued its decision for the first phase of the case, in which it determined that PCS Nitrogen is the successor to a former owner of the site and may be liable to Ashley II of Charleston, L.L.C. for its environmental response costs at the site. In the first quarter of 2008, PCS Nitrogen filed a motion with the Court for certification of an interlocutory appeal of the Court’s order and to stay further proceedings pending a decision on the appeal from the Fourth Circuit Appellate Court. In April 2008, the Court denied PCS Nitrogen’s motion for certification. PCS Nitrogen will have to wait until the Court issues a final ruling before it can appeal the Court’s decision. PCS Nitrogen has filed third-party complaints against owners and operators that it believes should be responsible parties with respect to the site. PCS Nitrogen is currently pursuing the complaints that it has filed against the third-party defendants. The Court will enter a final decision regarding the allocation and amount of liability that PCS Nitrogen and the third-party defendants may have relating to the Planters Property in the second phase of the case. PCS Nitrogen denies that it is a potentially responsible party and is vigorously defending its interests in these actions.
•	PCS Phosphate, along with several other entities, has received notice from parties to an Administrative Settlement Agreement (“Settling Parties”) with the USEPA of alleged contribution liability under CERCLA for costs incurred and to be incurred addressing PCB soil contamination at the Ward Superfund Site in Raleigh, North Carolina (“Site”). PCS Phosphate has agreed to participate, on a non-joint and several basis, with the Settling Parties in the performance of the removal action and the payment of certain other costs associated with the Site, including reimbursement of the USEPA’s past costs. The cost of performing the removal at the Site is estimated at $50.0. The removal activities commenced at the Site in August 2007. The company anticipates recovering some portion of its expenditures in this matter from other liable parties. In September 2008, the USEPA

NOTES TO THE POTASHCORP 2008 CONSOLIDATED FINANCIAL STATEMENTS

106   IN MILLIONS OF US DOLLARS EXCEPT SHARE AND PER-SHARE AMOUNTS

Note 30 CONTINGENCIES (continued)

	issued a final remedy, with an estimated cost of $6.1, for PCB-impacted sediments downstream of the Site (“Operable Unit 1”). In October 2008, the USEPA issued special notice letters to PCS Phosphate and other alleged potentially responsible parties requiring a good-faith offer to perform and/or pay for the clean-up of Operable Unit 1, to perform further investigation at the Site and adjacent properties, and to reimburse USEPA for its past costs. In January 2009, in addition to good-faith offers made by other potentially responsible parties, PCS Phosphate, along with some of the Settling Parties, submitted a good-faith offer to the USEPA. The USEPA is reviewing the good-faith offers. At this time, the company is unable to evaluate the extent of any exposure that it may have for the matters addressed in the special notice letter.
•	The USEPA has an ongoing initiative to evaluate implementation within the phosphate industry of a particular exemption for mineral processing wastes under the hazardous waste program. In connection with this industry-wide initiative, the USEPA conducted hazardous waste compliance evaluation inspections at numerous phosphate operations, including the company’s plants in Aurora, North Carolina; Geismar, Louisiana; and White Springs, Florida. The USEPA has notified the company of various alleged violations of the US Resource Conservation and Recovery Act (“RCRA”) at its Aurora and White Springs plants. The company and other industry members have met with representatives of the US Department of Justice, the USEPA and various state environmental agencies regarding potential resolutions of these matters. During these meetings, the company was informed that the USEPA also believes the Geismar plant is in violation of these requirements. As part of the initiative, the company entered into RCRA 3013 Administrative Orders on Consent to perform certain site assessment activities at its White Springs, Aurora and Geismar plants. The company is uncertain if any resolution will be possible without litigation, or, if litigation occurs, what the outcome would be. At this time, the company is unable to evaluate the extent of any exposure that it may have in these matters.
•	The USEPA also has begun an initiative to evaluate compliance with the Clean Air Act at sulfuric and nitric acid plants. In connection with this industry-wide initiative, the USEPA has sent requests for information to numerous facilities, including the company’s plants in Augusta, Georgia; Aurora, North Carolina; Geismar, Louisiana; Lima, Ohio; and White Springs, Florida. The USEPA has notified the company of various alleged violations of the Clean Air Act at its Geismar and Lima plants. The company has met and will continue to meet with representatives of the USEPA and the US Department of Justice regarding potential resolutions of these matters. At this time, the company is unable to evaluate the extent of any exposure that it may have in these matters.
•	Significant portions of the company’s phosphate reserves in Aurora, North Carolina are located in wetlands. Under the Clean Water Act, the company must obtain a permit from the US Army Corps of

	Engineers (the “Corps”) before disturbing the wetlands. The company has a permit from the Corps to mine specified areas. This permit expires in 2017, but the reserves in these areas could be exhausted before then. The company is seeking a new permit from the Corps to mine additional areas. This process includes significant public review and comment that could affect current mitigation and reclamation practices. The company expects to have the necessary approvals for mine continuation in April 2009. Failure to secure the required approvals for continuation of the mining operations on acceptable terms would negatively affect the company’s reserves and costs.
•	Pursuant to the 1996 Corrective Action Consent Order (the “Order”) executed between PCS Nitrogen Fertilizer, LP, formerly known as Arcadian Fertilizer, LP (“PCS Nitrogen Fertilizer”) and Georgia Department of Natural Resources, Environmental Protection Division (“GEPD”) in conjunction with PCS Nitrogen Fertilizer’s purchase of certain real property located in Augusta, Georgia from the entity from which PCS Nitrogen Fertilizer previously leased such property, PCS Nitrogen Fertilizer agreed to perform certain activities including a facility investigation and, if necessary, a corrective action. In accordance with the Order, PCS Nitrogen Fertilizer has performed an investigation of environmental site conditions and has documented its findings in several successive facility investigation reports submitted to GEPD. Based on these findings and on the requirements of the Order, PCS Nitrogen Fertilizer is implementing a pilot study to evaluate the viability of in-situ bioremediation of groundwater at the site. In the event the technology proves successful and full-scale implementation is warranted, upon GEPD approval, a full-scale bioremediation remedy will be implemented. If the pilot study proves unsuccessful or if GEPD does not approve this remedial strategy, other, more costly remediation alternatives may need to be evaluated and implemented.
•	Between September 11 and October 2, 2008, the company and PCS Sales (USA), Inc. were named as defendants in eight very similar antitrust complaints filed in federal courts. Other potash producers are also defendants in these cases. Each of the separate complaints alleges conspiracy to fix potash prices, to divide markets, to restrict supply and to fraudulently conceal the conspiracy, all in violation of Section 1 of the Sherman Act.
	Five of the eight complaints were brought by plaintiffs who claim to have purchased potash directly from at least one of the defendants during the period between July 1, 2003 and the present (collectively, the “Direct Purchaser Plaintiffs”). All five Direct Purchaser Plaintiffs purport to sue on behalf of a class of persons who purchased potash in the United States directly from a defendant. The Direct Purchaser Plaintiffs, who filed a single, consolidated amended complaint on November 13, 2008, seek unspecified treble damages, injunctive relief, attorneys’ fees, costs and pre- and post-judgment interest.

NOTES TO THE POTASHCORP 2008 CONSOLIDATED FINANCIAL STATEMENTS

IN MILLIONS OF US DOLLARS EXCEPT SHARE AND PER-SHARE AMOUNTS 107

Note 30 CONTINGENCIES (continued)

The other three complaints were brought by plaintiffs who claim to be indirect purchasers of potash (collectively, the “Indirect Purchaser Plaintiffs”). The Indirect Purchaser Plaintiffs, who purport to sue on behalf of all persons who purchased potash indirectly in the United States, filed a single, consolidated amended complaint on November 13, 2008. In addition to the Sherman Act claim described above, the Indirect Purchaser Plaintiffs also assert claims for violation of various state antitrust laws; violations of various state consumer protection statutes; and for unjust enrichment. The Indirect Purchaser Plaintiffs seek injunctive relief, unspecified damages, treble damages where allowed, costs, fees and pre- and post-judgment interest.

All eight lawsuits have been consolidated into a Multidistrict Litigation proceeding, or MDL (No. 1996), for coordinated pretrial proceedings before Judge Ruben Castillo in the United States District Court for the Northern District of Illinois.

The company and PCS Sales (USA), Inc. believe each of these eight private antitrust law lawsuits is without merit and intend to defend them vigorously.

The company is also engaged in ongoing site assessment and/or remediation activities at a number of other facilities and sites. Based on current information, it does not believe that its future obligations with respect to these facilities and sites are reasonably likely to have a material adverse effect on its consolidated financial position or results of operations.

In addition, various other claims and lawsuits are pending against the company in the ordinary course of business. While it is not possible to determine the ultimate outcome of such actions at this time, and there exist inherent uncertainties in predicting such outcomes, it is the company’s belief that the ultimate resolution of such actions is not reasonably likely to have a material adverse effect on its consolidated financial position or results of operations.

The breadth of the company’s operations and the global complexity of tax regulations require assessments of uncertainties and judgments in estimating the taxes it will ultimately pay. The final taxes paid are dependent upon many factors, including negotiations with taxing authorities in various jurisdictions, outcomes of tax litigation and resolution of disputes arising from federal, provincial, state and local tax audits. The resolution of these uncertainties and the associated final taxes may result in adjustments to the company’s tax assets and tax liabilities.

The company owns facilities which have been either permanently or indefinitely shut down. It expects to incur nominal annual expenditures for site security and other maintenance costs at certain of these facilities. Should the facilities be dismantled, certain other shutdown-related costs may be incurred. Such costs would not be expected to have a material adverse effect on the company’s consolidated financial position or results of operations and would be recognized and recorded in the period in which they were incurred.

Note 31 GUARANTEES

In the normal course of operations, the company provides indemnifications, that are often standard contractual terms, to counterparties in transactions such as purchase and sale contracts, service agreements, director/officer contracts and leasing transactions. These indemnification agreements may require the company to compensate the counterparties for costs incurred as a result of various events, including environmental liabilities and changes in (or in the interpretation of) laws and regulations, or as a result of litigation claims or statutory sanctions that may be suffered by the counterparty as a consequence of the transaction. The terms of these indemnification agreements will vary based upon the contract, the nature of which prevents the company from making a reasonable estimate of the maximum potential amount that it could be required to pay to counterparties. Historically, the company has not made any significant payments under such indemnifications and no amounts have been accrued in the accompanying consolidated financial statements with respect to these indemnification guarantees (apart from any appropriate accruals relating to the underlying potential liabilities).

The company enters into agreements in the normal course of business that may contain features that meet the definition of a guarantee. Various debt obligations (such as overdrafts, lines of credit with counterparties for derivatives and back-to-back loan arrangements) and other commitments (such as railcar leases) related to certain subsidiaries and investees have been directly guaranteed by the company under such agreements with third parties. The company would be required to perform on these guarantees in the event of default by the guaranteed parties. No material loss is anticipated by reason of such agreements and guarantees. At December 31, 2008, the maximum potential amount of future (undiscounted) payments under significant guarantees provided to third parties approximated $596.9. It is unlikely that these guarantees will be drawn upon and the maximum potential amount of future payments does not consider the possibility of recovery under recourse or collateral provisions, this amount is not indicative of future cash requirements or the company’s expected losses from these arrangements. At December 31, 2008, no subsidiary balances subject to guarantees were outstanding in connection with the company’s cash management

NOTES TO THE POTASHCORP 2008 CONSOLIDATED FINANCIAL STATEMENTS

108   IN MILLIONS OF US DOLLARS EXCEPT SHARE AND PER-SHARE AMOUNTS

Note 31 GUARANTEES (continued)

facilities, and it had no liabilities recorded for other obligations other than subsidiary bank borrowings of approximately $5.9, which are reflected in other long-term debt in Note 13.

The company has guaranteed the gypsum stack capping, closure and post-closure obligations of White Springs and PCS Nitrogen in Florida and Louisiana, respectively, pursuant to the financial assurance regulatory requirements in those states.

The environmental regulations of the Province of Saskatchewan require each potash mine to have decommissioning and reclamation plans. Financial assurances for these plans must be established within one year following their approval by the responsible provincial minister. The Minister of the Environment for Saskatchewan (“MOE”) provisionally approved the plans in July 2000. In July 2001, a CDN $2.0 million irrevocable Letter of Credit was posted. The company submitted a revised plan when it was due in 2006. In early 2009, the MOE advised that the 2006 decommissioning and reclamation plans were approved and advised of its preferred position regarding the financial assurances to be provided by the company. The financial assurances will be subject to ongoing discussions with the MOE, and the company has been advised that these financial assurances are to be in

place by June 30, 2009. Under the regulations, the decommissioning and reclamation plans and financial assurances are to be reviewed at least once every five years, or sooner as required by the MOE. The next scheduled review for the decommissioning and reclamation plans and financial assurances is in 2011. Based on current information, the company does not believe that its financial assurance requirements or future obligations with respect to this matter are reasonably likely to have a material impact on its consolidated financial position or results of operations.

The company has met its financial assurance responsibilities as of December 31, 2008. Costs associated with the retirement of long-lived tangible assets have been accrued in the accompanying consolidated financial statements to the extent that a legal liability to retire such assets exists (see Note 16).

During the period, the company entered into various other commercial letters of credit in the normal course of operations. As at December 31, 2008, $20.0 of letters of credit were outstanding (2007 – $23.9).

The company expects that it will be able to satisfy all applicable credit support requirements without disrupting normal business operations.

Note 32 RELATED PARTY TRANSACTIONS

Sales to Canpotex are at prevailing market prices. Sales for the year ended December 31, 2008 were $2,257.1 (2007 – $782.7; 2006 – $467.1). Account balances resulting from the Canpotex transactions are included in the Consolidated Statements of Financial Position and settled on normal trade terms (see Note 3).

Note 33 RECONCILIATION OF CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES

Canadian GAAP varies in certain significant respects from US GAAP. As required by the United States Securities and Exchange Commission, the effect of these principal differences on the company’s consolidated financial statements is described and quantified below:

(a) Long-term investments: Certain of the company’s investments in international entities are accounted for under the equity method. Accounting principles generally accepted in those foreign jurisdictions may vary in certain important respects from Canadian GAAP and in certain other respects from US GAAP. The company’s share of earnings of these equity investees under Canadian GAAP has been adjusted for the significant effects of conforming to US GAAP.

(b) Property, plant and equipment and goodwill: The net book value of property, plant and equipment and goodwill under Canadian GAAP is higher than under US GAAP, as past provisions for asset impairment under Canadian GAAP were measured based on the undiscounted cash flow from use together with the residual value of the assets. Under US GAAP, they were measured based on fair value, which was lower than the undiscounted cash flow from use together with the residual value of the assets. Fair value for this purpose was determined based on discounted expected future net cash flows.

(c) Depreciation and amortization: Depreciation and amortization under Canadian GAAP is higher than under US GAAP, as a result of differences in the carrying amounts of property, plant and equipment under Canadian and US GAAP.

(d) Exploration costs: Under Canadian GAAP, capitalized exploration costs are classified under property, plant and equipment. For US GAAP, these costs are generally expensed until such time as a final feasibility study has confirmed the existence of a commercially mineable deposit.

(e) Pre-operating costs: Operating costs incurred during the start-up phase of new projects are deferred under Canadian GAAP until commercial production levels are reached, at which time they are amortized over the estimated life of the project. US GAAP requires that these costs be expensed as incurred. As at December 31, 2008, 2007 and 2006, the start-up costs deferred for Canadian GAAP were not material.

(f) Pension and other post-retirement benefits: Under Canadian GAAP, when a defined benefit plan gives rise to an accrued benefit asset, a company must recognize a valuation allowance for the excess of the adjusted benefit asset over the expected future benefit to be realized from the plan asset. Changes in the pension valuation allowance are

NOTES TO THE POTASHCORP 2008 CONSOLIDATED FINANCIAL STATEMENTS

IN MILLIONS OF US DOLLARS EXCEPT SHARE AND PER-SHARE AMOUNTS 109

Note 33 RECONCILIATION OF CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (continued)

recognized in income. US GAAP does not specifically address pension valuation allowances, and the US regulators have interpreted this to be a difference between Canadian and US GAAP. In light of this, a difference between Canadian and US GAAP has been recorded for the effects of recognizing a pension valuation allowance and the changes therein under Canadian GAAP.

In addition, under US GAAP the company is required to recognize the difference between the benefit obligation and the fair value of plan assets in the Consolidated Statements of Financial Position with the offset to OCI. No similar requirement currently exists under Canadian GAAP.

(g) Foreign currency translation adjustment: The company adopted the US dollar as its functional and reporting currency on January 1, 1995. At that time, the consolidated financial statements were translated into US dollars at the December 31, 1994 year-end exchange rate using the translation of convenience method under Canadian GAAP. This translation method was not permitted under US GAAP. US GAAP required the comparative Consolidated Statements of Operations and Consolidated Statements of Cash Flow to be translated at applicable weighted average exchange rates whereas the Consolidated Statements of Financial Position were permitted to be translated at the December 31, 1994 year-end exchange rate. The use of disparate exchange rates under US GAAP gave rise to a foreign currency translation adjustment. Under US GAAP, this adjustment is reported as a component of accumulated OCI.

(h) Offsetting of certain amounts: Effective January 1, 2008, US GAAP requires an entity to adopt a policy of either offsetting or not offsetting fair value amounts recognized for derivative instruments and for the right to reclaim cash collateral or the obligation to return cash collateral against fair value amounts recognized for derivative instruments executed with the same counterparty under the same master netting arrangement. The company adopted a policy to offset such amounts effective January 1, 2008. Under Canadian GAAP, offsetting of the margin deposits is not permitted.

(i) Stock-based compensation: Under Canadian GAAP, the company’s stock-based compensation plan awards classified as liabilities are measured at intrinsic value at each reporting period. US GAAP requires that these liability awards be measured at fair value at each reporting period. The company uses a Monte Carlo simulation model to estimate the fair value of its performance unit incentive plan liability for US GAAP purposes. As at December 31, 2008, the difference between Canadian and US GAAP was not significant.

Under Canadian GAAP, stock options are recognized over the service period, which for PotashCorp is established by the option performance period. Effective January 1, 2006, under US GAAP, stock options are recognized over the requisite service period, which does not commence until the option plan is approved by the company’s shareholders and options are granted thereunder. For options granted under the company’s

2006 Performance Option Plan, the service period commenced January 1, 2006 under Canadian GAAP and May 4, 2006 under US GAAP. For options granted under the company’s 2007 Performance Option Plan, the service period commenced January 1, 2007 under Canadian GAAP and May 3, 2007 under US GAAP. For options granted under the company’s 2008 Performance Option Plan, the service period commenced January 1, 2008 under Canadian GAAP and May 8, 2008 under US GAAP. This difference impacts the stock-based compensation cost recorded and may impact diluted earnings per share.

(j) Stripping costs: Under Canadian GAAP, the company capitalizes and amortizes costs associated with the activity of removing overburden and other mine waste minerals in the production phase. US GAAP requires such stripping costs to be attributed to ore produced in that period as a component of inventory and recognized in cost of sales in the same period as related revenue.

(k) Income taxes related to the above adjustments: The income tax adjustment reflects the impact on income taxes of the US GAAP adjustments described above. Accounting for income taxes under Canadian and US GAAP is similar, except that income tax rates of enacted or substantively enacted tax law must be used to calculate future income tax assets and liabilities under Canadian GAAP, whereas only income tax rates of enacted tax law can be used under US GAAP.

(l) Income tax consequences of stock-based employee compensation: Under Canadian GAAP, the income tax benefit attributable to stock-based compensation that is deductible in computing taxable income but is not recorded in the consolidated financial statements as an expense of any period (the “excess benefit”) is considered to be a permanent difference. Accordingly, such amount is treated as an item that reconciles the statutory income tax rate to the company’s effective income tax rate. Under US GAAP, the excess benefit is recognized as additional paid-in capital.

(m) Income taxes related to uncertain income tax positions: US GAAP prescribes a comprehensive model for how a company should recognize, measure, present and disclose in its consolidated financial statements uncertain income tax positions that it has taken or expects to take on a tax return (including a decision whether to file or not to file a return in a particular jurisdiction). Canadian GAAP has no similar requirements related to the measurement of uncertain income tax positions.

(n) Cash flow statements: US GAAP requires the disclosure of income taxes paid. Canadian GAAP requires the disclosure of income tax cash flows, which would include any income taxes recovered during the year.

NOTES TO THE POTASHCORP 2008 CONSOLIDATED FINANCIAL STATEMENTS

110   IN MILLIONS OF US DOLLARS EXCEPT SHARE AND PER-SHARE AMOUNTS

Note 33 RECONCILIATION OF CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (continued)

The application of US GAAP, as described above, would have had the following effects on net income, net income per share, total assets, and shareholders’ equity and comprehensive income.

		2008			2007			2006
Net income as reported – Canadian GAAP	$	3,495.2		$	1,103.6		$	631.8
Items increasing (decreasing) reported net income
Cash flow hedge ineffectiveness		–			–			(4.5	)
Depreciation and amortization (c)		8.4			8.5			8.4
Stock-based compensation (i)		2.2			(1.7	)		1.3
Stripping costs (j)		(4.0	)		(10.9	)		2.6
Exploration costs (d)		(6.6	)		–			–
Share of earnings of equity investees (a)		(1.0	)		(1.9	)		0.5
Pension and other post-retirement benefits (f)		(0.3	)		–			2.0
Deferred income taxes relating to the above adjustments (k)		(0.3	)		(1.9	)		(3.0	)
Income taxes related to US GAAP effective income tax rate (k, l)		(52.0	)		(30.3	)		–
Income taxes related to stock-based compensation (l)		(32.7	)		(18.4	)		(13.3	)
Income taxes related to uncertain income tax positions (m)		(13.7	)		14.5			–
Net income – US GAAP	$	3,395.2		$	1,061.5		$	625.8
Basic weighted average shares outstanding – US GAAP		307,480,000			315,641,000			311,880,000
Diluted weighted average shares outstanding – US GAAP		317,434,000			324,292,000			318,669,000
Basic net income per share – US GAAP	$	11.04		$	3.36		$	2.01
Diluted net income per share – US GAAP	$	10.70		$	3.27		$	1.96
Total assets as reported – Canadian GAAP	$	10,248.8		$	9,716.6
Items increasing (decreasing) reported total assets
Property, plant and equipment (b)		(92.8	)		(101.2	)
Exploration costs (d)		(13.0	)		(6.4	)
Stripping costs (j)		(36.7	)		(32.7	)
Pension and other post-retirement benefits (f)		(105.2	)		(66.7	)
Margin deposits associated with derivative instruments (h)		(91.1	)		–
Investment in equity investees (a)		1.3			2.3
Income tax asset related to uncertain income tax positions (m)		24.8			18.4
Goodwill (b)		(46.7	)		(46.7	)
Total assets – US GAAP	$	9,889.4		$	9,483.6
Total shareholders’ equity as reported – Canadian GAAP	$	4,588.9		$	6,018.7		$	2,780.3
Items increasing (decreasing) reported shareholders’ equity
Accumulated other comprehensive income, net of related income taxes, consisting of:
Unrealized gains and losses on available-for-sale securities		–			–			792.0
Net gains on derivatives designated as cash flow hedges		–			–			79.4
Cumulative effect adjustment in respect of uncertain income tax positions (m)		(1.2	)		(1.2	)		–
Pension and other post-retirement benefits (f)		(246.6	)		(85.6	)		(117.9	)
Share of accumulated other comprehensive income of equity investees (a)		–			–			0.9
Foreign currency translation adjustment (g)		(20.9	)		(20.9	)		(20.9	)
Foreign currency translation adjustment (g)		20.9			20.9			20.9
Provision for asset impairment (b)		(218.0	)		(218.0	)		(218.0	)
Depreciation and amortization (c)		78.5			70.1			61.6
Exploration costs (d)		(13.0	)		(6.4	)		(6.4	)
Stripping costs (j)		(36.7	)		(32.7	)		2.6
Cash flow hedge ineffectiveness		–			–			0.4
Pension and other post-retirement benefits (f)		15.8			16.1			16.1
Share of other comprehensive income of equity investees (a)		1.3			2.3			4.2
Deferred income taxes relating to the above adjustments (k)		30.1			30.4			24.0
Income taxes related to US GAAP effective income tax rate (k, l)		(82.3	)		(30.3	)		–
Income taxes related to uncertain income tax positions (m)		86.5			14.5			–
Cumulative effect adjustment to retained earnings in respect of stripping costs		–			–			(16.3	)
Cumulative effect adjustment to retained earnings in respect of uncertain income tax positions		–			85.7			–
Shareholders’ equity – US GAAP	$	4,203.3		$	5,863.6		$	3,402.9

NOTES TO THE POTASHCORP 2008 CONSOLIDATED FINANCIAL STATEMENTS

IN MILLIONS OF US DOLLARS EXCEPT SHARE AND PER-SHARE AMOUNTS 111

Note 33 RECONCILIATION OF CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (continued)

Supplemental US GAAP Disclosure

Investments at Equity

Summarized US GAAP financial information of the company’s investments accounted for under the equity menthod (including SQM, APC and other) is as follows.

		2008		2007
Current assets	$	3,366.5	$	1,647.8
Non-current assets		1,763.1		1,432.8
Current liabilities		2,124.1		748.7
Non-current liabilities		716.2		678.6
Minority interest		45.1		44.0
		2008		2007		2006
Sales	$	7,571.1	$	3,624.4	$	2,611.8
Gross profit		1,328.0		510.5		409.7
Income from continuing operations and net income		949.4		382.5		209.1

Uncertainty in Income Taxes

The reconciliation of the beginning and ending amount of unrecognized tax benefits, excluding interest, for the year is as follows:

	2008			2007
Balance at beginning of year	$	11.6		$	24.2
Additions based on tax positions related to the current year		19.9			2.8
Additions for tax positions of prior years		76.8			12.3
Reductions for tax positions of prior years		(63.6	)		(18.0	)
Settlements		(15.1	)		(9.7	)
Balance at December 31	$	29.6		$	11.6

It is reasonably possible that a reduction in a range of $4.0 to $6.0 of unrecognized income tax benefits may occur within 12 months as a result of projected resolutions of worldwide income tax disputes. The company recognizes accrued interest related to unrecognized tax benefits and penalties in income tax expense. At December 31, 2008, $3.6 of interest was accrued to unrecognized tax benefits. Tax years subject to examination by jurisdiction were as follows:

	Years
Canada	2004-present
US	2007-present
Trinidad	2003-present
Barbados	2000-present

Recent Accounting Pronouncements

Framework for Fair Value Measurement

In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting (“SFAS”) No. 157, “Fair Value Measurements”. The standard establishes a framework for measuring fair value and expands the disclosures about fair value measurements. In February 2008, the FASB issued FASB Staff Position No. FAS 157-2, “Effective Date of FASB Statement No. 157” (“FSP FAS 157-2”). FSP FAS 157-2 amends SFAS No. 157 to delay the effective date of SFAS No. 157 for non-financial assets and non-financial liabilities until fiscal years beginning after November 15, 2008, and interim periods within those fiscal years, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis. The company adopted the effective portion of SFAS No. 157 during the first quarter of 2008. The implementation of this standard did not have a material impact on the consolidated financial statements as the company’s current policy on accounting for fair value measurements is consistent with this guidance. The company is currently reviewing the standard to determine the potential impact, if any, on its consolidated financial statements of applying SFAS No. 157 to its non-financial assets and non-financial liabilities. The company has provided additional prescribed disclosures not required under Canadian GAAP.

SFAS No. 157 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The three levels of the fair value hierarchy are described below:

Level 1 Values based on unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities.

Level 2 Values based on quoted prices in markets that are not active or model inputs that are observable either directly or indirectly for substantially the full term of the asset or liability.

Level 3 Values based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement.

As required by SFAS No. 157, when the inputs used to measure fair value fall within more than one level of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measure in its entirety.

NOTES TO THE POTASHCORP 2008 CONSOLIDATED FINANCIAL STATEMENTS

112      IN MILLIONS OF US DOLLARS EXCEPT SHARE AND PER-SHARE AMOUNTS

Note 33 RECONCILIATION OF CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (continued)

The following table presents the company’s fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of December 31, 2008.

							Fair Value Measurements at Reporting Date Using:
	Carrying Amount						Quoted Prices in					Significant
	of Asset (Liability)			Cash			Active Markets for		Significant Other			Unobservable
	at December 31,			Collateral			Identical Assets		Observable Inputs			Inputs
Description	2008			Netting			(Level 1)		(Level 2)			(Level 3)
Derivative instrument assets	$	17.9		$	–		$	–	$	6.3		$	11.6
Available-for-sale securities		1,762.1			–			1,744.9		–			17.2
Derivative instrument liabilities		(137.4	)		91.1	1		–		(106.1	)		(122.4	)

¹ Amount represents the effect of legally enforceable master netting arrangements between the company and its counterparties and the receivable for cash collateral placed with the same counterparties.

	Derivative Instrument			Available-for-Sale
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)	Assets (Liabilities)			Securities
Beginning balance, December 31, 2007	$	127.7		$	56.0
Total gains or (losses) (realized and unrealized) before income taxes
Included in earnings		17.4			(88.8	)
Included in other comprehensive income		(229.4	)		(23.1	)
Other 1		–			73.1
Purchases, sales, issuances and settlements		(26.5	)		–
Ending balance, December 31, 2008	$	(110.8	)	$	17.2
Amount of total gains or (losses) for the period included in earnings attributable to the change in unrealized gains or losses relating to instruments still held at the reporting date	$	(10.0	)	$	(88.8	)
Gains and (losses) (realized and unrealized) included in earnings for the year are reported in:
Cost of Goods Sold	$	17.4		$	–
Other income		–			(88.8	)

¹ Represents unrealized losses transferred from other comprehensive income to earnings as a result of the other-than-temporary impairment of the securities.

Fair Value Option for Financial Assets and Financial Liabilities

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities”. This standard permits entities to choose to measure many financial instruments and certain other items at fair value, providing the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without the need to apply hedge accounting provisions. The implementation of SFAS No. 159, effective January 1, 2008, did not have a material impact on the company’s consolidated financial statements.

Offsetting of Certain Amounts

In April 2007, the FASB issued FASB Staff Position No. FIN 39-1, “Amendment of FASB Interpretation No. 39” (“FSP FIN 39-1”). FSP FIN 39-1 amends certain paragraphs of FASB Interpretation No. 39, “Offsetting of Amounts Related to Certain Contracts”, to permit a reporting entity to either (i) offset derivative balances as well as fair value amounts recognized for the right to reclaim cash collateral or the obligation to return cash collateral against fair value amounts recognized for derivative instruments executed with the same counterparty under the same master netting arrangement, or (ii) offset no amounts of derivatives or cash collateral for derivative instruments executed with the same counterparty.

The company adopted the provisions of FSP FIN 39-1 effective January 1, 2008. As a result of the implementation of FSP FIN 39-1, the company changed its accounting policy, on a prospective basis, to offset fair value amounts recognized for derivative instruments under master netting arrangements. This has resulted in a decrease of derivative instrument liabilities of $91.1 due to the netting of margin deposits paid.

Business Combinations

In December 2007, the FASB issued SFAS No. 141(R), “Business Combinations”. The standard requires the acquiring entity in a business combination to recognize all (and only) the assets acquired and liabilities assumed in the transaction; establishes the acquisition date fair value as the measurement objective for all assets acquired and liabilities assumed; and requires the acquirer to disclose to investors and other users all of the information they need to evaluate and understand the

NOTES TO THE POTASHCORP 2008 CONSOLIDATED FINANCIAL STATEMENTS

IN MILLIONS OF US DOLLARS EXCEPT SHARE AND PER-SHARE AMOUNTS 113

Note 33 RECONCILIATION OF CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (continued)

nature and financial effect of the business combination. The company is currently reviewing the guidance, which is effective for fiscal years beginning after December 15, 2008, to determine the potential impact, if any, on its consolidated financial statements.

Noncontrolling Interests in Consolidated Financial Statements

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements”. The standard requires all entities to report noncontrolling (minority) interests as equity in consolidated financial statements. SFAS No. 160 eliminates the diversity that currently exists in accounting for transactions between an entity and noncontrolling interests by requiring they be treated as equity transactions. The company is currently reviewing the guidance, which is effective for fiscal years beginning after December 15, 2008, to determine the potential impact, if any, on its consolidated financial statements.

Disclosures about Derivative Instruments and Hedging Activities

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities”. The standard requires enhanced disclosures about an entity’s derivative and hedging activities. Entities are required to provide enhanced disclosures about (i) how and why an entity uses derivative instruments, (ii) how derivative instruments and related hedged items are accounted for, and (iii) how derivative instruments and related hedged items affect an entity’s financial position, financial performance and cash flows. The standard increases convergence with IFRSs, as it relates to disclosures of derivative instruments. The company is currently reviewing the guidance, which is effective for fiscal years beginning after November 15, 2008, to determine the potential impact, if any, on its consolidated financial statements.

The Hierarchy of Generally Accepted Accounting Principles

In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles”. This standard identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles (GAAP) in the United States (the GAAP hierarchy). The FASB does not expect that this standard will result in a change in current practice. SFAS No. 162 was effective
November 15, 2008. The issuance of this standard had no effect on the consolidated financial statements.

Deferred Income Taxes

The total valuation allowance recognized for deferred income tax assets in 2008 was $72.9 (2007 – $10.4). The company has determined that it is more likely than not that the deferred income tax assets net of the valuation allowance will be realized through a combination of future reversals of temporary differences and taxable income.

Stock-Based Compensation

The total compensation cost charged to income in respect of the company’s eight stock-based compensation plans under US GAAP was $33.3 for the year ended December 31, 2008 (2007 – $85.7; 2006 – $43.0).

The aggregate intrinsic value of options outstanding and expected to vest at December 31, 2008 under the Performance Option Plans was $189.9, and the aggregate intrinsic value of options exercisable was $117.1. During 2008, 3,507,000 stock options vested. The aggregate intrinsic value of options outstanding at December 31, 2008 under the Officers and Employees and Directors Plans was $323.1, and the aggregate intrinsic value of options exercisable was $323.1. The total intrinsic value of stock options exercised during the year ended December 31, 2008 was $199.7 (2007 – $137.4).

As of December 31, 2008, there was $16.9 of unrecognized compensation cost related to the company’s stock option plans. This cost is expected to be recognized over the period through December 31, 2010.

The company issued 7,004 performance units during 2008 (2007 – 18,726) under the performance unit incentive plan at a weighted average grant-date fair value of $114.70 per unit (2007 – $98.52). Based on the performance for the three year period ended December 31, 2008, 419,496 units vested pursuant to the plan and are to be paid out in early 2009. Following payout of these units, no units will remain outstanding pursuant to this plan.

Derivative Instruments and Hedging Activities

The company has designated its natural gas derivative instruments as cash flow hedges. During the year, net gains of $12.8 (including ineffectiveness) were recognized in cost of goods sold (2007 – $57.7; 2006 – $73.5).

Pension and Other Post-Retirement Benefits

The unamortized actuarial loss, unamortized prior service cost and unamortized transitional obligation included in accumulated other comprehensive income and expected to be recognized in net periodic pension cost during 2009 are $27.9, $(0.1) and $0.8, respectively.

Related Party Transactions

During the year, sales to a company associated with the immediate family of a member of the PCS Board of Directors totaled $30.1 (2007 – $29.7; 2006 – $16.0). These transactions were conducted in the normal course of business at the prevailing market prices and on normal trade terms.

NOTES TO THE POTASHCORP 2008 CONSOLIDATED FINANCIAL STATEMENTS

114  IN MILLIONS OF US DOLLARS EXCEPT SHARE AND PER-SHARE AMOUNTS

Note 33 RECONCILIATION OF CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (continued)

Supplemental Schedules

The following supplemental schedules present the Consolidated Financial Position, Operations and Retained Earnings, Comprehensive Income, Accumulated Other Comprehensive Income and Cash Flow in accordance with US GAAP as adjusted for the GAAP differences described in this note.

SUPPLEMENTAL SCHEDULE OF CONSOLIDATED FINANCIAL POSITION

As at December 31

		2008		2007
Assets
Current assets
Cash and cash equivalents	$	276.8	$	719.5
Accounts receivable		1,098.8		596.2
Inventories		715.2		428.8
Prepaid expenses and other current assets		79.2		36.7
Current portion of derivative instrument assets		6.4		30.8
		2,176.4		1,812.0
Derivative instrument assets		11.5		104.2
Property, plant and equipment		4,669.4		3,746.4
Investments		2,752.0		3,583.8
Other assets		183.5		144.0
Income taxes on uncertain income tax positions		24.8		18.4
Intangible assets		21.5		24.5
Goodwill		50.3		50.3
	$	9,889.4	$	9,483.6
Liabilities
Current liabilities
Short-term debt and current portion of long-term debt	$	1,324.1	$	90.0
Accounts payable and accrued charges		1,175.4		851.5
Current portion of derivative instrument liabilities		77.7		0.2
		2,577.2		941.7
Long-term debt		1,739.5		1,339.4
Derivative instrument liabilities		59.7		–
Deferred income tax liability		612.6		903.0
Income taxes on uncertain income tax positions		58.2		38.1
Accrued pension and other post-retirement benefits		502.3		274.1
Accrued environmental costs and asset retirement obligations		133.4		121.0
Other non-current liabilities and deferred credits		3.2		2.7
		5,686.1		3,620.0
Shareholders’ Equity
Share capital		1,402.5		1,461.3
Additional paid-in capital		227.6		169.8
Accumulated other comprehensive income		389.2		2,071.2
Retained earnings		2,184.0		2,161.3
		4,203.3		5,863.6
	$	9,889.4	$	9,483.6

NOTES TO THE POTASHCORP 2008 CONSOLIDATED FINANCIAL STATEMENTS

IN MILLIONS OF US DOLLARS EXCEPT SHARE AND PER-SHARE AMOUNTS 115

Note 33 RECONCILIATION OF CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (continued)

SUPPLEMENTAL SCHEDULE OF CONSOLIDATED OPERATIONS AND RETAINED EARNINGS

For the years ended December 31

		2008			2007			2006
Sales	$	9,446.5		$	5,234.2		$	3,766.7
Less: Freight		324.9			346.1			255.8
Transportation and distribution		132.4			124.1			134.1
Cost of goods sold		4,077.8			2,885.9			2,365.4
Gross Margin		4,911.4			1,878.1			1,011.4
Selling and administrative		186.1			213.6			158.0
Provincial mining and other taxes		543.4			135.4			66.5
Foreign exchange gain (loss)		(126.0	)		70.2			(4.4	)
Share of earnings of equity investees		(254.8	)		(74.3	)		(54.9	)
Other income		(71.1	)		(49.3	)		(39.6	)
		277.6			295.6			125.6
Operating Income		4,633.8			1,582.5			885.8
Interest Expense		62.8			68.7			85.6
Income before Income Taxes		4,571.0			1,513.8			800.2
Income Taxes		1,175.8			452.3			174.4
Net Income		3,395.2			1,061.5			625.8
Retained Earnings, Beginning of Year		2,161.3			1,124.7			577.5
Repurchase of Common Shares		(3,250.3	)		–			–
Cumulative Effect Adjustment in Respect of Uncertain Income Tax Positions		–			85.7			–
Cumulative Effect Adjustment in Respect of Stripping Costs		–			–			(16.3	)
Dividends		(122.2	)		(110.6	)		(62.3	)
Retained Earnings, End of Year	$	2,184.0		$	2,161.3		$	1,124.7
Net Income per Share – Basic	$	11.04		$	3.36		$	2.01
Net Income per Share – Diluted	$	10.70		$	3.27		$	1.96
Dividends per Share	$	0.40		$	0.35		$	0.20

NOTES TO THE POTASHCORP 2008 CONSOLIDATED FINANCIAL STATEMENTS

116  IN MILLIONS OF US DOLLARS EXCEPT SHARE AND PER-SHARE AMOUNTS

Note 33 RECONCILIATION OF CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (continued)

SUPPLEMENTAL SCHEDULE OF CONSOLIDATED COMPREHENSIVE (LOSS) INCOME

For the years ended December 31

		2008			2007			2006
Net Income	$	3,395.2		$	1,061.5		$	625.8
Other comprehensive (loss) income
Net (decrease) increase in unrealized gains on available-for-sale securities		(1,398.4	)		1,394.1			534.7
Net (losses) gains on derivatives designated as cash flow hedges		(266.8	)		49.4			(68.2	)
Reclassification to income of net gains on cash flow hedges		(12.9	)		(57.8	)		(79.7	)
Pension and other post-retirement benefits 1		(257.9	)		56.4			–
Unrealized foreign exchange (losses) gains on translation of self-sustaining foreign operations		(10.0	)		6.7			–
Adjustment to additional minimum pension liability		–			–			11.7
Share of other comprehensive income of equity investees		–			(1.3	)		0.2
Deferred income taxes related to other comprehensive income		264.0			(108.6	)		62.4
Other Comprehensive (Loss) Income		(1,682.0	)		1,338.9			461.1
Comprehensive Income	$	1,713.2		$	2,400.4		$	1,086.9

¹ 2008 comprised of amortization of net actuarial loss of $(250.2), amortization of prior service costs of $(9.4), and amortization of transitional obligation of $1.7. 2007 comprised of amortization of net actuarial loss of $56.6, amortization of prior service costs of $(1.4), and amortization of transitional obligation of $1.2.

SUPPLEMENTAL SCHEDULE OF CONSOLIDATED ACCUMULATED OTHER COMPREHENSIVE INCOME

For the years ended December 31

	2008			2007			2006
Accumulated other comprehensive income, beginning of year	$	2,071.2		$	733.5		$	343.2
Other comprehensive (loss) income, net of related income taxes		(1,682.0	)		1,338.9			461.1
Cumulative effect adjustment in respect of uncertain income tax positions		–			(1.2	)		–
Cumulative effect adjustment related to pension and other post-retirement benefits		–			–			(70.8	)
Accumulated other comprehensive income, end of year	$	389.2		$	2,071.2		$	733.5

The balances related to each component of accumulated other comprehensive income, net of related income taxes, are as follows:

		2008			2007			2006
Net unrealized gains on available-for-sale securities	$	761.8		$	2,098.7		$	792.0
Net unrealized (losses) gains on derivatives designated as cash flow hedges		(100.6	)		73.5			79.4
Pension and other post-retirement benefits 1		(246.6	)		(85.6	)		(117.9	)
Share of other comprehensive income of equity investees		–			–			0.9
Unrealized foreign exchange (losses) gains on self-sustaining foreign operations		(3.3	)		6.7			–
Foreign currency translation adjustment		(20.9	)		(20.9	)		(20.9	)
Cumulative effect adjustment in respect of uncertain income tax positions		(1.2	)		(1.2	)		–
Accumulated other comprehensive income, end of year	$	389.2		$	2,071.2		$	733.5

¹ 2008 comprised of unamortized net actuarial loss of $(246.2), unamortized prior service costs of $1.4 and unamortized transitional obligation of $(1.8). 2007 comprised of unamortized net actuarial loss of $(91.0), unamortized prior service costs of $8.7 and unamortized transitional obligation of $(3.3). 2006 comprised of unamortized net actuarial loss of $(122.9), unamortized prior service costs of $9.0 and unamortized transitional obligation of $(4.0).

NOTES TO THE POTASHCORP 2008 CONSOLIDATED FINANCIAL STATEMENTS

IN MILLIONS OF US DOLLARS EXCEPT SHARE AND PER-SHARE AMOUNTS 117

Note 33 RECONCILIATION OF CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (continued)

SUPPLEMENTAL SCHEDULE OF CONSOLIDATED CASH FLOW

For the years ended December 31

	2008			2007			2006
Operating Activities
Net income	$	3,395.2		$	1,061.5		$	625.8
Adjustments to reconcile net income to cash provided by operating activities
Depreciation and amortization		319.1			282.8			234.0
Stock-based compensation		34.0			40.3			28.5
(Gain) loss on disposal of property, plant and equipment and long-term investments		(27.1	)		7.9			(8.6	)
Provision for auction rate securities and plant shutdowns		88.8			26.5			6.3
Foreign exchange on deferred income tax		(106.4	)		52.4			0.5
Provision for deferred income tax		148.2			137.3			52.7
Undistributed earnings of equity investees		(165.7	)		(33.7	)		(25.0	)
Loss (gain) on derivative instruments		48.7			(21.1	)		–
Other long-term liabilities		2.6			(57.9	)		13.4
Changes in non-cash operating working capital
Accounts receivable		(593.7	)		(154.6	)		11.0
Inventories		(324.1	)		59.6			15.8
Prepaid expenses and other current assets		(23.7	)		7.0			(1.8	)
Accounts payable and accrued charges		174.3			250.9			(269.1	)
Cash provided by operating activities		2,970.2			1,658.9			683.5
Investing Activities
Additions to property, plant and equipment		(1,188.0	)		(595.6	)		(508.6	)
Purchase of long-term investments		(445.6	)		(30.7	)		(352.5	)
Purchase of investments in auction rate securities		–			(132.5	)		–
Proceeds from disposal of property, plant and equipment and long-term investments		43.2			4.5			22.0
Other assets and intangible assets		(46.6	)		7.8			(0.6	)
Cash used in investing activities		(1,637.0	)		(746.5	)		(839.7	)
Financing Activities
Proceeds from long-term debt obligations		400.0			1.5			483.9
Repayment and issue costs of long-term debt obligations		(0.2	)		(403.6	)		(1.3	)
Proceeds from (repayment of) short-term debt obligations		1,233.9			(67.9	)		(94.3	)
Dividends		(122.6	)		(93.6	)		(60.9	)
Repurchase of common shares		(3,356.4	)		–			–
Issuance of common shares		36.7			26.6			47.3
Income taxes related to stock-based compensation		32.7			18.4			13.3
Cash (used in) provided by financing activities		(1,775.9	)		(518.6	)		388.0
(Decrease) increase in Cash and Cash Equivalents		(442.7	)		393.8			231.8
Cash and Cash Equivalents, Beginning of Year		719.5			325.7			93.9
Cash and Cash Equivalents, End of Year	$	276.8		$	719.5		$	325.7
Supplemental cash flow disclosure
Income taxes paid (n)	$	677.1		$	221.0		$	296.8

Note 34 COMPARATIVE FIGURES

Certain of the prior years’ figures have been reclassified to conform with the current year’s presentation.

NOTES TO THE POTASHCORP 2008 CONSOLIDATED FINANCIAL STATEMENTS

118 Shareholder Information

Annual Meeting

The Annual Shareholders Meeting will be held at 10:30 a.m. Central Standard Time May 7, 2009 in the Grand Salon, TCU Place, 35 - 22nd Street East, Saskatoon, Saskatchewan.

It will be carried live on the company’s website, www.potashcorp.com.

Holders of common shares as of March 12, 2009 are entitled to vote at the meeting and are encouraged to participate.

Dividends

Dividend amounts paid to shareholders resident in Canada are adjusted by the exchange rate applicable on the dividend record date. Dividends are normally paid in February, May, August and November, with record dates normally set approximately three weeks earlier. Future cash dividends will be paid out of, and are conditioned upon, the company’s available earnings. Shareholders who wish to have their dividends deposited directly to their bank accounts should contact the transfer agent and registrar, CIBC Mellon Trust Company.

Registered shareholders can have dividends reinvested in newly issued common shares of PotashCorp at prevailing market rates.

Ownership

On February 20, 2009, there were 1,792 holders of record of the company’s common shares.

Corporate Offices

Canada:	US:
Suite 500, 122 - 1st Ave S	Suite 400, 1101 Skokie Blvd
Saskatoon SK S7K 7G3	Northbrook IL 60062
Phone: (306) 933-8500	Phone: (847) 849-4200

Common Share Prices and Volumes

This table sets forth the high and low prices, as well as the volumes, for the company’s common shares as traded on the Toronto Stock Exchange and the New York Stock Exchange (composite transactions) on a quarterly basis. Potash Corporation of Saskatchewan Inc. is on the S&P/TSX 60 and the S&P/TSX Composite indices.

		Toronto Stock Exchange 1						New York Stock Exchange
		High*		Low*		Volume		High*		Low*		Volume
2008	Q1		167.80		109.00		103,153,851		165.00		105.52		481,399,952
	Q2		246.29		155.03		118,100,762		241.62		150.44		725,191,906
	Q3		231.28		131.43		111,838,148		229.95		126.49		783,581,966
	Q4		142.00		61.81		165,047,982		133.44		47.54		1,153,295,676
Year 2008			246.29		61.81		498,140,743		241.62		47.54		3,143,469,500
2007	Q1		65.31		51.92		51,599,528		56.35		44.05		221,025,369
	Q2		86.21		61.02		51,480,129		80.85		52.82		220,781,704
	Q3		108.92		76.96		65,980,291		109.40		71.50		189,289,076
	Q4		148.89		94.30		67,978,612		151.90		97.36		239,545,310
Year 2007			148.89		51.92		237,038,560		151.90		44.05		870,641,459
2006	Q1		37.96		30.50		63,024,657		33.08		26.05		165,652,500
	Q2		39.00		28.93		56,060,451		35.47		26.28		162,390,900
	Q3		39.49		30.67		42,424,140		35.49		27.34		123,589,800
	Q4		56.96		37.75		58,463,577		49.06		33.83		185,087,100
Year 2006			56.96		28.93		219,972,825		49.06		26.05		636,720,300

¹ Trading prices are in Cdn$

NYSE Corporate Governance

Disclosure contemplated by 303A.11 of the NYSE’s listed company manual is available on our website at www.potashcorp.com. The company has filed annual written affirmations/certifications pursuant to the NYSE listing company manual. The certifications required by Section 302 of the Sarbanes-Oxley Act of 2002 are filed as exhibits to our 2008 Annual Report on Form 10-K.

POTASHCORP 2008 FINANCIAL REVIEW Keyword Online: Shareholder Info

Appendix 119

MARKET AND INDUSTRY DATA STATEMENT

Some of the market and industry data contained in this financial review and this Management’s Discussion & Analysis of Financial Condition and Results of Operations are based on internal surveys, market research, independent industry publications or other publicly available information. Although we believe that the independent sources used by us are reliable, we have not independently verified and cannot guarantee the accuracy or completeness of this information. Similarly, we believe our internal research is reliable, but such research has not been verified by any independent sources.

Information in the preparation of this annual report is based on statistical data and other material available at February 20, 2009.

FOOTNOTES, SOURCES AND ABBREVIATIONS

Footnotes

1	Availability of Raw Materials	Source: Fertecon, EIA
2	Cost of New Capacity	Source: Fertecon, PotashCorp
3	Greenfield	Definition: New operation built on undeveloped site
4	Greenfield Development Time	Source: Fertecon, PotashCorp
5	Producing Countries	Source: Fertecon
6	State- or Subsidy-Controlled Capacity	Source: Fertecon, British Sulphur, PotashCorp
7	Industry Operating Rate	Source: Fertecon, PotashCorp
8	PotashCorp % of World Capacity	Source: Fertecon; PotashCorp
9	PotashCorp World Position by Capacity	Source: Fertecon; Blue, Johnson; Agrium; Mosaic; Terra; PotashCorp

Abbreviated Company Names and Sources *

AAPFCO	American Association of Plant Food Control Officials, USA
Agrifos	Agrifos Fertilizer Inc., USA
Agrium	Agrium Inc. (TSX and NYSE: AGU), Canada
APC	Arab Potash Company Ltd. (Amman: ARPT), Jordan
Belaruskali	PA Belaruskali, Belarus
Bloomberg	Bloomberg L.P., USA
Blue, Johnson	Blue, Johnson & Associates, USA
British Sulphur	British Sulphur Consultants, UK
Canadian National Railway	Canadian National Railway Co. (TSX: CNR, NYSE: CNI), Canada
Canpotex	Canpotex Limited, Canada
CBOT	Chicago Board of Trade, USA
CF Industries	CF Industries, Inc., (NYSE: CF) USA
CNC	Caribbean Nitrogen Company, Trinidad
CP Rail	Canadian Pacific Railway, (TSX: CP) Canada
Doane	Doane Advisory Services, USA
EIA	Energy Information Administration, USA
FAI	Fertilizer Association of India, India
FAO	Food and Agriculture Organization of the United Nations
Fertecon	Fertecon Limited and Fertecon Research Centre Limited, UK
FMB	FMB Group Limited, UK
ICL	Israel Chemicals Ltd. (Tel Aviv: ICL), Israel
IFA	International Fertilizer Industry Association, France
IMF	International Monetary Fund, USA
Innophos	Innophos Holdings, Inc. (NASDAQ: IPHS), USA
Intrepid	Intrepid Potash, (NYSE: IPI) USA

IPNI	International Plant Nutrition Institute, USA
K+S	K+S Group (Xetra: SDF), Germany
Koch	Koch Industries, Inc., USA
LME	London Metal Exchange, UK
Mississippi Phosphate	Mississippi Phosphate Corporation, USA
Moody’s	Moody’s Corporation (NYSE: MCO), USA
Mosaic	The Mosaic Company (NYSE: MOS), USA
NYMEX	New York Mercantile Exchange, USA
NYSE	New York Stock Exchange, USA
OCP	Office Cherifien des Phosphates, Morocco
OMS	Overseas Marine Service, USA
Pemex	Petroleos Mexicanos, Mexico
PhosChem	Phosphate Chemicals Export Association, Inc., USA
QSLP	Qinghai Salt Lake Potash Co. Ltd., China
Silvinit	JSC Silvinit, Russia
Simplot	J.R. Simplot Company, USA
Sinofert	Sinofert Holdings Limited (HKSE, 0297.HK), China
SQM	Sociedad Quimica y Minera de Chile S.A. (Santiago Bolsa de Comercio Exchange, NYSE: SQM), Chile
Terra	Terra Industries, Inc. (NYSE: TRA), USA
TFI	The Fertilizer Institute, USA
Togliatti	OAO Togliatti Azot, Russia
Tringen	Trinidad Nitrogen Co., Limited, Trinidad
TSX	Toronto Stock Exchange, Canada
Uralkali	JSC Uralkali, (LSE and RTS: URKA) Russia
USDA	US Department of Agriculture, USA
Vale	Companhia Vale do Rio Doce (Bovespa: Vale), Brazil
Yara	Yara International (Oslo: YAR), Norway

* Where PotashCorp is listed as a source in conjunction with external sources, we have supplemented the external data with internal analysis.

POTASHCORP 2008 FINANCIAL REVIEW

120 Appendix

TERMS AND MEASURES

Glossary of Terms

2008E	2008 Estimated
2009F	2009 Forecast
CAGR	Compound Annual Growth Rate
Canpotex	An export company owned by all Saskatchewan producers of potash (PotashCorp, Mosaic and Agrium).
Constructed Capacity	Equipment in a state of readiness to produce. While constructed capacity is increased at mechanical completion of a project, a period of ramp-up may be required to achieve full operating levels.
Consumption vs Demand	Product applied vs product purchased
FOB	Free on Board – cost of goods on board at point of shipment
FSU	The former Soviet Union
GDP	Gross Domestic Product
Latin America	South America, Central America, Caribbean and Mexico
LNG	Liquefied Natural Gas
MMBtu	Million British thermal units
MMT	Million tonnes
North America	The North American market includes Canada and the United States.
Offshore	Offshore markets include all markets except Canada and the US.
PhosChem	An association formed under the Webb-Pomerene Act for US exports of phosphate fertilizer products. Members are PotashCorp and Mosaic. PCS Sales is responsible for export sales of liquid fertilizers for all PhosChem members while Mosaic is responsible for sales of solid fertilizers for members.
PotashCorp	Potash Corporation of Saskatchewan Inc. (PCS) and its direct or indirect subsidiaries, individually or in any combination, as applicable
State- or Subsidy- Controlled Production	State-controlled: Operational control in the hands of the state Subsidy-controlled:The state provides subsidies which control the economic viability of the operation

Scientific Terms

Nitrogen	NH3	ammonia (anhydrous), 82.2% N
	HNO3	nitric acid, 22% N (liquid)
	UAN	nitrogen solutions, 28-32% N (liquid)
Phosphate	P2O5	phosphoric acid (liquid)
	MGA	merchant grade acid, 54% P2O5 (liquid)
	DAP	diammonium phosphate, 46% P2O5 (solid)
	MAP	monoammonium phosphate, 52% P2O5 (solid)
	SPA	superphosphoric acid, 70% P2O5 (liquid)
	Monocal	monocalcium phosphate, 48.1% P2O5 (solid)
	Dical	dicalcium phosphate, 42.4% P2O5 (solid)
	DFP	defluorinated phosphate, 41.2% P2O5 (solid)
	STF	silicon tetrafluoride
Potash	KCl	potassium chloride, 60-63.2% K2O (solid)
Fertilizer Measures
K2O tonne	Measures the potassium content of fertilizers having different chemical analyses
P2O5 tonne	Measures the phosphorus content of fertilizers having different chemical analyses
N tonne	Measures the nitrogen content of fertilizers having different chemical analyses
Product tonne	Standard measure of the weights of all types of potash, phosphate and nitrogen products
Currency Abbreviations
CDN	Canadian dollar
EUR	Euro
NOK	Norwegian krone
RUB	Russian ruble
USD	United States dollar

POTASHCORP 2008 FINANCIAL REVIEW

EX-21

Exhibit 21

SUBSIDIARIES OF
POTASH CORPORATION OF SASKATCHEWAN INC.

	Jurisdiction of
	Incorporation or
Name of Entity	Formation
101070338 Saskatchewan Ltd.	Saskatchewan
175360 Canada Inc.	Canada
609430 Saskatchewan Ltd.	Saskatchewan
628550 Saskatchewan Ltd.	Saskatchewan
AA Sulfuric Corporation	Louisiana
Canpotex Bulk Terminals Limited	Canada
Chilkap Resources Ltd.	Yukon
Inversiones El Boldo Limitada	Chile
Inversiones El Coigüe S.A.	Chile
Inversiones El Roble Limitada	Chile
Inversiones El Sauce Limitada	Chile
Inversiones PCS Chile S.A.	Chile
Inversiones RAC Chile Limitada	Chile
Minera Saskatchewan Limitada	Chile
PCS Administration (USA), Inc.	Delaware
PCS (Barbados) Holdings SRL	Barbados
PCS (Barbados) Investment Company Ltd.	Barbados
PCS (Barbados) Shipping, Ltd.	Barbados
PCS Cassidy Lake Company	Ontario
PCS Cassidy Lake Limited	Canada
PCS Chesapeake LLC	Delaware
PCS Chile I LLC	Delaware
PCS Chile II LLC	Delaware
PCS Fosfatos do Brasil Ltda.	Brazil
PCS Hungary Holding Limited Liability Company	Hungary
PCS Industrial Products Inc.	Delaware
PCS Joint Venture, Ltd.	Florida
PCS Jordan LLC	Delaware
PCS L.P. Inc.	Delaware
PCS LP LLC 2	Delaware
PCS Nitrogen Ammonia Terminal Corporation I	Texas
PCS Nitrogen Ammonia Terminal Corporation II	Delaware
PCS Nitrogen Delaware LLC	Delaware
PCS Nitrogen Fertilizer, L.P.	Delaware
PCS Nitrogen Fertilizer Limited	Trinidad
PCS Nitrogen Fertilizer Operations, Inc.	Delaware
PCS Nitrogen, Inc.	Delaware
PCS Nitrogen LCD Corporation	Delaware
PCS Nitrogen Limited	Trinidad
PCS Nitrogen Ohio, L.P.	Delaware
PCS Nitrogen Payroll Corporation	Delaware
PCS Nitrogen Trinidad Corporation	Delaware
PCS Nitrogen Trinidad Limited	Trinidad
PCS Phosphate Company, Inc.	Delaware
PCS Purified Phosphates	Virginia
PCS Sales (Canada) Inc.	Saskatchewan

	Jurisdiction of
	Incorporation or
Name of Entity	Formation
PCS Sales (Indiana), Inc.	Indiana
PCS Sales (Iowa), Inc.	Iowa
PCS Sales (USA), Inc.	Delaware
PCS USA LLC	Delaware
Pérola S.A.	Brazil
Phosphate Holding Company, Inc.	Delaware
Potash Corporation of Saskatchewan (Florida) Inc.	Florida
Potash Corporation of Saskatchewan Transport Limited	Saskatchewan
PotashCorp Finance (Barbados) Limited	Barbados
Potash Holding Company, Inc.	Delaware
RAC Investments Ltd.	Cayman
Texasgulf Aircraft Inc.	Delaware
TG Corporation	Delaware
White Springs Agricultural Chemicals, Inc.	Delaware

EX-23

Exhibit 23

CONSENT OF INDEPENDENT REGISTERED CHARTERED ACCOUNTANTS

We consent to the incorporation by reference in the following Registration Statements of Potash Corporation of Saskatchewan Inc.:

• Registration Statement No. 33-37855 on Form S-8;

• Registration Statement No. 333-19215 on Form S-8;

• Registration Statement No. 333-93773 on Form S-8;

• Registration Statement No. 333-53531 on Form S-8;

• Registration Statement No. 333-75742 on Form S-8;

• Registration Statement No. 333-75744 on Form S-8;

• Registration Statement No. 333-113945 on Form S-8;

• Registration Statement No. 333-124677 on Form S-8;

• Registration Statement No. 33-57920 on Form S-3;

• Registration Statement No. 33-133854 on Form S-3;

• Registration Statement No. 333-142615 on Form S-8;

• Registration Statement No. 333-148023 on Form S-3;

• Registration Statement No. 333-150807 on Form S-8; and

• Registration Statement No. 333-151942 on Form S-8.

of our reports dated February 20, 2009 relating to the consolidated financial statements and financial statement schedules of Potash Corporation of Saskatchewan Inc. and the effectiveness of Potash Corporation of Saskatchewan Inc.’s internal control over financial reporting, (which reports (1) express unqualified opinions on the consolidated financial statements and financial statement schedules and which report on the consolidated financial statements includes an explanatory paragraph referring to the changes in the Company’s accounting for inventories and (2) express an unqualified opinion on the effectiveness of internal control over financial reporting), appearing in this Annual Report on Form 10-K of Potash Corporation of Saskatchewan Inc. for the year ended December 31, 2008.

/s/ Deloitte & Touche LLP

Independent Registered Chartered Accountants
Saskatoon, Canada
February 26, 2009

EX-31.A

Exhibit 31(a)

CERTIFICATION

I, William J. Doyle, certify that:

1. I have reviewed this Annual Report on Form 10-K of Potash Corporation of Saskatchewan Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 26, 2009

By:	/s/ WILLIAM J. DOYLE
	William J. Doyle
	President and Chief Executive Officer

EX-31.B

Exhibit 31(b)

CERTIFICATION

I, Wayne R. Brownlee, certify that:

1. I have reviewed this Annual Report on Form 10-K of Potash Corporation of Saskatchewan Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 26, 2009

By:	/s/ WAYNE R. BROWNLEE
	Wayne R. Brownlee
	Executive Vice President and Chief Financial Officer

EX-32

Exhibit 32

Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code), each of the undersigned officers of Potash Corporation of Saskatchewan Inc. (the “Company”), does hereby certify, to such officer’s knowledge, that:

The Annual Report on Form 10-K for the year ended December 31, 2008 (the “Form 10-K”), of the Company fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in the Form 10-K fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: February 26, 2009

By:	/s/ WILLIAM J. DOYLE
	William J. Doyle
	President and Chief Executive Officer

Date: February 26, 2009

By:	/s/ WAYNE R. BROWNLEE
	Wayne R. Brownlee
	Executive Vice President, Treasurer and Chief Financial Officer

The foregoing certification is being furnished as an exhibit to the Form 10-K pursuant to Item 601(b)(32) of Regulation S-K, section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code) and, accordingly, is not being filed as part of the Form 10-K.

EX-99.A

Exhibit 99(a)

Table of Contents

	Page
Letter to Shareholders		1
Notice of Annual and Special Meeting of Shareholders		2
Questions and Answers on Voting and Proxies		3
Business of the Meeting		6
Board of Directors		7
Appointment of Auditors and Report of Audit Committee		22
Adoption of 2009 Performance Option Plan		28
Corporate Governance		32
Compensation		37
Ownership of Shares		69
Directors’ and Officers’ Liability Insurance		70
Voting Shares		70
Shareholder Proposal		70
2010 Shareholder Proposals		70
Additional Information		70
Directors’ Approval		70
Appendices		71
Appendix A — Disclosure of Corporate Governance Practices		72
Appendix B — Resolution of Shareholders — 2009 Performance Option Plan		77
Appendix C — 2009 Performance Option Plan		78
Appendix D — Shareholder Proposal		84
Appendix E — Board of Directors Charter		87
Appendix F — Audit Committee Charter		90

Potash Corporation of Saskatchewan Inc.

February 20, 2009

Dear Shareholder:

On behalf of the Board of Directors, management and employees, we invite you to the 2009 Annual and Special Meeting of Shareholders which will take place on May 7, 2009 at 10:30 a.m. (local time) in the Grand Salon of TCU Place, 35 — 22^nd Street East, Saskatoon, Saskatchewan, Canada. The Annual and Special Meeting provides you, the shareholder, with an opportunity to meet, listen to and ask questions of the people who are responsible for the performance of the Corporation.

The Notice of Annual and Special Meeting and the accompanying Management Proxy Circular describes the business to be conducted at the meeting, provides information on executive compensation and explains the Corporation’s governance and governance principles.

Please take the time to review this circular and provide your vote on the business items of the meeting. Your vote and participation are very important.

If you are unable to attend the meeting in person, you can vote by telephone, via the Internet or by completing and returning the enclosed proxy. Please refer to the “Questions and Answers on Voting and Proxies” section of the accompanying Management Proxy Circular for further information.

We will also webcast the meeting at www.potashcorp.com. We encourage you to visit our website at any time before the meeting as it provides useful information about our company.

We look forward to seeing you on May 7, 2009.

Sincerely,
D. J. HOWE	W. J. DOYLE
Board Chair	President and Chief Executive Officer

PCS Tower, Suite 500, 122 – 1st Avenue South, Saskatoon, Saskatchewan Canada S7K 7G3

LETTER TO SHAREHOLDERS Page  1

Notice of Annual and Special Meeting of Shareholders

NOTICE IS HEREBY GIVEN that the Annual and Special Meeting (the “Meeting”) of shareholders of Potash Corporation of Saskatchewan Inc. (the “Corporation”), a corporation organized under the laws of Canada, will be held on:

May 7, 2009
10:30 a.m. (local time)
Grand Salon, TCU Place
35 – 22^nd Street East
Saskatoon, Saskatchewan, Canada

for the following purposes:

1.	to receive the consolidated financial statements of the Corporation for the fiscal year ended December 31, 2008 and the report of the auditors thereon;
2.	to elect the Board of Directors for 2009;
3.	to appoint auditors for 2009;
4.	to consider and, if deemed appropriate, adopt, with or without variation, a resolution (the full text of which is reproduced in Appendix B to the accompanying Management Proxy Circular) authorizing the Corporation to implement a new performance option plan, which is attached as Appendix C to the accompanying Management Proxy Circular;
5.	to consider the shareholder proposal attached as Appendix D to the accompanying Management Proxy Circular; and
6.	to transact such other business as may properly come before the Meeting or any adjournments thereof.

DATED at Saskatoon, Saskatchewan this 20^th day of February, 2009.

BY ORDER OF THE BOARD OF DIRECTORS

 
JOSEPH A. PODWIKA
Secretary

POTASH CORPORATION OF SASKATCHEWAN INC.

SUITE 500, 122 – 1^ST AVENUE SOUTH, SASKATOON, SK CANADA S7K 7G3

NOTICE OF MEETING Page  2

Questions and Answers on Voting
and Proxies

1.  Who can I call if I have questions about the information contained in this Management Proxy Circular or require assistance in completing my proxy form?

Georgeson Shareholder Communications Canada, Inc., the Corporation’s proxy solicitation agent, at 1-866-425-8527, for service in English and in French.

2.  Who is soliciting my proxy?

The management of the Corporation. Solicitation of proxies will be primarily by mail, supplemented by telephone or other contact by employees of the Corporation (who will receive no additional compensation), and all such costs will be borne by the Corporation. We have retained the services of Georgeson for the solicitation of proxies in Canada and in the United States. Georgeson’s services are estimated to cost $28,000.

3.  On what am I voting?

Four items:

(1)	the election of directors;
(2)	the appointment of auditors;
(3)	a resolution authorizing the Corporation to implement a new performance option plan; and
(4)	consideration of the shareholder proposal attached as Appendix D.

The Corporation’s Board of Directors and management recommend that you vote FOR items (1), (2), and (3) and AGAINST item (4).

4.  Who is entitled to vote?

Common shareholders as at the close of business on March 12, 2009 (the “Record Date”) or their duly appointed representatives will be entitled to cast a vote.

As at February 20, 2009, 295,240,247 common shares in the capital of the Corporation (the “Shares”) are entitled to be voted at the Meeting.

To the knowledge of the Corporation’s directors and officers, no person or company owns or exercises control or direction over more than 10% of the outstanding Shares.

5.  By when must I vote?

This will depend on the manner in which you will be voting:

(1)	If you are a Registered Shareholder planning to attend the Meeting and wish to vote your Shares in person at the Meeting, your vote will be taken and counted at the Meeting.
(2)	If you are a Registered Shareholder and voting using the proxy form, your proxy form should be received at the Toronto office of CIBC Mellon Trust Company by mail or facsimile prior to the commencement of the Meeting, or hand-delivered at the registration table on the day of the Meeting prior to the commencement of the Meeting.
(3)	If you are a Registered Shareholder and voting your proxy by telephone or Internet, your vote should be received by CIBC Mellon Trust Company no later than 11:00 p.m. (Saskatoon time) on Tuesday May 5, 2009.
(4)	If you are a Non-Registered (or beneficial) Shareholder and wish to attend the Meeting or vote by proxy, you should refer to Item 11.

Please note that Items 6 to 10 below are only applicable to Registered Shareholders. Non-Registered (or beneficial) Shareholders should refer to Item 11 for further information on voting.

6.  How do I vote if I am a Registered Shareholder?

You are a Registered Shareholder if your name appears on your share certificate. The enclosed proxy form indicates whether you are a Registered Shareholder.

You can vote your Shares by proxy or in person at the Meeting if you are a Registered Shareholder:

(1)  By Proxy

There are four ways that you can vote by proxy:

(a)  By Telephone

Call 1-866-271-1207 from your touch-tone phone and follow the instructions (only available to Registered

QUESTIONS AND ANSWERS ON VOTING AND PROXIES Page  3

Shareholders resident in Canada or the United States).

You will need the control number located on the enclosed proxy form. You do not need to return your proxy form.

(b)  On the Internet

Go to www.eproxyvoting.com/potash and follow the instructions on screen.

You will need the control number located on the enclosed proxy form. You do not need to return your proxy form.

At any time, CIBC Mellon may cease to provide telephone and Internet voting, in which case shareholders can elect to vote by mail, by fax or by attending the Meeting in person, as described below.

(c)  By Mail

By completing, dating and signing the enclosed proxy form and returning same in the envelope provided.

(d)  By Fax

By completing, dating and signing the enclosed proxy form and forwarding same by fax to 1-866-781-3111 (toll-free within Canada and the United States) or 1-416-368-2502 (from any country other than Canada and the United States).

If your Shares are not registered in your name (e.g. if they are held through a bank, trust company, securities broker or other nominee), do not use the above fax number as it is reserved for Registered Shareholders. Instead, use the fax numbers, if any, provided by your nominee. See Item 11(1).

(2)  By Attending the Meeting in Person

If you wish to vote in person at the Meeting, do not complete or return the proxy form.

7.  What if I sign the proxy form as described in this Management Proxy Circular?

Signing the proxy form gives authority to Mr. Dallas J. Howe, Mr. William J. Doyle, Mr. Wayne R. Brownlee or Mr. Joseph A. Podwika, all of whom are either directors or officers of the Corporation, to vote your Shares at the Meeting in accordance with your voting instructions.

A proxy must be in writing and must be executed by you or by your attorney authorized in writing or, if the shareholder is a corporation or other legal entity, by an officer or attorney thereof duly authorized. A proxy may also be completed over the telephone or over the Internet. See Items 6(1)(a) and (b).

8.  Can I appoint someone other than these people to vote my Shares?

Yes. You have the right to appoint some other person of your choice, who need not be a shareholder, to attend and act on your behalf at the Meeting. If you wish to do so, please strike out those four printed names appearing on the proxy form, and insert the name of your chosen proxyholder in the space provided thereon.

You cannot appoint a person to vote your Shares other than our directors or officers whose printed names appear on the proxy form if you decide to vote by telephone or Internet.

It is important to ensure that any other person you appoint is attending the Meeting and is aware that his or her appointment has been made to vote your Shares.

9.  How will my Shares be voted if I vote by proxy?

The persons named in the proxy form must vote or withhold from voting your Shares in accordance with your instructions on the proxy form. In the absence of such instructions, however, your Shares will be voted FOR the election to the Corporation’s Board of Directors of the nominees as described in this Management Proxy Circular and on the proxy form, FOR the appointment of Deloitte & Touche LLP as auditors until the close of the next annual meeting, FOR the resolution authorizing the Corporation to implement a new performance option plan, AGAINST the shareholder proposal, and FOR management’s proposals generally.

10.  If I change my mind, can I take back my proxy once I have given it?

Yes. A shareholder who has voted by proxy may revoke it by voting again in any manner (telephone, Internet, mail or fax). In addition, you may revoke a voted proxy by depositing an instrument in writing (which includes another proxy form with a later date) executed by you or by your attorney authorized in writing with our Corporate Secretary at Suite 500, 122 — 1^st Avenue South, Saskatoon, Saskatchewan, Canada, S7K 7G3, at any time up to and including the last business day preceding the date of the Meeting, or any adjournment or postponement thereof or by depositing it with the Meeting chair on the day of the Meeting, or any

QUESTIONS AND ANSWERS ON VOTING AND PROXIES Page  4

adjournment or postponement thereof. You may also revoke a proxy in any other manner permitted by law.

Note that your participation in person in a vote by ballot at the Meeting will automatically revoke any proxy previously given by you in respect of business covered by that vote.

11.  How do I vote if I am a Non-Registered (or beneficial) Shareholder?

You are a Non-Registered (or beneficial) Shareholder if your Shares are held through a bank, trust company, securities broker or other nominee.

For most of you, the proxy form or the request for voting instructions sent or to be sent by your nominee indicates whether you are a Non-Registered (or beneficial) Shareholder.

There are two ways that you can vote your Shares if you are a Non-Registered (or beneficial) Shareholder:

(1)  By Providing Voting Instructions to Your Nominee

Your nominee is required to seek voting instructions from you in advance of the Meeting. Accordingly, you will receive, or have already received, from your nominee either a request for voting instructions or a proxy form for the number of Shares you hold.

Every nominee has its own procedures which should be carefully followed by Non-Registered (or beneficial) Shareholders to ensure that their Shares are voted at the Meeting. These procedures generally allow voting by telephone, on the Internet, by mail or by fax. Please contact your nominee for instructions in this regard.

If your Shares are not registered in your name, do not use the fax number in 6(1)(d) as this number is reserved for Registered Shareholders.

(2)  By Attending the Meeting in Person

If you wish to vote in person at the Meeting, insert your own name in the space provided on the request for voting instructions or proxy form to appoint yourself as proxyholder and follow the instructions of your nominee.

Non-Registered (or beneficial) Shareholders who instruct their nominee to appoint themselves as proxyholders should, at the Meeting, present themselves to a representative of CIBC Mellon at the table identified as “Beneficial Shareholders”. Do not otherwise complete the form sent to you as your vote will be taken and counted at the Meeting.

12.  What if amendments are made to these matters or if other matters are brought before the Meeting?

The person named in the proxy form has discretionary authority with respect to amendments or variations to matters identified in the Notice of the Meeting and to other matters which may properly come before the Meeting.

As of the date of this Management Proxy Circular, our management knows of no such amendment, variation or other matter expected to come before the Meeting. If any other matters properly come before the Meeting, the persons named in the proxy form will vote on them in accordance with their best judgment.

13.  How will the votes be counted?

All matters to be considered at the Meeting will each be determined by a majority of votes cast at the Meeting by proxy or in person. In the event of equal votes, the Meeting chair is entitled to a second or casting vote.

14.  How can I contact the transfer agent?

You can contact the transfer agent as follows:

By mail:

CIBC Mellon Trust Company
P.O. Box 7010
Adelaide Street Postal Station
Toronto, Ontario, Canada M5C 2W9

By telephone:

1-800-387-0825 (toll-free within Canada and the United States)

or 1-416-643-5500 (from any country other than Canada and the United States)

By fax:

1-416-643-5501 (all countries)

Through the internet:

www.cibcmellon.com

Except as otherwise stated, the information contained herein is given as of February 20, 2009.

Unless otherwise specified, all dollar amounts are expressed in United States dollars.

Share and per-share data (as applicable) have been adjusted to reflect previous stock splits, including our three-for-one stock split in May 2007.

QUESTIONS AND ANSWERS ON VOTING AND PROXIES Page  5

Business of the Meeting

Financial Statements

The Consolidated Financial Statements for the fiscal year ended December 31, 2008 are included in the Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008 filed with the U.S. Securities and Exchange Commission (“SEC”) and the Canadian securities regulatory authorities.

Nominees for Election to the Board of Directors

The 12 nominees proposed for election as directors of the Corporation are listed beginning on page 8. All nominees have established their eligibility and willingness to serve as directors. Directors will hold office until the next annual meeting of shareholders of the Corporation or until their successors are elected or appointed.

Unless otherwise instructed, the persons designated in the form of proxy intend to vote for the election of the nominees listed beginning on page 8. If, for any reason, at the time of the Meeting any of the nominees are unable to serve, it is intended that the persons designated in the form of proxy will vote in their discretion for a substitute nominee or nominees.

Appointment of Auditors

Proxies solicited hereby will be voted to reappoint the firm of Deloitte & Touche LLP, the present auditors of the Corporation, as auditors of the Corporation to hold office until the next annual meeting of shareholders of the Corporation.

Unless otherwise instructed, the persons designated in the form of proxy intend to vote to reappoint Deloitte & Touche LLP as auditors of the Corporation.

Adoption of 2009 Performance Option Plan

At the Meeting, shareholders will be asked to consider and, if deemed appropriate, adopt, with or without variation, a resolution (the full text of which is reproduced as Appendix B to this Management Proxy Circular) authorizing the Corporation to implement a new performance option plan, which is attached as Appendix C to this Management Proxy Circular.

Unless otherwise instructed, the persons designated in the form of proxy intend to vote for the resolution to approve the new performance option plan.

Shareholder Proposal

A proposal has been submitted by a shareholder for consideration at the Meeting. Such proposal and the Board’s response thereto are set forth in the attached Appendix D.

Unless otherwise instructed, the persons designated in the form of proxy intend to vote against the proposal.

MANAGEMENT PROXY CIRCULAR ï Business of the Meeting Page  6

Board of Directors

•  The Corporation was recognized in 2008 for its governance and disclosure practices by virtue of a first place finish in the 2008 Board Games rankings prepared by the Globe and Mail and the receipt of the 2008 Governance Gavel Award from the Canadian Coalition for Good Governance regarding its director disclosure.

•  PotashCorp’s Chair, Dallas Howe, was recognized in early 2009 by the Institute of Corporate Directors with an ICD Fellowship Award for his leadership in Board Governance.

Nominees

The 12 directors being nominated for election in 2009 are:

Christopher M. Burley*	Keith G. Martell
William J. Doyle	Jeffrey J. McCaig
John W. Estey	Mary Mogford
C. Steven Hoffman	Paul J. Schoenhals
Dallas J. Howe	E. Robert Stromberg
Alice D. Laberge	Elena Viyella de Paliza

The Corporate Governance and Nominating Committee is of the view that these directors represent an appropriate mix of expertise and qualities required for the Board. See page 8 for their biographies.

*   New director nominee.

Independent Board

All directors, except for Mr. Doyle, Mr. Stromberg and Ms. Viyella de Paliza, are independent. See page 14 for details.

Executive Sessions

The Board meets in executive session, with only independent directors present during each regularly scheduled meeting of the Board. Sessions are of no fixed duration and participant directors are encouraged to raise and discuss any issues of concern.

Meeting Attendance

Directors attended 98% of Board and committee meetings in 2008.

Retirement

Frederick J. Blesi, who has served as a director of the Corporation since 2001 retired from the Board on May 8, 2008. Wade Fetzer III, who served as a director of the Corporation since 2002 will retire on May 7, 2009.

Director Compensation

We establish director compensation based on the advice of independent consultants, with a view to establishing compensation at the median of the applicable Comparator Group. See page 17 for details.

Total fees and retainers earned by all Board members in 2008 were $1,885,500.

“At Risk” Investment

By the time a director has served on the Board for 5 years, he or she must own Shares and/or Deferred Share Units with a value at least five times the annual retainer paid to directors. One-half of the ownership threshold is required to be achieved within 21/2 years.

All director nominees are currently in compliance with the applicable ownership guidelines of the Corporation.

See page 21 for details.

MANAGEMENT PROXY CIRCULAR ï Board of Directors Page  7

Nominees for Election to the Board of Directors

The articles of the Corporation provide that the Board of Directors of the Corporation (the “Board”) shall consist of a minimum of 6 directors and a maximum of 20, with the actual number to be determined from time to time by the Board. The Board has determined that, at the present time, there will be 12 directors.

Proxies solicited hereby will be voted for the following proposed nominees (or for substitute nominees in the event of contingencies not known at present) who will, subject to the bylaws of the Corporation and applicable corporate law, hold office until the next annual meeting of shareholders or until their successors are elected or appointed in accordance with the bylaws or applicable corporate law. In an uncontested election, any nominee for director who fails to receive votes in favor of his or her election representing at least a majority of the votes cast (added together with the votes withheld) shall tender his or her resignation for consideration by the Corporate Governance and Nominating Committee. Except in extenuating circumstances, it is expected that the committee will recommend to the Board that the resignation be accepted and effective within a period of 90 days and that the action taken be publicly disclosed. To the extent possible, the committee and Board members who act on the resignation shall be directors who have themselves received a majority of votes cast.

The following table states the names and ages of all the persons to be nominated for election as directors, all other positions and offices with the Corporation now held by them, their present principal occupation or employment, their business experience over the last five years, the period during which present directors of the Corporation have served as directors, their principal areas of expertise and their independence status. The table also discloses the value of at-risk holdings for each of them as of February 20, 2009 and their overall board and committee meeting attendance.

For further detailed information on director independence, attendance, principal areas of expertise, at-risk holdings and compensation, please see the tables and narrative following this table.

CHRISTOPHER M. BURLEY

Age: 47

Calgary, Alberta, Canada

Independent⁽¹⁾

Mr. Burley recently retired as Managing Director and Vice Chairman Energy of Merrill Lynch Canada Inc., an investment banking firm, after more than 21 years in the investment banking business. He is a graduate of the Institute of Corporate Directors’ Education Program.

Principal Areas of Expertise/Experience:	Value of At-Risk Holdings(2):
Finance	February 2009(3): $839,600
Investment Banking
Governance

Board Committee Membership:	Board & Committee Attendance(4):
n/a	n/a

WILLIAM J. DOYLE

Age: 58

Winnetka, Illinois, USA

Director since 1989

Non-independent⁽¹⁾

Mr. Doyle is President and Chief Executive Officer of the Corporation. He joined PotashCorp as President of PCS Sales in 1987, after a career with International Minerals and Chemical Corporation. He is Chairman of Canpotex Limited, on the boards of The Fertilizer Institute and International Plant Nutrition Institute, as well as a member of the Executive Management group of the International Fertilizer Industry Association. Mr. Doyle is a graduate of Georgetown University in Washington, DC and is a member of its Board of Directors.

Principal Areas of Expertise/Experience:	Value of At-Risk Holdings(2):
Fertilizer/Mining/Chemical Industry	February 2009(3): $40,419,507
Global Agriculture/International Commerce
Global Senior Executive Management

Board Committee Membership:	Board & Committee Attendance(4):
none	100%

MANAGEMENT PROXY CIRCULAR ï Board of Directors Page  8

JOHN W. ESTEY

Age: 58
Glenview, Illinois, USA
Director since 2003

Independent⁽¹⁾

Mr. Estey is President and Chief Executive Officer of S&C Electric Company. He is a member of the Board of Governors of the National Electrical Manufacturers Association, a director of the Executives’ Club of Chicago, a member of the Dean’s Advisory Board at the Kellogg School of Management at Northwestern University and a member of the Board of Trustees of the Adler Planetarium.

Principal Areas of Expertise/Experience:	Value of At-Risk Holdings(2):
Global/International Commerce	February 2009(3): $2,453,387
Business Management
Compensation

Board Committee Membership:	Board & Committee Attendance(4):
Compensation (chair)	100%
Safety, Health and Environment

C. STEVEN HOFFMAN

Age: 60
Lincolnshire, Illinois, USA
Director since 2008

Independent⁽¹⁾

Mr. Hoffman is an export consultant and a former senior executive of IMC Global Inc. With over 22 years of global fertilizer sales and marketing management experience, he retired as Senior Vice President and President Sales and Marketing of IMC Global upon completion of the IMC Global and Cargill Fertilizer merger, creating the Mosaic Company. He is a former Chairman and President of the Phosphate Chemicals Export Association, Inc. (“PhosChem”) and a former Chairman of Canpotex Limited.

Principal Areas of Expertise/Experience:	Value of At-Risk Holdings(2):
Fertilizer/Mining/Chemical Industry	February 2009(3): $244,328
Global Agriculture/International Commerce
Business Management

Board Committee Membership:	Board & Committee Attendance(4):
Audit	100%
Safety, Health and Environment

DALLAS J. HOWE

Age: 64
Calgary, Alberta, Canada
Director since 1991

Independent⁽¹⁾

Mr. Howe is owner and Chief Executive Officer of DSTC Ltd., a technology investment company, and a director of Advanced Data Systems Ltd. and Viterra (formerly Saskatchewan Wheat Pool). A director of Potash Corporation of Saskatchewan, the Crown corporation, from 1982 to 1989, he joined the Corporation’s Board in 1991 and was elected Chair in 2003.

Principal Areas of Expertise/Experience:	Value of At-Risk Holdings(2):
Agriculture	February 2009(3): $8,918,611
e-Commerce/Technology
Governance

Board Committee Membership:	Board & Committee Attendance(4):
Board Chair	100%
Corporate Governance and Nominating

ALICE D. LABERGE

Age: 52

Vancouver, British
Columbia, Canada
Director since 2003

Independent⁽¹⁾

Ms. Laberge is a Corporate Director and the former President and Chief Executive Officer of Fincentric Corporation, a global provider of software solutions to financial institutions. She was previously Senior Vice President and Chief Financial Officer of MacMillan Bloedel Limited and is a director of the Royal Bank of Canada, Russel Metals Inc., the United Way of the Lower Mainland and St. Paul’s Hospital Foundation in Vancouver. She is a trustee of the Healthcare Benefit Trust and a member of the Faculty Advisory Board, Sauder School of Business, University of British Columbia.

Principal Areas of Expertise/Experience:	Value of At-Risk Holdings(2):
e-Commerce/Technology	February 2009(3): $1,843,317
Finance
Accounting

Board Committee Membership:	Board & Committee Attendance(4):
Audit (chair)	100%
Corporate Governance and Nominating

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KEITH G. MARTELL

Age: 46
Saskatoon, Saskatchewan, Canada
Director since 2007

Independent⁽¹⁾

Mr. Martell is Executive Chairman of First Nations Bank of Canada. He is a director of the Public Sector Pension Investment Board of Canada, The North West Company Inc. and Saskatoon Friendship Inn. He is a trustee of The North West Company Fund and Primrose Lake Trust.

Principal Areas of Expertise/Experience:	Value of At-Risk Holdings(2):
Finance/Accounting	February 2009(3): $215,649
First Nations
Business Management

Board Committee Membership:	Board & Committee Attendance(4):
Audit	100%
Compensation

JEFFREY J. MCCAIG

Age: 57
Calgary, Alberta, Canada
Director since 2001

Independent⁽¹⁾

Mr. McCaig is Chairman and Chief Executive Officer of the Trimac Group of Companies, a North American provider of bulk trucking and third-party logistics services. Prior to that, he practiced law, specializing in corporate financing and securities. He is a director of Orbus Pharma Inc., The Standard Life Assurance Company of Canada and a director and co-owner of the Calgary Flames Hockey Club.

Principal Areas of Expertise/Experience:	Value of At-Risk Holdings(2):
Transportation Industry	February 2009(3): $2,661,563
Legal
Business Management

Board Committee Membership:	Board & Committee Attendance(4):
Audit	100%
Compensation

MARY MOGFORD

Age: 64
Newcastle, Ontario, Canada
Director since 2001

Independent⁽¹⁾

Ms. Mogford is a Corporate Director and a former Ontario Deputy Minister of Finance and Deputy Minister of Natural Resources. She is a director of MDS Inc. and the SickKids Foundation. She is a Fellow of the Institute of Corporate Directors (ICD) and an accredited director under the ICD/Rotman School of Business Directors’ Education Program.

Principal Areas of Expertise/Experience:	Value of At-Risk Holdings(2):
Finance	February 2009(3): $3,138,766
Public Policy
Governance

Board Committee Membership:	Board & Committee Attendance(4):
Corporate Governance and Nominating (chair)	96%
Audit

PAUL J. SCHOENHALS

Age: 67
Calgary, Alberta, Canada
Director since 1992

Independent⁽¹⁾

Mr. Schoenhals is a retired President and Chief Executive Officer of Enform, a petroleum industry safety and training service. He is a former Member of the Legislative Assembly and Cabinet Minister in Saskatchewan and was Chairman of Potash Corporation of Saskatchewan, the Crown corporation, from 1987 to 1989.

Principal Areas of Expertise/Experience:	Value of At-Risk Holdings(2):
Public Policy	February 2009(3): $1,969,695
Business Management

Board Committee Membership:	Board & Committee Attendance(4):
Safety, Health and Environment (chair)	85%
Compensation

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E. ROBERT STROMBERG, Q.C.

Age: 67
Jackfish Lake, Saskatchewan,
Canada
Director since 1991

Non-independent⁽¹⁾

Mr. Stromberg was formerly associated with the Saskatchewan law firm Robertson Stromberg Pedersen. He is a director of NorSask Forest Products Inc. and Hitachi Canadian Industries Ltd. and holds the rank of Honorary Lieutenant-Colonel of the North Saskatchewan Regiment.

Principal Areas of Expertise/Experience:	Value of At-Risk Holdings(2):
Global/International Commerce	February 2009(3): $4,250,546
Legal

Board Committee Membership:	Board & Committee Attendance(4):
Safety, Health and Environment	100%

Mr. Stromberg is not considered independent because of a business relationship in a company in which Mr. Stromberg’s sons are associated but in which Mr. Stromberg has no interest. This relationship is described in greater detail below.

ELENA VIYELLA DE PALIZA

Age: 54
Dominican Republic
Director since 2003

Non-independent⁽¹⁾

Ms. Viyella de Paliza is President of Inter-Quimica, S.A., a chemicals importer and distributor, Monte Rio Power Corp. and Indescorp, S.A. She is a member of the board of the Inter-American Dialogue and past president of the Dominican Business Council, the Dominican Stock Exchange, Dominican Manufacturers Association and the National Agribusiness Board.

Principal Areas of Expertise/Experience:	Value of At-Risk Holdings(2):
Fertilizer Industry	February 2009(3): $2,079,722
Finance/Business Management
Global/International Commerce

Board Committee Membership:	Board & Committee Attendance(4):
Safety, Health and Environment	100%

Ms. Paliza is not considered independent because of a business relationship in a company in which Ms. Paliza’s father and brother are interested parties but in which Ms. Paliza has no interest. This relationship is described in greater detail below.

Wade Fetzer III, who has served since 2002 will retire from the Board on May 7, 2009.

(1)	See “Director Independence and Other Relationships”.
(2)	See “At Risk Investments and Year Over Year Changes” for additional detail.
(3)	Based on the closing price per Share on the New York Stock Exchange of $83.96 on February 20, 2009.
(4)	See “Attendance of Directors” for additional detail.

All of the above director nominees have had the principal occupation described above for the previous five years other than Ms. Laberge, who was Chief Executive Officer of Fincentric Corporation from December 2003 to June 2005.

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Board Tenure
(Director Nominees)

as at February 20, 2009

Director Independence and Other Relationships

	Independence Status of Directors/Director Nominees
					Not		Reason for
Name	Management		Independent		Independent		Non-independent Status
Christopher M. Burley				x
William J. Doyle		x
John W. Estey				x
Wade Fetzer III				x
C. Steven Hoffman				x
Dallas J. Howe				x
Alice D. Laberge				x
Keith G. Martell				x
Jeffrey J. McCaig				x
Mary Mogford				x
Paul J. Schoenhals				x
E. Robert Stromberg						x		family business relationship
Elena Viyella de Paliza						x		family business relationship

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The Board has determined that all of the directors of the Corporation and proposed nominees, with the exception of Mr. Doyle, Ms. Paliza and Mr. Stromberg, are independent within the meaning of the “PotashCorp Governance Principles”, National Instrument 58-101 “Disclosure of Corporate Governance Practices” (“NI 58-101”), applicable rules of the SEC and the New York Stock Exchange (“NYSE”) corporate governance rules. In addition, there are no interlocking director relationships among the board members.

For a director to be considered independent, the Board must determine that the director does not have any material relationship with the Corporation, either directly or indirectly (e.g. as a partner, shareholder or officer of an organization that has a relationship with the Corporation). Pursuant to the “PotashCorp Governance Principles” and the “PotashCorp Core Values and Code of Conduct”, directors and executive officers of the Corporation inform the Board as to their relationships with the Corporation and provide other pertinent information pursuant to questionnaires that they complete, sign and certify on an annual basis. The Board reviews such relationships to identify impairments to director independence and in connection with disclosure obligations under Item 404(a) of Regulation S-K under the Securities Exchange Act of 1934 (the “Exchange Act”).

As permitted by the NYSE corporate governance rules, the Board has adopted categorical standards to assist it in making determinations of director independence. These standards are set out in the “PotashCorp Governance Principles”, the full text of which is available on the Corporation’s website, www.potashcorp.com. The independence standards established by the Board are as follows:

a)  A Director will not be considered independent if, currently or within the preceding three years, as applicable:

i)	the Director is, or was, an employee or executive officer of the Corporation, including any affiliated entity of the Corporation;
ii)	an immediate family member of the Director is, or was, an executive officer of the Corporation, including any affiliated entity of the Corporation;
iii)	the Director is, or was, a partner of, employed by or affiliated with any of the Corporation’s present or former internal or external auditors;
iv)	an immediate family member of the Director is, or was, a partner of any of the Corporation’s present or former internal or external auditors;
v)	an immediate family member of the Director is an employee of the Corporation’s internal or external auditors and participates in its audit, assurance or tax compliance (but not tax planning) practice, or is or was employed or affiliated with any of the Corporation’s present or former internal or external auditors and personally works or worked on the Corporation’s audit within such time; or
vi)	an executive officer of the Corporation serves or served on the compensation committee of an entity which, in turn, employs or employed either (a) the particular Director as an executive officer or (b) an immediate family member of such Director as an executive officer.

b)

A Director will not be considered independent if the Director received any direct compensation, or an immediate family member of the Director received more than Cdn$75,000 in direct compensation, during any 12 month period within the past three fiscal years from the Corporation, other than director and committee fees and pension or other forms of deferred compensation for prior service (provided that such compensation is not contingent in any way on continued service).

c)

A Director will not be considered independent if the Director has any of the following commercial or charitable relationships:

(i)

the Director currently serves as an executive officer or employee of, or any of his or her immediate family members currently serves as an executive officer of, another company that makes payments to, or receives payments from, the Corporation for property or services in an amount that, in any one of the three most recent fiscal years, exceeds the greater of (x) US$1,000,000 or (y) 2 percent of the annual consolidated gross revenues of the company for which such Director, or any of his or her immediate family members, serves as an executive officer (or as an employee in the case of the Director); or

(ii)

the Director currently serves as an officer, director or trustee of a charitable organization, and the Corporation’s discretionary charitable contributions to that organization (or in the case of a

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foundation, the foundation together with the organization or entity to which the foundation supports) exceeds the greater of (x) US$1,000,000 or (y) 2 percent of that organization’s total annual consolidated gross revenues within any one of the three most recent fiscal years (provided that the Corporation’s matching of employee charitable contributions will not be included in the amount of the Corporation’s contributions for this purpose).

d)  Where a relationship exists as a result of a Director who is a limited partner, a non-managing member or who occupies a similar position in an entity that does business with the Corporation, or who has a shareholding in such entity which is not significant, and who, in each case, has no active role in sales to, purchases from, or in providing services to the Corporation and derives no direct material benefit from same, such relationship shall be considered not to be material.

Mr. Doyle is the Chief Executive Officer (“CEO”) of the Corporation and is therefore not independent. Mr. Doyle is also Chairman of Canpotex Limited. The Corporation had sales of approximately $2,257.1 million to Canpotex Limited in 2008.

A son of Mr. Stromberg, David Stromberg, is a director and a major indirect shareholder of Micro Oil Inc. (“Micro Oil”), a privately held process oil blender and supplier based in Saskatoon, Saskatchewan. David Stromberg is also the president of Micro Oil. Another son of Mr. Stromberg, Jeffrey Stromberg, is a shareholder of Micro Oil. In 2008, receipts and payments in the amount of Cdn$2,014,601 were transacted between the Corporation and Micro Oil, which exceeds 2% of Micro Oil’s gross revenues. Micro Oil and the Corporation have also entered into a confidentiality agreement relating to the development of oil processes used by the Corporation. Purchases from Micro Oil are made in the ordinary course of business. Mr. Stromberg has no interest in the business of his adult sons. Through his prominence in the Saskatchewan business community and his professional qualifications and experience, Mr. Stromberg has been and continues to be a valued member of the Board. His presence on the Board plays no role in the Corporation’s decision to transact business with Micro Oil. The Corporation has and will continue to make this decision on the basis of the best interests of the Corporation.

Ms. Paliza’s father and brother are executive officers of Fertilizantes Santo Domingo, C. por A (“Fersan”), a fertilizer bulk blender and distributor of agrichemicals based in the Dominican Republic, which is a customer of the Corporation. Although representing less than 1% of the Corporation’s consolidated sales in 2008, sales to Fersan exceeded 2% of Fersan’s 2008 consolidated gross revenues. As such, Ms. Paliza does not meet the Corporation’s categorical independence standards which incorporate in relevant part the NYSE corporate governance rules. Ms. Paliza has no direct or indirect interest in the Corporation’s sales to and purchases by Fersan and all such transactions are completed on normal trade terms. Even though she does not meet the aforementioned independence standards, Ms. Paliza provides a valuable contribution to the Board through her industry knowledge and experience, and international business perspective.

In determining the independence of its other directors, the Board evaluated business and other relationships that each director had with the Corporation. In doing so, it determined as immaterial (i) any relationship falling below the thresholds in paragraph (c)(i) or covered pursuant to paragraph (d) above, and not otherwise required to be disclosed pursuant to Item 404(a) of Regulation S-K under the Exchange Act, including certain relationships of Mr. Estey, Mr. McCaig and Mr. Schoenhals, (ii) any relationships falling below the thresholds in paragraph 3(c)(ii) above, including certain relationships of Mr. Estey, Ms. Laberge, Mr. Martell and Ms. Mogford and (iii) any business relationship between the Corporation and an entity as to which the director in question has no relationship other than as a director thereof, including certain directorships of Mr. Estey, Mr. Howe, Ms. Laberge, Mr. McCaig and Ms. Mogford.

Board/Director Assessment

Annual Board Assessment by All Members of the Board

Each year Board members complete a detailed questionnaire which (a) provides for quantitative ratings in key areas, and (b) seeks subjective comment in each of those areas. The questionnaire is administered by the Corporate Secretary. Responses are reviewed by the Corporate Secretary and the Chair of the Corporate Governance and Nominating Committee. A summary report is then prepared and provided to the Board Chair, the Corporate Governance and Nominating Committee and the CEO and then reported to the full Board by the Corporate Governance and Nominating Committee Chair. Attribution of comments to individual Directors in the summary report is made only if authorized by that Director. In assessing the responses to the questionnaire, the focus is on continuous improvement. Matters requiring follow-up are identified, action plans are developed and there is ongoing monitoring by the Corporate Governance and

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Nominating Committee to ensure satisfactory results. As part of the annual Board assessment, the Board reviews and considers any proposed changes to the Board Charter.

Annual Assessment of Each Committee by Members of That Committee

Each year members of each Committee complete a detailed questionnaire designed to allow Committee members to evaluate how well each Committee is operating and to make suggestions for improvement. The questionnaire is administered by the Corporate Secretary who receives responses and reviews them with the appropriate Committee Chair. A summary report is then prepared and provided to the Board Chair, the Chair of the Corporate Governance and Nominating Committee, the appropriate Committee and the CEO and then reported to the full Board by the appropriate Committee Chair. As part of the annual Committee assessment, the Board reviews and considers any proposed changes to the Committee Charters.

As with the Board assessment, the focus is on continuous improvement. Chairs of each Committee are expected to follow up on matters raised in the Committee assessments and take action as appropriate.

Each of the Audit, Compensation, Corporate Governance and Nominating, and Safety, Health and Environment Committees participate in this process.

Annual Assessment of the Board Chair by Members of the Board

Each year members of the Board are asked to assess and comment on the discharge, by the Board Chair, of his duties. Individual responses are received by the Chair of the Corporate Governance and Nominating Committee. The Chair of the Corporate Governance and Nominating Committee solicits specific input from the CEO from his perspective as CEO regarding the effectiveness of the Chair. A summary report is then provided to the Board Chair and the full Board, with no attribution of comments to individual Directors without their consent. As part of the annual Board Chair assessment, the Board reviews and considers any proposed changes to the Board Chair position description.

Annual Assessment of Each Committee Chair by Members of Each Committee

Each year, members of each Committee are asked to assess and comment on the discharge, by each Committee Chair, of his or her duties. Responses are received by the Corporate Secretary and the Committee Chair under review. A summary report is then provided to the appropriate Committee and to the full Board, with no attribution of comments to individual Directors without their consent. As part of the annual Committee Chair assessment, the Board reviews and considers any proposed changes to the Committee Chair position descriptions.

Annual Assessment of Individual Directors

Each year during the period from May to September, the Board Chair (and, if in the opinion of the Board Chair it is desirable, the Chair of the Corporate Governance and Nominating Committee) formally meets with each Director individually to engage in full and frank discussion of any and all issues which either wish to raise, with a focus on maximizing the contribution of each Director to the Board and Committees. In completing the review, the Board Chair employs a checklist, discussing both short-term and long-term goals, and establishes action items to allow each individual Director to enhance both his or her personal contributions and overall Board effectiveness. The Board Chair will share peer feedback with each Director as appropriate and reviews progress and action taken. Each Director, during such formal review, should be prepared to discuss with the Board Chair how the Directors, both individually and collectively, can operate more effectively. The Board Chair discusses the results of the individual evaluations with the Chair of the Corporate Governance and Nominating Committee and reports summary findings to both that Committee and to the full Board at the November meeting.

Management Board Survey

As part of the Board’s continuing efforts to improve its performance, the Board surveys those members of senior management who regularly interact with the Board and/or its Committees to solicit their input and perspective on the operation of the Board and how the Board might improve its effectiveness. The survey includes subjective management responses to questions and one on one interviews between management respondents and the Chair of the Corporate Governance and Nominating Committee. The results of the management surveys and the one on one interviews are reported by the Chair of the Corporate Governance and Nominating Committee to the full Board and the Corporate Secretary.

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Attendance of Directors

The following tables provide a summary of attendance at Board and Committee meetings held during fiscal 2008.

Type of Meeting Held	Number of Meetings
Board of Directors		9
Audit Committee (“AUD”)		9
Compensation Committee (“COMP”)		6
Corporate Governance and Nominating Committee (“GOV”)		5
Safety, Health and Environment Committee (“SHE”)		5

						Total Board/Committee
Director	Board meetings attended			Committee meetings attended		meetings attended
Frederick J. Blesi(1)	4 of 4	100	%	5 of 5 AUD	100%	12 of 12	100%
				3 of 3 GOV	100%
William J. Doyle(2)	9 of 9	100	%			9 of 9	100%
John W. Estey	9 of 9	100	%	6 of 6 COMP (Chair)	100%	20 of 20	100%
				5 of 5 SHE	100%
Wade Fetzer III	9 of 9	100	%	6 of 6 COMP	100%	20 of 20	100%
				5 of 5 GOV	100%
C. Steven Hoffman(3)	5 of 5	100	%	4 of 4 AUD	100%	11 of 11	100%
				2 of 2 SHE	100%
Dallas J. Howe(4)	9 of 9 (Chair)	100	%	5 of 5 GOV	100%	14 of 14	100%
Alice D. Laberge(5)	9 of 9	100	%	9 of 9 AUD (Chair)	100%	23 of 23	100%
				2 of 2 GOV	100%
				3 of 3 SHE	100%
Keith G. Martell(6)	9 of 9	100	%	9 of 9 AUD	100%	21 of 21	100%
				3 of 3 COMP	100%
Jeffrey J. McCaig	9 of 9	100	%	9 of 9 AUD	100%	24 of 24	100%
				6 of 6 COMP	100%
Mary Mogford	8 of 9	89	%	9 of 9 AUD	100%	22 of 23	96%
				5 of 5 GOV (Chair)	100%
Paul J. Schoenhals	7 of 9	78	%	5 of 6 COMP	83%	17 of 20	85%
				5 of 5 SHE (Chair)	100%
E. Robert Stromberg, Q.C.(7)	9 of 9	100	%	1 of 1 GOV	100%	15 of 15	100%
				5 of 5 SHE	100%
Elena Viyella de Paliza	9 of 9	100	%	5 of 5 SHE	100%	14 of 14	100%
Aggregate Attendance	105 of 108	98	%	45 of 45 AUD	100%	222 of 226	98%
				21 of 21 GOV	100%
				26 of 27 COMP	96%
				25 of 25 SHE	100%

(1)	Served as a member of the Board and a member of the Audit Committee and Corporate Governance Committee until his retirement from the Board on May 8, 2008.
(2)	At the invitation of applicable committees, Mr. Doyle attended all or a portion of many of the committee meetings held in 2008.
(3)	Appointed a member of the Board and a member of the Audit Committee and Safety, Health & Environment Committee on May 8, 2008.
(4)	In addition to the committees of which he is a member, Mr. Howe, as Board Chair, regularly attends other committee meetings as well. Mr. Howe attended all of the 19 committee meetings held in 2008.
(5)	Served as a member of the Safety, Health and Environment Committee until May 8, 2008.
(6)	Appointed a member of the Compensation Committee on May 8, 2008.
(7)	Served as a member of the Corporate Governance Committee until February, 2008.

Pursuant to the “PotashCorp Governance Principles”, the Board meets in executive session, with only independent directors present during each regularly scheduled meeting of the Board. The presiding officer at the executive session is Dallas J. Howe, the Board Chair, or, in his absence, a director selected by majority vote of those present. Sessions are of no fixed duration and participant directors are encouraged to raise and discuss any issues of concern.

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Director Compensation

2008 Director Compensation Package

We establish director compensation based on the advice of independent consultants, with a view to establishing compensation at the median of the applicable Comparator Group (see “Compensation Discussion and Analysis — Compensation Principles”). Only such directors that are not also officers or employees of the company, that is all directors other than Mr. Doyle (the “outside directors”), are compensated for service on the Board.

Cash Compensation

Each outside director was paid a retainer at an annual rate of $135,000 and a travel fee of $500 per day where travel was required on a day or days on which a meeting did not occur. Outside directors received an additional $10,000 per year if they served as a chair of a Board Committee ($15,000 in the case of the Compensation Committee Chair and the Audit Committee Chair). All Audit Committee members received an additional $5,000 per year, with the exception of the Audit Committee Chair. Each outside director who was a member of a Board Committee received a per diem fee of $1,500 for meetings he or she attended, provided such meetings were not held the same day as a Board meeting. Outside directors were also reimbursed for expenses incurred in discharging their responsibilities. Mr. Howe, as Board Chair, received an annual retainer of $320,000, but did not receive per diem or travel fees.

As described below, each outside director can defer, in the form of Deferred Share Units, up to 100% of the annual retainer fees payable to such director in respect of serving as a director, which would otherwise be payable in cash.

Stock-Based Compensation

Effective November 20, 2001, we adopted the Plan, which allows non-employee directors to defer, in the form of Deferred Share Units up to 100% of the annual retainer payable to such director in respect of serving as a director that would otherwise be payable in cash. Each Deferred Share Unit has an initial value equal to the market value of a Share at the time of deferral. The Plan is intended to enhance our ability to attract and retain highly qualified individuals to serve as directors and promote a greater alignment of interests between such directors and our shareholders. The Plan also provides for discretionary grants of Deferred Share Units, which the Board discontinued on January 24, 2007 in connection with an increase to the annual retainer.

Each Deferred Share Unit is credited to the account of an individual director and fully vests upon an award, but is distributed only when the director has ceased to be a member of the Board or the board of directors of any subsidiary and the director is neither our employee nor an employee of any of our subsidiaries. At such time, the director will receive a cash payment equal to the market value of a number of Shares purchased on the open market equal to the number of Deferred Share Units recorded in the director’s account (reduced by the amount of applicable withholding taxes). While the Compensation Committee, with Board approval, has the discretion to distribute Shares in lieu of cash, the Committee and Board have determined that all distributions pursuant to the Plan will be made in cash. Deferred Share Units earn dividends in the form of additional Deferred Share Units at the same rate as dividends are paid on Shares.

The number of Deferred Share Units credited to the director’s account with respect to director retainer fees that the director elects to allocate to the Plan is determined as of the last trading day of each calendar quarter and is equal to the quotient obtained by dividing (a) the aggregate amount of retainer fees allocated to the Plan for the relevant calendar quarter by (b) the market value of a Share on such last trading day (determined on the basis of the closing price on the Toronto Stock Exchange (“TSX”) for participants resident in Canada and on the basis of the closing price on the NYSE for all other participants).

In 2008, the following directors elected to receive 2008 director retainer fees in the form of Deferred Share Units: Mr. Blesi, 100% of director retainer; Mr. Hoffman, 85% of director retainer; Ms. Laberge, 65% of director retainer; Mr. Martell, 100% of director retainer; Mr. McCaig, 100% of director retainer; and Ms. Mogford, 100% of director retainer.

The directors were not granted any stock options in 2008 and have not been granted any stock options since the Board’s decision in 2003 to discontinue stock option grants to outside directors.

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Stock Ownership Guidelines

The Board believes that the economic interests of directors should be aligned with those of shareholders. To achieve this, all directors are required to hold Shares and/or Deferred Share Units with a value at least five times their annual retainer. One-half of the ownership threshold is required to be achieved within 21/2 years, and full compliance is required within five years of joining the Board. The Board may make exceptions to this standard where, as a result of the unique financial circumstances of a director, compliance would result in an unacceptable hardship. As of February 20, 2009, all of our directors were in compliance with the requirements described above.

Other Benefits

Directors participate in our Group Life insurance coverage (Cdn$50,000), Accidental Death and Dismemberment coverage (Cdn$100,000), Business Travel Accidental coverage (Cdn$250,000) and Supplemental Business Travel Medical coverage ($250,000) per calendar year.

The following table sets forth compensation earned by our directors during fiscal 2008 as prescribed in accordance with Item 402(k) of Regulation S-K. The amounts set forth for each director in the “Stock Awards” and “Total” columns include the appreciation or decline in value, as applicable, of Deferred Share Units received prior to, and during, 2008 pursuant to the Plan. The table in footnote (2) below sets forth further details, including the amount of each director’s 2008 annual retainer and Committee meeting and other fees received in the form of cash and Deferred Share Units.

2008 Director Compensation⁽¹⁾

(see explanatory notes)

									Change in
									Pension
	Fees Earned								Value and
	or						Non-Equity		Nonqualified
	Paid in						Incentive Plan		Deferred		All Other
	Cash		Stock Awards		Option Awards		Compensation		Compensation		Compensation		Total
Name	($)(2)		($)(2)(3)(4)		($)(5)		($)		Earnings		($)(6)		($)
(a)	(b)		(c)		(d)		(e)		(f)		(g)		(h)
Frederick J. Blesi*		10,500		1,234,677		—		—		—		62		1,245,239
William J. Doyle(7)		—		—		—		—		—		—		—
John W. Estey		161,000		(1,560,537)		—		—		—		2,482		(1,397,055)
Wade Fetzer III		145,500		(750,438)		—		—		—		2,510		(602,428)
C. Steven Hoffman**		22,616		51,931		—		—		—		2,401		76,948
Dallas J. Howe		320,000		(2,571,041)		—		—		—		3,633		(2,247,408)
Alice D. Laberge		116,000		(1,060,635)		—		—		—		4,461		(940,174)
Keith G. Martell		15,500		21,339		—		—		—		6,214		43,053
Jeffrey J. McCaig		16,000		(1,645,322)		—		—		—		2,762		(1,626,560)
Mary Mogford		19,000		(1,556,158)		—		—		—		4,628		(1,532,530)
Paul J. Schoenhals		155,500		(1,304,493)		—		—		—		2,850		(1,146,143)
E. Robert Stromberg, Q.C.		146,000		(1,180,649)		—		—		—		4,852		(1,029,797)
Elena Viyella de Paliza		149,000		(1,037,300)		—		—		—		3,341		(884,959)

*	Retired from the Board on May 8, 2008.
**	Elected to the Board on May 8, 2008.

(1)	Those amounts that were paid in Canadian dollars have been converted to United States dollars using the average exchange rate for the month prior to the date of payment.
(2)	The following table sets forth each director’s annual retainer, meeting and other fees for fiscal year 2008 that were received in the form of cash or deferred to Deferred Share Units.

MANAGEMENT PROXY CIRCULAR ï Board of Directors Page  18

Remuneration of Directors

For the Fiscal Year Ended December 31, 2008

					Committee
					Meeting and				Percentage of
	Annual Retainer				Other Fees				Total
									Remuneration
			Deferred				Total		in Deferred
	Cash		Share Units		Cash		Remuneration		Share Units
Name	($)		($)		($)		($)		(%)
Frederick J. Blesi		—		49,231		10,500		59,731		82.42
William J. Doyle		—		—		—		—		—
John W. Estey		150,000		—		11,000		161,000		—
Wade Fetzer III		135,000		—		10,500		145,500		—
C. Steven Hoffman		13,615		77,154		9,000		99,769		77.33
Dallas J. Howe		320,000		—		—		320,000		—
Alice D. Laberge		97,500		52,500		18,500		168,500		31.16
Keith G. Martell		—		140,000		15,500		155,500		90.03
Jeffrey J. McCaig		—		140,000		16,000		156,000		88.76
Mary Mogford		—		150,000		19,000		169,000		88.76
Paul J. Schoenhals		145,000		—		10,500		155,500		—
E. Robert Stromberg, Q.C.		135,000		—		11,000		146,000		—
Elena Viyella de Paliza		135,000		—		14,000		149,000		—
Total		1,131,115		608,885		145,500		1,885,500		32.29

⁽³⁾  Reports the amounts recognized for fiscal year 2008 US GAAP financial statement reporting purposes in accordance with FAS 123R for Deferred Share Units received pursuant to the Plan. Deferred Share Units are settled in cash upon a director’s retirement and, therefore, are considered a liability award under FAS 123R. As such, we recognize amounts attributable to (1) the annual increase or decrease in the value of outstanding Deferred Share Units received prior to 2008, which value is based on the annual increase or decrease in the market price of our Shares as measured on the last trading day of each year, and (2) the value of Deferred Share Units received in 2008, which value is based on the market price of our Shares on the last trading day of the year.

The amounts set forth in column (c) above reflect amounts recognized for the 2008 decline in the value of outstanding Deferred Share Units received prior to 2008, based on the 2008 decline in the price of our Shares on the NYSE from $143.96 to $73.22. The amounts set forth in column (c) also reflect amounts recognized for the value of Deferred Share Units received in 2008, which value is based on $73.22, the price of our Shares on the NYSE on the last trading day of 2008. Each outside director was permitted to defer, in the form of Deferred Share Units, up to 100% of the annual retainer fees payable to such director in respect of serving as a director, which we would otherwise have paid in cash. See “Remuneration of Directors” in footnote (2) above. The number of Deferred Share Units that each director received, in lieu of cash, was determined by the closing price of our Shares on the last trading day of the quarter in which such fees were earned (using the closing price on the TSX for residents of Canada and the closing price on the NYSE for all other participants) (Cdn$159.50 and $155.21 for the quarter ended March 31, 2008, Cdn$236.57 and $228.57 for the quarter ended June 30, 2008, Cdn$137.97 and $132.01 for the quarter ended September 30, 2008 and Cdn$89.54 and $73.22 for the quarter ended December 31, 2008).

The following table sets forth the amounts recognized for fiscal year 2008 US GAAP financial statement reporting purposes that are attributable to (a) the decline in the value of Deferred Share Units received prior to, and during, 2008, (b) the value of Deferred Share Units received in 2008 for the deferral of the annual retainer and (c) the value of dividends received in 2008 in the form of Deferred Share Units.

				C.							E. Robert	Elena
	Frederick J.	John W	Wade	Steven	Dallas J.	Alice D.	Keith G.	Jeffrey J	Mary	Paul J.	Stromberg,	Viyella
	Blesi(a)	Estey	Fetzer III	Hoffman	Howe	Laberge	Martell	McCaig	Mogford	Schoenhals	Q.C.	de Paliza
	($)	($)	($)	($)	($)	($)	($)	($)	($)	($)	($)	($)
Appreciation (Decline in Value)	1,180,830	(1,569,397)	(754,699)	25,243	(2,585,638)	(1,118,776)	(119,124)	(1,795,247)	(1,715,619)	(1,311,899)	(1,187,352)	(1,043,189)
Deferred Fees	49,231	—	—	77,136	—	52,500	140,000	140,000	150,000	—	—	—
Dividends	4,616	8,860	4,261	38	14,597	6,241	463	9,925	9,461	7,406	6,703	5,889
Total	1,234,677	(1,560,537)	(750,438)	51,931	(2,571,041)	(1,060,635)	21,339	(1,645,322)	(1,556,158)	(1,304,493)	(1,180,649)	(1,037,300)

      ^(a)  Mr. Blesi, who served since 2001, retired from the Board on May 8, 2008. Mr. Blesi received the payout value of his 23,274 Deferred Share Units in cash on August 6, 2008 in accordance with the Plan. Pursuant to the Plan, the payout value of each of Mr. Blesi’s Deferred Share Units was equal to $195.06, which represents the average closing price of our Shares on the NYSE for the ten trading days prior to August 7, 2008, the tenth trading day following the release of our quarterly results immediately following Mr. Blesi’s retirement.

⁽⁴⁾  As of December 31, 2008, the total number of all Deferred Share Units held by each outside director is as follows: Mr. Blesi, 0; Mr. Estey, 22,196; Mr. Fetzer, 10,674; Mr. Hoffman, 709; Mr. Howe, 36,568; Ms. Laberge, 15,936; Mr. Martell, 1,966; Mr. McCaig, 25,671; Ms. Mogford, 24,565; Mr. Schoenhals, 18,554; Mr. Stromberg, 16,792; and Ms. Viyella de Paliza, 14,754.

MANAGEMENT PROXY CIRCULAR ï Board of Directors Page  19

The grant date fair value of each grant of Deferred Share Units received by each director in 2008 is as follows:

	February 11,	March 31,	May 8,	June 30,	August 8,	September 30,	November 10,	December 31,
	2008	2008	2008	2008	2008	2008	2008	2008
Name	(Dividend)	(Deferred Fees)	(Dividend)	(Deferred Fees)	(Dividend)	(Deferred Fees)	(Dividend)	(Deferred Fees)
Frederick J. Blesi	$2,296	$35,000	$2,320	$14,231	—	—	—	—
	(15.93 units)	(225.50 units)	(11.66 units)	(62.26 units)	—	—	—	—
John W. Estey	$2,213	—	$2,214	—	$2,216	—	$2,217	—
	(15.36 units)	—	(11.13 units)	—	(12.92 units)	—	(27.16 units)	—
Wade Fetzer III	$1,064	—	$1,065	—	$1,065	—	$1,066	—
	(7.39 units)	—	(5.35 units)	—	(6.21 units)	—	(13.06 units)	—
C. Steven Hoffman	—	—	—	$17,636	$7.72	$29,750	$30.26	$29,750
	—	—	—	(77.15 units)	(0.05 units)	(225.36 units)	(0.37 units)	(406.31 units)
Dallas J. Howe	$3,646	—	$3,648	—	$3,650	—	$3,652	—
	(26.09 units)	—	(18.33 units)	—	(20.05 units)	—	(44.91 units)	—
Alice D. Laberge	$1,547	$13,125	$1,557	$13,125	$1,563	$13,125	$1,574	$13,125
	(11.07 units)	(82.21 units)	(7.82 units)	(55.45 units)	(8.59 units)	(100.30 units)	(19.35 units)	(178.57 units)
Keith G. Martell	$85	$35,000	$107	$35,000	$122	$35,000	$178	$35,000
	(0.61 units)	(219.24 units)	(0.54 units)	(147.86 units)	(0.67 units)	(267.48 units)	(1.83 units)	(476.18 units)
Jeffrey J. McCaig	$2,449	$35,000	$2,472	$35,000	$2,488	$35,000	$2,516	$35,000
	(17.52 units)	(219.24 units)	(12.42 units)	(147.86 units)	(13.67 units)	(267.48 units)	(30.94 units)	(476.18 units)
Mary Mogford	$2,330	$37,500	$2,356	$37,500	$2,373	$37,500	$2,877	$37,500
	(16.68 units)	(234.90 units)	(11.83 units)	(158.42 units)	(13.03 units)	(286.58 units)	(29.54 units)	(510.19 units)
Paul J. Schoenhals	$1,850	—	$1,851	—	$1,852	—	$1,853	—
	(13.24 units)	—	(9.30 units)	—	(10.17 units)	—	(22.78 units)	—
E. Robert Stromberg, Q.C.	$1,674	—	$1,705	—	$1,685	—	$2,009	—
	(11.98 units)	—	(8.42 units)	—	(9.21 units)	—	(20.62 units)	—
Elena Viyella de Paliza	$1,471	—	$1,472	—	$1,473	—	$1,474	—
	(10.21 units)	—	(7.40 units)	—	(8.59 units)	—	(18.05 units)	—

⁽⁵⁾  As of December 31, 2008, the following directors held outstanding options: Mr. Blesi, 15,500; Mr. Fetzer, 9,000; Mr. Howe, 61,200; Mr. McCaig, 78,000; Ms. Mogford, 18,000; and Mr. Stromberg, 39,600. The following table provides information relating to outstanding stock options held by each of our outside directors as of December 31, 2008 and stock option exercises by each of our outside directors during 2008.

							Number of Shares		Value Realized
	Number of Securities						Acquired on		Upon Exercise
	Underlying						Exercise of		of Stock
	Unexercised Options		Option		Option		Stock Options		Options During
Name	Exercisable(a)		Exercise Price		Expiration Date		During 2008(b)		2008(c)
Frederick J. Blesi		6,500	$	10.50		11/20/2011		—		—
		9,000	$	11.00		11/20/2012
Wade Fetzer III		9,000	$	11.00		11/20/2012		—		—
		21,600	Cdn$	10.70		11/09/2009
Dallas J. Howe		21,600	Cdn$	15.88		11/21/2010		18,000		3,591,735
		9,000	Cdn$	16.65		11/20/2011
		9,000	Cdn$	17.44		11/20/2012
		60,000	Cdn$	16.36		1/23/2011
Jeffrey J. McCaig		9,000	Cdn$	16.65		11/20/2011		—		—
		9,000	Cdn$	17.44		11/20/2012
Mary Mogford		9,000	Cdn$	16.65		11/20/2011		—		—
		9,000	Cdn$	17.44		11/20/2012
		21,600	Cdn$	15.88		11/21/2010
E. Robert Stromberg, Q.C.		9,000	Cdn$	16.65		11/20/2011		—		—
		9,000	Cdn$	17.44		11/20/2012

(a)	As of December 31, 2008, the aggregate value of unexercised options that are currently exercisable held by each outside director was as follows: Mr. Blesi, $967,660; Mr. Fetzer, $559,980; Mr. Howe, $4,309,727; Mr. McCaig, $5,337,560; Ms. Mogford, $1,222,856; and Mr. Stromberg, $2,713,866. The aggregate value of unexercised options held by Mr. Howe, Mr. McCaig, Ms. Mogford and Mr. Stromberg was converted to U.S. dollars using the average Canadian exchange rate of 1.0671 for fiscal year 2008.
(b)	The number of Shares retained by each director following exercise of the stock options is as follows: Mr. Howe, 18,000.
(c)	The value realized upon exercise was converted to U.S. dollars using the average Canadian exchange rate of 1.0671 for fiscal year 2008.

(6)	Reports the cost of tax gross-ups for taxable benefits and life insurance premiums paid for the benefit of each director.
(7)	As CEO, any compensation Mr. Doyle receives is disclosed in the Summary Compensation Table for Named Executive Officers. See “Executive Compensation — Summary Compensation Table”.

MANAGEMENT PROXY CIRCULAR ï Board of Directors Page  20

“At Risk” Investment and Year Over Year Changes

The following table provides ownership information as at February 20, 2009 and February 20, 2008, respectively.

												Value of
												Common
										Total At Risk		Shares/DSUs					Equity at		Shares
								Common		Value of		Needed to					Risk		Deemed to
								Shares		Common		Meet 2009					Multiple		be
				Common				and		Shares and		Ownership		Ownership			of 2009		Beneficially
	Director			Shares		DSUs		DSUs		DSUs		Guideline		Guideline			Annual		Owned
	Since		Year	(#)		(#)(1)		(#)		($)(2)		($)		Compliance(3)			Retainer		(#)(4)(5)
Christopher M. Burley			2009		10,000		n/a		10,000		839,600		675,000		Yes			6.5		10,000
			2008		n/a		n/a		n/a		n/a									n/a
			Change		n/a		n/a		n/a											n/a
William J. Doyle(6)		1989	2009		481,413		—		481,413		40,419,507		n/a		n/a			n/a		3,103,731
			2008		295,613		—		295,613		46,115,698									3,654,149
			Change		+185,800		n/a		+185,800											-550,419
John W. Estey		2003	2009		7,000		22,221		29,221		2,453,387		750,000		Yes			17.1		7,000
			2008		7,000		22,144		29,144		4,546,464									7,000
			Change		—		+77		+77											—
Wade Fetzer III		2002	2009		—		10,686		10,686		897,170		675,000		Yes			7.0		9,000
			2008		30,000		10,649		40,649		6,341,244									39,000
			Change		-30,000		+37		-29,963											-30,000
Charles S. Hoffman		2008	2009		2,200		710		2,910		244,328		700,000		Yes			1.8		2,200
			2008		—		—		—		—				(to be fully met					—
			Change		+2,200		+710		+2,910						by May 8, 2013	)				+2,200
Dallas J. Howe		1991	2009		69,615		36,610		106,225		8,918,611		1,600,000		Yes			29.2		130,815
			2008		51,615		36,484		88,099		13,743,444									130,815
			Change		+18,000		+126		+18,126											—
Alice D. Laberge		2003	2009		6,000		15,955		21,955		1,843,317		750,000		Yes			12.9		6,000
			2008		6,000		15,484		21,484		3,351,504									6,000
			Change		—		+471		+471											—
Keith G. Martell		2007	2009		600		1,968		2,568		215,649		700,000		Yes			1.6		600
			2008		—		852		852		132,912				(to be fully met					—
			Change		+600		+1,116		+1,716						by May 3, 2012	)				+600
Jeffrey M. McCaig		2001	2009		6,000		25,700		31,700		2,661,563		700,000		Yes			19.9		84,000
			2008		6,000		24,504		30,504		4,758,624									84,000
			Change		—		+1,196		+1,196											—
Mary Mogford		2001	2009		12,791		24,593		37,384		3,138,766		750,000		Yes			21.9		30,791
			2008		12,660		23,320		35,980		5,612,880									30,660
			Change		+131		+1,273		+1,404											+131
Paul J. Schoenhals		1992	2009		4,885		18,575		23,460		1,969,695		725,000		Yes			14.2		4,885
			2008		4,885		18,511		23,396		3,649,776									4,885
			Change		—		+64		+64											—
E. Robert Stromberg		1991	2009		33,812		16,811		50,623		4,250,546		675,000		Yes			33.0		73,412
			2008		33,790		16,754		50,544		7,884,933									73,390
			Change		+21		+57		+79											+21
Elena Viyella de Paliza		2003	2009		10,000		14,770		24,770		2,079,722		675,000		Yes			16.1		10,000
			2008		9,000		14,720		23,720		3,700,320									9,000
			Change		+1,000		+50		+1,050											+1,000

(1)	Deferred Share Units do not carry any voting rights. The number of Deferred Share Units held by each director has been rounded down to the nearest whole number.
(2)	Based on the closing price per Share on the NYSE of $156.00 on February 20, 2008 and $83.96 on February 20, 2009.
(3)	By the time a director has served on the Board for 5 years, he or she must own Shares and/or Deferred Share Units with a value at least five times the annual retainer paid to directors. One-half of the ownership threshold is required to be achieved within 21/2 years.
(4)	For 2009, the number of Shares indicated above as deemed to be beneficially owned by the nominated directors includes Shares purchasable by such directors within 60 days of February 20, 2009 through the exercise of options granted by the Corporation, as follows: William J. Doyle 2,622,536 Shares; Wade Fetzer III 9,000 Shares; Dallas J. Howe 61,200 Shares; Jeffrey J. McCaig 78,000 Shares; Mary Mogford 18,000 Shares; and E. Robert Stromberg 39,600 Shares. No stock options have been granted to the Corporation’s non-employee directors since November 2002.

For 2008, the number of Shares indicated above as deemed to be beneficially owned by the nominated directors includes Shares purchasable by such directors within 60 days of February 20, 2008 through the exercise of options granted by the Corporation, as follows: William J. Doyle 2,572,536 Shares; Wade Fetzer III 9,000 Shares; Dallas J. Howe 79,200 Shares; Jeffrey J. McCaig 78,000 Shares; Mary Mogford 18,000 Shares; and E. Robert Stromberg 39,600 Shares.

(5)	No Shares beneficially owned by any of the directors are pledged as security.
(6)	Includes 45,997 shares held in the William J. Doyle 2007 Family Descendents Trust, 19,898 shares held in the William & Kathy Doyle Foundation, 216,381 shares held in the WJ Doyle Revocable Trust and 199,137 shares held in the Doyle Family LLC.

MANAGEMENT PROXY CIRCULAR ï Board of Directors Page  21

Appointment of Auditors and
Report of Audit Committee

•  All fees paid to the independent auditors for 2008 were approved in accordance with the Corporation’s pre-approval policy.

•  In 2008 the committee was active in policy development and refinement, including reviews and modifications to our Risk Management Policy and Treasury policies.

Appointment of Auditors

The Board, on recommendation from the Audit Committee, recommends the re-appointment of Deloitte & Touche LLP as auditors.

Pre-Approval Policy for External Auditor Services

The Audit Committee monitors and reviews the independence of its auditors on an on-going basis. In addition, the Audit Committee has adopted processes for the pre-approval of engagements for services of its external auditors. See page 23 for details.

Members of the Audit Committee for 2008

Alice D. Laberge (Chair)
Frederick J. Blesi (until his retirement May 8, 2008)
C. Steven Hoffman (from his appointment May 8, 2008)
Keith G. Martell
Jeffrey J. McCaig
Mary Mogford

Role of the Audit Committee

The role of the Audit Committee is to assist the Board in fulfilling its oversight responsibilities for (i) the integrity of the Corporation’s financial statements, (ii) the Corporation’s compliance with legal and regulatory requirements, (iii) the qualification and independence of the Corporation’s independent auditors, and (iv) the performance of the Corporation’s independent auditors.

See page 26 for more details.

Independent Audit Committee

The Board has determined that each of the directors who served as members of the Audit Committee during the year ended December 31, 2008, is independent according to the Board’s independence standards as set out in the “PotashCorp Governance Principles” (which is available on the Corporation’s website, www.potashcorp.com), National Instrument 52-110 “Audit Committees” (“NI 52-110”), applicable rules of the SEC and the corporate governance rules of the NYSE. See also “Nominees for Election to the Board of Directors — Director Independence and Other Relationships”.

Financial Expertise and Financially Literate

The Board has determined that Ms. Laberge and Mr. Martell each qualify as an “audit committee financial expert” under the rules of the SEC and thereby have the requisite accounting and/or related financial management expertise required under the rules of the NYSE. In addition, the Board has determined that each member of the Audit Committee is “financially literate” within the meaning of and required by NI 52-110.

See page 25 for a brief description of the education and experience for each current member of the Audit Committee that is relevant to the performance of his or her responsibilities as a member of the Audit Committee.

MANAGEMENT PROXY CIRCULAR ï Appointment of Auditors and Report of Audit Committee Page  22

Appointment of Auditors

Deloitte & Touche LLP (or its predecessors) have been the Corporation’s auditors since the Corporation’s initial public offering in 1989. The Board, on recommendation from the Audit Committee, recommends the re-appointment of Deloitte & Touche LLP as auditors.

Proxies solicited hereby will be voted to reappoint the firm of Deloitte & Touche LLP, the present auditors, as auditors of the Corporation to hold office until the next annual meeting of shareholders, unless the shareholder signing such proxy specifies otherwise. The affirmative vote of a majority of Shares voted on such matter is required to reappoint the firm of Deloitte & Touche LLP as auditors of the Corporation.

A representative of Deloitte & Touche LLP is expected to attend the Meeting. At that time the representative will have the opportunity to make a statement if he or she desires and will be available to respond to appropriate questions.

Auditor’s Fees

For the years ended December 31, 2008 and December 31, 2007, Deloitte & Touche LLP received the following fees:

	Year Ended December 31,
	2008		2007
Audit Fees	$	2,501,000	$	2,263,000
Audit Related Fees		224,000		314,000
Tax Fees		26,000		33,000
All Other Fees		11,000		0

Audit Fees

Deloitte & Touche LLP billed the Corporation $2,501,000 and $2,263,000 for 2008 and 2007, respectively, for the following audit services (i) audit of the annual consolidated financial statements of the Corporation for the fiscal years ended December 31, 2008 and 2007; (ii) review of the interim financial statements of the Corporation included in quarterly reports on Form 10-Q for the periods ended March 31, June 30 and September 30, 2008 and 2007; (iii) audits of individual statutory financial statements; and (iv) the provision of consent letters.

Audit-Related Fees

Deloitte & Touche LLP billed the Corporation $224,000 and $314,000 for 2008 and 2007, respectively, for the following services (i) accounting consultations regarding financial accounting and reporting standards; (ii) employee benefit plan audits; and (iii) due diligence procedures.

Tax Fees

Deloitte & Touche LLP billed the Corporation $26,000 and $33,000 for 2008 and 2007, respectively, for the following services (i) tax compliance; (ii) tax planning; and (iii) tax advice, including minimizing tax exposure or liability.

All Other Fees

Deloitte & Touche LLP billed the Corporation $11,000 and $0 for 2008 and 2007, respectively, for training services provided to the Corporation’s internal audit personnel.

Pre-Approval Policy for External Auditor Services

The Audit Committee monitors and reviews the independence of its auditors on an on-going basis. In addition, the Audit Committee has adopted processes for the pre-approval of engagements for services of its external auditors.

MANAGEMENT PROXY CIRCULAR ï Appointment of Auditors and Report of Audit Committee Page  23

The Audit Committee’s policy requires pre-approval of all audit and non-audit services provided by the external auditor. The policy identifies three categories of external auditor services and the pre-approval procedures applicable to each category, as follows:

(1)	Audit and audit-related services — these are identified in the annual Audit Service Plan presented by the external auditor and require annual approval. The Audit Committee monitors the audit services engagement at least quarterly.
(2)	Pre-approved list of non-audit services — non-audit services which are reasonably likely to occur have been identified and receive general pre-approval of the Audit Committee, and as such do not require specific pre-approvals. The term of any general pre-approval is 12 months from approval unless otherwise specified. The Audit Committee annually reviews and pre-approves the services on this list.
(3)	Other proposed services — all proposed services not categorized above are brought forward on a case-by-case basis and specifically pre-approved by the Chair of the Audit Committee, to whom pre-approval authority has been delegated.

All fees paid to the independent auditors for 2008 were approved in accordance with the pre-approval policy.

MANAGEMENT PROXY CIRCULAR ï Appointment of Auditors and Report of Audit Committee Page  24

A. Laberge, Chair	S. Hoffman	K. Martell	J. McCaig	M. Mogford

Report of the Audit Committee

The Corporation has a standing Audit Committee. The Board has determined that each of the following directors, who served as members of the Audit Committee during the year ended December 31, 2008, is independent according to the Board’s independence standards as set out in the “PotashCorp Governance Principles” (which is available on the Corporation’s website, www.potashcorp.com), National Instrument 52-110 “Audit Committees” (“NI 52-110”), applicable rules of the SEC and the corporate governance rules of the NYSE. See also “Nominees for Election to the Board of Directors — Director Independence and Other Relationships”.

Alice D. Laberge (Chair)
Frederick J. Blesi (until his retirement May 8, 2008)
C. Steven Hoffman (from his appointment May 8, 2008)
Keith G. Martell
Jeffrey J. McCaig
Mary Mogford

The Board has determined that Ms. Laberge and Mr. Martell each qualify as an “audit committee financial expert” under the rules of the SEC and thereby have the requisite accounting and/or related financial management expertise required under the rules of the NYSE. In addition, the Board has determined that each member of the Audit Committee is “financially literate” within the meaning of and required by NI 52-110.

The following is a brief description of the education and experience for each current member of the Audit Committee that is relevant to the performance of his or her responsibilities as a member of the Audit Committee.

Ms. Laberge acquired significant financial experience and exposure to accounting and financial issues as Chief Executive Officer and Chief Financial Officer of Fincentric Corporation, Chief Financial Officer with MacMillan Bloedel Limited and a director of various public companies. In her positions with previous companies she was actively involved in assessing the performance of the companies’ auditors. Ms. Laberge completed her Masters of Business Administration at the University of British Columbia.

As a senior executive and officer of IMC Global Inc. for 10 years, Mr. Hoffman acquired financial experience through supervision of the principal accounting officers of the Sales and Marketing departments and evaluation of the financial statements of IMC Global. He also served on the Audit Committee of Canpotex Limited, the international marketing company for Saskatchewan potash producers. Mr. Hoffman received his Bachelor of Business Administration Degree at Stephen F. Austin State University and completed the Financial Literacy Program at the University of Toronto in 2008.

Mr. Martell has acquired significant financial experience as Executive Chairman of First Nations Bank of Canada, as a director of the Public Sector Pension Investment Board of Canada (where he is the Chair of the Audit Committee), as a director of The North West Company Inc. and as a trustee of The North West Company Fund. Mr. Martell is a Chartered Accountant and has ten years of public practice with KPMG. He received his Bachelor of Commerce degree from the University of Saskatchewan.

Mr. McCaig has gained experience relevant to the performance of his responsibilities as an Audit Committee member as Chairman and Chief Executive Officer of Trimac Holdings. Mr. McCaig also has a Masters of Science in Management from the Sloan Program, Stanford University and a Bachelor of Economics degree from Harvard College in Cambridge, Massachusetts.

Ms. Mogford is a former Ontario Deputy Minister of Finance and Deputy Minister of Natural Resources. She currently acts or has acted as a member of the audit committee for several publicly traded companies. Ms. Mogford has eighteen years of experience acting as a member of an audit committee.

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The role of the Audit Committee is to assist the Board in fulfilling its oversight responsibilities for (i) the integrity of the Corporation’s financial statements, (ii) the Corporation’s compliance with legal and regulatory requirements, (iii) the qualification and independence of the Corporation’s independent auditors, and (iv) the performance of the Corporation’s independent auditors. In accordance with the Audit Committee Charter adopted by the Board, the Audit Committee has responsibility for the oversight of the Corporation’s financial reporting and audit processes and related internal controls on behalf of the Board. During the fiscal year ended December 31, 2008, the Audit Committee met 9 times.

In overseeing the audit process, the Audit Committee obtained from the independent auditors their letter dated February 20, 2009, as required by the Independent Standards Board Standard No. 1, describing all relationships between the auditors and the Corporation that might bear on the auditors’ independence and the auditors’ judgment that they are, in fact, independent and discussed with the auditors the disclosures therein. The Audit Committee also reviewed the organizational structure, procedure and practices that support the objectivity of the internal audit department and reviewed the Internal Audit Department Charter. The Audit Committee reviewed with both the independent and the internal auditors their audit plans, audit scope and identification of audit risks.

The Audit Committee discussed, with and without management present, the results of the independent auditors’ communications required by generally accepted auditing standards. The Committee also discussed the results of the internal audit examinations.

In meetings with financial management, internal audit and the independent auditors, the Audit Committee reviewed the interim financial statements and interim earnings releases and approved the interim financial statements for the applicable quarter. The Audit Committee also reviewed and approved the quarterly “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (“MD&A”).

The Audit Committee reviewed and discussed the MD&A and the audited financial statements of the Corporation as of and for the fiscal year ended December 31, 2008, with management and the independent auditors, including the quality and acceptability of the Corporation’s financial reporting practices and the completeness and clarity of the related financial disclosures. Management is responsible for the preparation of the Corporation’s financial statements and the independent auditors are responsible for auditing those financial statements.

The Audit Committee reviewed the processes involved in evaluating the Corporation’s internal control environment and the Audit Committee also oversaw and monitored the 2008 compliance process related to the certification and attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002.

Based on the above-mentioned review and discussions with management and the independent auditors, the Audit Committee recommended to the Board that the audited consolidated financial statements and MD&A be included in the Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008, for filing with the SEC and Canadian securities regulatory authorities. The Audit Committee also recommended the reappointment, subject to shareholder approval, of the independent auditors.

The Audit Committee reviews the Corporation’s Disclosure Controls and Procedures on an annual basis. It also reviewed its committee charter and the PotashCorp Core Values and Code of Conduct. Both the Audit Committee Charter and the PotashCorp Core Values and Code of Conduct are available to shareholders and others on the Corporation’s website, www.potashcorp.com. The Audit Committee Charter is also attached as Appendix F. The Audit Committee has oversight responsibility for the Corporation’s compliance with legal and regulatory requirements. The Audit Committee receives regular periodic reports of the Corporation’s ethics and compliance activities, including a review of management’s compliance risk assessment and the efforts undertaken to mitigate ethics and compliance risks during the year, including an overview of the corporate ethics and compliance training program and quantitative and qualitative accounts of compliance matters which have been reported to the Corporation. In addition to ensuring that there are mechanisms for

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the anonymous submission of ethics and compliance reports generally, the Audit Committee has established specific procedures for:

•  the receipt, retention and treatment of complaints received by the Corporation regarding accounting, internal accounting controls or auditing matters; and

•  the confidential, anonymous submission by employees of the Corporation of concerns regarding questionable accounting or auditing matters.

In 2008, the Audit Committee was active in the revisions to the Corporation’s Risk Management Policy, which changes were made by the Board at its September meeting. The new policy provides clear delineation of accountability and responsibilities as well as a more complete outline of the components of the corporate level risk management program. The Audit Committee also oversaw revisions to the Corporation’s treasury policies, which revisions included expanded accountability and reports to the Audit Committee.

Submitted on behalf of the Audit Committee: Alice D. Laberge, C. Steven Hoffman, Keith G. Martell, Jeffrey J. McCaig and Mary Mogford.

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Adoption of 2009
Performance Option Plan

On February 20, 2009, the Board adopted a new performance option plan (the “2009 Performance Option Plan”), subject to the approval of the 2009 Performance Option Plan by the Corporation’s shareholders at the Meeting. If approved, the 2009 Performance Option Plan will be deemed effective as of January 1, 2009 (the “Effective Date”) and will permit the grant of options to purchase up to 1,000,000 Shares to individual officers and employees of the Corporation and its subsidiaries. Non-employee directors and other non-employee contractors and third party vendors will not be eligible to participate in the 2009 Performance Option Plan.

Options to purchase Shares may be granted under the terms of the 2009 Performance Option Plan only during 2009 and no options will be granted prior to the Meeting. Unless sooner terminated as provided therein, the 2009 Performance Option Plan will terminate one year from the Effective Date, although the terms of the plan will continue to govern options granted thereunder prior to termination.

The 2009 Performance Option Plan will be administered by the Compensation Committee or any other Board Committee designated by the Board. A copy of the 2009 Performance Option Plan is attached as Appendix C. This description of the 2009 Performance Option Plan is qualified, in its entirety, by the terms of the attached plan document.

If approved, the 2009 Performance Option Plan will result in up to 0.34% (as at February 20, 2009) of the outstanding share capital of the Corporation being available for issue pursuant to the exercise of options granted under the 2009 Performance Option Plan. The aggregate number of Shares in respect of which stock options may be granted to any one person pursuant to the 2009 Performance Option Plan and which remain outstanding may not at any time exceed 250,000 Shares, representing 0.09% (as at February 20, 2009) of the outstanding share capital of the Corporation.

Under the terms of the 2009 Performance Option Plan, options will generally have a term of ten years, except that if the term expires during a blackout period applicable to a relevant optionee, or within 10 trading days after the expiration of the blackout period applicable to the relevant optionee, the term shall expire on the tenth trading day after the end of such blackout period. For purposes of the 2009 Performance Option Plan, “blackout period” refers to any period during which the relevant optionee is prohibited by the Corporation’s trading policy from trading in the Corporation’s securities.

Options will vest at the end of the three-year performance cycle ending December 31, 2011, subject to the Corporation’s achievement of the performance criteria described in the 2009 Performance Option Plan. The performance metrics and vesting scale have been designed in accordance with the Corporation’s compensation philosophy. See “Compensation Discussion and Analysis”. In general, options will vest as determined by a schedule that references the Corporation’s performance during the performance cycle as measured by reference to cash flow return on investment and weighted average cost of capital. Any options that do not become vested will terminate at the end of the performance cycle.

The number of options granted to each individual optionee will be targeted to deliver total compensation in the upper quartile of the Comparator Group for corporate performance, based on cash flow return on investment and weighted average cost of capital, above the 75^th percentile of the Dow Jones U.S. Basic Materials Index (“DJUSBMI”). Similarly, for corporate performance at the 50^th percentile of the DJUSBMI, the number of options granted will be targeted to deliver total compensation at the median of the Comparator Group.

It is anticipated that there will be approximately 260 participants in the 2009 Performance Option Plan. Following shareholder approval of the 2009 Performance Option Plan at the Meeting, a determination will be made as to the number of options to be granted to executive officers and other participants, which options will be granted in accordance with the criteria described below.

The option price for any option granted under the 2009 Performance Option Plan to any optionee shall be fixed by the Board when the option is granted and, for optionees resident in the United States and any other optionees designated by the Board, the option price shall not be less than the fair market value of a Share at such time, which shall be deemed to be the closing price per Share on the NYSE on the last trading day immediately preceding the day the stock option is granted. For all other optionees, the option price shall be deemed to be the closing price per Share on the TSX on the last trading day immediately preceding the day the stock option is granted. In either case, if the Shares did not trade on such

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exchange on such day, the option price shall be the closing price per Share on such exchange on the last day on which the Shares traded on such exchange prior to the day the stock option is granted.

The 2009 Performance Option Plan requires all options to be subject to provisions to the effect that:

(a)

if the employment of an optionee as an officer or employee of the Corporation or a subsidiary terminates by reason of his or her death, or if an optionee who is a retiree pursuant to paragraph (b) below dies during the 36-month period following retirement, the legal personal representatives of the optionee will be entitled to exercise any unexercised vested options, including such stock options that may vest after the date of death, during the period ending at the end of the twelfth calendar month following the calendar month in which the optionee dies, failing which exercise the stock options will terminate;

(b)

subject to the terms of paragraph (a) above, if the employment of an optionee as an officer or employee of the Corporation or a subsidiary terminates by reason of retirement in accordance with the then prevailing retirement policy of the Corporation or subsidiary, the optionee will be entitled to exercise any unexercised vested stock options, including such stock options that may vest after the date of retirement, during the period ending at the end of the 36th month following the calendar month in which the optionee retires, failing which exercise the stock options will terminate;

(c)  subject to the treatment of stock options in connection with a change of control (as described below), if the employment of an optionee as an officer or employee of the Corporation or a subsidiary terminates for any reason other than as provided in paragraphs (a) or (b) above, the optionee will be entitled to exercise any unexercised vested stock options, to the extent vested and exercisable at the date of such event, during the period ending at the end of the calendar month immediately following the calendar month in which the event occurs, failing which exercise the stock options will terminate; and

(d)  each stock option is personal to the optionee and is not assignable, except (i) as provided in paragraph (a) above, and (ii) at the election of the Board, a stock option may be assignable to the spouse, children and grandchildren of the original optionee and to a trust, partnership or limited liability company, the entire beneficial interest of which is held by one or more of the foregoing.

Nothing contained in paragraphs (a), (b) or (c) above shall extend the period during which a stock option may be exercised beyond its term, or any earlier date on which it is otherwise terminated in accordance with the provisions of the 2009 Performance Option Plan.

If a stock option is assigned pursuant to paragraph (d)(ii) above, the references in paragraphs (a), (b) and (c) above to the termination of employment or death of an optionee shall not relate to the assignee of a stock option but shall relate to the original optionee. In the event of such assignment, legal personal representatives of the original optionee shall not be entitled to exercise the assigned stock option, but the assignee of the stock option or the legal personal representatives of the assignee may exercise the stock option during the applicable specified period.

The Board may amend or discontinue the 2009 Performance Option Plan at any time, without obtaining approval of the shareholders of the Corporation unless required by the relevant rules of the TSX, provided that no such amendment may increase the aggregate maximum number of Shares that may be subject to stock options granted under the 2009 Performance Option Plan, change the manner of determining the minimum option price, extend the option term under any option beyond ten years (or the date on which the option would otherwise expire under the plan), expand the assignment provisions of the 2009 Performance Option Plan, permit non-employee directors to participate in the 2009 Performance Option Plan or, without the consent of the holder of the option, alter or impair any option previously granted to an optionee under the 2009 Performance Option Plan; and provided further, for greater certainty, that, without the prior approval of the Corporation’s shareholders, stock options issued under the 2009 Performance Option Plan shall not be repriced, replaced or regranted through cancellation, or by lowering the option price of a previously granted stock option. In the event of certain transactions affecting the capitalization of the Corporation, including a merger, the Board shall make appropriate adjustments in the number or option price of outstanding options or the number of Shares available for grant and other authorized limits under the 2009 Performance Option Plan to reflect such transaction.

If a change of control (as defined in the 2009 Performance Option Plan) occurs and either (1) the successor fails to assume the Corporation’s obligations under the 2009 Performance Option Plan or fails to convert or replace stock options granted thereunder with equivalent options, or (2) during the two years following the change of control, the optionee is terminated without Cause (as defined in the 2009 Performance Option Plan) or the optionee resigns employment for Good Reason (as defined in the 2009 Performance Option Plan), all unvested options then outstanding

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will become fully vested. Each stock option granted under the 2009 Performance Option Plan to an optionee that participates in the Corporation’s Medium-Term Incentive Plan will be subject to the terms and conditions of the Corporation’s Policy on Recoupment of Unearned Compensation, which is described in the section “Compensation”.

A participant in the 2009 Performance Option Plan who is employed and resident in Canada will be deemed to receive a benefit from employment in the year he or she exercises options under the 2009 Performance Option Plan equal to the difference between the exercise price and the market price of the Shares at the time of exercise, multiplied by the number of Shares over which options are exercised. One-half of this amount will be deducted in the participant’s taxable income in the year of exercise. If the participant so elects, and subject to certain limitations, taxation of the said benefit may be deferred from the year of exercise until the earliest of the year the participant disposes of the Shares, dies or ceases to be resident in Canada for tax purposes. The participant will have a cost base in the optioned Shares equal to their market value on the date of exercise for purposes of computing any capital gain or capital loss on any subsequent disposition of the Shares. The Corporation may not take any tax deduction in respect of the benefits deemed to be received by participants under the 2009 Performance Option Plan in Canada.

All of the options granted under the 2009 Performance Option Plan will be treated as non-qualified stock options for U.S. federal income tax purposes. A participant in the 2009 Performance Option Plan who is employed and resident in the U.S. will not be deemed to receive any income at the time an option is granted, nor will the Corporation’s applicable subsidiary be entitled to a deduction at that time. However, when any part of an option is exercised, the participant will be deemed to have received ordinary income in an amount equal to the difference between the exercise price of the option and the fair market value of the Shares received on the exercise of the option. The Corporation’s applicable subsidiary will be entitled to a tax deduction in an amount equal to the amount of ordinary income realized by such participants. Upon any subsequent sale of the Shares acquired upon the exercise of an option, any gain (the excess of the amount received over the fair market value of the Shares on the date ordinary income was recognized) or loss (the excess of the fair market value of the Shares on the date ordinary income was recognized over the amount received) will be a long-term capital gain or loss if the sale occurs more than one year after such date of recognition and otherwise will be a short-term capital gain or loss.

Grants under the 2009 Performance Option Plan will be made after shareholder approval is obtained and during the 2009 fiscal year.

In order for the 2009 Performance Option Plan to become effective, the resolution to approve the 2009 Performance Option Plan must be passed by a majority of the votes cast by the shareholders who vote in respect of the resolution.

UNLESS A PROXY SPECIFIES THAT THE SHARES IT REPRESENTS SHOULD BE VOTED AGAINST THE RESOLUTION TO APPROVE THE 2009 PERFORMANCE OPTION PLAN, THE PROXY-HOLDERS NAMED IN THE ACCOMPANYING FORM OF PROXY INTEND TO VOTE FOR THE RESOLUTION.

Securities Authorized for Issuance Under Equity Compensation Plans

The Corporation has six other stock option plans.  On May 8, 2008, the Corporation’s shareholders approved the 2008 Performance Option Plan under which the Corporation was permitted, after February 20, 2008 and before January 1, 2009 to grant options for the issuance of up to 1,000,000 Shares pursuant to the exercise of the options. As at January 1, 2009, options to acquire 485,500 Shares had been granted and were outstanding under the 2008 Performance Option Plan. Grants under the 2008 Performance Option Plan were made during fiscal year 2008 only. The material terms of the 2008 Performance Option Plan are described in “Compensation Discussion and Analysis — Incentive Plan Compensation — Long-Term Incentives (Stock Options)”. Additional information regarding the 2008 Performance Option Plan can be found in the Corporation’s Management Proxy Circular for the fiscal year ended 2007. No amendments with respect to the 2008 Performance Option Plan have been adopted since the beginning of the last fiscal year.

On May 3, 2007, the Corporation’s shareholders approved the 2007 Performance Option Plan under which the Corporation was permitted, after February 20, 2007 and before January 1, 2008, to grant options for the issuance of up to 3,000,000 Shares pursuant to the exercise of the options. As at January 1, 2009, options to acquire 1,714,050 Shares had been granted and were outstanding under the 2007 Performance Option Plan. Grants under the 2007 Performance Option Plan were made during fiscal year 2007 only. The material terms of the 2007 Performance Option Plan are described in “Compensation Discussion and Analysis — Incentive Plan Compensation — Long-Term Incentives (Stock Options)”. Additional information regarding the 2007 Performance Option Plan can be found in the

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Corporation’s Management Proxy Circular for the fiscal year ended 2006. No amendments with respect to the 2007 Performance Option Plan have been adopted since the beginning of the last fiscal year.

On May 4, 2006, the Corporation’s shareholders approved the 2006 Performance Option Plan under which the Corporation was permitted, after February 27, 2006 and before January 1, 2007, to grant options for the issuance of up to 4,200,000 Shares pursuant to the exercise of the options. As at January 1, 2009, options to acquire 2,659,800 Shares had been granted and were outstanding under the 2006 Performance Option Plan. Grants under the 2006 Performance Option Plan were made during fiscal year 2006 only. The material terms of the 2006 Performance Option Plan are described in the “Compensation Discussion and Analysis — Incentive Plan Compensation — Long-Term Incentives (Stock Options)”. Additional information regarding the 2006 Performance Option Plan can be found in the Corporation’s Management Proxy Circular for the fiscal year ended 2005. No amendments with respect to the 2006 Performance Option Plan have been adopted since the beginning of the last fiscal year.

On May 5, 2005, the Corporation’s shareholders approved the 2005 Performance Option Plan under which the Corporation was permitted, after February 28, 2005 and before January 1, 2006, to grant options for the issuance of up to 3,600,000 Shares pursuant to the exercise of the options. As at January 1, 2009, options to acquire 2,684,864 Shares had been granted and were outstanding under the 2005 Performance Option Plan. Grants under the 2005 Performance Option Plan were made during fiscal year 2005 only. The material terms of the 2005 Performance Option Plan are described in the “Compensation Discussion and Analysis — Incentive Plan Compensation — Long-Term Incentives (Stock Options)”. Additional information regarding the 2005 Performance Option Plan can be found in the Corporation’s Management Proxy Circular for the fiscal year ended 2004. No amendments with respect to the 2005 Performance Option Plan have been adopted since the beginning of the last fiscal year.

The Corporation’s Stock Option Plan — Officers and Employees and Stock Option Plan — Directors were each terminated by the Board on November 16, 2006. Options previously granted under the Stock Option Plan — Officers and Employees and Stock Option Plan — Directors will continue to be governed by the terms of their respective plan. As at January 1, 2009, 5,048,242 options were outstanding under the Stock Option Plan — Officers and Employees and 257,900 options were outstanding under the Stock Option Plan — Directors. No amendments with respect to the Stock Option Plan — Officers and Employees and the Stock Option Plan — Directors have been adopted since the beginning of the last fiscal year.

The following table provides information about securities that may be issued under the Corporation’s existing equity compensation plans, as of December 31, 2008 and February 20, 2009.

Equity Compensation Plan Information

			(c) Number of Shares
	(a) Number of Shares	(b) Weighted-	remaining available for
	to be issued upon	average exercise	future issuance under
	exercise of	price of outstanding	equity compensation
	outstanding options,	options, warrants	plans (excluding Shares
Plan Category	warrants and rights	and rights	reflected in column (a))
December 31, 2008
Equity compensation plans approved by shareholders	12,849,356 (1)	$33.26	0
Equity compensation plans not approved by shareholders	n/a	n/a	n/a
February 20, 2009
Equity compensation plans approved by shareholders	12,812,630 (2)	$33.05	0
Equity compensation plans not approved by shareholders	n/a	n/a	n/a

(1)

Of this amount, 2,683,864 options were outstanding pursuant to the 2005 Performance Option Plan, 2,659,800 options were outstanding pursuant to the 2006 Performance Option Plan, 1,714,050 options were outstanding pursuant to the 2007 Performance Option Plan, 485,500 options were outstanding pursuant to the 2008 Performance Option Plan, 5,048,242 options were outstanding pursuant to the Stock Option Plan — Officers and Employees and 257,900 options were outstanding pursuant to the Stock Option Plan — Directors.

(2)

Of this amount, 2,661,464 options were outstanding pursuant to the 2005 Performance Option Plan, 2,659,800 options were outstanding pursuant to the 2006 Performance Option Plan, 1,714,050 options were outstanding pursuant to the 2007 Performance Option Plan, 485,500 options were outstanding pursuant to the 2008 Performance Option Plan, 5,033,916 options were outstanding pursuant to the Stock Option Plan — Officers and Employees and 257,900 options were outstanding pursuant to the Stock Option Plan — Directors.

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Corporate Governance

•  During 2008, the Corporate Governance and Nominating Committee (the “CG&N Committee”) continued its refinement of the Board evaluation process, including the addition of input from senior management into the Board effectiveness evaluations.

•  The Corporation was recognized in 2008 for its governance and disclosure practices by virtue of a first place finish in the 2008 Board Games rankings prepared by the Globe and Mail and the receipt of the 2008 Governance Gavel Award from the Canadian Coalition for Good Governance regarding its director disclosure.

•  During 2008, the CG&N Committee also addressed the issue of whether to provide an advisory vote on executive compensation as per a number of proposals received by other companies regarding such votes. For the reasons set forth in the response to the “Say on Pay” shareholder proposal, attached as Appendix D, the CG&N Committee remains of the view that such advisory votes on executive compensation are not appropriate under the circumstances.

Statement of Corporate Governance Practices

PotashCorp, its Board and its management are committed to the highest standard of corporate governance. The Board, through the CG&N Committee, continually evaluates and enhances the Corporation’s corporate governance practices by monitoring Canadian and U.S. regulatory developments affecting corporate governance and transparency of public company disclosure.

As a Canadian reporting issuer with securities listed on the TSX and NYSE, the Corporation complies with the applicable regulatory requirements concerning corporate governance in both Canada and the United States.

Members of the Corporate Governance and Nominating Committee for 2008

Mary Mogford (Chair)
Frederick J. Blesi (until his retirement May 8, 2008)
Wade Fetzer III
Dallas J. Howe
Alice D. Laberge
E. Robert Stromberg (until February 2008)

Role of the Corporate Governance and Nominating Committee

The CG&N Committee is responsible for overseeing compliance with current and emerging governance requirements established by governmental regulators in the United States and Canada and by the NYSE and TSX. The CG&N Committee maintains a checklist of regulatory requirements which is updated and reviewed at every meeting. The CG&N Committee also is responsible for developing and implementing best Board governance practices.

See page 34 for more details.

Nominating Process

The role of the CG&N Committee is also to identify individuals qualified to become members of the Board consistent with criteria approved by the Board, to recommend to the Board nominees for election to the Board at each annual meeting of shareholders or to fill vacancies on the Board and to address related matters.

Nominees must possess and exhibit the highest degree of integrity, professionalism, values and independent judgment.

Director Orientation and Continuing Education

The Board has adopted a written New Director Orientation Policy and also recognizes the importance of ongoing director education and the need for each director to take personal responsibility for this process.

Ability of Shareholders to Communicate With the Board

The Corporation has a process for shareholders and other interested parties who wish to communicate with members of the Board, including the Chair or the non-management directors as a group. See page 36 for details.

To further facilitate communications between the Corporation’s shareholders and the Board, the Corporation has adopted a policy that all directors standing for re-election and all new director nominees are expected to attend the Meeting. In 2008, all such directors and nominees attended the annual meeting.

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Statement of Corporate Governance Practices

PotashCorp, its Board and its management are committed to the highest standard of corporate governance. The Board, through its Corporate Governance and Nominating Committee, continually evaluates and enhances the Corporation’s corporate governance practices by monitoring Canadian and U.S. regulatory developments affecting corporate governance and transparency of public company disclosure.

As a Canadian reporting issuer with securities listed on the TSX and NYSE, the Corporation complies with the applicable regulatory requirements concerning corporate governance in both Canada and the United States.

In Canada, we comply with corporate governance rules of the Canadian securities regulatory authorities in all of the provinces and territories of Canada. The Corporation is required to disclose its corporate governance practices in accordance with NI 58-101 in reference to the benchmarks set out in National Policy 58-201 “Corporate Governance Guidelines”.

In the United States, the Corporation is required to comply with the provisions of the Sarbanes-Oxley Act of 2002 and the rules adopted by the SEC pursuant to that Act, as well as the governance rules of the NYSE, in each case as applicable to a foreign private issuer. The Corporation complies with the current corporate governance rules of the NYSE. There are no significant differences between the Corporation’s corporate governance practices and those required of U.S. domestic issuers under the NYSE listing standards.

To comply with the applicable corporate governance standards and achieve those best practices, the Board has adopted the “PotashCorp Governance Principles” and “PotashCorp Core Values and Code of Conduct”. The complete text of the “PotashCorp Governance Principles”, the “PotashCorp Core Values and Code of Conduct”, and the Board and Committee Charters, as well as other governance related documents, can be found on the Corporation’s website, www.potashcorp.com, and are available in print to any shareholder who requests a copy.

In accordance with NI 58-101, the Corporation annually discloses information relating to its system of corporate governance. Details of the Corporation’s corporate governance practices are described in Appendix A to this Management Proxy Circular. Furthermore, in accordance with the requirements of NI 58-101, the text of the Corporation’s Board of Directors Charter is attached as Appendix E. In addition, the Board of Directors Charter, the Board Committee charters and the “PotashCorp Governance Principles” are also available on the Corporation’s website, www.potashcorp.com, and in print to any shareholder who requests a copy.

The Board exercises its duties directly and through its Committees. The Board has four standing committees: the Audit Committee, the Corporate Governance and Nominating Committee, the Compensation Committee and the Safety, Health and Environment Committee. The recent activities of the Corporate Governance and Nominating Committee are described below in this section. The report of the Compensation Committee is contained in the section on Executive Compensation and the report of the Audit Committee can be found in the section “Appointment of Auditors and Report of Audit Committee”.

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M. Mogford, Chair	W. Fetzer III	D. Howe	A. Laberge

Corporate Governance and Nominating Committee Report

General

The Corporation has a standing Corporate Governance and Nominating Committee, referred to as the “CG&N Committee” hereinafter in this report. The CG&N Committee has a charter which is available to shareholders and others at the Corporation’s website, www.potashcorp.com. Each of the following four directors who comprise the CG&N Committee is independent according to the Board’s independence standards as set out in the “PotashCorp Governance Principles” (which is available on the Corporation’s website), NI 58-101, applicable rules of the SEC and the corporate governance rules of the NYSE. See also “Nominees for Election to the Board of Directors — Director Independence and Other Relationships”. During the fiscal year ended December 31, 2008, the CG&N Committee met 5 times.

Mary Mogford (Chair)
Frederick J. Blesi (until his retirement May 8, 2008)
Wade Fetzer III
Dallas J. Howe
Alice D. Laberge
E. Robert Stromberg (until February 2008)

Disclosure Regarding Governance Procedures

The CG&N Committee is responsible for overseeing compliance with current and emerging governance requirements established by governmental regulators in the United States and Canada and by the NYSE and TSX. The CG&N Committee maintains a checklist of regulatory requirements which is updated and reviewed at every meeting. The CG&N Committee also is responsible for developing and implementing best Board governance practices. The Chair of the CG&N Committee works closely with the Corporate Secretary, the Associate General Counsel and the Senior Director of Investor Relations to ensure that the CG&N Committee stays aware of developments and trends in best governance practices, particularly from the perspective of regulatory bodies, shareholder advocates, individual and institutional investors, governance organizations and academic commentators. In addition, the CG&N Committee is charged with management of the annual review of the performance of the Board, a process that is described in greater detail on page 14 and in Appendix A.

2008 Governance Activities

In 2008, PotashCorp was awarded the Governance Gavel Award for Director Disclosure by the Canadian Coalition for Good Governance which recognizes excellence in the way companies communicate with their shareholders via the annual proxy circular and our Board was ranked first by the Globe and Mail in its 2008 Board Games, which ranks the corporate governance practices of Canadian public companies.

During 2008, the Committee continued its refinement of the Board evaluation process, including an element of input from senior management into the Board effectiveness evaluations.

During 2008, the CG&N Committee also addressed the issue of whether to provide an advisory vote on executive compensation as per a number of proposals received by other companies regarding such votes. For the reasons set forth in the response to the “Say on Pay” proposal, attached as Appendix D, the CG&N Committee remains of the view that such advisory votes on executive compensation are not appropriate under the circumstances.

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Disclosure Regarding Nominating Processes

In accordance with the provisions of section 137 of the Canada Business Corporations Act (the “CBCA”), shareholders holding in the aggregate not less than 5% of the Corporation’s outstanding shares may submit a formal proposal for individuals to be nominated for election as directors. Shareholders wishing to make such a formal proposal should refer to the relevant provisions of the CBCA for a description of the procedures to be followed. For additional information regarding shareholder proposals, see “2010 Shareholder Proposals”. Shareholders who do not meet the threshold criteria for making, or otherwise choose not to make, a formal proposal may at any time suggest nominees for election to the Board. Names of and supporting information regarding such nominees should be submitted to: Corporate Secretary, Potash Corporation of Saskatchewan Inc., Suite 500, 122 — 1st Avenue South, Saskatoon, Saskatchewan, S7K 7G3, Canada.

The role of the CG&N Committee is to identify individuals qualified to become members of the Board consistent with criteria approved by the Board, to recommend to the Board nominees for election to the Board at each annual meeting of shareholders or to fill vacancies on the Board and to address related matters. In addition, the CG&N Committee also develops and recommends to the Board corporate governance principles applicable to the Corporation and is responsible for leading the annual review of the performance of the Board.

A CG&N Committee-recommended nominee for a position on the Board must, at a minimum, meet the qualification standards for directors established by section 105 of the CBCA. In addition, such nominee must possess and exhibit the highest degree of integrity, professionalism, values and independent judgment. The CG&N Committee also believes that the Board should be comprised of directors who possess experience and expertise in one or more of the following areas:

•  fertilizer industry

•  agriculture

•  global agriculture

•  global/international commerce

•  transportation industry

•  e-commerce/technology

•  finance

•  global senior executive management

•  investment banking

•  legal

•  accounting

•  mining industry

•  chemical industry

•  general business management

•  public policy

•  corporate governance

•  compensation/human resources

On an ongoing basis the CG&N Committee asks incumbent directors and senior management to suggest individuals who should be considered as proposed nominees to the Board. The CG&N Committee identifies the mix of expertise and qualities required for the Board. The Chair of the CG&N Committee, in consultation with the CG&N Committee, the Board Chair and the CEO maintains an evergreen list of potential candidates suggested by incumbent directors, senior management or shareholders and biographical information for each such potential candidate. When it becomes apparent that a vacancy on the Board will arise, either from mandatory or elective retirement or otherwise, the CG&N Committee reviews its list of potential candidates against the skill sets of incumbent Board members and the range of experience and expertise necessary for the Board. In completing this analysis, the CG&N Committee utilizes a skills matrix. Potential candidates who have, in the opinion of the CG&N Committee, the desired expertise are identified. Those who have the requisite qualifications and meet the Corporation’s standards are ranked by the CG&N Committee in order of preference and contacted to determine their interest in serving on the Board. If this process does not result in the identification of suitable nominees, the CG&N Committee may engage the services of a search firm to assist in the identification of director candidates. The CG&N Committee evaluates all potential candidates in the manner described, no matter what the source of the recommendation.

Prior to joining the Board, new directors are informed of the degree of energy and commitment the Corporation expects of its directors.

In an uncontested election, any nominee for director who fails to receive votes in favor of his or her election representing at least a majority of the votes cast (added together with the votes withheld) shall tender his or her resignation for consideration by the CG&N Committee. Except in extenuating circumstances, it is expected that the CG&N Committee will recommend to the Board that the resignation be accepted and effective within a period of 90 days and that the action

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taken be publicly disclosed. To the extent possible, the CG&N Committee and Board members who act on the resignation shall be directors who have themselves received a majority of votes cast.

Disclosure Regarding Director Orientation and Continuing Education

The Board has adopted a written New Director Orientation Policy designed to:

(a)	provide each new director with a baseline of knowledge about the Corporation that will serve as a basis for informed decision-making;
(b)	tailor the program for each new director to take into account his or her unique mix of skills, experience, education, knowledge and needs; and
(c)	deliver information over a period of time to minimize the likelihood of overload and maximize the lasting educational impact.

The orientation program is tailored to the needs of each new director and consists of a combination of written materials, one-on-one meetings with senior management, site visits and other briefings and training as appropriate.

The Board also recognizes the importance of ongoing director education and the need for each director to take personal responsibility for this process. To facilitate ongoing education, the Corporation:

(a)	maintains a director’s intranet site to facilitate the exchange of views and published information;
(b)	maintains a membership for each director in an organization dedicated to corporate governance and ongoing director education;
(c)	each year encourages and funds the attendance of each director at one seminar or conference of interest and relevance, and funds the attendance of each committee Chair at one additional seminar or conference. In all cases, approval for attendance is obtained, in advance, from the Board Chair;
(d)	encourages presentations by outside experts to the Board or committees on matters of particular import or emerging significance; and
(e)	at least annually, schedules a site visit in conjunction with a Board meeting.

The Board holds one meeting each year at an operating facility. Site visits by the Board and meetings with senior management of the facility are incorporated into the itinerary.

Disclosure Regarding the Ability of Shareholders to Communicate With the Board of Directors

The Corporation has a process for shareholders or other interested parties who wish to communicate with members of the Board, including the Chair or the non-management directors as a group. Communications in writing should be sent to:

PotashCorp Board of Directors
c/o Corporate Secretary
Suite 500, 122 – 1^st Avenue South
Saskatoon, Saskatchewan
S7K 7G3
CANADA

Communications by e-mail should be sent to directors@potashcorp.com.

Matters relating to the Corporation’s accounting, internal accounting controls or auditing matters are referred to the Audit Committee. Other matters are referred to the Board Chair.

To further facilitate communications between the Corporation’s shareholders and the Board, the Corporation has adopted a policy that all directors standing for re-election and all new director nominees are expected to attend the Meeting. In 2008, all such directors and nominees attended the annual meeting.

Submitted on behalf of the CG&N Committee: Mary Mogford, Wade Fetzer III, Dallas J. Howe and Alice D. Laberge.

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Compensation

•  Reinforcing the Corporation’s pay-for-performance philosophy, in 2008, the Compensation Committee was active in reviewing the design of a new Medium-Term Incentive Plan for the three-year performance period ending December 31, 2011 and transitioning to the DAXglobal Agribusiness Index as a benchmark for comparison.

•  In November 2008, upon recommendation of the Compensation Committee, the Board approved a recoupment policy. Pursuant to the policy, the Board can, among other actions, require reimbursement of an executive’s incentive compensation or cancel an executive’s unvested performance option awards if it learns of misconduct by the executive that contributed to the Company having to restate all or a portion of its financial statements. In addition, the Committee recommended and the Board has implemented a new double-trigger change of control provision in the 2009 Performance Option Plan.

Members of the Compensation Committee for 2008

John Estey (Chair)
Wade Fetzer III
Keith Martell (from his appointment May 8, 2008)
Jeffrey McCaig
Paul Schoenhals

Role of the Compensation Committee

The role of the Compensation Committee is to formulate and make recommendations to the Board in respect of compensation issues relating to the Corporation’s directors and senior officers. The Compensation Committee makes recommendations regarding the Corporation’s stock option plans and administers the Short- and Medium-Term Incentive Plans, and the Performance Option Plans, each in accordance with its terms. The Compensation Committee reviews and makes recommendations regarding the general merit increase budget for salaried and non-bargaining hourly employees and has general oversight of employee benefit programs. In addition, the Compensation Committee, in consultation with the Chief Executive Officer, considers and reports to the Board regarding employee or executive succession matters.

See page 38 for more details.

Compensation Committee Interlocks and Insider Participation

None of the members of the Compensation Committee serves, or has at any time served, as an officer or employee of the Corporation or any of its subsidiaries. None of the Corporation’s executive officers has served as a member of a compensation committee of any other entity, one of whose executive officers served as a member of the Compensation Committee.

Compensation Discussion and Analysis

The Corporation’s executive compensation consists of six main elements: base salary, short-term incentives, performance units, performance stock options, pension benefits and severance benefits. The Corporation designs executive compensation policies to attract, motivate and retain qualified executives. To emphasize performance-based compensation, the Corporation benchmarks total cash compensation levels to the median of a peer group of companies and provides the opportunity to earn total compensation above the median through medium-term and long-term incentive plans. See page 41 for details.

The Corporation believes that the most effective compensation program is one that is competitive within the marketplace, rewards the achievement of specific annual, long-term and strategic goals and aligns the interests of executives with shareholders by rewarding performance above established goals with the ultimate objective of increasing shareholder value. To accomplish these objectives, most compensation is variable and fluctuates based on individual and corporate performance.

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J. Estey, Chair	W. Fetzer lll	K. Martell	J. McCaig	P. Schoenhals

Report of the Compensation Committee and
Compensation Committee Responsibilities and Procedures

Composition of the Compensation Committee

We have a standing Compensation Committee, referred to as the “Committee” in this Compensation section. The Committee is, at present, composed of five directors: John W. Estey (Chair), Wade Fetzer III, Keith G. Martell, Jeffrey J. McCaig and Paul J. Schoenhals. The Board has determined that each of the directors who served as members of the Committee during the year ended December 31, 2008, is independent according to the Board’s independence standards as set out in the “PotashCorp Governance Principles” (which is available on our website, www.potashcorp.com), NI 58-101, applicable rules of the SEC and the NYSE corporate governance rules. See also “Board of Directors — Director Independence and Other Relationships”. The Board believes the members of the Committee have the knowledge and experience to effectively perform their responsibilities. The members of the Committee have expertise in, among other areas, business management and finance, and four of the members are current or former principal executive officers. See also “Board of Directors — Nominees for Election to the Board of Directors”.

The Committee held 6 meetings in the last fiscal year. The Committee meets without management present at each regularly scheduled Committee meeting.

Compensation Committee Responsibilities and Procedures

The Committee has a Committee Charter, which is available on our website and in print to any shareholder who requests a copy from our Corporate Secretary. The Committee may delegate any of its responsibilities to a subcommittee comprised of one or more members of the Committee.

As described in the Committee’s charter, the Committee has the responsibility to:

1.	Review and approve on an annual basis the corporate goals and objectives relevant to the compensation of our CEO. The Committee evaluates at least once a year the CEO’s performance in light of established goals and objectives and, based on such evaluation, together with all other independent members of the Board, determines and approves the CEO’s annual compensation, including, as appropriate, salary, bonus, incentive and equity compensation;
2.	Review and approve on an annual basis the evaluation process and compensation structure for our executive officers, including an annual Executive Salary Administration Program under which the parameters for salary adjustments (at the discretion of the CEO) for executive officers are established;
3.	Review and make recommendations to the Board with respect to the adoption, amendment and termination of our management incentive-compensation and equity-compensation plans, oversee their administration and discharge any duties imposed on the Committee by any of those plans;
4.	Assess the competitiveness and appropriateness of our policies relating to the compensation of the executive officers;
5.	Review management’s long-range planning for executive development and succession, and develop a CEO succession plan;
6.	Approve the Committee’s annual report on executive compensation for inclusion in our proxy statement, in accordance with applicable rules and regulations, and review and approve, prior to publication, the compensation sections of the proxy statement;
7.	Review the general design and make-up of our broadly applicable benefit programs as to their general adequacy, competitiveness, internal equity and cost effectiveness;

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8.	Annually review the performance of our pension plans;
9.	Review periodically executive officer transactions in our securities and approve such transactions as appropriate for their exemption from short-swing profit liability under Section 16(b) of the Exchange Act;
10.	Annually review and recommend to the Board a compensation package for our directors. In considering the director compensation package, the Committee may take into consideration the relative responsibilities of directors in serving on the Board and its various Committees. The Committee may request that management report to the Committee periodically on the status of the compensation package of the Board in relation to other similarly situated companies. Directors who are our employees shall not be compensated for their services as directors. The Committee shall review annually any stock ownership guidelines applicable to directors and shall recommend to the Board revisions to any such guidelines as appropriate; and
11.	Perform other review functions relating to management compensation and human resources policies as the Committee deems appropriate.

As the chief human resources officer, the Senior Vice President, Administration is our company’s representative to the Committee and provides the Committee with information and input on corporate compensation and benefits philosophy and plan design, succession planning, program administration and the financial impact of director, executive and broad-based employee compensation and benefit programs. In addition, the Senior Vice President, Administration provides information to and works with the Committee’s executive compensation consultant as directed by the Committee.

Compensation Committee Interlocks and Insider Participation

During 2008, none of the members of the Committee served, or has at any time served, as an officer or employee of our company or any of our subsidiaries. None of our executive officers has served as a member of a compensation committee, or other committee serving an equivalent function, of any other entity, one of whose executive officers served as a member of the Committee.

Report of the Compensation Committee

The following report has been submitted by the Committee:

The Committee has reviewed and discussed the Compensation Discussion and Analysis contained in this Management Proxy Circular with management and, based on this review and discussion, recommends that it be included in our annual report on Form 10-K for the year ended December 31, 2008 and in this Management Proxy Circular.

By the Compensation Committee:

John W. Estey (Chair)
Wade Fetzer III
Keith G. Martell
Jeffrey J. McCaig
Paul J. Schoenhals

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Compensation Discussion and Analysis

Executive Summary

The following Compensation Discussion and Analysis discusses the structure, policies, principles and elements of our executive compensation program as well as the process related to and individuals involved in our executive compensation decisions. Information about the compensation awarded to our Named Executive Officers (as defined below) in 2006, 2007 and 2008 can be found in the Summary Compensation Table and related compensation tables beginning on page 56.

The Compensation Committee has engaged Watson Wyatt as executive compensation consultants. Watson Wyatt reports to the Chair of the Committee and primarily provides input to the Committee on the philosophy and competitiveness of the design and award values for certain of our executive and director compensation programs.

As discussed in further detail below, our executive compensation consists of six main elements: base salary, short-term incentives, performance units, performance stock options, pension benefits and severance benefits. We design executive compensation policies to attract, motivate and retain qualified executives. To emphasize performance-based compensation, we benchmark total cash compensation levels to the median of a peer group of companies and provide the opportunity to earn total compensation above the median through medium-term and long-term incentive plans.

Based on a study conducted by Watson Wyatt in 2008, during the past three years, the realized pay of our Named Executive Officers was within the top quartile of our peer group, coinciding with the top quartile performance of our company relative to our peer group. A similar study of chief executive officer compensation at companies comprising the S&P/TSX 60 Index that was conducted in 2007 by the Hay Group, an independent executive compensation consulting group, found similar results for the compensation of our CEO. These results demonstrate the alignment between our Named Executive Officers’ compensation and our performance and support the Compensation Committee’s compensation philosophy.

We design our incentive plans with performance periods of varying durations. We provide executives with annual incentives through the Short-Term Incentive Plan, three-year incentives through the Medium-Term Incentive Plan and ten-year incentives through the Performance Option Plans. To align incentive compensation with shareholder interests, we link the amount of variable compensation to total shareholder return or metrics with a demonstrated relationship to total shareholder return.

Under our Short-Term Incentive Plan, we achieved an award percentage of 200% based on our actual 2008 cash flow return, which was more than 150% of our 2008 cash flow return target.

During the three-year performance period ended December 31, 2008, we achieved the maximum vesting percentage under our Medium-Term Incentive Plan based on our three-year total shareholder return of 153.31% and as compared to the three-year total shareholder return of the Dow Jones U.S. Basic Materials Index (“DJUSBMI”) of -31.45%. As a result, 150% of the performance share units granted under our Medium-Term Incentive Plan vested based on our total shareholder return and our total shareholder return relative to the total shareholder return of the DJUSBMI.

100% of the outstanding options granted under our 2006 Performance Option Plan vested based on the difference between our cash flow return on investment and our weighted average cost of capital during the three-year performance period ended December 31, 2008.

We also provide pension benefits to supplement the income of our employees after their retirement, and in cases of termination without cause, we strive to provide appropriate severance benefits that reflect the potential difficulty in obtaining comparable employment in a short period of time and provide for a complete separation between the terminated employee and our company. In the past, we entered into change in control agreements with certain of our senior executives, which agreements remain outstanding. No new agreements have been entered into since 1994.

We strongly support Share ownership by our executives. Each of our executives is required to hold Shares with a value of between one and five-times the executive’s base salary, depending on the executive’s position. Our share ownership guidelines reflect the value of Shares held by executives and can be met through direct or beneficial ownership of Shares.

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Compensation Structure and Policies

We design executive compensation policies, as described below, to attract, motivate and retain qualified executives. We believe that the most effective compensation program is one that is competitive within the marketplace, rewards the achievement of specific annual, long-term and strategic goals by the company and aligns the interests of executives with shareholders by rewarding performance above established goals with the ultimate objective of increasing shareholder value. To accomplish these objectives, most compensation is variable and fluctuates based on individual and corporate performance. To align variable compensation with shareholder interests, we link the amount of variable compensation to total shareholder return or metrics with a demonstrated relationship to total shareholder return.

Compensation Principles

•  To emphasize performance-based compensation, for each position studied, we maintain total cash compensation levels (salary and annual short-term incentive targets) at the median (50^th percentile) of the relevant group of comparable companies.

•  We determine competitive and median levels of compensation with the assistance of independent compensation consultants that prepare, at least annually, analyses of external competitive compensation. Such analyses currently consist of (1) a group of publicly traded U.S. and Canadian companies with similar industry characteristics, revenues and market capitalization, which we refer to herein as the “Comparator Group”, and (2) additional executive compensation surveys of U.S.-based companies with similar industry and revenue size, which we refer to herein as the “Additional Surveys”. We refer to the Comparator Group and the Additional Surveys collectively as the “Comparative Compensation Information”. See “— Compensation Consultants and Comparator Groups”.

•  We provide the opportunity to achieve compensation above the median through medium-term and long-term incentive plans (performance units and stock options) if our performance exceeds the median performance of comparable companies. We design these plans, including our performance-based option plans, with measures (total shareholder return and internal performance measures historically linked with total shareholder return) that require company performance above the median, relative to other basic materials companies, to deliver total compensation above the median. For 2008 and the six preceding years, we used the total shareholder return of the DJUSBMI as a benchmark for determining the relative performance of our company. In 2009, we will begin to replace the DJUSBMI with the DAXglobal Agribusiness Index as a benchmark for determining relative performance.

•  We establish the overall value of retirement and welfare benefits at approximately the median of comparable companies.

Elements of Executive Compensation

Our executive compensation consists of six main elements: base salary, short-term incentives, performance units issued under the Medium-Term Incentive Plan, which measures a performance period of three years, performance stock options issued as long-term incentives, pension benefits and severance benefits.

We combine these elements, particularly base salary, and the short, medium and long-term incentives, to provide a total compensation package that attracts highly qualified individuals and provides strong incentive to align efforts and motivate executives to deliver company performance that creates sustaining shareholder value. The total value of the compensation package is weighted towards the variable incentive components. In particular, medium-term and long-term incentive targets comprise about 60% and short-term incentive targets comprise about 15% of total potential compensation value. The total value of our CEO’s compensation package is weighted even more heavily towards medium- and long-term incentive compensation.

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The following charts set forth the relative weight of 2008 compensation attributable to base salary, short-term incentive targets and medium- and long-term incentive targets for (1) our CEO and the CEOs of the Comparator Group, and (2) our Named Executive Officers and Named Executive Officers of the Comparator Group

Our CEO Compensation	CEO Compensation of Comparator Group
Our NEO Compensation	NEO Compensation of Comparator Group

We establish corporate performance goals for each variable incentive component. For short-term incentives, we set corporate and operating group financial and operating goals annually. The Medium-Term Incentive Plan incorporates absolute and relative total shareholder return targets over a three-year period, with potential payout occurring only at the end of the three-year period. The performance periods under the Medium-Term Incentive Plan do not overlap. As a result, awards, if earned, are paid out only once every three years. Our long-term incentive program grants performance stock options, which we refer to as performance options because the plan includes a performance target required for vesting of the options in addition to the inherent requirement of stock appreciation for the vested options to have value. Vesting is determined at the end of a three-year period based upon a target for cash flow return on investment compared to the weighted average cost of capital. The option term is generally ten years from the date of grant.

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More detail on each element and its purpose within the total executive compensation program is described in the following table and further in this report.

			Performance
Current Compensation	Form	Eligibility	Period
Base salary •   For executive officers, we set base salary targets at the median of the Comparative Compensation Information, adjusted to reflect individual performance and internal equity	Cash	All salaried employees	Annual
Short-term incentives •   We base awards on achievement of predetermined goals for corporate performance or a combination of corporate and operating group performance. •   We establish targets at the median of the Comparative Compensation Information. •   Individual awards may be adjusted (± 20%) to recognize individual performance, provided the total adjusted awards approximate the total awards at mid-point. •   We extended award eligibility to Canadian and U.S. hourly employees effective January 1, 2008.	Cash	All executives and most salaried staff and union and non-union hourly employees	1 year
Medium-term incentives •   As of January 1, 2006, we issued units at a price equal to the average closing price of our common stock for the last 30 trading days of 2005. •   Each award vests and is paid out at the end of the three-year performance period (December 31, 2008). One-half of the units vest based on our total shareholder return, or TSR, and one-half of the units vest based on our TSR relative to the DJUSBMI’s TSR. •   The value at payout equals the number of vested units multiplied by the average closing price of our common stock for the last 30 trading days of 2008, subject to a maximum value per unit of three times the average closing price of our common stock for the last 30 trading days of 2005.	Performance Share Units	All executives and senior management (approximately 66 individuals)	3 years
Long-term incentives •   Options granted under our Performance Option Plans vest based on the amount by which our cash flow return on investment exceeds the weighted average cost of capital during the three-year performance period. •   The value of vested options is based on appreciation of our common stock during the ten-year option period. •   We made one option grant per year following shareholder approval of the Performance Option Plan at the annual meeting of shareholders. We have determined not to make off-cycle option grants during the year. •   The number of options that the Board grants annually is that number of options that will result in the appropriate total compensation for each management level as determined by reference to the Comparative Compensation Information. See “Compensation Principles” above.	Performance Options	All executives, senior management and other selected managers (approximately 258 individuals)	3 year vesting 10 year option term

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			Measurement
Post-Retirement and Termination Compensation	Form	Eligibility	Period
Pension Benefits
Canadian Pension Plan •   Benefits are based on the participant’s required contributions (up to 5.5% of earnings) and equivalent matching contributions by our company.	Cash	All Canadian salaried staff and certain union and non-union hourly employees	Pensionable service period
Canadian Supplemental Retirement Income Plan •   Benefits are based on 2% of the average of the participant’s three highest years’ earnings multiplied by years of pensionable service, minus the benefit payable under the Canadian Pension Plan. Certain senior executives’ benefits are calculated differently. See “— Pension Benefits” below. •   No benefits are payable if the participant is not at least age 55 at retirement; benefits are reduced if the participant is not at least age 62 at retirement.	Cash	Selected senior executives (23 individuals)	Pensionable service period to a maximum of 35 years
U.S. Pension Plan •   Benefits are based on 1.5% of the participant’s final average compensation, which is calculated using the highest paid 60 consecutive months of service out of the last 120 months, multiplied by years of service accrued after December 31, 1998. Participants with service accrued prior to January 1, 1999 under previous plans will have a portion of their benefit calculated pursuant to such plans. See “— Pension Benefits” below. •   Benefits are reduced if the participant is not at least age 65, or age 62 with 20 years of service, at termination.	Cash	All U.S. salaried and non-union hourly employees	Pensionable service period to a maximum of 35 years
U.S. Supplemental Plan •   Benefits are intended to provide participants with the same aggregate benefits they would have received under the U.S. Pension Plan had there been no legal limitations on those benefits. •   No benefits are payable if the participant is not at least age 55 at termination.	Cash	Eligible U.S. salaried and non-union hourly employees	Pensionable service period to a maximum of 35 years
Severance Benefits
Change in control severance benefits •   Benefits are awarded in connection with termination within two years of a change of control. •   Termination includes ceasing to be employed for any reason, including constructive dismissal, except by reason of death, disability, resignation or voluntary retirement, or dismissal for dishonest or willful misconduct.	Cash, Insurance and Other Benefits	Selected senior executives (3 individuals)	Upon termination of employment
General severance benefits •   Benefits are awarded in connection with termination without cause. •   Benefits are generally based on two weeks of salary for each complete year of service, subject to a minimum of 4 weeks and a maximum of 52 weeks.	Cash	All salaried employees	Upon termination of employment

In addition to the above elements of compensation, certain U.S. employees participate in our 401(k) plan, which we refer to herein as the “401(k) Plan”, and certain Canadian employees participate in our savings plan, which we refer to herein as the “Savings Plan”. Pursuant to the 401(k) Plan and the Savings Plan, we make company contributions for the benefit

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of participants. For information about the amount of company contributions made for the benefit of Named Executive Officers (as defined below) pursuant to such plans, see “Executive Compensation — Summary Compensation Table”. We do not have non-qualified deferred compensation plans or arrangements pursuant to which our Named Executive Officers may elect to defer current compensation. Where appropriate, we design our compensation arrangements to provide relief from Section 162(m) of the Internal Revenue Code.

Salary

We believe that salary is a necessary component to retaining qualified employees. We have established a system of tiered salary levels for senior executives (vice president and above). We assign senior executive positions to an appropriate salary tier, considering the position’s internal value, as well as external comparisons to relevant positions in the Comparative Compensation Information. The Committee generally establishes salary guidelines at levels that approximate the median (the 50^th percentile) of the Comparative Compensation Information. Individual executive salaries for executives that report directly to the CEO are subject to approval by the CEO and the Committee. The CEO’s salary is subject to approval by the Committee and the Board.

Incentive Plan Compensation

We design our incentive plans with performance periods of varying durations. We provide executives with annual incentives through the Short-Term Incentive Plan, three-year incentives through the Medium-Term Incentive Plan and ten-year incentives through the Performance Option Plans. Our incentive plans do not provide mechanisms by which executives can monetize unvested equity awards or, except as described below in “Medium-Term Incentive Plan”, obtain value prior to the end of the relevant performance period. We believe that, in the aggregate, the range of performance periods in our incentive plans creates a strong alignment between the interests of our executive officers and shareholders.

The Committee analyzes our incentive plans based on actual and potential performance scenarios to ensure that the value of the incentive awards granted to our Named Executive Officers is appropriately linked to our performance. In 2008, at the request of the Committee, the Committee’s executive compensation consultants, Watson Wyatt, conducted a study of the relationship of our Named Executive Officers’ pay to the performance of our company. For purposes of the study, pay included base salary, the payout value or, if not yet paid, the 2007 year-end value of incentive awards granted during the measurement period and the aggregate annual change in the value of stock options during the measurement period. Company performance was measured based on growth in cash flow per Share, growth in earnings per Share and total shareholder return during the measurement period. The study concluded that during the three years ended December 31, 2007, the pay of our Named Executive Officers was within the top quartile of the Comparator Group, coinciding with the top quartile performance of our company relative to the Comparator Group. A similar study of chief executive officer compensation at companies comprising the S&P/TSX 60 Index conducted by the Hay Group in 2007 found similar results for the compensation of our CEO. These results demonstrate an alignment between our Named Executive Officers’ compensation and our performance, reflecting the Committee’s compensation philosophy of providing the opportunity to achieve compensation above the median through medium-term and long-term incentive plans if our performance exceeds the median performance of comparable companies.

The Comparator Group used by Watson Wyatt for the above study excluded CF Industries Holdings, Inc. and The Mosaic Company due to the unavailability of three years of historical compensation data for such companies.

Policy on Recoupment of Unearned Compensation

In November 2008, the Board approved a policy on Recoupment of Unearned Compensation. Under the policy, if the Board learns of misconduct by an executive that contributed to a restatement of our company’s financial statements, the Board can take action it deems necessary to remedy the misconduct. In particular, the Board can require reimbursement of incentive compensation or effect the cancellation of unvested performance option awards if (1) the amount of the compensation was based on achievement of financial results that were subsequently restated, (2) the executive engaged in misconduct that contributed to the need for the restatement and (3) the executive’s compensation would have been a lesser amount if the financial results had been properly reported.

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Short-Term Incentive Plan

Our Short-Term Incentive Plan is intended to aid in developing strong corporate management by providing annual financial incentives to eligible employees to achieve corporate success. The plan provides for incentive awards based on an individual’s performance and position and our financial and operational results. The plan provides incentives to individuals during a near-term performance period, which we set at one year, and focuses on successful fulfillment of short term corporate and operational goals.

The purpose of the Short-Term Incentive Plan is to tie compensation more directly to corporate and operational performance and to attract, retain, motivate and reward productive employees who support corporate and operational goals. After extending the plan to most salaried staff employees beginning on January 1, 2006, we further extended participation in the plan to Canadian and U.S. union and non-union hourly employees beginning on January 1, 2008.

We assign participants an incentive award target, expressed as a percentage of salary. Achievement of the target is determined by our cash flow return, as defined in the plan. We use cash flow as a supplemental financial measure, because management believes that it is useful as an indicator of our ability to service our debt, meet other payment obligations and make strategic investments. In addition, cash flow is strongly correlated with long-term TSR. In this way, the use of cash flow return as a performance measure under our Short-Term Incentive Plan further supports the alignment between our Named Executive Officers’ compensation and our performance.

For certain participants employed at operating facilities, one-half of the award is based upon achievement of the corporate performance target and one-half is based upon achievement of annually determined operating facility targets, including safety, environmental performance and productivity.

We generally set cash flow return targets that are challenging to achieve. Despite a strong year in 2006 based on our gross margin and total shareholder return, our cash flow return was less than 100% of the target. In an even stronger year in 2007, based on gross margin and total shareholder return, our cash flow return exceeded target but was less than the amount required to deliver the maximum payout for the Short-Term Incentive Plan awards. Given the record results of 2008, the maximum payout level for the Plan was achieved. The following table sets forth our performance under the Short-Term Incentive Plan for each of the last three years.

	2008		2007		2006
Cash Flow Return Target		23.20%		14.86%		16.10%
Actual Cash Flow Return(1)		45.85%		21.85%		14.37%
Adjusted Cash Flow Return Ratio(2)		1.9766		1.4573		0.8924

(1)	For a description of how cash flow return is calculated under the Short-Term Incentive Plan, see “— Summary Compensation Table — Non-Equity Incentive Plan Compensation”.
(2)	Due to rounding, dividing actual cash flow return by the cash flow return target may not result in the exact adjusted cash flow return ratio.

For senior executives, including the Named Executive Officers, unadjusted incentive awards can range from 0% to 200% of salary, depending upon an executive’s position, actual cash flow return above the minimum threshold return and compared to the target return. Because the value of the awards under the Short-Term Incentive Plan are capped at specified percentages of participants’ salaries, the Committee can more readily stress-test executive officer compensation and analyze the effect of significant upturns or downturns in company performance. The incentive awards are subject to adjustment (±20%) based on the executive’s individual performance and other factors that the Committee deems appropriate, provided that total adjusted awards approximate total awards at mid-point. Under the terms of the plan, we generally make no payments if our cash flow return is less than 50% of the target set by the Board for that year. For information regarding each Named Executive Officer’s 2006, 2007 and 2008 Short-Term Incentive Plan awards, see “Executive Compensation — Summary Compensation Table”.

Medium-Term Incentive Plan

Our Medium-Term Incentive Plan was intended to reward senior executives and other key employees for superior performance over a three-year performance period and for their continued contributions to our success. The performance objectives under the plan were designed to further align the interests of executives and key employees with those of shareholders by linking the vesting of awards to the total return to shareholders, or TSR, over a three-year performance period that began January 1, 2006 and ended December 31, 2008. TSR measures the capital appreciation

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in our Shares, including dividends paid during the performance period, and thereby simulates the actual investment performance of our Shares.

Under the Medium-Term Incentive Plan, we awarded participants a number of units based on the participant’s salary at the beginning of the performance period (multiplied by three), a target award percentage and the average Share price over the 30 trading days immediately preceding the performance period. The target award percentages range from 20% to 70%, depending upon the executive’s position and potential for contribution to our success.

Units granted under the Medium-Term Incentive Plan vested over the three-year performance period ended December 31, 2008. One-half of the units vested based on increases in our TSR. The remaining one-half of the units vested based on the extent to which our TSR matched or exceeded the TSR of the common shares of a group of peer companies. The peer group of companies consisted of the companies that are included in the DJUSBMI. Plan participants generally were required to continue in a qualifying position throughout the performance period as a condition to vesting. However, if a participant’s employment terminated earlier due to the participant’s retirement, disability or death, or we terminated a participant’s employment without just cause, the participant was entitled to a cash payment in settlement of a pro rata number of units, with vesting based on the achievement of performance objectives as of the date of termination. A participant who resigned or whose employment was terminated for just cause forfeited all rights to any units granted under the plan.

Depending on the achievement of the performance objectives, 0% to 150% of the units granted under the Medium-Term Incentive Plan would have vested. Achievement of the target performance objectives — a TSR of 30% and a TSR that outperformed the DJUSBMI by 5% — would have entitled a participant to 100% of the units awarded under the plan. Between 100% and 150% of the units would have vested if actual performance exceeded target performance. The maximum 150% of the units would have vested based on a TSR of 50% or more and a TSR that outperformed the DJUSBMI by 10% or more. No units would have vested if the minimum performance objectives — positive TSR and a TSR that matched the DJUSBMI — were not achieved.

The following tables set forth the percentage of units granted under the Medium-Term Incentive Plan that vested for the three-year performance period ended December 31, 2008, based on the performance of our Shares and the performance of our Shares relative to the DJUSBMI.

Vesting of MTIP units
based on our TSR
Opening Share Price	$	25.99
Closing Share Price	$	64.936
Dividends Paid/Share	$	0.90
Total Shareholder Return		153.31%
Vesting Percentage		150%

Vesting of MTIP units
based on relative TSR
PotashCorp TSR	153.31%
DJUSBMI TSR	−31.45%
PotashCorp TSR – DJUSBMI TSR	184.76%
Vesting Percentage	150%

Total Vesting Percentage 150%

We will settle vested units in cash based on the average price of our common stock over the last 30 trading days of the performance period. The price used to determine the cash payout could not exceed 300% of the market value of a Share as at the beginning of the performance cycle. Because the value of the units granted under the Medium-Term Incentive Plan were capped at 300% of the market value of a Share, the Committee could readily stress-test executive officer compensation and analyze the effect of significant upturns or downturns in company performance.

As set forth in the table above, 150% of the performance units vested based on our performance during the three-year performance period ended December 31, 2008. The total vesting percentage reflects the vesting of one-half of the units at 150% based on our TSR and the vesting of one-half of the units at 150% based on our TSR relative to the TSR of the DJUSBMI. The vested performance units will be settled and paid out in cash in an amount equal to $64.936 per unit, which is the average closing price of our common stock for the last 30 trading days of 2008. See “Executive Compensation — Summary Compensation Table — Stock Awards” for the complete vesting schedule applicable to the Medium-Term Incentive Plan.

We adopted a new Medium-Term Incentive Plan for the three-year performance period that began January 1, 2009 and ends December 31, 2011. The plan is substantially similar to the Medium-Term Incentive Plan for the performance period ending December 31, 2008 discussed above. Relative performance under the new Medium-Term Incentive Plan is based on the performance of the DAXglobal Agribusiness Index.

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Long-Term Incentives (Stock Options)

We provide our executives with long-term incentives through our Performance Option Plans. Our Performance Option Plans award options to senior executives and other key employees for superior performance over a three-year performance period. Options vest based on metrics with a demonstrated relationship to total shareholder return. The options have a ten year term from the date of grant, providing incentives to executives to promote long-term shareholder interests.

We make one option grant per year following shareholder approval of the Performance Option Plan at the annual meeting of shareholders. We have determined not to make off-cycle option grants during the year. The number of options that the Board grants annually is that number of options that will result in the appropriate total compensation for each management level, as determined by reference to the Comparative Compensation Information. See “Compensation Principles”. Options are not available for grant after the end of the calendar year in which the Performance Option Plan is approved by shareholders.

— Performance Option Plans

On May 8, 2008, our shareholders approved the 2008 Performance Option Plan under which we could offer, after February 20, 2008 and before January 1, 2009, options for the issuance of up to 1,000,000 Shares pursuant to the exercise of options to eligible officers and employees. As of February 20, 2009, options to acquire 485,500 Shares were issued and outstanding under the 2008 Performance Option Plan. As of February 20, 2009, options to acquire an additional 1,714,050 Shares were issued and outstanding under the 2007 Performance Option Plan. Options to acquire 2,659,800 Shares and 2,661,464 Shares have vested and are outstanding under the 2006 Performance Option Plan and the 2005 Performance Option Plan, respectively.

For 2009, we are requesting shareholder approval of an amount of 1,000,000 options to be available for grant under the provisions of the 2009 Performance Option Plan. We expect that this amount is sufficient for one annual grant to be made after the Meeting and before January 1, 2010. The 2009 Performance Option Plan incorporates our newly-adopted Recoupment Policy and a double-trigger change of control provision. See “Policy on Recoupment of Unearned Compensation” above and “Adoption of 2009 Performance Option Plan” on page 28.

Under our Performance Option Plans, the exercise price of an option shall not be less than the quoted market closing price of our Shares on the last trading day immediately preceding the date of grant. Option vesting is determined by achieving corporate performance goals that historically have correlated with our TSR and the relative performance of our TSR to the DJUSBMI TSR. We measure performance over a three-year period. A vesting schedule determines the percentage of options vested at the end of the three-year period and ties the level of total compensation to our performance. An option’s maximum term is currently ten years from the date of grant.

In connection with the development of our first Performance Option Plan in 2005, the Committee worked with Hewitt Associates to use 10-year historical data to analyze the correlation between our cash flow return on investment (“CFROI”) minus our weighted average cost of capital (“WACC”) and our TSR performance relative to the DJUSBMI performance. Having established the link between our CFROI-WACC and TSR performance levels relative to the DJUSBMI performance, the Committee and Hewitt Associates developed a schedule based upon our CFROI-WACC levels to vest appropriate amounts of Shares at different performance levels. Consultants at Watson Wyatt also reviewed and confirmed this methodology.

In order to deliver a level of total compensation that is consistent with the level of corporate performance achieved, data on compensation provided by the Comparative Compensation Information is analyzed on an annual basis to determine the 25^th, 50^th, and 75^th percentile compensation levels for our management positions. We link these compensation study results and the vesting schedule to determine option grant levels that will deliver the appropriate compensation for the performance delivered. We strive to set the target value of each Named Executive Officer’s option grant at a level that, including such Named Executive Officer’s other compensation, will deliver compensation in the upper quartile of the Comparative Compensation Information if company performance is also in the upper quartile relative to the Comparative Compensation Information.

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The following table sets forth the percentage of stock options granted under the 2005 Performance Option Plan and the 2006 Performance Option Plan that vested for the three-year performance periods ended December 31, 2007 and December 31, 2008, respectively.

	CFROI-WACC to
	Achieve Maximum		Actual		Actual
	Vesting		CFROI-WACC(1)		Vesting Percentage
2005 Performance Option Plan		2.50		8.29		100%
2006 Performance Option Plan		2.50		16.50		100%

⁽¹⁾  For a description of how CFROI-WACC is calculated and for the full Performance Option Plan vesting schedule, see “Grants of Plan-Based Awards — Option Awards”.

— Stock Option Plan — Officers and Employees

As at February 20, 2009, options for a total of 5,033,916 Shares were issued and outstanding under the Stock Option Plan — Officers and Employees (the “Stock Option Plan”). Options were granted with an exercise price equal to the quoted market closing price of our Shares on the last trading day immediately preceding the date of grant. The options became exercisable over two years and expire after ten years.

Currently, all options granted under the Stock Option Plan are exercisable. Pursuant to a resolution of the Board on November 16, 2006, no additional options may be granted under the Stock Option Plan. See “Performance Option Plans” above for a description of the incentive plans under which we currently grant stock options to officers and employees.

Post-Retirement and Termination Compensation

Pension Benefits

We provide pension benefits to supplement the income of our employees after their retirement. We provide post-retirement benefits to employees generally and typically do not consider an employee’s past compensation in determining eligibility for post-retirement benefits. In Canada, eligible employees, including senior executives, participate in the Potash Corporation of Saskatchewan Inc. Pension Plan, which we refer to as the Canadian Pension Plan, and a supplemental retirement income plan, which we refer to as the Canadian Supplemental Plan. In the United States, eligible employees, including senior executives, participate in a pension plan, which we refer to as the U.S. Pension Plan, and a supplemental pension plan, which we refer to as the U.S. Supplemental Plan. The Canadian Pension Plan is a defined contribution plan that includes individual and company contributions. Each of the Canadian Supplemental Plan, the U.S. Pension Plan and the U.S. Supplemental Plan is a defined benefit plan with benefits calculated based on the participant’s service and the plan’s benefit formula. In addition, certain U.S. employees participate in the 401(k) Plan and certain Canadian employees participate in the Savings Plan. We make contributions to the 401(k) Plan and the Savings Plan for the benefit of participants in accordance with the terms of such plans. For information about the amount of company contributions made for the benefit of Named Executive Officers pursuant to such plans, see “Executive Compensation — Summary Compensation Table”. We do not grant extra years of credited service under our pension plans except as discussed under “— Change in Control Agreements” below and otherwise as appropriate in exceptional circumstances.

We maintain the Canadian Pension Plan, which generally requires all participating employees to contribute 5.5% of their earnings (or such lesser amount as is deductible for Canadian income tax purposes) to the Canadian Pension Plan and our company to contribute an equal amount. When an individual retires, the full amount in the individual’s account is used to produce the pension.

We maintain the Canadian Supplemental Plan, which provides a supplementary pension benefit for certain of our officers and managers. Under the basic terms of the Canadian Supplemental Plan, a pension benefit is provided in an amount equal to 2% of the average of the participant’s three highest years’ earnings multiplied by the participant’s years of pensionable service (to a maximum of 35 years), minus any annual retirement benefit payable under the Canadian Pension Plan. For the purposes of the Canadian Supplemental Plan, earnings are defined as the participant’s annual base pay plus 100% of all bonuses paid or payable for such year pursuant to the Short-Term Incentive Plan. The normal retirement age pursuant to the Canadian Supplemental Plan is 65, with a reduction in benefits for early retirement prior to age 62. No benefits pursuant to the Canadian Supplemental Plan are payable if termination occurs prior to age 55.

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Benefits payable to employees who have reached the minimum age (55) for retirement pursuant to the Canadian Supplemental Plan may be secured by letters of credit provided by us or may be otherwise secured by us, if appropriate. Benefits are generally paid in the form of a single lump sum payment equal to the actuarial present value of the annual benefits or, in certain circumstances, an annuity for life.

For a designated group of senior officers, including Mr. Doyle and Mr. Brownlee, the benefit payable under the Canadian Supplemental Plan is an amount equal to (1) 5% of the average of the senior officer’s three highest years’ earnings multiplied by the senior officer’s years of pensionable service (to a maximum of 10 years), plus (2) 2% of the average of the senior officer’s three highest years of earnings multiplied by the senior officer’s years of pensionable service in excess of 25 years to a maximum of 10 additional years, minus (3) any annual retirement benefit payable under the Canadian Pension Plan and certain other tax qualified plans.

Prior to January 1, 1999, PCS Phosphate Company, Inc. and PCS Nitrogen, Inc. maintained separate defined benefit pension plans (the “Phosphate Pension Plan” and the “Nitrogen Pension Plan”) for their respective eligible U.S. employees, including Mr. Dietz and Mr. Delaney, in the case of PCS Nitrogen. Effective January 1, 1999, we consolidated our pension plans for U.S. employees and the Nitrogen Pension Plan was merged with and into the Phosphate Pension Plan to form the U.S. Pension Plan.

Under the U.S. Pension Plan, participants age 65 with 5 years of service (or age 62 or older with at least 20 years of service) receive a retirement benefit of 1.5% of the participant’s final average compensation (as defined below) multiplied by the participant’s years of service accrued after December 31, 1998 (maximum 35 years) in the form of a life annuity. Participants with service accrued prior to January 1, 1999 under previous plans, including Mr. Dietz and Mr. Delaney, will have a portion of their retirement benefit calculated under the formulas for such plans. Employees not meeting the minimum age or years of service requirement at termination will receive a reduced benefit.

Pursuant to the U.S. Pension Plan, final average compensation is defined as compensation for the highest paid 60 consecutive months of service out of the last 120 months of service. Compensation is defined as a participant’s base pay plus the annually paid bonus under our Short-Term Incentive Plan. The retirement benefits from the U.S. Pension Plan for Mr. Dietz, Ms. Irwin and Mr. Delaney are subject to certain limitations on the amount of retirement benefits that may be provided under U.S. tax qualified pension plans. The U.S. Supplemental Plan is intended to provide a participant with the same aggregate benefits that such participant would have received had there been no legal limitations on the benefits provided by the U.S. Pension Plan. No benefits pursuant to the U.S. Supplemental Plan are payable if termination occurs prior to age 55.

In February 2009, we adopted amendments, effective with respect to services provided on or after July 1, 2009, to the Canadian Supplemental Plan, the U.S. Supplemental Plan, and agreements we had entered into with certain of our senior officers, including Mr. Doyle and Mr. Brownlee, concerning their Supplemental Plan benefits. For the purpose of calculating a participant’s benefit under the Canadian Supplemental Plan, the U.S. Supplemental Plan and the individual agreements, the amendments limit the inclusion of awards paid pursuant to our Short-Term Incentive Plan to 100% of base salary for the relevant calendar year. In addition, the amendments modify the calculation of a participant’s benefit under the Canadian Supplemental Plan and the individual agreements to be based on the participant’s three highest consecutive years’ earnings rather than the participant’s three highest years’ earnings.

As calculated in accordance with generally accepted accounting principles in Canada (“Canadian GAAP”) for financial statement reporting purposes, the following table sets forth our total liability under the Canadian Supplemental Plan and the U.S. Supplemental Plan for all current and former executive officers and other covered employees as of December 31, 2008 and December 31, 2007.

	December 31,
	2008		2007
Total Supplemental Plan Liability	$	25.6 million	$	23.1 million

Severance Benefits

In cases of termination without cause, we strive to provide appropriate severance benefits that take into account the potential difficulty in obtaining comparable employment in a short period of time and provide for a complete separation between the terminated employee and our company. Our current severance policy for termination without cause, which is generally applicable to salaried employees, including the Named Executive Officers, is to provide notice of impending termination, or payment of salary in lieu of notice, equivalent to two weeks for each complete year of service (subject to a

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minimum of 4 weeks and a maximum of 52 weeks). Such policy is superseded by specific termination provisions contained in any applicable written agreement and may be subject to adjustment.

Change in Control Agreements

Effective December 30, 1994, we and, where applicable, PCS Sales, entered into change in control agreements with certain senior executives, including Mr. Doyle and Mr. Brownlee. At that time, we deemed such agreements to be appropriate arrangements with senior executives. Subsequently, we have not entered into new change in control agreements. The initial term of each 1994 change in control agreement was through December 31, 1997. The term of each agreement has automatically renewed for successive one-year periods since December 31, 1997 and continues to be subject to automatic renewal for successive one-year terms until the employee reaches age 65 or unless either party gives notice of termination.

Benefits pursuant to the change in control agreements require both a change in control and an involuntary termination of the executive’s employment (including constructive dismissal) within two years following a change in control. The severance benefit entitlements upon termination of employment following a change in control of our company are:

•  a lump-sum payment of three times the executive’s current base salary and average bonus for the last three years;

•  a lump-sum payment of the pro-rata target bonus for the year in which the termination occurs;

•  immediate vesting and cash out of all outstanding Medium-Term Incentive Plan awards;

•  a credit of three additional years of service under the Canadian Supplemental Plan;

•  a three-year continuation of medical, disability and group term life insurance, provided that these benefits terminate upon obtaining similar coverage from a new employer or upon commencement of retiree benefits; and

•  financial or outplacement counseling to a maximum of Cdn$10,000.

Payments to be made pursuant to the foregoing and relating to the employee’s bonus may be deferred by the executive for up to three years or for such other period as may be permitted by the Income Tax Act (Canada). Mr. Doyle is entitled to a “gross up” of payments to cover excise taxes under the golden parachute rules of the Internal Revenue Code, if payable in respect of such benefits.

The change in control agreements further provide that all outstanding non-exercisable options granted to the executive become exercisable upon the occurrence of a change in control. In the event no public market for the Shares exists, we (or PCS Sales, as the case may be) will compensate the executive for the value of his or her options based on a Share value approved by our shareholders upon a change in control, or, if no such value has been approved, the market value of the Shares when last publicly traded.

For additional information about the above change in control agreements, including the definitions of change in control and termination, see the Form of Agreement dated December 30, 1994, filed as Exhibit 10(p) to our annual report on Form 10-K for the year ended December 31, 1995.

Compensation Consultants and Comparator Groups

To gather information about competitive compensation practices, the Committee relies on the input and recommendations of independent compensation consultants and data provided by broad-based executive compensation surveys. Although this information is an important tool in the Committee’s processes, the decisions made by the Committee are solely the responsibility of the Committee and reflect other factors and considerations. For a discussion of the factors that the Committee considers in making compensation decisions, see “Compensation Structure and Policies”, “Compensation Principles” and “Elements of Executive Compensation” above.

In 2005, the Committee engaged Watson Wyatt as executive compensation consultants. Watson Wyatt reports to the Chair of the Committee and provides input to the Committee on the philosophy and competitiveness of the design and award values for certain of our executive and director compensation programs. In addition, Watson Wyatt assists in the evaluation of compensation arrangements associated with certain strategic opportunities.

In accordance with our adherence to the best practice of retaining independent executive compensation consulting, Watson Wyatt does not perform any other consulting services for us. Any work other than executive compensation

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consulting services performed for us by Watson Wyatt must be approved in advance by the Chair of the Committee. The following table sets forth the fees we paid to Watson Wyatt in 2007 and 2008:

	Year Ended December 31,
	2008		2007(1)
Compensation consulting services	$	362,300	$	267,400
Other services		—		—

⁽¹⁾  In 2007, we also paid Hewitt Associates $46,100 for its proprietary Total Compensation Measurement, or TCM, data services, which provided compensation data for selected executive and director positions. We no longer use Hewitt Associates’ TCM data services and did not pay Hewitt Associates any fees in 2008 for compensation consulting services. Hewitt Associates has historically provided other consulting services for us, including actuarial consulting, employee benefits design, finance consulting and recordkeeping services. In 2007, we paid Hewitt Associates approximately $395,200 for actuarial and other services.

The Committee uses executive compensation analyses prepared on at least an annual basis by Watson Wyatt and other independent compensation consultants. Such analyses currently consist of (1) a group of 20 publicly traded U.S. and Canadian companies, or the Comparator Group, selected on the basis of a number of factors, including similar industry characteristics, revenues and market capitalization, and (2) additional executive compensation surveys of U.S.-based companies with similar industry and revenue size gathered by three compensation consulting services, or the Additional Surveys.

The 20 companies included in the Comparator Group in 2008 were:

Air Products and Chemicals, Inc. 
Agrium Inc.
Arch Coal Inc.
Ashland Inc.
Barrick Gold Corporation
Cameco Corporation
CF Industries Holdings, Inc. Eastman Chemical Company
Ecolab Inc.
Martin Marietta Materials, Inc.
Monsanto Company
The Mosaic Company
Newmont Mining Corporation
Nova Chemicals Corporation Peabody Energy Corporation
PPG Industries, Inc.
Praxair, Inc.
Rohm and Haas Company
The Valspar Corporation
Vulcan Materials Company

In 2008, the three Additional Surveys were (1) the WWDS 2008/2009 Survey Report on Top Management Compensation, (2) the Mercer 2008 US Benchmark Database — Executive and (3) the Towers Perrin 2008 US CDB General Industry Executive Database.

Executive Share Ownership Guidelines

We strongly support Share ownership by our executives. In November 2004, we introduced minimum shareholding guidelines, to be met by November 2009 for the then-current executive officer group. Any individual promoted into a position subject to these guidelines will have a five-year period within which to meet the share ownership requirements. The shareholding requirements reflect the value of Shares held and can be met through direct or beneficial ownership of Shares, including Shares held through our qualified defined contribution savings plans. Options and performance units (under the Medium-Term Incentive Plan) are not included in the definition of Share ownership for purposes of the guidelines.

The Guidelines are:

	Share Ownership
Title	Guideline
Chief Executive Officer	5 times base salary
Chief Financial Officer, Chief Operating Officer, Senior Vice	3 times base salary
Presidents and Division Presidents
Designated Senior Vice Presidents and Vice Presidents	1 times base salary

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As of February 20, 2009, all of the Named Executive Officers hold Shares with a value in excess of the ownership guidelines. The table below sets forth, for each Named Executive Officer, the number and value of Shares held, the value of Shares required to meet the ownership guidelines and the value of Shares held as a multiple of the Named Executive Officer’s base salary.

Named Executive	Number of Shares	Value of Shares	Value Required to	Value Held as
Officer	Held	Held	Meet Guidelines	Multiple of Salary
William J. Doyle	481,413(1)	$40,419,507	$5,460,000	37.0x
Wayne R. Brownlee	58,499	$ 4,911,546	$1,483,200	9.9x
James F. Dietz	57,589	$ 4,835,179	$1,458,600	9.9x
Barbara Jane Irwin	53,446	$ 4,487,343	$1,185,600	11.4x
G. David Delaney	39,831	$ 3,344,240	$1,228,500	8.2x

⁽¹⁾  Includes 45,997 Shares held in the William J. Doyle 2007 Family Descendents Trust, 19,898 Shares held in the William & Kathy Doyle Foundation, 216,381 Shares held in the WJ Doyle Revocable Trust and 199,137 Shares held in the Doyle Family LLC.

Chief Executive Officer Compensation

The Committee reviews annually the CEO’s salary, any awards under our Short- and Medium-Term Incentive Plans and any grant of options under our option plans and makes its recommendations to the Board. With the assistance of Watson Wyatt, the Committee analyzes the relationship between our performance and the CEO’s annual earnings. The CEO’s annual salary is determined primarily on the basis of his individual performance and our company’s performance. While no mathematical weighting formula is used, the Committee considers all factors that it deems relevant, including our financial results, our TSR and performance relative to similar companies within our industry, survey compensation data obtained from our compensation consultants, the duties and responsibilities of the CEO, the CEO’s individual performance relative to written objectives established at the beginning of each year, current compensation levels and the effect of significant upturns or downturns in our performance. Awards pursuant to the Short- and Medium-Term Incentive Plans and under the option plans are made in accordance with the plans as outlined above. If minimum targets set under the Short- and Medium-Term Incentive Plans and option plans are not met, the CEO does not receive compensation pursuant to those plans.

With the assistance of Watson Wyatt, the Committee also references the compensation of the CEOs in the Comparative Compensation Information. The comparison of our CEO compensation to the Comparative Compensation Information incorporates many factors including the relative sales and market capitalization of the companies, their profitability and shareholder return history, the duties of the CEO and any other extenuating or special circumstances. In general, we set CEO cash compensation at the median of the applicable range.

In January 2009, the Committee and the Board reviewed Mr. Doyle’s performance relative to his 2008 performance goals for the purpose of determining his 2009 base pay level and 2008 short-term incentive bonus award. At that time, a 2009 salary of $1,092,000 and a short-term incentive bonus award of $2,075,000 for 2008 performance were recommended by the Committee and approved by the Board. The goals and related achievements upon which the decision was based were:

1.  Improve all measurable safety indices with the emphasis on reducing serious injuries so we can achieve our goal of providing the safest work environment for our employees.

The 2008 overall safety results did not meet our expectations. Our nitrogen segment had an outstanding performance with zero lost time injuries and a 25% reduction in the recordable rate of injuries. Unfortunately, lost time injuries and the recordable rate of injuries increased 63% and 10%, respectively, in each of the potash and phosphate segments. A fatality occurred at Lanigan when a truck overturned underground.

2.  Exceed the budget approved for 2008, including earnings per Share (“EPS”) and cash flow per Share (“CFPS”) targets by 25%.

We exceeded each of our 2008 budgeted targets for EPS and CFPS by more than 25%.

3.  Continue to drive the “Potash First” strategy by staying on top of all global opportunities while at the same time being open to strategic alternatives for phosphate and nitrogen should an attractive alternative present itself.

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We kept the Board informed and engaged about strategic opportunities and related considerations about the company, the industry and relevant external events, in order to obtain the best Board feedback possible to test management’s assumptions and strategy. We continued to drive our “Potash First” strategy by increasing our investment in Israel Chemicals Ltd. to 11% and our investment in Sinofert Holdings Limited to 22%. We initiated and continued to actively pursue other global potash opportunities and strategic developments in phosphate and nitrogen.

4.  Outperform our peer group of basic materials companies.

In 2008, our common stock outperformed the DJUSBMI with an annual total shareholder return of approximately –48.9%, compared to approximately –52.0% for the DJUSBMI. Our common stock fell short of sector average, which was approximately –28.6%.

5.  Grow the revenue base and bottom line for our company through strategic use of capital.

The following 2008 events and projects are expected to expand our revenue base and contribute to future annual gross margin:

(a)	the sale of our phosphate feed plant in Brazil;
(b)	a full year of natural gas sales in New Brunswick;
(c)	the completion of the first round of our expansion and debottlenecking projects at Rocanville, Allan and Lanigan;
(d)	our ongoing expansion and debottlenecking projects at Patience Lake, Cory, New Brunswick, Rocanville and Allan; and
(e)	the construction of three additional Silicon Tetraflouride plants and continued work on a new sulfuric acid plant at Aurora.

6.  Show measurable success in leadership development and succession planning for our employees.

With 72.7% of senior staff openings filled by internal candidates, we fell just short of our target of 75%. We had four high level retirements and one termination that were successfully filled by internal candidates. More than 200 staff attended management and leadership skills training courses. Our management team conducted its annual succession planning review and discussed the results with the Committee.

7.  Lead management’s effort to make sure it does its part in the pursuit of the best possible corporate governance for our company.

Transparency and accountability are the foundation of excellent corporate governance. The CEO personally engaged numerous stakeholders, including shareholders, the analyst community, media and employees in personal meetings and conference calls throughout the year. In addition, the CEO supported the Board’s response to concerns raised by RiskMetrics regarding supplemental retirement plans for executives by adopting features recommended by RiskMetrics, including a cap on includable income that would primarily affect the CEO. We also engaged shareholders who expressed interest in the company’s environmental, human rights and executive compensation practices.

Our commitment to excellence in corporate governance was recognized by external monitors, including The Globe and Mail, which ranked our company 1^st out of more than 200 Canadian companies in its 2008 corporate governance rankings. The Canadian Coalition for Good Governance presented our company with its Governance Gavel Award for excellence in director disclosure. The Canadian Institute of Chartered Accountants recognized the quality of our corporate reporting and disclosure practices with its Award of Excellence in the Mining category for our 2007 Annual Report, and presented us with overall Awards of Excellence for our website disclosure and for our Sustainability Report.

8.  Improve product quality through strict adherence to size guide number (SGN) and uniformity index (UI) measurements so we can provide the highest quality products to our customers.

Product quality performance improved significantly in 2008. The total number of customer complaints declined by more than 20%, principally in our phosphate segment. Complaints related to dust, lumps or sizing in solid products were down 15%, and we received no customer complaints regarding SGN or UI measurements.

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9.  Provide leadership for our company with the investment community, within our industry and in the communities in which our people work and reside.

In 2008, we received high marks in investor surveys relating to “Confidence in Management” and “Communications with the Financial Community”. On a scale of 1 to 10, we received a rating above 8.5 for each category in these surveys, including a rating of 9.5 for management’s knowledge of the business and a rating of 9.3 for overall communications. Our ratings in these surveys were in the top quartile for all categories. The 2008 Christensen Survey ranked us as the top company in our sector for corporate and investor communications. In addition, surveys of community leaders were conducted in three communities in which we operate (Lima, Marseilles and Weeping Water) regarding our community involvement, business practices and economic impact. We averaged an overall rating of 4.0 (on a scale of 1 to 5), which is in the top quartile for these surveys.

The CEO served on the boards of key industry groups, including serving as Chairman of the Nutrients for Life Foundation, Vice-President, Sustainability of the International Fertilizer Association and a member of the boards of The Fertilizer Institute and the International Fertilizer Industry Association. The CEO delivered the keynote address at the SouthWest Fertilizer Conference and delivered “state of the industry” speeches to customer groups. The CEO also addressed the Chicago Mercantile Exchange on the dynamics of global agricultural and fertilizer commodities markets, published an op-ed piece in The Globe and Mail regarding the importance of the fertilizer industry to the world economy and conducted numerous media interviews.

10.  Find new ways to make it easier for our customers to do business with us.

Seven important customer initiatives were introduced or continued in 2008:

(a)	Upgraded and expanded our North American and international transportation and distribution system to: (i) improve asset utilization; (ii) improve loading, unloading and delivery times; (iii) increase storage capacity; (iv) offer additional transportation mode alternatives; and (v) bring our product closer to our customers;
(b)	Collaborated with customers in developing strategies to optimize their supply chain and reduce rail cycle times and seasonality in their business;
(c)	Partnered with customers in our operational Best Practices workshops to discuss and share information to ensure the highest levels of product quality, reliability and service;
(d)	Assumed an active leadership role in industry trade associations, working closely with governmental and other agencies to address transportation policy matters and proposed ammonia railcar designs to ensure the safe and reliable shipment of products to our customers;
(e)	Expanded the delivery of market analysis reports, targeting the issues and trends most important to our fertilizer, feed and industrial customers;
(f)	Supplemented our Safe Feed/Safe Food certification by voluntarily implementing enhanced risk analyses and control tools for assessing and restricting contaminants, demonstrating our pledge to food safety and enhancing consumer confidence in the products we provide; and
(g)	Used information technology to enhance and streamline our customers’ ability to forecast and monitor the sourcing, procurement and delivery of our products to their end-use locations.

11.  Improve the environmental commitment and performance across our company’s operations to positively impact the climate, our use of natural resources, and our environmental stewardship.

Environmental performance continued to improve in 2008. The number of permit excursions and reportable releases in the U.S. declined 35% to 11 in total, while the number of spills in Canada and the U.S. was flat at 9 incidents total. In our potash segment, we increased our emphasis on environmental management at the site level and expanded our training of site personnel on environmental awareness and responsibilities.

Mr. Doyle’s award under our Short-Term Incentive Plan for 2008 as set forth in the “Summary Compensation Table” and salary for 2009 were determined in accordance with the foregoing and approved by the Committee and all other independent members of the Board.

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Executive Compensation

Summary Compensation Table⁽¹⁾

The following table sets forth, for our 2008, 2007 and 2006 fiscal years, all compensation earned by the individuals who served as our Chief Executive Officer and our Chief Financial Officer, and by each of our other three most highly compensated executive officers as of the end of calendar year 2008, for services rendered to us and our subsidiaries (the “Named Executive Officers” or “NEOs”).

Our Named Executive Officers may change from year to year due to fluctuations in our executive officers’ annual compensation as calculated in accordance with SEC regulations. For example, Garth W. Moore, President, PCS Potash, was a Named Executive Officer for 2007. However, due to the FAS 123R Option Award calculation (as described in footnote (3) below) for retirement eligible officers, Mr. Moore, who is retirement eligible, is not a Named Executive Officer for 2008 and does not appear in the Summary Compensation Table below.

												Change in
												Pension and
										Non-Equity		Nonqualified
										Incentive		Deferred
						Stock		Option		Plan		Compensation		All Other
Name and			Salary		Bonus	Awards(2)		Awards(3)		Compensation(4)		Earnings(5)		Compensation(6)		Total
Principal Position	Year		($)		($)	($)		($)		($)		($)		($)		($)
(a)	(b)		(c)		(d)	(e)		(f)		(g)		(h)		(i)		(j)
William J. Doyle President and Chief Executive Officer		2008 2007 2006		1,092,000 1,040,000 1,000,000	— — —		2,919,270 3,830,786 1,120,382		6,508,418 7,652,960 5,797,500		2,075,000 2,190,000 750,000		4,173,645 2,340,578 94,917		257,984 134,297 180,958		17,026,317 17,188,621 8,943,757
Wayne R. Brownlee Executive Vice President, Treasurer and Chief Financial Officer		2008 2007 2006		494,400 480,000 460,000	— — —		863,187 1,132,709 331,281		1,802,292 2,018,887 1,913,173		692,000 578,000 300,000		2,238,102 406,802 276,707		43,693 44,114 58,556		6,133,674 4,660,512 3,339,717
James F. Dietz Executive Vice President and Chief Operating Officer		2008 2007 2006		486,200 463,000 445,000	— — —		835,006 1,095,729 320,466		1,754,121 2,049,900 1,932,500		647,000 621,000 270,000		196,209 62,363 179,240		42,795 40,133 41,397		3,961,331 4,332,125 3,188,603
Barbara Jane Irwin Senior Vice President, Administration		2008 2007 2006		387,600 372,500 359,000	— — —		588,753 772,586 225,957		1,005,802 949,404 566,967		435,000 400,000 180,000		35,803 21,171 53,059		21,978 20,094 19,544		2,474,936 2,535,755 1,404,527
G. David Delaney President, PCS Sales		2008 2007 2006		399,750 375,000 348,000	— — —		560,573 735,606 215,141		965,455 1,082,647 566,967		450,000 450,000 171,000		23,287 8,793 38,763		33,554 34,330 32,835		2,432,619 2,697,197 1,372,706

⁽¹⁾  Those amounts that were paid in Canadian dollars have been converted to United States dollars using the average exchange rate for the month prior to the date of payment.

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⁽²⁾  Reports amounts calculated in accordance with revised Statement of Financial Accounting Standards No. 123R, “Share-Based Payment”, or FAS 123R, under generally accepted accounting principles in the United States, or US GAAP, for performance share units granted pursuant to our Medium-Term Incentive Plan in effect for the three-year performance period January 1, 2006 to December 31, 2008. See “Compensation Discussion and Analysis — Medium-Term Incentive Plan”. For the FAS 123R calculations, the value of the performance share units was estimated quarterly using a Monte Carlo valuation model with the following assumptions:

	Risk-Free				Correlation Between
	Interest				our Common Share		Volatility of Our		Volatility of
	Rate		Dividend Yield		Price and DJUSBMI		Common Share Price		DJUSBMI
Quarter Ended March 31, 2006		4.816%		1.24%		0.52		27.87%		16.68%
Quarter Ended June 30, 2006		5.122%		1.18%		0.56		30.85%		17.79%
Quarter Ended September 30, 2006		4.614%		1.15%		0.58		29.83%		17.73%
Quarter Ended December 31, 2006		4.808%		1.12%		0.48		31.53%		17.75%
Quarter Ended March 31, 2007		4.574%		1.09%		0.49		32.58%		17.90%
Quarter Ended June 30, 2007		4.858%		1.02%		0.50		33.36%		17.22%
Quarter Ended September 30, 2007		3.984%		0.97%		0.52		35.16%		18.85%
Quarter Ended December 31, 2007		3.177%		0.90%		0.68		43.61%		22.60%
Quarter Ended March 31, 2008		1.497%		0.84%		0.75		49.07%		28.34%
Quarter Ended June 30, 2008		2.198%		0.78%		0.76		51.95%		30.32%
Quarter Ended September 30, 2008		1.564%		0.71%		0.80		59.74%		36.62%

(3)	Reports amounts calculated in accordance with FAS 123R for options granted pursuant to the 2008 Performance Option Plan, 2007 Performance Option Plan and the 2006 Performance Option Plan, respectively. The amounts reported for Mr. Doyle, Mr. Brownlee and Mr. Dietz represent the full grant date fair value of the awards in accordance with FAS 123R, because each of the Named Executive Officers are eligible for retirement. See “Compensation Discussion and Analysis — Long-Term Incentives”. For a discussion of the assumptions made in the valuation of the awards, see Notes 27 and 33 to our consolidated financial statements for the fiscal year ended December 31, 2008, Notes 27 and 33 to our consolidated financial statements for the fiscal year ended December 31, 2007 and Notes 26 and 32 to our consolidated financial statements for the fiscal year ended December 31, 2006.
(4)	Reports amounts awarded pursuant to our Short-Term Incentive Plan for 2008, 2007 and 2006 performance, which amounts were paid in 2009, 2008 and 2007, respectively. See “Compensation Discussion and Analysis — Short-Term Incentive Plan”.
(5)	Reports the aggregate annual change in the actuarial present value of each Named Executive Officer’s accumulated benefit under the Canadian Supplemental Plan, the U.S. Pension Plan and the U.S. Supplemental Plan, as set forth in the below table.

		William J.		Wayne R.		James F.			Barbara Jane		G. David
		Doyle		Brownlee		Dietz			Irwin		Delaney
	2008	$	4,173,645	$	2,238,102		—			—		—
Canadian Supplemental Plan	2007		2,340,578		406,802		—			—		—
	2006		94,917		276,707		—			—		—
	2008		—		—	$	19,181		$	3,797	$	(13,894	)
U.S. Pension Plan	2007		—		—		(27,946	)		8,703		(7,738	)
	2006		—		—		98,885			17,991		18,514
	2008		—		—	$	177,028		$	32,006	$	37,181
U.S. Supplemental Plan	2007		—		—		90,309			12,468		16,531
	2006		—		—		80,354			35,068		20,249
	2008	$	4,173,645	$	2,238,102	$	196,209		$	35,803	$	23,287
Total	2007		2,340,578		406,802		62,363			21,171		8,793
	2006		94,917		276,707		179,240			53,059		38,763

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⁽⁶⁾  The following table sets forth the amounts attributable to each of the compensation items included in “All Other Compensation” for each Named Executive Officer.

		William J.		Wayne R.		James F.			Barbara Jane			G. David
		Doyle		Brownlee		Dietz			Irwin			Delaney
	2008	$	10,427	$	10,446		—			—			—
Company Contributions to Canadian Pension Plan	2007		8,590		8,568		—			—			—
	2006		8,195		8,218		—			—			—
	2008		65,044		29,780	$	20,575	(a)	$	18,075	(b)	$	18,150	(c)
Company Contributions to Savings Plan or 401(k) Plan	2007		60,285		27,779		20,039	(a)		17,520	(b)		17,190	(c)
	2006		60,000		27,600		19,807	(a)		17,251	(b)		16,320	(c)
	2008		9,977		3,280		8,487			3,063			1,736
Life Insurance Premiums Paid for the Benefit of NEO	2007		10,122		3,690		7,354			2,574			1,391
	2006		10,601		4,240		7,459			2,293			1,213
	2008		20,624		—		—			—			—
Medical Insurance Premiums Paid on Behalf of NEO	2007		17,014		—		—			—			—
	2006		14,040		6,743		—			—			—
	2008		36,093		187		1,594			840			798
Tax Gross-ups for Taxable Benefits	2007		11,663		6,192		—			—			—
	2006		19,614		—		2,365			—			—
	2008		115,819		—		12,139			—			12,870
Perquisites(d)	2007		55,708		11,264		12,740			—			15,749
	2006		68,508		11,755		11,766			—			15,302
	2008	$	257,984	$	43,693	$	42,795		$	21,978		$	33,554
Total	2007		163,383		57,493		40,133			20,094			34,330
	2006		180,958		58,556		41,397			19,544			32,835

(a)	For 2008, includes $13,435 in contributions to the 401(k) Plan on behalf of Mr. Dietz and $7,140 that exceeds the 401(k) Plan statutory limit and is therefore immediately taxable and paid to Mr. Dietz in cash. For 2007, includes $13,289 in contributions to the 401(k) Plan on behalf of Mr. Dietz and $6,750 that exceeds the 401(k) Plan statutory limit and is therefore immediately taxable and paid to Mr. Dietz in cash. For 2006, includes $13,057 in contributions to the 401(k) Plan on behalf of Mr. Dietz and $6,750 that exceeds the 401(k) Plan statutory limit and is therefore immediately taxable and paid to Mr. Dietz in cash.
(b)	For 2008, includes $13,650 in contributions to the 401(k) Plan on behalf of Ms. Irwin and $4,425 that exceeds the 401(k) Plan statutory limit and is therefore immediately taxable and paid to Ms. Irwin in cash. For 2007, includes $13,350 in contributions to the 401(k) Plan on behalf of Ms. Irwin and $4,170 that exceeds the 401(k) Plan statutory limit and is therefore immediately taxable and paid to Ms. Irwin in cash. For 2006, includes $13,200 in contributions to the 401(k) Plan on behalf of Ms. Irwin and $4,051 that exceeds the 401(k) Plan statutory limit and is therefore immediately taxable and paid to Ms. Irwin in cash.
(c)	For 2008, includes $13,650 in contributions to the 401(k) Plan on behalf of Mr. Delaney and $4,500 that exceeds the 401(k) Plan statutory limit and is therefore immediately taxable and paid to Mr. Delaney in cash. For 2007, includes $13,350 in contributions to the 401(k) Plan on behalf of Mr. Delaney and $3,840 that exceeds the 401(k) Plan statutory limit and is therefore immediately taxable and paid to Mr. Delaney in cash. For 2006, includes $12,480 in contributions to the 401(k) Plan on behalf of Mr. Delaney and $3,840 that exceeds the 401(k) Plan statutory limit and is therefore immediately taxable and paid to Mr. Delaney in cash.
(d)	Perquisites include, for Mr. Doyle, country club memberships, financial and tax planning services, spousal travel benefits (while accompanying the executive on corporation business) and parking; for Mr. Brownlee, country club memberships, spousal travel benefits (while accompanying the executive on corporation business) and parking; and for Mr. Dietz and Mr. Delaney, country club memberships and spousal travel benefits (while accompanying the executive on corporation business). The aggregate incremental cost of the financial and tax planning services paid for the benefit of Mr. Doyle was $29,506 in 2007 and $38,412 in 2006.

Salary and Bonus

As reported in the Summary Compensation Table above, the percentage of our Named Executive Officers’ total 2006, 2007 and 2008 compensation that is comprised of salary and bonus is between 5% and 20% and is generally consistent with our compensation philosophy. See “Compensation Discussion and Analysis — Elements of Executive Compensation”.

Stock Awards

Amounts reported in column (e) of the Summary Compensation Table reflect performance share units granted during 2006 pursuant to our Medium-Term Incentive Plan. As of January 1, 2006, Mr. Doyle received a grant of 80,802 performance share units, Mr. Brownlee received a grant of 23,892 performance share units, Mr. Dietz received a grant of 23,112 performance share units, Ms. Irwin received a grant of 16,296 performance share units and Mr. Delaney received a grant of 15,516 performance share units. The performance share units vested and will be settled in cash at the end of the three-year performance cycle (December 31, 2008) in relation to a vesting schedule whereby one-half of the units

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vested in accordance with corporate Total Shareholder Return (TSR) and one-half of the units vested in accordance with corporate TSR relative to a selected comparator group’s TSR.

We used the following vesting schedules to determine how many units each Named Executive Officer was entitled to receive at the end of the performance period ending December 31, 2008.

TSR Vesting Schedule
TSR	Vesting Percentage
0% or less	0%
10%	50%
20%	75%
30%	100%
40%	125%
50% or more	150%

Relative TSR Vesting Schedule
TSR minus DJUSBMI TSR	Vesting Percentage
Less than 0%	0%
0%	50%
5%	100%
10% or more	150%

For results falling between the reference points in the charts above, the level of vesting was mathematically interpolated between the reference points. The value at payout will be based on the number of vested units multiplied by the trailing 30-day average common Share price. For a discussion of our actual results for the performance period ending December 31, 2008 and the number of performance units that were vested and paid out to each of our Named Executive Officers, see “Compensation Discussion and Analysis — Elements of Executive Compensation — Medium-Term Incentive Plan”.

Option Awards

For a description of the applicable formulas in determining the amounts payable under our Performance Option Plans, see “Grants of Plan-Based Awards — Option Awards”.

Non-Equity Incentive Plan Compensation

Amounts reported in column (g) of the Summary Compensation Table reflect the amounts paid pursuant to our Short-Term Incentive Plan for the 2006, 2007 and 2008 performance periods. The amount of each Named Executive Officer’s award is generally equal to the officer’s award percentage, as determined by our annual cash flow return compared to a target cash flow return, multiplied by the officer’s annual salary. Individual awards, however, may be adjusted (± 20%) to recognize individual performance, provided the total of adjusted awards approximates the total awards at mid-point. Each officer’s award percentage is calculated according to the below schedule, which has been abbreviated from the full schedule included in our Short-Term Incentive Plan. In the below schedule, ACFR, or adjusted cash flow return ratio, represents our actual annual cash flow return, as defined in the plan, divided by the target cash flow return, as determined by the annual corporate budget approved by our Board.

As per the terms of the plan, we generally make no payments if our cash flow return is less than 50% of the target set by the Board for that year.

	Award Percentage	Award Percentage	Maximum Award
	When ACFR is	When ACFR is Equal to or Greater	Percentage (ACFR
Officers	Less Than 1	Than 1	Greater Than 1.5)
Tier I: Corporate President, CEO	100% multiplied by ACFR	(200% multiplied by ACFR) minus 100%	200%
Tier II: Executive Level 7 (Executive VP and COO, Executive VP and CFO)	70% multiplied by ACFR	(140% multiplied by ACFR) minus 70%	140%
Tier III: Executive Level 6 (Senior VP Admin., Subsidiary Presidents)	55% multiplied by ACFR	(110% multiplied by ACFR) minus 55%	110%

Actual cash flow return is calculated by measuring operating income (net income before deducting taxes and interest), removing the effects of extraordinary gains or losses, incentive award accruals, non-cash items such as depreciation and cash taxes and then dividing by the asset base. For further details on awards under our Short-Term Incentive Plan, see “Compensation Discussion and Analysis — Elements of Executive Compensation — Short-Term Incentive Plan” and our Short-Term Incentive Plan, filed as Exhibit 10(n) to our annual report on Form 10-K for the year ended December 31, 2007.

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Total Compensation

The following table sets forth the total compensation awarded to our Chief Executive Officer, individually, and our Named Executive Officers, collectively, in each case as a percentage of our net income in 2008, 2007 and 2006. Total compensation reflects the Named Executive Officers’ total compensation as disclosed in column (j) of the Summary Compensation Table. Net income is calculated in accordance with Canadian GAAP. For additional information about net income, see our consolidated financial statements and the notes thereto for the fiscal years ended December 31, 2008, December 31, 2007 and December 31, 2006.

				Aggregate Total
		Total Compensation of	% of	Compensation of	% of
	Net Income	Chief Executive Officer	Net Income	Named Executive Officers	Net Income
2008	$3,495.2 million	$17.0 million	0.5%	$32.0 million		0.9	%
2007	$1,103.6 million	$17.2 million	1.6%	$31.9 million		2.9
2006	$631.8 million	$8.9 million	1.4%	$19.3 million		3.1

Employment Agreements

Except for the change in control agreements described above in “Compensation Discussion and Analysis — Post-Retirement and Termination Compensation”, we have not entered into individual employment agreements with any of our executive officers. For a discussion of the terms and conditions of executive officers’ compensation, see “Compensation Discussion and Analysis”.

Grants of Plan-Based Awards

The following table provides information relating to plan-based awards granted in 2008 to the Named Executive Officers.

			Estimated Possible Payouts Under				Estimated Future Payouts Under
			Non-Equity Incentive Plan Awards(1)				Equity Incentive Plan Awards					Grant
										Exercise		Date Fair
										or Base	Closing	Value of
										Price of	Market	Stock and
										Option	Price on	Option
	Grant		Threshold		Target	Maximum	Threshold	Target	Maximum	Awards(2)	Date of	Awards
Name	Date		($)		($)	($)	(#)	(#)	(#)	($/Sh)	Grant	($)
(a)	(b)		(c)		(d)	(e)	(f)	(g)	(h)	(k)	($/Sh)	(l)
William J. Doyle
Short-Term Incentive Plan				546,000	1,092,000	2,184,000
Performance Option Plan		5/8/2008					0	87,750	87,750	$198.77	$199.01		6,508,418
Wayne R. Brownlee
Short-Term Incentive Plan				173,000	346,000	692,000
Performance Option Plan		5/8/2008					0	23,650	23,650	Cdn$199.70	Cdn$202.65		1,802,292
James F. Dietz
Short-Term Incentive Plan				170,250	340,500	681,000
Performance Option Plan		5/8/2008					0	23,650	23,650	$198.77	$199.01		1,754,121
Barbara Jane Irwin
Short-Term Incentive Plan				108,750	217,500	435,000
Performance Option Plan		5/8/2008					0	11,750	11,750	$198.77	$199.01		871,498
G. David Delaney
Short-Term Incentive Plan				112,500	225,000	450,000
Performance Option Plan		5/8/2008					0	11,750	11,750	$198.77	$199.01		871,498

(1)

The amounts in columns (c), (d) and (e) set forth the threshold, target and maximum values of the 2008 Short-Term Incentive Plan awards based on respective cash flow returns of 50%, 100% and 150% of target cash flow return for 2008. The actual amount of each Named Executive Officer’s 2008 Short-Term Incentive Plan award is set forth in column (g) of the Summary Compensation Table above.

(2)

Pursuant to the terms of the plan, options under the 2008 Performance Option Plan were granted with an exercise price equal to the closing market price per Share on the NYSE for Mr. Doyle, Mr. Dietz, Ms. Irwin and Mr. Delaney and on the TSX for Mr. Brownlee, in each case on the trading day prior to the grant date. The closing market price on the grant date is shown in the adjoining column to column (k) in the above table. As is our practice, options under the 2008 Performance Option Plan were granted following shareholder approval of the plan at the 2008 Annual Meeting on May 8, 2008.

Option Awards

Certain amounts reported in column (f) of the Summary Compensation Table represent options granted during 2006 and 2007 pursuant to our 2006 Performance Option Plan and 2007 Performance Option Plan, respectively, and certain

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amounts reported in column (f) of the Summary Compensation Table and columns (g), (h) and (l) of the Grant of Plan-Based Awards Table reflect options granted during 2008 pursuant to our 2008 Performance Plan. On May 4, 2006, Mr. Doyle received a grant of 450,000 performance options, Mr. Brownlee and Mr. Dietz received a grant of 150,000 performance options, and Ms. Irwin and Mr. Delaney received a grant of 72,000 performance options. On May 3, 2007, Mr. Doyle received a grant of 336,000 performance options, Mr. Brownlee and Mr. Dietz received a grant of 90,000 performance options, and Ms. Irwin and Mr. Delaney received a grant of 46,800 performance options. On May 8, 2008, Mr. Doyle received a grant of 87,750 performance options, Mr. Brownlee and Mr. Dietz received a grant of 23,650 performance options, and Ms. Irwin and Mr. Delaney received a grant of 11,750 performance options. The options have 10-year terms and vest based on performance incentives over the three-year performance periods ending December 31, 2008, December 31, 2009 and December 31, 2010.

In accordance with the Performance Option Plans, the performance incentives that will be used to determine vesting of the performance options are cash flow return on investment (“CFROI”) and weighted average cost of debt and equity capital (“WACC”).

CFROI is the ratio of after-tax operating cash flow to average gross investment. After-tax operating cash flow is calculated by measuring operating income (net income before deducting income taxes and interest), removing nonrecurring or unusual items, incentive award accruals, non-cash items such as depreciation and amortization and current income taxes. Average gross investment is calculated by measuring the average of total assets and making adjustments for amortization and depreciation, the fair value adjustment for certain investments, fair value of derivative instrument assets, cash and cash equivalents and certain current liabilities. WACC is calculated by measuring the product of the market yield cost of net debt and the market value of net debt divided by the market value of net debt and equity, and adding the product of the cost of equity and the market value of equity divided by the market value of net debt and equity, in each case subject to certain adjustments. For further details on awards under our Performance Option Plans, see our 2008 Performance Option Plan filed as Exhibit 10(ff) to our quarterly report on Form 10-Q for the period ended March 31, 2008, our 2007 Performance Option Plan filed as Exhibit 10(ee) to our quarterly report on Form 10-Q for the period ended March 31, 2007 and our 2006 Performance Option Plan, filed as Exhibit 10(dd) to our annual report on Form 10-K for the year ended December 31, 2007.

We use the following vesting schedule to determine how many options each Named Executive Officer receives at the end of the performance periods ending December 31, 2008 and December 31, 2009.

Vesting Schedule
3 Year Average of
CFROI Minus WACC	Vesting Percentage
Less than 0%	0%
0.20%	30%
1.20%	70%
2.20%	90%
2.50%	100%

For results falling between the reference points in the chart above, the level of vesting is mathematically interpolated between the reference points. The amount, if any, realized upon the exercise of performance options will depend on the market price of our Shares relative to the exercise price per Share of the performance option at the time of exercise. For a discussion of our actual results for the performance period ending December 31, 2008 and the number of performance options that were vested, see “Compensation Discussion and Analysis — Elements of Executive Compensation — Long-Term Incentives (Stock Options) — Performance Option Plans”.

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Outstanding Equity Awards at Fiscal Year-End

The following table provides information relating to exercisable and unexercisable stock options and unvested stock awards as of December 31, 2008 for the Named Executive Officers.

	Option Awards												Stock Awards
															Equity
															Incentive Plan
						Equity							Equity		Awards:
						Incentive							Incentive Plan		Market or
						Plan							Awards:		Payout
						Awards:							Number of		Value of
	Number of			Number of		Number of							Unearned		Unearned
	Securities			Securities		Securities							Shares, Units		Shares, Units
	Underlying			Underlying		Underlying							or Other		or Other
	Unexercised			Unexercised		Unexercised		Option			Option		Rights That		Rights That
	Options			Options		Unearned		Exercise			Expiration		Have Not		Have Not
Name	Exercisable(1)			Unexercisable		Options(2)		Price			Date		Vested		Vested
(a)	(b)			(c)		(d)		(e)			(f)		(i)		(j)
William J. Doyle		320,000							$10	.16		11/21/2010
		420,000							$10	.50		11/20/2011
		420,000							$11	.00		11/20/2012
		337,536			—				$13	.17		11/20/2013		—		—
		675,000							$29	.41		5/5/2015
		450,000	(3)						$33	.67		5/4/2016
							336,000		$62	.73		5/3/2017
							87,750		$198	.77		5/8/2018
Wayne R. Brownlee		180,000							Cdn$16	.65		11/20/2011
		180,000							Cdn$17	.44		11/20/2012
		144,660			—				Cdn$17	.17		11/20/2013		—		—
		195,000							Cdn$36	.64		5/5/2015
		150,000	(3)						Cdn$37	.27		5/4/2016
							90,000		Cdn$69	.48		5/3/2017
							23,650		Cdn$199	.70		5/8/2018
James F. Dietz		50,000							$10	.50		11/20/2011
		210,000							$11	.00		11/20/2012
		168,756			—				$13	.17		11/20/2013		—		—
		195,000							$29	.41		5/5/2015
		150,000	(3)						$33	.67		5/4/2016
							90,000		$62	.73		5/3/2017
							23,650		$198	.77		5/8/2018
Barbara Jane Irwin		15,000							$10	.16		11/20/2010
		157,390							$10	.50		11/20/2011
		180,000							$11	.00		11/20/2012
		144,660			—				$13	.17		11/20/2013		—		—
		105,000							$29	.41		5/5/2015
		72,000	(3)						$33	.67		5/4/2016
							46,800		$62	.73		5/3/2017
							11,750		$198	.77		5/8/2018
G. David Delaney		65,000							$29	.41		5/5/2015
		72,000	(3)		—				$33	.67		5/4/2016		—		—
							46,800		$62	.73		5/3/2017
							11,750		$198	.77		5/8/2018

(1)

As of December 31, 2008, the aggregate value of unexercised options that are currently exercisable held by each Named Executive Officer was as follows: Mr. Doyle, $140,292,287; Mr. Brownlee, $51,282,207; Mr. Dietz, $40,811,448; Ms. Irwin $38,151,484 and Mr. Delaney, $5,695,250. The aggregate value of unexercised options held by Mr. Brownlee was converted to U.S. dollars using the average Canadian exchange rate of 1.0671 for fiscal year 2008.

(2)

The outstanding equity incentive plan awards reported in column (d) represent unearned options pursuant to our 2007 and 2008 Performance Option Plans. Options granted pursuant to the 2007 Performance Option Plan vest at the end of the performance period ending December 31, 2009, and options granted

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pursuant to the 2008 Performance Option Plan vest at the end of the performance period ending December 31, 2010. The reported number of Shares underlying the options is based on achievement of the plans’ maximum performance levels.

⁽³⁾  Reports options granted under the 2006 Performance Option Plan that vested at the end of the performance period ending December 31, 2008. The value of such vested options held by each Named Executive Officer, as of December 31, 2008, was as follows: Mr. Doyle, $17,797,500; Mr. Brownlee, $7,347,484; Mr. Dietz, $5,932,500; Ms. Irwin, $2,847,600 and Mr. Delaney, $2,847,600. The aggregate value of vested options held by Mr. Brownlee was converted to U.S. dollars using the average Canadian exchange rate of 1.0671 for fiscal year 2008.

Option Exercises and Stock Vested

The following table provides information relating to amounts received upon the exercise of stock options by the Named Executive Officers during 2008.

	Option Awards				Stock Awards
	Number of
	Shares				Number of
	Acquired on		Value Realized		Shares Acquired
	Exercise(1)		Upon Exercise		on Vesting(2)		Value Realized Upon Vesting
Name	(#)		($)		(#)		($)
(a)	(b)		(c)		(d)		(e)
William J. Doyle		400,000		35,192,500		121,203		7,870,438
Wayne R. Brownlee		—		—		35,838		2,327,176
James F. Dietz		—		—		34,668		2,251,201
Barbara Jane Irwin		22,610		3,760,569		24,444		1,587,296
G. David Delaney		40,000		4,147,344		23,274		1,511,320

(1)	The number of Shares retained by each Named Executive Officer following exercise of the stock options is as follows: Mr. Doyle, 210,000; Ms. Irwin, 15,000 and Mr. Delaney, 0.
(2)	Reports the number of performance units granted under the Medium-Term Incentive Plan that vested based on performance incentives over the three-year performance period ended December 31, 2008. The performance units will be settled in cash at a value of $64.936 per unit, which is the average price of our common stock over the last 30 trading days of the performance period.

Pension Benefits

The following table provides information relating to the present value of the Named Executive Officers’ accumulated benefit under the Canadian Supplemental Plan, the U.S. Pension Plan and the U.S. Supplemental Plan.

					Present Value of
		Number of Years			Accumulated		Payments During
		Credited Service			Benefit(1)		Last Fiscal Year
Name	Plan Name	(#)			($)		($)
William J. Doyle	Canadian Supplemental Plan		21.67			14,817,608		—
Wayne R. Brownlee	Canadian Supplemental Plan		31.67	(2)		5,031,623		—
James F. Dietz	U.S. Pension Plan		15.5			369,111
	U.S. Supplemental Plan		11.83	(3)		760,872		—
Barbara Jane Irwin	U.S. Pension Plan		8.25			102,092
	U.S. Supplemental Plan		8.25			176,390		—
G. David Delaney	U.S. Pension Plan		25.67			210,742
	U.S. Supplemental Plan		11.83			180,388		—

(1)	The present value of accumulated benefit assumes retirement at the earliest age that does not require a reduction in benefits. For the Canadian Supplemental Plan, such age is 62. For the U.S. Pension Plan and U.S. Supplemental Plan, such age is 65 or age 62 with 20 years of service.
(2)	Mr. Brownlee’s years of credited service includes 11.6 years of service, from May 1977 to December 1988, with the government of Saskatchewan prior to the privatization of our company in 1989 and 20.1 years of service, from December 1988 to the present, with our company and our predecessors.
(3)	The differences in Mr. Dietz’s and Mr. Delaney’s years of credited service under the U.S. Pension Plan and the U.S. Supplemental Plan relate to the plans’ differing treatment of Mr. Dietz’s and Mr. Delaney’s years of credited service under the Nitrogen Pension Plan, a predecessor to the U.S. Pension Plan.

The present values of the accumulated benefits reported in the above table are generally calculated in accordance with the assumptions used for financial reporting purposes. See Note 15 to our consolidated financial statements for the fiscal year ended December 31, 2008. The total present value of accumulated benefits in our financial statements is calculated in accordance with Canadian GAAP. The assumptions for Mr. Doyle and Mr. Brownlee differ from the

MANAGEMENT PROXY CIRCULAR ï Compensation Page  63

assumptions disclosed in Note 15 to our consolidated financial statements for the fiscal year ended December 31, 2008. The key assumptions used in calculating the present value of accumulated benefits for Mr. Doyle and Mr. Brownlee are as follows:

Interest Rate	7.50% per annum
Retirement Age	Age 62
Mortality Rates	1994 Unisex Pensioner Mortality Table

The below table sets forth our accrued obligation at the beginning and end of the fiscal year ended December 31, 2008 for each of the Named Executive Officer’s benefits under the Canadian Supplemental Plan, the U.S. Pension Plan and the U.S. Supplemental Plan and the accumulated value at the beginning and end of the fiscal year ended December 31, 2008 for each of the Named Executive Officer’s benefits under the Savings Plan and the 401(k) Plan.

		Accrued						Accrued
		Obligation/						Obligation/
		Accumulated				Non-		Accumulated
		Value at		Compensatory		Compensatory		Value at
		Start of Year		Changes		Changes		End of Year
Name	Plan Name	($)		($)		($)		($)
William J. Doyle	Canadian Pension Plan		156,823		8,575		(42,457)		122,941
	Canadian Supplemental Plan		10,643,963		1,872,600		2,301,045		14,817,608
	Savings Plan		702,321		0		(241,569)		460,752
Wayne R. Brownlee	Canadian Pension Plan		580,127		8,575		(125,739)		462,962
	Canadian Supplemental Plan		2,793,521		1,165,169		1,072,933		5,031,623
	Savings Plan		157,495		24,440		(73,846)		108,089
James F. Dietz	U.S. Pension Plan		349,930		32,501		(13,230)		369,111
	U.S. Supplemental Plan		583,844		204,484		(27,456)		760,872
	401(k) Plan		569,483		6,685		(233,887)		342,281
Barbara J. Irwin	U.S. Pension Plan		98,295		16,724		(12,927)		102,092
	U.S. Supplemental Plan		144,383		54,341		(22,335)		176,390
	401(k) Plan		91,893		6,900		(30,898)		67,895
G. David Delaney	U.S. Pension Plan		224,636		14,041		(27,935)		210,742
	U.S. Supplemental Plan		143,207		61,093		(23,911)		180,388
	401(k) Plan		1,311,861		6,900		(643,357)		675,404

For additional information about the Canadian Pension Plan, the Canadian Supplemental Plan, the U.S. Pension Plan, the U.S. Supplemental Plan, the Savings Plan and the 401(k) Plan, see “Compensation Discussion and Analysis — Post-Retirement and Termination Compensation”.

Estimated Termination Payments and Benefits

The following table sets forth estimates of the amounts payable to each of our Named Executive Officers upon the specified termination events, assuming that each such event took place on the last business day of fiscal year 2008. The table does not include (1) benefits under plans that are generally available to salaried employees and that do not discriminate in favor of executive officers, including the Canadian Pension Plan, the U.S. Pension Plan, the Savings Plan and the 401(k) Plan or (2) the value of outstanding equity awards that have previously vested, such as stock options, which awards are set forth above in “Executive Compensation — Outstanding Equity Awards at Fiscal Year-End”. For descriptions of the compensation plans and agreements that provide for the payments set forth in the following table, including our severance policy and our change in control agreements, see “Compensation Discussion and Analysis — Elements of Executive Compensation”.

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	William J.		Wayne R.		James F.		Barbara Jane		G. David
	Doyle		Brownlee		Dietz		Irwin		Delaney
	($)		($)		($)		($)		($)
Involuntary Termination/Termination Without Cause Salary/Severance Supplemental Plan(1)(2) Executive Health & Welfare Benefits		2,329,728 911,619 1,399,251 18,858		1,646,650 763,530 883,120 0		618,148 290,673 327,475 0		94,982 94,982 0 0		403,547 403,547 0 0
Termination Following Change in Control Salary/Severance Stock Options (Accelerated)(3) Supplemental Plan(1)(2) Executive Health & Welfare Benefits Tax Gross-up		31,073,051 8,291,000 21,332,140 1,399,251 50,660 0		12,461,447 3,053,200 7,876,939 1,531,308 0 0		7,494,748 290,673 6,876,600 327,475 0 0		3,433,514 94,982 3,338,532 0 0 0		3,742,079 403,547 3,338,532 0 0 0
Retirement Stock Options (36 Month Continued Vesting)(3) Supplemental Plan(1)(2)		22,721,391 21,322,140 1,399,251		8,760,059 7,876,939 883,120		7,204,075 6,876,600 327,475		3,338,532 3,338,532 0		3,338,532 3,338,532 0

(1)	Supplemental Plan refers to the Canadian Supplemental Plan for Mr. Doyle and Mr. Brownlee and to the U.S. Supplemental Plan for Mr. Dietz, Ms. Irwin and Mr. Delaney. The Supplemental Plan benefits set forth for each Named Executive Officer reflect the incremental value of benefits for each termination event that exceeds the present value of benefits set forth in the “Pension Benefits” table above.
(2)	As of December 31, 2008, Ms. Irwin was age 53 and ineligible to receive benefits under the U.S. Supplemental Plan, and Mr. Delaney was age 48 and ineligible to receive benefits under the U.S. Supplemental Plan. No benefits are payable if the participant is not at least age 55 at termination.
(3)	The aggregate value of Mr. Brownlee’s stock options was converted to U.S. dollars using the December 31, 2008 Canadian exchange rate of 1.2246.

Payments Made Upon Involuntary Termination or Termination Without Cause

As quantified in the table above, upon involuntary termination or termination without cause, a Named Executive Officer is generally entitled to receive (1) severance in an aggregate amount equal to two weeks of salary for each year of service (subject to a minimum of four weeks and a maximum of fifty-two weeks), (2) benefits under the Canadian or U.S. Supplemental Plan, as reduced in accordance with the plan’s early retirement provisions and (3) with respect to Mr. Doyle, executive health and welfare benefits during the severance period.

Payments Made Upon Termination Following a Change in Control

As described in “Compensation Discussion and Analysis — Post-Retirement and Termination Compensation”, we have entered into change in control agreements with Mr. Doyle and Mr. Brownlee. As quantified in the table above, upon a termination within two years of a change in control, these Named Executive Officers are entitled to receive (1) severance in an aggregate amount equal to three times the executive’s current base salary and average bonus for the last three years, (2) benefits under the Canadian Supplemental Plan, as supplemented by three additional years of service and as reduced in accordance with the plan’s early retirement provisions and (3) with respect to Mr. Doyle, executive health and welfare benefits for a period of three years. Mr. Doyle is also entitled to a tax gross-up to cover excise taxes, if payable for the receipt of benefits under the change in control agreement.

As quantified in the table above, upon termination following a change in control, Named Executive Officers without change in control agreements are generally entitled to receive (1) severance in an aggregate amount equal to two weeks of salary for each year of service (subject to a minimum of four weeks and a maximum of fifty-two weeks) and (2) benefits under the Canadian or U.S. Supplemental Plan, as reduced in accordance with the plan’s early retirement provisions.

In addition, all outstanding options become exercisable upon a change in control without regard to whether the Named Executive Officer is terminated.

Payments Made Upon Retirement

As quantified in the table above, upon retirement, a Named Executive Officer is generally entitled to receive (1) the right to exercise any vested performance options, including such options that may vest after retirement, for a period of three years and (2) benefits under the Canadian or U.S. Supplemental Plan, as reduced in accordance with the plan’s early retirement provisions.

The following table sets forth the estimated annual or aggregate amounts that each Named Executive Officer would have received upon retirement at December 31, 2008 and would receive upon retirement at age 65 pursuant to the retirement

MANAGEMENT PROXY CIRCULAR ï Compensation Page  65

plans in which each Named Executive Officer participates. The age 65 amounts in the below table assume annual salary increases of 3% and flat short-term incentive award targets (as a percentage of salary) for each of the Named Executive Officers and use the same interest rates as disclosed under “— Pension Benefits” above. Voluntary contributions by each of the Named Executive Officers to the retirement plans have been excluded from the calculation of the amounts set forth below.

		William J. Doyle				Wayne R. Brownlee				James F. Dietz				Barbara Jane Irwin				G. David Delaney
		($)				($)				($)				($)				($)
		Year End		Age 65		Year End		Age 65		Year End		Age 65		Year End		Age 65		Year End		Age 65
Canadian/U.S	Annual		808,035		1,400,500		340,736		746,737		150,703		198,045		73,588		233,369		144,550		476,036
Pension Plan	Aggregate		12,151,501		18,293,143		5,377,243		9,753,785		540,573		1,855,182		142,198		2,186,080		332,267		4,459,251
Savings/	Annual		24,394		65,425		6,849		31,060		28,365		47,693		5,521		38,329		72,408		243,729
401(k) Plan	Aggregate		366,851		854,573		108,085		405,701		342,281		446,761		67,895		359,044		675,404		2,283,121
Total	Annual		832,429		1,465,925		347,585		777,797		179,068		245,738		79,109		271,698		216,958		719,765
	Aggregate		2,518,352		19,147,716		5,485,328		10,159,486		882,854		2,301,944		210,093		2,545,124		1,007,671		4,742,371

Payments Made Upon Death or Disability

Generally, death or disability does not result in incremental value. If a Named Executive Officer becomes disabled, the individual may (1) go on long term disability, which would result in the continued accrual of Supplemental Plan benefits or (2) retire immediately, which would result in the same benefits as retirement. Canadian Supplemental Plan death benefits are generally payable at 60% of the amount of benefits if the participant had retired on the date of death. U.S. Supplemental Plan benefits are generally payable at the greater of (1) 50% of the amount of benefits if the participant had retired on the date of death, payable for the remainder of the spouse’s lifetime and (2) 100% of the amount of benefits if the participant had retired on the date of death, payable for a period of ten years.

Medium-Term Incentive Plan

In addition to the benefits described and quantified above, upon certain termination events, a Named Executive Officer would have been entitled to receive immediate vesting and payout or a pro rata portion of the performance period’s Medium-Term Incentive Plan award. The performance period for the Medium-Term Incentive Plan ended on December 31, 2008. Accordingly, this termination benefit would not have resulted in incremental value if the Named Executive Officer had been terminated on December 31, 2008.

MANAGEMENT PROXY CIRCULAR ï Compensation Page  66

Performance Graphs

The following graph illustrates the Corporation’s cumulative shareholder return, assuming reinvestment of dividends, by comparing a $100 investment in the Shares at December 31, 2003 to the return on the Standard & Poor’s 500 Index^®, the DJUSBMI and a self-selected peer group used in our previous year’s proxy statement and a new self-selected peer group. The performance of the previous peer group is presented here for comparative purposes in accordance with Item 201(e) of Regulation S-K and will not be provided in the future.

	Dec-03		Dec-04		Dec-05		Dec-06		Dec-07		Dec-08
PotashCorp-NYSE Listing	$	100	$	194	$	189	$	340	$	1,028	$	524
New Self-Selected Peer Group	$	100	$	153	$	165	$	257	$	776	$	383
Old Self-Selected Peer Group	$	100	$	146	$	161	$	247	$	719	$	362
S&P 500®	$	100	$	111	$	116	$	135	$	142	$	90
DJUSBMI	$	100	$	113	$	119	$	140	$	185	$	91

Copyright ^© 2009 S&P, a division of The McGraw-Hill Companies Inc. All right reserved.
Copyright ^© 2009 Dow Jones & Co. All rights reserved.

The new self-selected peer group consists of:	Symbol
Agrium Inc.*	AGU
CF Industries, Inc.	CF
Intrepid Potash	IPI
Mosaic Co (formerly IMC Global Inc) (through 4Q04)	MOS
Terra Industries, Inc.	TRA
Yara International ASA	YAR NO
Israel Chemicals Limited	CHIM IT
Sociedad Quimica Y Minera de Chile S.A.	SQM/B CI
K + S AG	SDF/GR
Arab Potash Company	APOT JR
Uralkali	URKA RU

* TSX Listing.

The old self-selected peer group consists of:	Symbol
Agrium Inc.*	AGU
Mosaic Co (formerly IMC Global Inc) (through 4Q04)	MOS
Yara International ASA	YAR NO
Israel Chemicals Limited	CHIM IT
Sociedad Quimica Y Minera de Chile S.A.	SQM/B CI
K + S AG	SDF/GR

* TSX Listing.

MANAGEMENT PROXY CIRCULAR ï Compensation Page  67

The following graph illustrates the Corporation’s cumulative shareholder return, assuming reinvestment of dividends, by comparing a Cdn$100 investment in the Shares at December 31, 2003 to the return on the S&P/TSX Composite Index.

	Dec-03		Dec-04		Dec-05		Dec-06		Dec-07		Dec-08
PotashCorp-TSX Listing	$	100	$	179	$	168	$	303	$	784	$	491
S&P 500	$	100	$	111	$	116	$	135	$	142	$	90
S&P/TSX Composite Index	$	100	$	114	$	142	$	167	$	183	$	123

Copyright^© 2009, S&P, a division of The McGraw Hill Companies, Inc. All rights reserved.

MANAGEMENT PROXY CIRCULAR ï Compensation Page  68

Ownership of Shares

The following table sets forth information as of February 20, 2009, with respect to the beneficial ownership of Shares held by the executive officers of the Corporation named in the Summary Compensation Table herein and by all directors and executive officers of the Corporation as a group.

				Number of			Percentage
				Shares			of
	Number of			Beneficially			Outstanding
Name	Shares Held			Owned(1)(2)(3)(4)			Shares
William J. Doyle, Director, President and Chief Executive Officer		481,413	(5)		3,103,949	(5)		1.06	%
Wayne R. Brownlee, Executive Vice President, Treasurer and Chief Financial Officer		58,498			908,158			0.31	%
James F. Dietz, Executive Vice President and Chief Operating Officer		57,589			831,345			0.29	%
Barbara Jane Irwin, Senior Vice President, Administration		53,446			727,496			0.25	%
G. David Delaney, President, PCS Sales		39,831			176,831			0.06	%
All directors and executive officers as a group, including the above-named individuals (25 persons)		1,011,748			7,542,509			2.56	%

(1)	The number of Shares beneficially owned is reported on the basis of regulations of the SEC, and includes Shares that the individual has the right to acquire at any time within 60 days after February 20, 2009 and Shares directly or indirectly held by the individual or by certain family members or others over which the individual has sole or shared voting or investment power.
(2)	Each of the directors and executive officers of the Corporation, with the exception of Mr. Doyle, beneficially owned less than 1% of the Shares issued and outstanding as at February 20, 2009. The directors and executive officers of the Corporation as a group beneficially owned approximately 2.56% of the Shares issued and outstanding as at February 20, 2009.
(3)	Includes Shares purchasable within 60 days after February 20, 2009 through the exercise of options granted by the Corporation, as follows: Mr. Doyle 2,622,536 Shares; Mr. Brownlee 849,660 Shares; Mr. Dietz 773,756 Shares; Ms. Irwin 674,050 Shares; Mr. Delaney 137,000 Shares; and directors and executive officers as a group, including the foregoing individuals, 7,137,293 Shares.
(4)	No Shares beneficially owned by any of the directors or Named Executive Officers are pledged as security.
(5)	Includes 45,997 shares held in the William J. Doyle 2007 Family Descendents Trust, 19,898 shares held in the William & Kathy Doyle Foundation, 216,381 in the WJ Doyle Revocable Trust and 199,137 in the Doyle Family LLC.

As of February 20, 2009, no person or group known to the Corporation (from records and reports filed with the SEC on Schedule 13D or 13G) owned more than 5% of the Corporation’s Shares.

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Directors’ and Officers’

Liability Insurance

The Corporation has acquired and maintains liability insurance for its directors and officers as well as those of its subsidiaries as a group. The coverage limit of such insurance is $125 million per claim and $125 million in the annual aggregate. The Corporation has entered into a one-year contract ending June 30, 2009. Premiums of $1,240,000 were paid by the Corporation for the last fiscal year. Claims for which the Corporation grants indemnification to the insured persons are subject to a $5 million deductible for any one loss.

Voting Shares

There are 295,240,247 Shares of the Corporation outstanding as of February 20, 2009, each Share carrying the right to one vote. Each shareholder of record at the close of business on March 12, 2009 is entitled to vote at the Meeting the Shares registered in his or her name on that date.

The quorum for any meeting of shareholders is one or more persons present and holding or representing by proxy not less than 5% of the total number of outstanding Shares.

Shareholder Proposal

A proposal has been submitted by a shareholder for consideration at the Meeting. Such proposal and the Board’s response thereto are set forth in the attached Appendix D.

2010 Shareholder Proposals

Proposals of shareholders intended to be presented at the Corporation’s annual meeting of shareholders in 2010 and which such shareholders are entitled to request be included in the Management Proxy Circular for that meeting, must be received at the Corporation’s principal executive offices not later than November 21, 2009.

Additional Information

Financial information relating to the Corporation is contained in its comparative financial statements and MD&A for the fiscal year ended December 31, 2008. Additional information relating to the Corporation that is not contained in this Management Proxy Circular, including the Corporation’s financial information as well as its most recent Form 10-K together with any document incorporated by reference therein, is available on SEDAR at www.sedar.com or EDGAR at www.sec.gov/edgar.shtml. Copies may be obtained on request from the Corporate Secretary, Potash Corporation of Saskatchewan Inc., Suite 500, 122 — 1^st Avenue South, Saskatoon, Saskatchewan, S7K 7G3, Canada.

Directors’ Approval

The contents and the sending of this Management Proxy Circular have been approved by the Board.

JOSEPH A. PODWIKA

Secretary

February 20, 2009

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Appendices

	Page
Appendix A — Disclosure of Corporate Governance Practices		72
Appendix B — Resolution of Shareholders — 2009 Performance Option Plan		77
Appendix C — 2009 Performance Option Plan		78
Appendix D — Shareholder Proposal		84
Appendix E — Board of Directors Charter		87
Appendix F — Audit Committee Charter		90

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Appendix A
Disclosure of Corporate Governance Practices

100% Compliance

The Corporation’s governance practices fully comply with the governance rules of the Canadian Securities Administrators. The following table sets out the Corporation’s compliance with National Instrument 58-101 — Disclosure of Corporate Governance Practices.

FORM 58-101F1 — CORPORATE GOVERNANCE DISCLOSURE

Board of Directors

Independent Directors

The Board has determined that all of the directors of the Corporation with the exception of Mr. Doyle, Ms. Paliza and Mr. Stromberg are independent. See disclosure under the “Director Independence and Other Relationships” section of this Management Proxy Circular.

Directors who are not independent

See disclosure under the “Director Independence and Other Relationships” section of this Management Proxy Circular.

Majority of independent directors

Nine of twelve, or 75%, of the Corporation’s current directors are independent.

Other directorships

Such other directorships have been disclosed in the “Nominees for Election to the Board of Directors” section of this Management Proxy Circular.

Meeting without management or non-independent directors

The Board has adopted a policy for the independent members of the Board to meet without management present at each regularly scheduled meeting of the Board. These sessions are of no fixed duration and participating directors are encouraged to raise and discuss any issues of concern. This policy was complied with for all meetings of the Board in 2008.

Board chair independence

Dallas J. Howe serves as the Board Chair, and is an independent director. He has served as Board Chair since 2003. A position description for the Board Chair has been developed and approved by the Board. Amongst other things the Board Chair is expected to:

(a)	provide leadership to ensure effective functioning of the Board;
(b)	lead in the assessment of Board performance;
(c)	assist the Compensation Committee in monitoring and evaluating the performance of the Chief Executive Officer and senior officers of the Corporation;
(d)	lead the Board in ensuring succession plans are in place at the senior management level; and
(e)	act as an effective liaison among the Board and management.

Director Attendance

Attendance records are fully disclosed in the “Attendance of Directors” section of this Management Proxy Circular. Pursuant to the “PotashCorp Governance Principles”, directors are expected to attend all meetings of the Board and Board committees upon which they serve, to come to such meetings fully prepared, and to remain in attendance for the duration of the meetings. Where a director’s absence from a meeting is unavoidable, the director should, as soon as practicable after the meeting, contact the Board Chair, the Chief Executive Officer or the Corporate Secretary for a briefing on the substantive elements of the meeting.

Board Mandate

The Board of Directors Charter is attached to this Management Proxy Circular as Appendix E.

Position Descriptions

Board and committee chair position descriptions

A position description for the Board Chair and each Board Committee Chair (which are attached to the relevant Board Committee Charters) has been developed and approved by the Board and can be found on the Corporation’s website at www.potashcorp.com.

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CEO position description

A written position description for the Chief Executive Officer has been developed and approved by the Board.

The Chief Executive Officer reports to the Board and has general supervision and control over the business and affairs of the Corporation. Amongst other things, the Chief Executive Officer is expected to:

(a)	foster a corporate culture that promotes ethical practices, encourages individual integrity and fulfils social responsibility;
(b)	develop and recommend to the Board a long-term strategy and vision for the Corporation that leads to creation of shareholder value;
(c)	develop and recommend to the Board annual business plans and budgets that support the Corporation’s long-term strategy; and
(d)	consistently strive to achieve the Corporation’s financial and operating goals and objectives.

Orientation and Continuing Education

Orientation

The Board has adopted a written New Director Orientation Policy designed to:

(a)	provide each new director with a baseline of knowledge about the Corporation that will serve as a basis for informed decision-making;
(b)	tailor the program for each new director, taking into account his or her unique mix of skills, experience, education, knowledge and needs; and
(c)	deliver information over a period of time to minimize the likelihood of overload and maximize the lasting educational impact.

The orientation program is tailored to the needs of each new director, and consists of a combination of written materials, one-on-one meetings with senior management, site visits and other briefings and training as appropriate.

Continuing Education

The Board recognizes the importance of ongoing director education and the need for each director to take personal responsibility for this process. To facilitate ongoing education, the Corporation:

(a)	maintains a director’s intranet site to facilitate the exchange of views and published information;
(b)	maintains a membership for each director in an organization dedicated to corporate governance and ongoing director education;
(c)	each year encourages and funds the attendance of each director at one seminar or conference of interest and relevance and funds the attendance of each Committee Chair at one additional seminar or conference. In all cases, approval for attendance is obtained, in advance, from the Board Chair;
(d)	encourages presentations by outside experts to the Board or Committees on matters of particular importance or emerging significance; and
(e)	at least annually, schedules a site visit in conjunction with a Board meeting.

Ethical Business Conduct

Code of Conduct

The Board has adopted the “PotashCorp Core Values and Code of Conduct”. The complete text of the “PotashCorp Core Values and Code of Conduct”, as well as other governance related documents, can be found at www.potashcorp.com and are available in print to any shareholder who requests them.

The Audit Committee reviews the process for communicating the “PotashCorp Core Values and Code of Conduct” to the Corporation’s personnel, and for monitoring compliance therewith. The Board, through the Audit Committee, receives regular reports from management directly responsible for compliance-related matters (the General Counsel, Vice President Internal Audit and Senior Vice President Administration). In addition, annual compliance sign offs are sought from each employee.

The Board, through the Audit Committee Chair, also receives reports of all financial or accounting issues raised through the Corporation’s anonymous toll-free hotline.

The Corporation has not filed any material change reports since the beginning of the 2008 financial year that pertains to any conduct of a director or executive officer that constitutes a departure from the “PotashCorp Core Values and Code of Conduct”. Pursuant to the “PotashCorp Governance Principles”, no waiver of the application of the “PotashCorp Core Values and Code of Conduct” to directors or executive officers is permitted.

Material Interests

Pursuant to the “PotashCorp Governance Principles”, each director of the Corporation must possess and exhibit the highest degree of integrity, professionalism

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and values, and must never be in a conflict of interest with the Corporation. A director who has a conflict of interest regarding any particular matter under consideration should advise the Board, refrain from debate on the matter and abstain from any vote regarding it. The Board has also developed categorical independence standards to assist it in determining when individual directors are free from conflicts of interests and are exercising independent judgment in discharging their responsibilities. All directors and senior officers are bound by the “PotashCorp Core Values and Code of Conduct” and no waiver of the application of that Code to directors or senior officers is permitted.

Culture of ethical business conduct

The “PotashCorp Core Values and Code of Conduct” was redistributed to all employees in November 2007 and is continually reinforced with on-line training programs. During 2008 and the beginning of 2009, all directors and employees were asked to sign a written confirmation of their compliance with the “PotashCorp Core Values and Code of Conduct”. The Board, through the Audit Committee, requires the management Compliance Committee to annually report on the status of the Corporation’s ethics and compliance programs, including receipt of the Compliance Risk Assessment, Summary of Ethics and Compliance Training during the current year and plans for ethics and compliance training in the coming year.

Nomination of Directors

Identification of new candidates for board nomination

The Corporate Governance and Nominating Committee (the “CG&N Committee”) is responsible for recruiting and proposing to the full Board new nominees for directors. The CG&N Committee, in the discharge of its duties:

(a)	in consultation with the Board and Chief Executive Officer and, on an ongoing basis, identifies the mix of expertise and qualities required for the Board;
(b)	assesses the attributes new directors should have for the appropriate mix to be maintained;
(c)	in consultation with the Board and Chief Executive Officer and, on an ongoing basis, maintains a database of potential candidates;
(d)	has implemented a procedure to identify, with as much advance notice as practicable, impending Board vacancies, so as to allow sufficient time for recruitment and for introduction of proposed nominees to the existing Board;
(e)	develops a “short-list” of candidates and arranges for each candidate to meet with the CG&N Committee, the Board Chair and the Chief Executive Officer;

(f)   recommends to the Board, as a whole, proposed nominee(s) and arranges for their introduction to as many Board members as practicable;

(g)	ensures that prospective candidates are informed of the degree of energy and commitment the Corporation expects of its directors; and
(h)	encourages diversity in the composition of the Board.

Independent Corporate Governance and Nominating Committee

The Corporation has a standing CG&N Committee.

Each of the directors who comprise the CG&N Committee is independent. Please refer to “Director Independence and Other Relationships” and the “Corporate Governance and Nominating Committee Report” sections of this Management Proxy Circular for additional information.

Corporate Governance and Nominating Committee Charter

The responsibilities, powers and operation of the CG&N Committee are set out in its charter, which is available on the Corporation’s website at www.potashcorp.com. Pursuant to the CG&N Committee Charter, the purpose of the CG&N Committee is to identify the individuals qualified to become members of the Board, to recommend to the Board nominees for election to the Board at each annual meeting of shareholders or to fill vacancies on the Board and to address related matters. Please refer to the “Corporate Governance and Nominating Committee Report” section of this Management Proxy Circular for additional information.

Compensation Committee

Director and Officer Compensation

Director and officer compensation is established on the advice of independent consultants, with a view to establishing target compensation at the median of the applicable comparator group. Please refer to the “Compensation Discussion and Analysis” and the “Director Compensation” sections of this Management Proxy Circular, as well as the section “Outside Compensation Consultants” in this table.

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Independence

The Corporation has a standing Compensation Committee. Each of the five directors who comprise the Compensation Committee is independent. Please refer to the “Director Independence and Other Relationships” and “Compensation Discussion and Analysis” sections of this Management Proxy Circular for additional information.

Compensation Committee Charter

The responsibilities, powers and operation of the Compensation Committee are set out in its charter, which is available on the Corporation’s website at www.potashcorp.com. Pursuant to the Compensation Committee Charter, the purpose of the Compensation Committee is to carry out the Board’s responsibility for: (i) executive compensation (including philosophy and programs); (ii) management development and succession; (iii) Board compensation; and (iv) broadly applicable compensation and benefit programs. Please refer to the “Compensation Discussion and Analysis” section of this Management Proxy Circular for additional information.

Outside Compensation Consultants

In 2005, the Compensation Committee of the Board of Directors engaged Watson Wyatt as executive compensation consultants. Watson Wyatt provides input to the Committee on the philosophy and competitiveness of the design and award values for certain executive and director compensation programs. In addition, Watson Wyatt assists in the evaluation of compensation arrangements associated with certain strategic opportunities. In accordance with the Committee’s adherence to the best practice of retaining independent executive compensation consulting, Watson Wyatt does not perform any other consulting services for the Corporation. Any work other than executive compensation consulting services performed for the Corporation by Watson Wyatt must be approved in advance by the Chair of the Compensation Committee.

Other Board Committees

In addition to the Audit Committee, Compensation Committee and CG&N Committee, the Board also has a Safety, Health and Environment Committee. The Safety, Health and Environment Committee assists the Board review and recommend for approval policies, management systems and performance with respect to safety, health and environment matters affecting the Corporation.

Board Assessments

Pursuant to the “PotashCorp Governance Principles”, which is available on the Corporation’s website at www.potashcorp.com, the Board has adopted the following five-part effectiveness evaluation program:

1.   Annual Board Assessment by All Members of the Board

Each year Board members complete a detailed questionnaire which (a) provides for quantitative ratings in key areas and (b) seeks subjective comment in each of those areas. The questionnaire is administered by the Corporate Secretary. Responses are reviewed by the Corporate Secretary and the Chair of the CG&N Committee. A summary report is then prepared and provided to the Board Chair, the CG&N Committee and the CEO, and then reported to the full Board by the CG&N Committee Chair. Attribution of comments to individual Directors in the summary report is made only if authorized by that Director. In assessing the responses to the questionnaire, the focus is on continuous improvement. Matters requiring follow-up are identified, action plans are developed and there is ongoing monitoring by the CG&N Committee to ensure satisfactory results. As part of the annual Board assessment, the Board reviews and considers any proposed changes to the Board Charter.

2.   Annual Assessment of Each Committee by Members of That Committee

Each year members of each Committee complete a detailed questionnaire designed to allow Committee members to evaluate how well each Committee is operating and to make suggestions for improvement. The questionnaire is administered by the Corporate Secretary who receives responses and reviews them with the appropriate Committee Chair. A summary report is then prepared and provided to the Board Chair, the Chair of the CG&N Committee, the appropriate Committee and the CEO and then reported to the full Board by the appropriate Committee Chair. As part of the annual Committee assessment, the Board reviews and considers any proposed changes to the Committee Charters.

As with the Board assessment, the focus is on continuous improvement. Chairs of each Committee are expected to follow up on matters raised in the Committee assessments and take action as appropriate.

Each of the Audit, Compensation, CG&N, and Safety, Health and Environment Committees participate in this process.

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3.   Annual Assessment of the Board Chair by Members of the Board

Each year members of the Board are asked to assess and comment on the discharge, by the Board Chair, of his duties. Individual responses are received by the Chair of the CG&N Committee. The Chair of the C&GN Committee solicits specific input from the CEO from his perspective as CEO regarding the effectiveness of the Chair. A summary report is then provided to the Board Chair and the full Board, with no attribution of comments to individual Directors without their consent. As part of the annual Board Chair assessment, the Board reviews and considers any proposed changes to the Board Chair position description.

4.   Annual Assessment of Each Committee Chair by Members of Each Committee

Each year, members of each Committee are asked to assess and comment on the discharge, by each Committee Chair, of his or her duties. Responses are received by the Corporate Secretary and the Committee Chair under review. A summary report is then provided to the appropriate Committee and to the full Board, with no attribution of comments to individual Directors without their consent. As part of the annual Committee Chair assessment, the Board reviews and considers any proposed changes to the Committee Chair position descriptions.

5.   Annual Assessment of Individual Directors

Each year during the period from May to September, the Board Chair (and, if in the opinion of the Board Chair it is desirable, the Chair of the CG&N Committee) formally meets with each Director individually to engage in full and frank discussion of any and all issues that either wish to raise, with a focus on maximizing the contribution of each Director to the Board and Committees. In completing the review, the Board Chair employs a checklist, discusses both short-term and long-term goals, and establishes action items to allow each individual Director to enhance both his or her personal contributions and overall Board effectiveness. The Board Chair will share peer feedback with each Director as appropriate and reviews progress and action taken. Each Director, during such formal review, should be prepared to discuss with the Board Chair how the Directors, both individually and collectively, can operate more effectively. The Board Chair discusses the results of the individual evaluations with the Chair of the CG&N Committee and report summary findings to both that Committee and to the full Board at the November meeting.

6.   Management Board Survey

As part of the Board’s continuing efforts to improve its performance, the Board surveys those members of senior management who regularly interact with the Board and/or its Committees to solicit their input and perspective on the operation of the Board and how the Board might improve its effectiveness. The survey includes subjective management responses to questions and one on one interviews between management respondents and the Chair of the CG&N Committee. The results of the management surveys and the one on one interviews are reported by the Chair of the Corporate Governance and Nominating Committee to the full Board and the Corporate Secretary.

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Appendix B
Resolution of Shareholders — 2009 Performance Option Plan

WHEREAS the Board of Directors of Potash Corporation of Saskatchewan Inc. (the “Corporation”) has, approved a new performance option plan (the “2009 Performance Option Plan”), a copy of which is attached as Appendix C to the Management Proxy Circular of the Corporation sent to the shareholders of the Corporation in connection with the annual and special meeting of shareholders of the Corporation to be held May 7, 2009;

NOW THEREFORE, BE IT RESOLVED that:

1.	the 2009 Performance Option Plan is hereby adopted and approved by the shareholders of the Corporation;
2.	any officer of the Corporation be and is hereby authorized and directed for and on behalf of the Corporation to do such things and to take such actions as may be necessary or desirable to carry out the intent of the foregoing resolution and the matters authorized thereby.

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Appendix C
2009 Performance Option Plan

1.  PURPOSE OF PLAN

Potash Corporation of Saskatchewan Inc. (the “Corporation”) by resolution of its Board of Directors (the “Board”) has established, subject to shareholder approval at the Corporation’s 2009 Annual and Special Meeting of shareholders, this Potash Corporation of Saskatchewan Inc. 2009 Performance Option Plan (the “Plan”) to support the Corporation’s compensation philosophy of providing selected employees and officers with an opportunity to: promote the growth and profitability of the Corporation; align their interests with shareholders; and earn compensation commensurate with corporate performance. The Corporation believes this Plan will directly assist in supporting the Corporation’s compensation philosophy by providing participants with the opportunity through stock options, which will vest, if at all, based on corporate performance over a three-year period, to acquire common shares of the Corporation (“Common Shares”).

2.  DURATION OF THIS PLAN

This Plan was adopted by the Board on February 20, 2009 to be effective as of January 1, 2009 (the “Effective Date”), subject to shareholder approval at the Corporation’s 2009 Annual and Special Meeting of shareholders, and shall remain in effect, unless sooner terminated as provided herein, until one (1) year from the Effective Date, at which time it will terminate. After this Plan is terminated, no stock options may be granted but stock options previously granted shall remain outstanding in accordance with their applicable terms and conditions and this Plan’s terms and conditions.

3.  ADMINISTRATION

This Plan shall be administered by the Compensation Committee of the Board or any other committee designated by the Board to administer this Plan (the “Committee”). The Committee shall be responsible for administering this Plan, subject to this Section 3 and the other provisions of this Plan. The Committee may employ attorneys, consultants, accountants, agents, and other individuals, any of whom may be an employee, and the Committee, the Corporation, and its officers and directors shall be entitled to rely upon the advice, opinions, or valuations of any such individuals. All actions taken and all interpretations and determinations made by the Committee shall be made in the Committee’s sole discretion and shall be final and binding upon the participants, the Corporation, and all other interested individuals. To the extent applicable, the Plan shall be administered with respect to optionees subject to the laws of the U.S. so as to avoid the application of penalties pursuant to Section 409A of the Internal Revenue Code, and stock options hereunder may be subject to such restrictions as the Committee determines are necessary to avoid application of such Section 409A.

4.  AUTHORITY OF THE COMMITTEE

The Committee shall have full and exclusive discretionary power to interpret the terms and the intent of this Plan and any Stock Option Award Agreement or other agreement or document ancillary to or in connection with this Plan, to determine eligibility for stock options and to adopt such rules, regulations, forms, instruments, and guidelines for administering this Plan as the Committee may deem necessary or proper. Such authority shall include adopting modifications and amendments to any Stock Option Award Agreement that are necessary to comply with the laws of the countries and other jurisdictions in which the Corporation and/or its subsidiaries operate.

5.  SHARES SUBJECT TO STOCK OPTIONS

The aggregate number of Common Shares issuable after February 20, 2009 pursuant to stock options under this Plan may not exceed 1,000,000 Common Shares. The aggregate number of Common Shares in respect of which stock options have been granted to any one person pursuant to this Plan and which remain outstanding shall not at any time exceed 250,000. The authorized limits under this Plan shall be subject to adjustment under Sections 12 and 13.

If any stock option granted under this Plan, or any portion thereof, expires or terminates for any reason without having been exercised in full, the Common Shares with respect to which such option has not been exercised shall again be available for further stock options under this Plan; provided, however, that any stock option that is granted

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under this Plan that does not vest as a result of a failure to satisfy the Performance Measures, shall not be again available for grant under this Plan.

6.  GRANT OF STOCK OPTIONS

From time to time the Board may designate individual officers and employees of the Corporation and its subsidiaries eligible to be granted options to purchase Common Shares and the number of Common Shares which each such person will be granted a stock option to purchase; provided that the aggregate number of Common Shares subject to such stock options may not exceed the number provided for in Section 5 of this Plan. Non-employee directors and other non-employee contractors and third party vendors are not eligible to participate in this Plan.

7.  OPTION PRICE

The option price for any option granted under this Plan to any optionee shall be fixed by the Board when the option is granted and shall be not less than the fair market value of the Common Shares at such time which, for optionees resident in the United States and any other optionees designated by the Board, shall be deemed to be the closing price per Common Share on the New York Stock Exchange on the last trading day immediately preceding the day the option is granted and, for all other optionees, shall be deemed to be the closing price per Common Share on the Toronto Stock Exchange on the last trading day immediately preceding the day the option is granted; provided that, in either case, if the Common Shares did not trade on such exchange on such day the option price shall be the closing price per share on such exchange on the last day on which the Common Shares traded on such exchange prior to the day the option is granted.

8.  VESTING OF STOCK OPTIONS

Subject to achievement of Performance Measures as certified and approved by the Audit Committee of the Board, stock options granted under this Plan will vest no later than thirty (30) days after the audited financial statements for the applicable Performance Period have been approved by the Board.

9.  PERFORMANCE MEASURES FOR VESTING OF STOCK OPTIONS

(a)  The Performance Measures which will be used to determine the degree to which stock options will vest over the three-year period beginning the first day of the fiscal year in which they are granted (the “Performance Period”) shall be cash flow return on investment (“CFROI”) and weighted average cost of net debt and equity capital (“WACC”).

(i)

CFROI is the ratio of after tax operating cash flow to average gross investment over the fiscal year, calculated as A divided by B, where (1) A equals operating income less/plus nonrecurring or unusual items less/plus change in unrealized gains/losses on derivative instruments included in net income plus accrued incentive awards plus depreciation and amortization less current taxes, and (2) B equals the average of total assets less/plus the fair value adjustment for investments in available for sale securities less the fair value of derivative instrument assets plus accumulated depreciation plus accumulated amortization less cash and cash equivalents less non interest bearing current liabilities excluding derivatives.

(ii)

WACC is the weighted average cost of net debt and equity capital, calculated as [A times the product of B divided by C] plus [D times the product of E divided by C], where (1) A equals the after-tax market yield cost of debt, (2) B equals the market value of debt less cash and cash equivalents (3) C equals the market value of debt less cash and cash equivalents, plus the market value of equity, (4) D equals the cost of equity, and (5) E equals the market value of equity.

(b)  In determining the number of stock options that will actually vest based on the degree to which the Performance Measures have been attained during the applicable Performance Period, the following chart

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shall be utilized which shows the three year average excess of CFROI being greater than WACC and the respective portion of the stock option that will vest:

Performance Measure		Vesting Scale
3 year average excess of		% of Stock Option
CFROI > WACC		Grant Vesting
	<0%		0%
	0.20%		30%
	1.20%		70%
	2.20%		90%
	2.50%		100%

(c)  In assessing the portion of the stock options that shall vest in accordance with the above chart, the following shall be done:

(i)	Each year, the CFROI and WACC will be calculated in accordance with the definitions herein, based on the audited financial statements and approved by the Audit Committee.
(ii)	In each Performance Period, the average of the three fiscal years shall be calculated by taking the simple average of the individual years’ results.
(iii)	The resulting three-year average will then be applied, using the scale above to determine the number of stock options, if any, that will vest as of the end of the Performance Period.
(iv)	For results falling between the reference points in the chart above, the level of vesting shall be mathematically interpolated between the reference points.

10.  TERMS OF STOCK OPTIONS

The period during which a stock option is exercisable (the “Term”) may not exceed 10 years from the date the stock option is granted (the “Initial Exercise Period”), plus any Additional Exercise Period (as defined below). If such Initial Exercise Period would otherwise expire (i) during a Blackout Period (as defined below) applicable to the relevant optionee or (ii) within 10 trading days after the expiration of the Blackout Period applicable to the relevant optionee, the Term of the related stock option shall expire on the date that is the tenth trading day after the end of such Blackout Period (an “Additional Exercise Period”). For purposes of this Plan, “Blackout Period” means any period during which the relevant optionee is prohibited by the Corporation’s trading policy from trading in the Corporation’s securities. The Stock Option Award Agreement may contain provisions limiting the number of Common Shares with respect to which stock options may be exercised in any one year. Each stock option agreement shall contain provisions to the effect that:

(a)

if the employment of an optionee as an officer or employee of the Corporation or a subsidiary terminates, by reason of his or her death, or if an optionee who is a retiree pursuant to Section 10(b) dies, the legal personal representatives of the optionee will be entitled to exercise any unexercised vested options, including such stock options that may vest after the date of death, during the period ending at the end of the twelfth calendar month following the calendar month in which the optionee dies, failing which exercise the stock options terminate;

(b)

subject to the terms of Section 10(a) above, if the employment of an optionee as an officer or employee of the Corporation or a subsidiary terminates, by reason of retirement in accordance with the then prevailing retirement policy of the Corporation or subsidiary, the optionee will be entitled to exercise any unexercised vested stock options, including such stock options that may vest after the date of retirement, during the period ending at the end of the 36th month following the calendar month in which the optionee retires, failing which exercise the stock options terminate;

(c)  subject to the terms of Section 14 below, if the employment of an optionee as an officer or employee of the Corporation or a subsidiary terminates, for any reason other than as provided in Sections 10(a) or (b), the optionee will be entitled to exercise any unexercised vested stock options, to the extent exercisable at the date of such event, during the period ending at the end of the calendar month immediately following the calendar month in which the event occurs, failing which exercise the stock options terminate;

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(d)

for greater certainty and for these purposes, an optionee’s employment with the Corporation or a subsidiary shall be considered to have terminated effective on the last day of the optionee’s actual and active employment with the Corporation or subsidiary whether such day is selected by agreement with the optionee or unilaterally by the Corporation or subsidiary and whether with or without advance notice to the optionee. For the avoidance of doubt, no period of notice that is given or ought to have been given under applicable law in respect of such termination of employment will be utilized in determining an optionee’s entitlement under the Plan. The employment of an optionee with the Corporation shall be deemed to have terminated for all purposes of the Plan if such person is employed by or provides services to a person that is a subsidiary of the Corporation and such person ceases to be a subsidiary of the Corporation, unless the Committee determines otherwise; and

(e)

each stock option is personal to the optionee and is not assignable, except (i) as provided in Section 10(a), and (ii) at the election of the Board, a stock option may be assignable to the spouse, children and grandchildren of the original optionee and to a trust, partnership or limited liability company, the entire beneficial interest of which is held by one or more of the foregoing.

Nothing contained in Sections 10(a), (b) or (c) shall extend the Term beyond its stipulated expiration date or the date on which it is otherwise terminated in accordance with the provisions of this Plan.

If a stock option is assigned pursuant to Section 10(e)(ii), the references in Sections 10(a), (b) and (c) to the termination of employment or death of an optionee shall not relate to the assignee of a stock option but shall relate to the original optionee. In the event of such assignment, legal personal representatives of the original optionee shall not be entitled to exercise the assigned stock option, but the assignee of the stock option or the legal personal representatives of the assignee may exercise the stock option during the applicable specified period.

11.  EXERCISE OF STOCK OPTIONS

Subject to the provisions of this Plan, a vested stock option may be exercised from time to time by delivering to the Corporation at its registered office a written notice of exercise specifying the number of Common Shares with respect to which the stock option is being exercised and accompanied by payment in cash or certified cheque in full of the purchase price of the Common Shares then being purchased.

12.  ADJUSTMENTS

Appropriate adjustments to the authorized limits set forth in Section 5, in the number, class and/or type of Common Shares optioned and in the option price per share, both as to stock options granted or to be granted, shall be made by the Board to give effect to adjustments in the number of Common Shares which result from subdivisions, consolidations or reclassifications of the Common Shares, the payment of share dividends by the Corporation, the reconstruction, reorganization or recapitalization of the Corporation or other relevant changes in the capital of the Corporation.

13.  MERGERS

If the Corporation proposes to amalgamate or merge with another body corporate, the Corporation shall give written notice thereof to optionees in sufficient time to enable them to exercise outstanding vested stock options, to the extent they are otherwise exercisable by their terms, prior to the effective date of such amalgamation or merger if they so elect. The Corporation shall use its best efforts to provide for the reservation and issuance by the amalgamated or continuing corporation of an appropriate number of Common Shares, with appropriate adjustments, so as to give effect to the continuance of the stock options to the extent reasonably practicable. In the event that the Board determines in good faith that such continuance is not in the circumstances practicable, it may upon 30 days’ notice to optionees terminate the stock options.

14.  CIRCUMSTANCES FOR ACCELERATED VESTING

If a “change of control” of the Corporation occurs and at least one of the two additional circumstances described below occurs, each then outstanding stock option granted under this Plan may be exercised, in whole or in part, even if such option is not otherwise exercisable by its terms.

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(a)  Additional circumstances include:

(i)	Upon a “change of control” the potential successor fails to assume the obligations with respect to each option or fails to convert or replace the options with equivalent options; or
(ii)	During the two-year period following the effective date of a change of control, the optionee is terminated without Cause (as defined below) or the optionee resigns employment for Good Reason (as defined below).

(b)  For purposes of this Plan, a change of control of the Corporation shall be deemed to have occurred if any of the following occur, unless the Board adopts a plan after the Effective Date of this Plan that has a different definition (in which case such definition shall be applied), or the Committee decides to modify or amend the following definition through an amendment of this Plan:

(i)	within any period of two consecutive years, individuals who at the beginning of such period constituted the Board and any new directors whose appointment by the Board or nomination for election by shareholders of the Corporation was approved by a vote of at least a majority of the directors then still in office who either were directors at the beginning of the period or whose appointment or nomination for election was previously so approved, cease for any reason to constitute a majority of the Board;
(ii)	there occurs an amalgamation, merger, consolidation, wind-up, reorganization or restructuring of the Corporation with or into any other entity, or a similar event or series of such events, other than any such event or series of events which results in securities of the surviving or consolidated corporation representing 50% or more of the combined voting power of the surviving or consolidated corporation’s then outstanding securities entitled to vote in the election of directors of the surviving or consolidated corporation being beneficially owned, directly or indirectly, by the persons who were the holders of the Corporation’s outstanding securities entitled to vote in the election of directors of the Corporation prior to such event or series of events in substantially the same proportions as their ownership immediately prior to such event of the Corporation’s then outstanding securities entitled to vote in the election of directors of the Corporation;
(iii)	50% or more of the fixed assets (based on book value as shown on the most recent available audited annual or unaudited quarterly consolidated financial statements) of the Corporation are sold or otherwise disposed of (by liquidation, dissolution, dividend or otherwise) in one transaction or series of transactions within any twelve month period;
(iv)	any party, including persons acting jointly or in concert with that party, becomes (through a take-over bid or otherwise) the beneficial owner, directly or indirectly, of securities of the Corporation representing 20% or more of the combined voting power of the Corporation’s then outstanding securities entitled to vote in the election of directors of the Corporation, unless in any particular situation the Board determines in advance of such event that such event shall not constitute a change of control; or
(v)	the Board approves and/or recommends that shareholders accept, approve or adopt any transaction that would constitute a change of control under clause (ii), (iii) or (iv) of this Section 14(b) and determines that the change of control resulting from such transaction will be deemed to have occurred as of a specified date earlier than the date under (ii), (iii) or (iv), as applicable.

(c)  For purposes of this Plan, “Cause” means dishonest or willful misconduct or lack of good faith resulting in material harm to the Corporation, financial or otherwise.

(d)  For purposes of this Plan, “Good Reason” means:

(i)	a substantial diminution in the optionee’s authorities, duties, responsibilities, status (including offices, titles, and reporting requirements) from those in effect immediately prior to the change of control;
(ii)	the Corporation requires the optionee to be based at a location in excess of fifty (50) miles from the location of the optionee’s principal job location or office immediately prior to the change of control, except for required travel on Corporation business to an extent substantially consistent with the optionee’s business obligations immediately prior to the change of control;
(iii)	a reduction in the optionee’s base salary, or a substantial reduction in optionee’s target compensation under any incentive compensation plan, as in effect as of the date of the change of control;

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(iv)

the failure to increase the optionee’s base salary in a manner consistent (both as to frequency and percentage increase) with practices in effect immediately prior to the change of control or with practices implemented subsequent to the change of control with respect to similarly positioned employees; or

(v)

the failure of the Corporation to continue in effect the optionee’s participation in the Corporation’s short- and long-tem incentive plans, stock option plans, and employee benefit and retirement plans, policies or practices, at a level substantially similar or superior to and on a basis consistent with the relative levels of participation of other similarly-positioned employees, as existed immediately prior to the change of control.

A termination of employment by the optionee for one of the reasons set forth in clause (i), (ii), (iii), (iv) or (v) of this Section 14(d), will not constitute Good Reason unless, within the 30-day period immediately following the occurrence of such Good Reason event, the optionee has given written notice to the Corporation of the event relied upon for such termination and the Corporation has not remedied such event within 30 days (the “Cure Period”) of the receipt of such notice. For the avoidance of doubt, the optionee’s employment shall not be deemed to terminate for Good Reason unless and until the Cure Period has expired and the Corporation has not remedied the applicable Good Reason event. The Corporation and the optionee may mutually waive in writing any of the foregoing provisions with respect to an event that otherwise would constitute Good Reason.

15.  RECOUPMENT POLICY

Each stock option granted under this Plan to an optionee that, as of the date the option is granted, participates in the Corporation’s Medium-Term Incentive Plan shall be subject to the terms and conditions of the Corporation’s Policy on Recoupment of Unearned Compensation (as previously adopted and, from time to time, amended by the Board) attached to such optionee’s Stock Option Award Agreement (as defined below).

16.  AMENDMENT OR DISCONTINUANCE OF THIS PLAN

The Board may amend or discontinue the Plan at any time, without obtaining the approval of shareholders of the Corporation unless required by the relevant rules of the Toronto Stock Exchange, provided that, subject to Sections 12, 13, and 14, no such amendment may increase the aggregate maximum number of Common Shares that may be subject to stock options under this Plan, change the manner of determining the minimum option price, extend the Term under any option beyond 10 years (plus any Additional Exercise Period) or the date on which the option would otherwise expire under the Plan, expand the assignment provisions of the Plan, permit non-employee directors to participate in the Plan or, without the consent of the holder of the option, alter or impair any option previously granted to an optionee under this Plan; and, provided further, for greater certainty, that, without the prior approval of the Corporation’s shareholders, stock options issued under this Plan shall not be repriced, replaced, or regranted through cancellation, or by lowering the option price of a previously granted stock option. Pre-clearance of the Toronto Stock Exchange of amendments to the Plan will be required to the extent provided under the relevant rules of the Toronto Stock Exchange.

17.  EVIDENCE OF STOCK OPTIONS

Each stock option granted under this Plan shall be evidenced by a written stock option agreement between the Corporation and the optionee which shall give effect to the provisions of this Plan and include such other terms as the Committee shall determine (“Stock Option Award Agreement”).

18.  WITHHOLDING

To the extent that the Corporation is required to withhold federal, provincial, state, local or foreign taxes in connection with any payment made or benefit realized by an optionee or other person hereunder, and the amounts available to the Corporation for such withholding are insufficient, it shall be a condition to the receipt of such payment or the realization of such benefit that the optionee or such other person make arrangements satisfactory to the Corporation for payment of the balance of such taxes required to be withheld, which arrangements (in the discretion of the Board) may include relinquishment of a portion of such benefit. Participants shall also make such arrangements in connection with the disposition of Common Shares acquired upon the exercise of option rights with respect to this Plan.

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Appendix D
Shareholder Proposal

The following shareholder proposal (the “Proposal”) has been submitted by a shareholder for consideration at the Meeting. This Proposal and its supporting statements represent the views of the submitting shareholder. The Corporation is legally required to include the Proposal in this Management Proxy Circular. For the reasons set out below, the Board and management oppose the Proposal.

The submitting shareholder is Meritas Financial (“Meritas”), 410 Hespeler Road, Unit 5, Cambridge, Ontario N1R 6J6. The Proposal and Meritas’s supporting statement are set out verbatim below in italics.

Proposal

RESOLVED, that shareholders of Potash Corporation of Saskatchewan Inc. urge the board of directors to adopt a policy that Potash Corporation of Saskatchewan Inc.’s shareholders be given the opportunity at each annual meeting of shareholders to vote on an advisory resolution, to be proposed by Potash Corporation of Saskatchewan Inc.’s management, to ratify the compensation of the Named Executive Officers set forth in the proxy statement. The proposal submitted to shareholders should ensure that shareholders understand that the vote is non-binding and would not affect any compensation paid or awarded to any Named Executive Officer.

SUPPORTING STATEMENT:

Ever-improving executive compensation disclosure allows shareholders to become better informed with respect to the amounts to be paid to executives, the circumstances under which payments will be made, and the reasons for specific decisions about compensation structure. However disclosure, no matter how detailed, does not allow shareholders to provide any input on the decisions that have been made.

Shareholders are seeking assurance that directors are making serious efforts to ensure that executive compensation is linked to corporate performance. Many are also concerned about the arrangements made with executives under pension schemes and severance packages. An advisory vote will provide shareholders with an opportunity to register their views on all elements of executive compensation.

For many years, shareholders of Canadian Issuers have had the opportunity to consider and vote on the adoption of stock-based compensation plans and many types of amendments made to them after they are adopted. Most other elements of executive compensation are not subject to a direct shareholder vote.

Currently, shareholders who do not support some or all aspects of the corporation’s executive compensation package can only register this view through the relatively imprecise methods of withholding votes from the entire board or the directors on the compensation committee. An advisory vote will allow shareholders to clearly express their views of executive compensation by voting on the matter directly.

An advisory vote on compensation was introduced in the United Kingdom in 2002. According to research compiled by Deloitte, in reported vote results from U.K. shareholder meetings held between 2002 and 2007, only 64 of 593 companies indicated that more than 20% of shareholders did not support the directors’ executive compensation report. Yet significant positive changes to executive compensation have been noted. According to corporate governance expert Stephen Davis, Deloitte & Touche found that there has been a significant increase in the amount of total incentive pay “with meaningful performance conditions attached” in the advent of the institution of the advisory vote In the U.K.^*

The Institution of an advisory vote on executive compensation implicitly acknowledges the expertise of the directors charged with making decisions regarding compensatory matters while allowing shareholders to provide Issuers with their views of those decisions.

*Stephen Davis, “Does ‘Say on Pay’ Work?”, Policy Briefing No. 1, Millstein Centre for Corporate Governance and Performance, Yale School of Management, 2007, p. 10.

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THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE AGAINST THE PROPOSAL FOR THE FOLLOWING REASONS:

This proposal seeks to solicit a non-binding vote from shareholders regarding the compensation provided to the Named Executive Officers. For the reasons explained below, the Board believes that adopting this proposal would not be in the best interests of the Corporation and its shareholders.

We are aware that executive compensation is a matter of importance to shareholders. As a result, in July of 2008, a joint session of the Compensation and Corporate Governance Committees thoroughly reviewed and considered the latest “Say on Pay” developments and concluded against implementation of a shareholder vote on executive compensation. This matter was again fully reviewed and considered upon receipt of this proposal. While we understand the sentiment expressed by the proposal, we do not believe, from a governance perspective, that a shareholder vote on executive compensation is an efficient or appropriate vehicle to address shareholder concerns regarding executive compensation. Simply stated, a vote of this nature blurs the distinction between shareholders and boards of directors and their respective roles and responsibilities. Rather than promoting good corporate governance, we are concerned that such a vote pulls in the opposite direction.

We believe that it is the role of the Compensation Committee to establish appropriate levels of executive compensation that align the interests of shareholders and management. Matters relating to executive compensation are highly specialized. The Corporation, through the Compensation Committee, spends a significant amount of time and resources to ensure that our executive compensation is appropriate and meaningfully performance based. In particular, the Compensation Committee is charged with formulating and making recommendations to the Board in respect of compensation issues, including reviewing and approving on an annual basis the evaluation process and compensation structure for our executive officers. Accordingly, an advisory vote on executive compensation would place shareholders into a highly specialized area and ask them to make an overall judgment on all the components of the compensation package with a simple yes or no vote.

Furthermore, the Compensation Committee and the Board take very seriously their responsibilities to shareholders to ensure that appropriate levels of compensation are paid to the persons charged with the responsibility of ensuring our long-term success. To reinforce the integrity of the Compensation Committee, all members are independent and in arriving at its conclusions, the Compensation Committee seeks input from independent external consultants, including analyses of external competitive compensation.

The Compensation Committee promotes shareholder interests by adhering to its “pay for performance” philosophy. Consistent with this philosophy, the Compensation Committee sets our senior executives’ annual base salary at median levels per survey data from the Committee’s independent compensation consultant and puts a significant proportion of their cash compensation at risk through performance-based awards under our annual short-term incentive plan and triennial medium-term incentive plan. By placing a significant amount of compensation at risk, the Compensation Committee rewards executives for superior performance and ensures that our executives’ compensation is aligned with shareholder interests (see “Compensation Discussion and Analysis — Elements of Executive Compensation” for additional detail). In addition, we have, for a number of years, provided our shareholders with a significant voice in our compensation plans through an annual vote on our performance option plan, a key component of our pay for performance compensation.

We believe our executive compensation is strongly aligned with our “pay for performance” philosophy, and third-party studies support this alignment. A 2008 study conducted by the Committee’s executive compensation consultant found that, during the past three years, the realized pay of our Named Executive Officers was within the top quartile of our peer group, coinciding with the top quartile performance of the Corporation relative to our peer group. A similar study of chief executive officer compensation at companies comprising the S&P/TSX 60 Index that was conducted in 2007 by the Hay Group, an independent executive compensation consulting group, found similar results for the compensation of our CEO.

We do not believe that the advisory vote called for in the proposal is the most effective mechanism for shareholders to communicate with the Corporation. The advisory vote is general and would not provide the Board meaningful insight. If shareholders do not ratify compensation decisions, the Board will understand that shareholders are dissatisfied, but the source of shareholder dissatisfaction, much less what actions should be taken to address the dissatisfaction, will not necessarily be clear.

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We believe that the best and most constructive means shareholders have of expressing concerns regarding executive compensation, or any other matter of interest to shareholders, is through direct communication with our management and the Board, including members of the Compensation Committee. Our investor relations department and senior management are in frequent contact with many of our shareholders, including at investor conferences and meetings. The process by which shareholders can contact the Board is described in the section entitled “Disclosure Regarding the Ability of Shareholders to Communicate With the Board of Directors” appearing on page 36 of this Management Proxy Circular. The Board believes that direct communication facilitates a sharing of shareholder views and is ultimately more meaningful and useful to management and the Board than a non-binding advisory vote.

The proposal also would subject the Corporation to an advisory vote requirement without any assurance that other public companies, particularly our industry peers, would be subject to a similar requirement. The proponent urges adoption of an advisory vote on executive compensation based on its purported success in the United Kingdom. However the advisory vote process in both the UK and Australia is mandated by law and applies to all public companies. The vast majority of U.S. companies do not have an advisory vote on executive compensation and, to our knowledge, no Canadian companies have an advisory vote on executive compensation. The U.S. legislature has proposed legislation that would require companies filing reports with the Securities and Exchange Commission to adopt an advisory vote on executive compensation. In light of these ongoing developments, it would be prudent to await the outcome of the debate on the U.S. legislation before adopting an advisory vote proposal. This would permit the Corporation to review the requirements of any such legislation to ensure that any practices adopted by the Corporation do not conflict with the legislation.

As indicated above, we are sensitive to the sentiments expressed by this proposal. We will continue to monitor this issue and specifically revisit it with our Compensation and Corporate Governance Committees later this year.

For the reasons described above, the Board believes that this proposal is not in the best interests of the Corporation and our shareholders.

The Board recommends that shareholders vote AGAINST this proposal.

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Appendix E
Board of Directors Charter

1.  PURPOSE AND ROLE

The Board of Directors (the “Board”) of Potash Corporation of Saskatchewan Inc. (the “Corporation”) is responsible for the stewardship and oversight of the management of the Corporation and its global business. It has the statutory authority and obligation to protect and enhance the assets of the Corporation in the interest of all shareholders.

Although Directors may be elected by the shareholders to bring special expertise or a point of view to Board deliberations, they are not chosen to represent a particular constituency. The best interests of the Corporation and its shareholders must be paramount at all times.

The involvement and commitment of Directors is evidenced by regular Board and Committee meeting attendance, preparation, and active participation in setting goals and requiring performance in the interest of shareholders.

2.  COMPOSITION

The Board shall be comprised of that number of Directors as shall be determined from time to time by the Board, in accordance with the Corporation’s articles, bylaws and applicable laws.

3.  MEETINGS

The time at which and place where the meetings of the Board shall be held and the calling of the meetings and procedure in all things at such meetings shall be determined by the Board in accordance with the Corporation’s articles, bylaws and applicable laws.

The agenda for each Board meeting shall be established by the CEO and the Board Chair, taking into account suggestions from other members of the Board. Meeting materials and information shall be distributed in advance of each meeting so as to provide adequate time for review. The Board has a policy of holding one meeting each year at one of the Corporation’s operating facilities. Site visits by the Board and meetings with senior management of the facility are incorporated into the itinerary.

Directors are expected to attend, in person or via tele- or video-conference, all meetings of the Board and the Committees upon which they serve, to come to such meetings fully prepared, and to remain in attendance for the duration of the meeting. Where a Director’s absence from a meeting is unavoidable, the Director should, as soon as practicable after the meeting, contact the Board Chair, the CEO, or the Corporate Secretary for a briefing on the substantive elements of the meeting.

4.  CHAIR

The Chair of the Board shall have the duties and responsibilities set forth in the “Chair of the Board of Directors Position Description.”

5.  RESPONSIBILITIES

The Board operates by delegating certain of its responsibilities to management and reserving certain powers to itself. Its principal duties fall into six categories:

•   Overseeing and approving on an ongoing basis the Corporation’s business strategy and strategic planning process;

•   Selection of the management;

•   Setting goals and standards for management, monitoring their performance and taking corrective action where necessary;

•   Approving policies, procedures and systems for implementing strategy, managing risk, and ensuring the integrity of the Corporation’s internal control and management information systems;

•   Adopting a communications policy and reporting to shareholders on the performance of the business;

•   Approval and completion of routine legal requirements.

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5.1  Strategy Determination

(a)

The Board has the responsibility to participate, as a whole and through its Committees, in identifying the objectives and goals of the business as well as the associated risks, and the strategy by which it proposes to reach those goals and mitigate such risks. The Board shall adopt a strategic planning process and shall approve, on an annual basis, a strategic plan which takes into account, among other things, the opportunities and risks of the business.

(b)

The Board has the responsibility to ensure congruence between shareholder expectations, company plans and management performance.

5.2  Selection of the Management

(a)	The Board retains the responsibility for managing its own affairs, including planning its composition, selecting its Chair, nominating candidates for election to the Board, appointing Committees and determining Director compensation.
(b)	The Board has the responsibility for the appointment and replacement of a Chief Executive Officer (“CEO”) of the Corporation, for monitoring CEO performance, determining CEO compensation, and providing advice and counsel in the execution of the CEO’s duties.

(c)  The Board has the responsibility for approving the appointment and remuneration of all corporate officers, acting upon the advice of the CEO.

(d)	The Board has the responsibility for, to the extent feasible, satisfying itself as to the integrity of the CEO and the other executive officers and that the CEO and other executive officers create a culture of integrity throughout the Corporation.
(e)	The Board has the responsibility for ensuring that adequate provision has been made for management succession (including appointing, training and monitoring senior management).

5.3  Monitoring and Acting

(a)	The Board has the responsibility for monitoring the Corporation’s progress towards its goals, and revising and altering its direction in light of changing circumstances.
(b)	The Board has the responsibility for taking action when performance falls short of its goals or when other special circumstances (for example mergers and acquisitions or changes in control) warrant it.

5.4  Policies and Procedures

(a)	The Board has the responsibility for developing the Corporation’s approach to corporate governance, including developing a set of corporate governance principles and guidelines that are specifically applicable to the Corporation.
(b)	The Board has the responsibility for approving and monitoring compliance with all significant policies, procedures and internal control and management systems by which the Corporation is operated.

(c)  The Board has responsibility for ensuring that the Corporation operates at all times within applicable laws and regulations, and to high ethical and moral standards.

5.5  Reporting to Shareholders

(a)	The Board has the responsibility for adopting a communications policy for the Corporation, including adopting measures for receiving feedback from stakeholders.
(b)	The Board has the responsibility for ensuring that the financial performance of the Corporation is reported to shareholders on a timely, regular and non-selective basis.

(c)  The Board has the responsibility for ensuring that the financial results are reported fairly, and in accordance with generally accepted accounting principles.

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(d)	The Board has the responsibility for timely and non-selective reporting of any other developments that have a significant and material impact on the value of the shareholders’ assets.
(e)	The Board has the responsibility for reporting annually to shareholders on its stewardship for the preceding year.
(f)	The Board has the responsibility for approving any payment of dividends to shareholders.

5.6  Legal Requirements

(a)  The Board is responsible for ensuring that legal requirements, documents and records have been properly prepared, approved and maintained.

5.7  Other

(a)	On an annual basis, this Board Charter shall be reviewed and assessed, and any proposed changes shall be submitted to the Board for consideration.
(b)	Any security holder may contact the Board by email or by writing to the Board c/o the Corporate Secretary. Matters relating to the Corporation’s accounting, internal accounting controls or auditing matters will be referred to the Audit Committee. Other matters will be referred to the Board Chair.

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Appendix F
Audit Committee Charter

1.  PURPOSE

1.1.  The Audit Committee (the “Committee”) is a standing committee of the Board of Directors of Potash Corporation of Saskatchewan Inc. (the “Corporation”). Its purpose is to assist the Board of Directors in fulfilling its oversight responsibilities for (i) the integrity of the Corporation’s financial statements, (ii) the Corporation’s compliance with legal and regulatory requirements,(iii) the qualifications and independence of the auditors of the Corporation (the “external auditors”), and (iv) the performance of the Corporation’s internal audit function and external auditors. The Committee will also prepare the report that is, under applicable legislation and regulation, required to be included in the Corporation’s annual proxy statement and circular.

2.  AUTHORITY

2.1.  The Committee has authority to conduct or authorize investigations into any matter within its scope of responsibility. It is empowered to:

(a)	Determine the public accounting firm to be recommended to the Corporation’s shareholders for appointment as external auditors, and, subject to applicable law, be directly responsible for the compensation and oversight of the work of the external auditors. The external auditors will report directly to the Committee.
(b)	Resolve any disagreements between management and the external auditors regarding financial reporting.
(c)	Pre-approve all auditing and permitted non-audit services performed by the Corporation’s external auditors.
(d)	Retain independent counsel, accountants, or others to advise the Committee or assist in its duties.
(e)	Seek any information it requires from employees — all of whom are directed to cooperate with the Committee’s requests — or external parties.
(f)	Meet with the Corporation’s officers, external auditors or outside counsel, as necessary.
(g)	Delegate authority, to the extent permitted by applicable legislation and regulation, to one or more designated members of the Committee, including the authority to pre-approve all auditing and permitted non-audit services, providing that such decisions are presented to the full Committee at its next scheduled meeting.

3.  COMPOSITION

3.1.	The Committee shall consist of at least three and no more than six members of the Board of Directors.
3.2.	The Corporate Governance and Nominating Committee will recommend to the Board of Directors members for appointment to the Committee and the Chair of the Committee. Only independent Directors shall be entitled to vote on any Board resolution approving such recommendations.
3.3.	If and whenever a vacancy shall exist on the Committee, the remaining members may exercise all its powers so long as a quorum remains in office.
3.4.	Each Committee member shall be independent according to the independence standards established by the Board of Directors, and all applicable corporate and securities laws and stock exchange listing standards.
3.5.	Each Committee member will also be financially literate. At least one member shall be designated as the “financial expert”, as defined by applicable legislation and regulation. No Committee member shall simultaneously serve on the audit committees of more than two other public companies.

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4.  MEETINGS

4.1.	A majority of the members of the Committee shall constitute a quorum. All determinations of the Committee shall be made by a majority of its members present at a meeting duly called and held. All Committee members are expected to attend each meeting, in person or via tele- or video-conference. Any decision or determination of the Committee reduced to writing and signed by all of the members of the Committee shall be fully as effective as if it had been made at a meeting duly called and held.
4.2.	The Committee will meet at least once each fiscal quarter, with authority to convene additional meetings, as circumstances require. The Committee will invite other members of the Board of Directors, members of management, internal auditors or others to attend meetings and provide pertinent information, as necessary. External auditors shall be entitled to receive notice of every meeting of the Committee and to attend and be heard thereat. The Committee will meet separately, periodically, with management, with internal audit and with external auditors. The Committee will also meet periodically in camera. Meeting agendas will be prepared and provided in advance to members, along with appropriate briefing materials.
4.3.	The time at which and place where the meetings of the Committee shall be held and the calling of meetings and the procedure in all things at such meetings shall be determined by the Committee; provided that meetings of the Committee shall be convened whenever requested by the external auditors or any member of the Committee in accordance with the Canada Business Corporations Act (the “CBCA”). Following a Committee meeting, the Committee Chair shall report on the Committee’s activities to the Board of Directors at the next Board of Directors meeting. The Committee shall keep and approve minutes of its meetings in which shall be recorded all action taken by it, which minutes shall be available as soon as practicable to the Board of Directors.

5.  CHAIR

5.1.  The Chair of the Committee shall have the duties and responsibilities set forth in Appendix “A”.

6.  RESPONSIBILITIES

There is hereby delegated to the Committee the duties and powers specified in section 171 of the CBCA and, without limiting these duties and powers, the Committee will carry out the following responsibilities.

6.1.  Financial Statements

(a)  Review significant accounting and reporting issues and understand their impact on the financial statements. These issues include:

(i)	complex or unusual transactions and highly judgmental areas;
(ii)	major issues regarding accounting principles and financial statement presentations, including any significant changes in the Corporation’s selection or application of accounting principles; and
(iii)	the effect of regulatory and accounting initiatives, as well as off-balance sheet structures, on the financial statements of the Corporation.

(b)	Review analyses prepared by management and/or the external auditors, setting forth significant financial reporting issues and judgments made in connection with the preparation of the financial statements, including analyses of the effects of alternative GAAP methods on the financial statements.
(c)	Review both U.S. GAAP and Canadian GAAP issues and any reconciliation issues from Canadian GAAP to U.S. GAAP.
(d)	Review with management and the external auditors the results of the audit, including any difficulties encountered. This review will include any restrictions on the scope of the external auditors’ activities or on access to requested information, and the resolution of any significant disagreements with management.
(e)	Review and discuss the annual audited financial statements and quarterly financial statements with management and the external auditors, including the Corporation’s disclosures under “Management’s

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Discussion and Analysis of Financial Condition and Results of Operations” (“MD&A”), including the discussion of critical accounting estimates included therein.

(f)	Review and discuss the unaudited annual financial statements prior to the Corporation’s year-end earnings release.
(g)	Review the annual financial statements and MD&A and make a determination whether to recommend their approval by the Board of Directors.
(h)	Approve the quarterly financial statements and MD&A prior to their release.
(i)	Review disclosures made by the Chief Executive Officer and the Chief Financial Officer during the Forms 10-K and 10-Q certification process about significant deficiencies or material weaknesses in the design or operation of internal controls or any fraud that involves management or other employees who have a significant role in the Corporation’s internal controls.
(j)	Review and discuss earnings press releases prior to their release (particularly use of “pro forma” information or other non-GAAP financial measures), as well as financial information and earnings guidance provided externally, including to analysts and rating agencies.
(k)	Review management’s internal control report and the related attestation by the external auditors of the Corporation’s internal controls over financial reporting.

6.2.  Internal Control

(a)	Consider the effectiveness of the Corporation’s internal control system, including information technology security and control.
(b)	Understand the scope of internal audit’s and external auditors’ review of internal control over financial reporting, and obtain reports on significant findings and recommendations, together with management’s responses.
(c)	Review external auditors’ management letters and management’s responses to such letters.
(d)	As requested by the Board of Directors, discuss with management, internal audit and the external auditors the Corporation’s major risk exposures (whether financial, operational or otherwise), the adequacy and effectiveness of the accounting and financial controls, and the steps management has taken to monitor and control such exposures.
(e)	Annually review the Corporation’s disclosure controls and procedures, including any significant deficiencies in, or material non-compliance with, such controls and procedures.
(f)	Discuss with the Chief Financial Officer and, as is in the Committee’s opinion appropriate, the Chief Executive Officer, all elements of the certification required pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act.

6.3.  Internal Audit

(a)	Review with management, the external auditors and internal audit the charter, plans, activities, staffing and organizational structure of the internal audit function.
(b)	Ensure there are no unjustified restrictions or limitations on the functioning of the internal audit department, and review and concur in the appointment, replacement, or dismissal of the Vice President, Internal Audit.
(c)	Review the effectiveness of the internal audit function, including compliance with The Institute of Internal Auditors’ Standards for the Professional Practice of Internal Auditing.
(d)	On a regular basis, meet separately with the Vice President, Internal Audit to discuss any matters that the Committee or the Vice President, Internal Audit believes should be discussed privately.

6.4.  External Audit

(a)  Review the external auditors’ proposed audit scope and approach, (including coordination of audit effort with internal audit) and budget.

MANAGEMENT PROXY CIRCULAR ï Appendices Page  92

(b)  Oversee the work and review the performance of the external auditors, and make recommendations to the Board regarding the appointment or discharge of the external auditors. In performing this oversight and review, the Committee will:

(i)	At least annually, obtain and review a report by the external auditors describing (A) the external auditors’ internal quality control procedures; (B) any material issues raised by the most recent internal quality control review, or peer review, of the external auditors, or by any inquiry or investigation by governmental or professional authorities, within the preceding five years, respecting one or more independent audits carried out by the external auditors, and any steps taken to deal with any such issues; and (C) (to assess the auditor’s independence) all relationships between the external auditors and the Corporation.
(ii)	Take into account the opinions of management and internal audit.
(iii)	Review and evaluate the lead partner of the external auditors.

(c)	On an annual basis receive and review from the external auditors a report on items required to be communicated to the Committee by applicable rules and regulations.
(d)	Ensure the rotation of the lead audit partner every five years and other audit partners every seven years, and consider whether there should be regular rotation of the audit firm itself.
(e)	Present its conclusions with respect to the external auditors to the full Board of Directors.
(f)	Set clear hiring policies for employees or former employees of the present or former external auditors.
(g)	On a regular basis, meet separately with the external auditors to discuss any matters that the Committee or external auditors believe should be discussed privately.

6.5.  Compliance

(a)	Review the effectiveness of the system for monitoring compliance with laws and regulations and the results of management’s investigation and follow-up (including disciplinary action) of any instances of non-compliance.
(b)	Establish procedures for: (i) the receipt, retention and treatment of complaints received by the Corporation regarding accounting, internal accounting controls or auditing matters; and (ii) the confidential, anonymous submission by employees of the Corporation of concerns regarding questionable accounting or auditing matters.
(c)	Review the findings of any examinations by regulatory agencies, and any external auditors observations made regarding those findings.
(d)	Review the process for communicating the Core Values and Code of Conduct to Corporation personnel, and for monitoring compliance therewith.
(e)	Obtain regular updates from management and Corporation legal counsel regarding compliance matters.

6.6.  Reporting Responsibilities

(a)	Regularly report to the Board of Directors about Committee activities and issues that arise with respect to the quality or integrity of the Corporation’s financial statements, the Corporation’s compliance with legal or regulatory requirements, the performance and independence of the Corporation’s external auditors, and the performance of the internal audit function.
(b)	Provide an open avenue of communication between internal audit, the external auditors, and the Board of Directors.
(c)	Report annually to shareholders, describing the Committee’s composition, responsibilities and how they were discharged, and any other information required by applicable legislation or regulation, including approval of non-audit services.
(d)	Review any other reports the Corporation issues that relate to Committee responsibilities.

MANAGEMENT PROXY CIRCULAR ï Appendices Page  93

6.7.  Other Responsibilities

(a)	Discuss with management the Corporation’s major policies with respect to risk assessment and risk management.
(b)	Perform other activities related to this Committee Charter as requested by the Board of Directors.

(c)  Institute and oversee special investigations as needed.

(d)	Ensure appropriate disclosure of this Committee Charter as may be required by applicable legislation or regulation.
(e)	Confirm annually that all responsibilities outlined in this Committee Charter have been carried out.
(f)	Receive and review, at least quarterly, a report prepared by the Corporation’s Natural Gas Hedging Committee and, if the Corporation’s hedged position is outside approved guidelines, determine the reasons for the deviation and any action which will be taken as a result.
(g)	Annually review the Corporation’s natural gas hedging policy.
(h)	Receive and review, at least annually and in conjunction with the Compensation Committee, a report on pension plan governance including a fund review and retirement plan accruals.

7.  FUNDING

7.1.  The Corporation shall provide for appropriate funding, as determined by the Committee, for (i) compensation to the external auditors for the purpose of preparing or issuing an audit report or performing other audit review or attest services as pre-approved by the Committee; (ii) compensation to any outside experts employed by the Committee; and (iii) ordinary administrative expenses of the Committee that are necessary or appropriate in carrying out its duties.

8.  OTHER

8.1.	The Committee shall conduct an evaluation of the Committee’s performance and this Audit Committee Charter, including Appendix “A” attached hereto, at least annually, and recommend to the Board of Directors such Committee Charter changes as the Committee deems appropriate.
8.2.	Authority to make minor technical amendments to this Committee Charter is hereby delegated to the Secretary of the Corporation who will report any amendments to the Board of Directors at its next meeting.

APPENDIX “A”
POTASH CORPORATION OF SASKATCHEWAN INC.
Audit Committee Chair Position Description

In addition to the duties and responsibilities set out in the Board of Directors Charter and any other applicable charter, mandate or position description, the chair (the “Chair”) of the Audit Committee (the “Committee”) of Potash Corporation of Saskatchewan Inc. (the “Corporation”) has the duties and responsibilities described below.

1.  Provide overall leadership to facilitate the effective functioning of the Committee, including:

(a)	overseeing the structure, composition, membership and activities delegated to the Committee;
(b)	chairing every meeting of the Committee and encouraging free and open discussion at meetings of the Committee;

(c)  scheduling and setting the agenda for Committee meetings with input from other Committee members, the Chair of the Board of Directors and management as appropriate;

(d)	facilitating the timely, accurate and proper flow of information to and from the Committee;
(e)	arranging for management, internal and external auditors and others to attend and present at Committee meetings as appropriate;
(f)	arranging sufficient time during Committee meetings to fully discuss agenda items;

MANAGEMENT PROXY CIRCULAR ï Appendices Page  94

(g)	encouraging Committee members to ask questions and express viewpoints during meetings; and
(h)	taking all other reasonable steps to ensure that the responsibilities and duties of the Committee, as outlined in its Charter, are well understood by the Committee members and executed as effectively as possible.

2.	Foster ethical and responsible decision making by the Committee and its individual members.
3.	Encourage the Committee to meet in separate, regularly scheduled, non-management, closed sessions with the internal auditor and the independent auditors.
4.	Following each meeting of the Committee, report to the Board of Directors on the activities, findings and any recommendations of the Committee.
5.	Carry out such other duties as may reasonably be requested by the Board of Directors.

MANAGEMENT PROXY CIRCULAR ï Appendices Page  95

Potash Corporation
of Saskatchewan Inc. Proxy

For use at the Annual and Special Meeting

of Shareholders to be held on May 7, 2009.

THIS PROXY IS SOLICITED ON BEHALF OF MANAGEMENT OF THE CORPORATION.

The undersigned holder of common shares (“Shares”) of Potash Corporation of Saskatchewan Inc. (the “Corporation”) hereby appoints Dallas J. Howe, Board Chair, or failing him, William J. Doyle, President and Chief Executive Officer, or failing him, Wayne R. Brownlee, Executive Vice President, Treasurer and Chief Financial Officer, or failing him, Joseph A. Podwika, Secretary, or instead of any of the foregoing,

as proxy for the undersigned to attend, vote and act for and on behalf of the undersigned at the annual and special meeting of shareholders of the Corporation to be held:

Thursday, the 7^th day of May, 2009 (the “Meeting”)

10:30 a.m. (local time)

Grand Salon, TCU Place

35 — 22^nd Street East

Saskatoon, Saskatchewan, Canada

and at any adjournments thereof, and hereby revokes any proxy previously given by the undersigned.

1.   A shareholder has the right to appoint a person who need not be a shareholder, to represent him and to attend and act on his behalf at the Meeting, other than the nominees designated above, and may exercise such right by inserting the name of his nominee in the space provided above for that purpose.

2.   The Shares represented by this proxy will be voted in accordance with any choice specified in this proxy. If no specification is made, the persons named above will vote such Shares FOR the election of the directors named in this proxy, FOR the appointment of Deloitte & Touche LLP as auditors of the Corporation, FOR the resolution (attached as Appendix B to the accompanying Management Proxy Circular) approving the adoption of a new performance

option plan, the full text of which is attached as Appendix C to the accompanying Management Proxy Circular and AGAINST the shareholder proposal (attached as Appendix D to the accompanying Management Proxy Circular). This proxy confers authority to vote in the proxyholder’s discretion with respect to amendments to matters identified in the accompanying Notice of Meeting and with respect to other matters that may properly come before the Meeting.

3.	If this proxy is not dated, it shall be deemed to be dated on the date on which this proxy was mailed by the Corporation.
4.	Reference is made to the accompanying Management Proxy Circular of the Corporation for further information regarding the completion and use of this proxy and other information pertaining to the Meeting.

Without limiting the general powers hereby conferred, the Shares represented by this proxy are to be:

1.	Voted FOR, or WITHHELD FROM VOTING, the nominees for directors listed below.
		For	Withhold		For	Withhold
	(01) C. M. Burley	o	o	(07) K. G. Martell	o	o
	(02) W. J. Doyle	o	o	(08) J. J. McCaig	o	o
	(03) J. W. Estey	o	o	(09) M. Mogford	o	o
	(04) C. S. Hoffman	o	o	(10) P. J. Schoenhals	o	o
	(05) D. J. Howe	o	o	(11) E. R. Stromberg	o	o
	(06) A. D. Laberge	o	o	(12) E. Viyella de Paliza	o	o

		For	Withhold
2.	Voted FOR, or WITHHELD FROM VOTING, on the appointment of Deloitte & Touche LLP as auditors of the Corporation.	o	o
		For	Against
3.	Voted FOR or AGAINST the resolution (attached as Appendix B to the accompanying Management Proxy Circular) approving the adoption of a new performance option plan, the full text of which is attached as Appendix C to the accompanying Management Proxy Circular.	o	o
		For	Against
4.	Voted FOR or AGAINST the shareholder proposal (attached as Appendix D to the accompanying Management Proxy Circular).	o	o

Dated the ­ ­ day of ­ ­  2009.

Name of Shareholder Signature of Shareholder

EX-99.B

Exhibit 99(b)

Our vision

Play a key role in the global food solution while building long-term value for all our stakeholders.

Our goals

• Be the preferred supplier to the markets we serve

• Maximize long-term shareholder value

• Build strong relationships with and improve the socioeconomic well-being of our communities

• Attract and retain talented, motivated and productive employees who are committed to our long-term goals

• Prevent harm to people and damage to the environment

Company profile

PotashCorp is an integrated producer of fertilizer, industrial and animal feed products. We are the world’s largest fertilizer enterprise, producing the three primary plant nutrients: potash, phosphate and nitrogen. Among these, potash-the main focus of our business – delivers the highest quality earnings. With large low-cost operations, plans to expand capacity significantly and strategic global investments, we have an unmatched ability to meet the needs of North America and growing offshore potash markets.

INSIDE:	Page
Performance Highlights		2
Letter to Shareholders		5
6 Keys to Understanding Our Business		7
Board and Senior Management		24
Shareholder Information		26

Financial data in this report are stated in US dollars unless otherwise noted.

Performance Highlights

($ millions, except per-share data and percentages)	2008		2007		2006		2005		2004		5-Year			10-Year
											CAGR1			CAGR
Financial Position
Current assets		2,267.2		1,811.3		1,310.2		1,110.8		1,243.6
Property, plant & equipment		4,812.2		3,887.4		3,525.8		3,262.8		3,098.9
Other long-term assets		3,169.4		4,017.9		1,381.0		984.3		784.3
Total assets		10,248.8		9,716.6		6,217.0		5,357.9		5,126.8
Current liabilities		2,615.8		1,001.9		1,103.5		1,096.1		703.7
Long-term debt		1,739.5		1,339.4		1,357.1		1,257.6		1,258.6
Other long-term liabilities		1,304.6		1,356.6		976.1		871.7		778.9
Shareholders’ equity		4,588.9		6,018.7		2,780.3		2,132.5		2,385.6
Total liabilities & shareholders’ equity		10,248.8		9,716.6		6,217.0		5,357.9		5,126.8
Financial Results
Sales		9,446.5		5,234.2		3,766.7		3,847.2		3,244.4		28	%		14	%
Gross margin — Potash		3,055.5		912.3		561.1		707.4		422.8		72	%		25	%
Gross margin — Phosphate		1,114.5		432.8		125.3		98.9		15.8		73	%3		17	%
Gross margin — Nitrogen		737.4		536.1		315.6		318.7		242.8		31	%		28	%
Total gross margin		4,907.4		1,881.2		1,002.0		1,125.0		681.4		67	%		23	%
Net income		3,495.2		1,103.6		631.8		542.9		298.6		101	%3		30	%
Net income per share — diluted 2		11.01		3.40		1.98		1.63		0.90		100	%3		30	%
Cash provided by operating activities		3,013.2		1,688.9		696.8		865.1		658.3
Additions to property, plant & equipment		1,198.3		607.2		508.6		382.7		220.5

¹ Compound annual growth rate
² Adjusted for a two-for-one stock split in August 2004 and a three-for-one stock split in May 2007
³ 2003 result was negative, therefore 6-year CAGR used

5		$	3.0 billion	169%
Consecutive years of record earnings	Cash flow from operating activities			Increase in average realized potash price year over year

2 Keyword Online: Financials

2008 Overall Gross Margin
$	4.9 billion

GROSS MARGIN

Record performance continued for all three nutrient segments, with overall gross margin reaching $4.9 billion, far surpassing last year’s total of $1.9 billion.

Potash

Potash gross margin was $3.1 billion, more than triple the $912.3 million generated in 2007.

This record performance was achieved largely on the strength of realized potash prices, which far more than offset a 9 percent decrease in year-over-year potash sales volumes. Annual per-tonne potash prices rose 169 percent above last year’s level, with fourth-quarter realized prices averaging $625 per tonne. Driven by tight long-term supply/demand fundamentals, this strong pricing - - even under difficult global economic circumstances -illustrates a key advantage of the potash business model.

Phosphate and Nitrogen

In phosphate and nitrogen, as in many businesses, 2008 was a story told in two parts.

Despite higher raw materials costs, robust demand and prices in the first three quarters led to full-year gross margin records in both nutrients: phosphate $1.1 billion and nitrogen $737.4 million. In the uncertain economic climate of the fourth quarter, however, weakened demand, rapidly declining raw material costs and growing inventories led phosphate and nitrogen producers around the world to lower prices, reducing performance industry-wide.

Letter to Shareholders

Food Production Remains A Global Priority

The latter half of 2008 brought unprecedented challenges to world financial markets, and no industry — even those as essential as fertilizer and food — escaped untouched.

This financial turmoil dominated people’s attention, while concern about the global food supply — a potentially devastating crisis that earned priority status earlier in the year — was pushed out of the spotlight. The prospect of food shortages has dire implications, and the fact that this has been bumped from the headlines does not mean it has been resolved. The long-term need to increase food production remains a critical issue.

PotashCorp’s products are integral to protecting the global food supply, and the need to produce higher yields per acre represents a significant opportunity for your company.

In recent years, we have benefited from growing demand and higher prices for our fertilizer products, especially potash. This helped us achieve a fifth consecutive year of record earnings in 2008.

Yet even with long-term food consumption trends that are hard to dispute, our industry was affected by the widespread loss of confidence in the global economy. Despite robust grain demand and extremely low inventories relative to use, crop commodity prices were caught up in the freefall. Farmers, like other consumers, reacted by holding on to their capital and deferring fertilizer purchases.

Diverting focus and resources away from food production — even in the short term — will result in greater need. When attention returns to the food crisis, the challenges will have grown.

We believe this will further increase the need for and value of the crop nutrients we produce. With this understanding, your company has not wavered from the long-term strategies that led to our success over the past two decades and provide even greater potential for the future.

A Fundamental Issue

The world looks very different in the agricultural regions of China, India and Brazil than it does in headline coverage of financial issues.

With global population growing by approximately 75 million people per year, the food supply is under extreme pressure. Many countries with the fastest growing populations also have the strongest economic growth, enabling more people to improve their diets by adding meat and protein-rich foods.

This requires more grain. In seven of the past nine years, world grain production has fallen short of consumption. As a result, global inventories are low. Current grain stocks would feed the world for just over two months, compared to the greater than three-month cushion averaged over the past 30 years. This reduction puts the world food supply at risk.

Simply put, more food must be produced on a land base that is being squeezed by global development - - and the only practical solution is to improve agricultural yields. This has raised interest in and awareness of the essential role of fertilizer in food production. While the financial crisis meant demand for our products was deferred through the fourth quarter of 2008 and the early months of 2009, we expect the need for them will continue to grow.

5

Letter to Shareholders (continued)

To prepare for this growth, we continue to build our potash capacity. Adding to previously announced debottlenecking and expansion projects, we have expanded our plans at Allan, Cory and Rocanville to get the most out of our existing operations. In total, we are investing CDN $7 billion to raise our constructed capacity to 18 million tonnes by the end of 2012.

As we have in the past, we will bring on this capacity when it is needed, remaining true to our long-held strategy of matching production to market demand. We demonstrated our commitment to this late in 2008 when we announced plans to curtail 2 million tonnes of production in early 2009 in anticipation of reduced demand during the first quarter.

We will not push our products into markets when there is a lull, but we will be prepared as demand growth returns. We expect a new surge to begin during the second half of 2009 — and we will be ready to capitalize on the opportunity.

Producing Financial Performance

By using our resources, particularly potash, when they have the greatest value, we have continued to improve our financial performance.

In 2008, we earned a record $11.01 per share, or $3.5 billion, more than triple our 2007 net income. Gross margin grew to $4.9 billion — a $3 billion increase over 2007 — as all our nutrients made record contributions.

Significantly higher prices for potash are at the heart of this record performance. Our average realized price of $625 per tonne in the fourth quarter of 2008 was nearly four times our average price of 2007. More importantly, these price gains held up late in the year, even as the financial turmoil triggered a chain of events that led to a sharp decline in phosphate and nitrogen prices.

Potash buyers have recognized that strong and sustainable pricing is required to encourage much-needed long-term investments in capacity. With our unmatched capability in potash, this represents more opportunity for our company.

Pursuing Our Full Potential

As pleased as we are with our 2008 performance, we believe it only hints at what we can achieve. The world will need more fertilizer, especially potash. With no significant greenfield projects underway, and factoring in new

production from all announced capacity expansion projects, the global potash supply is expected to be challenged for at least the next five years.

That should support stronger pricing and even greater financial performance. We anticipate higher prices and will soon have the capability to produce up to 18 million tonnes. While this is not a forecast, we believe it is possible that price increases and demand could elevate our annual potash gross margin toward $25 billion in the years ahead.

We believe our potash advantage separates us from other companies in our industry, and we will use this in the pursuit of greater returns for our shareholders.

A Long-Term Commitment

As a company, we remain unfailingly focused on the long-term demand for our products and the potential it holds. Accordingly, we base our business decisions on maximizing value — not quarter by quarter, but over an extended period of time. This includes building strong and lasting relationships with all our stakeholders, as we understand how we nourish each other’s growth.

Our Board of Directors has both supported and challenged our vision and plans, ensuring we maintain the high standards and strong reputation that have been established by our performance. The strong leadership we receive is important to our continued success.

We have abundant reserves and will use them to help the world’s farmers meet the challenge of feeding an ever-growing population. Not only will this allow us to serve the needs of our customers and communities for generations to come, it will enhance our ability to reward you for providing the capital needed to fulfill the noble cause of food production.

We look forward to continuing on a path of strong financial performance and greater returns for our shareholders.

William J. Doyle

President and Chief Executive Officer

February 20, 2009

6

KEY 1

WAYNE BROWNLEE,
Executive Vice President and CFO

“We’re witnessing an unprecedented period of global development - creating new opportunities for people to enrich their lives and diets, and for our business and stakeholders to prosper.”

The world needs more fertilizer

It’s a picture of growth — and necessity.

Global population grows by 75 million every year as it rises toward an expected 9.2 billion by 2050. Consumption of meat and other sources of protein — which require substantial grain to produce - - continues to climb as millions of people in developing nations gain purchasing power. Available agricultural land per person shrinks as cities and populations expand, while poor fertility practices continue to keep soils underproductive in much of the world.

The result? Demand for grain has outpaced production for seven of the past nine years, forcing countries to deplete grain stocks to meet their immediate needs and leaving stocks-to-use levels near historical lows.

The world needs to find a sustainable way to produce more food for more people on limited land. The world needs more fertilizer.

•      Mined from evaporated sea deposits •      As fertilizer: improves root strength and disease resistance, enhances taste, color and texture of food •      As feed: aids animal growth and milk production •      Used in industrial products (food products, soaps, water softeners)	•      Mined from ancient sea fossils •      As fertilizer: aids in photosynthesis, speeds crop maturity •      As feed: assists in muscle repair and skeletal development •      Used in industrial products (soft drinks, food products, metal treatment)	•      Synthesized from air using steam and natural gas •      As fertilizer: builds proteins and enzymes, speeds plant growth •      As feed: essential to RNA, DNA and cell maturation •      Used in industrial products (plastics, resins, adhesives)
POTASH     K	PHOSPHATE     P	NITROGEN     N

Keyword Online: Our Business 9

World markets

China uses more fertilizer than any other country, with farmers often double- and triple-cropping to grow rice, fruits and vegetables for its 1.3 billion people.

In the coming years, China plans to raise its annual grain production by approximately 10 percent, or 50 million tonnes. To achieve this growth, its government is taking important steps to encourage productivity and modernize the country’s agricultural practices. In addition to doubling agricultural subsidies to improve returns to farmers, it is raising minimum prices for key commodities such as wheat and rice. It is also beginning to allow the transfer of land-use rights, which should ultimately lead to larger and more efficient farms.

KEY 1     The world needs more fertilizer

NORTH AMERICA

The US and Canada are major suppliers of food and fiber, with the US accounting for approximately 40 percent of total global trade in wheat, corn, soybeans and cotton. Both countries are among the world’s most efficient agricultural producers.

Rising global food demand and domestic biofuel mandates have created competition for limited farmland and driven crop prices beyond historical levels. This has led US farmers to achieve record earnings in five of the past six years and reduced debt-to-equity ratios to all-time lows. A strong financial footing and low global grain inventories give them the ability and incentive to maximize crop production.

INDIA

India’s large population (1.1 billion) and growing incomes are driving the need for more food and better diets. With 17 percent of world population but only 11 percent of its arable land, and yields typically 20-50 percent of those on equivalent US cropland, India’s need for fertilizer is clear.

The Indian government recently set an agricultural sector growth target of 4 percent per year until 2012. To stimulate yield improvements, it has raised the minimum support price for rice by 40 percent in the current crop year and continues to heavily subsidize farmers for potash use.

BRAZIL

With land, water and labor available to increase crop and meat production, Brazil has become a virtual supermarket to the world. However, its soils are potassium-deficient and require potash to remain productive. Brazil supplies approximately 40 percent of China’s soybean market and is the world’s largest sugar cane producer with one-quarter of global production and plans for expansion. Corn, another potash-intensive crop, is also grown for export and to feed its expanding livestock industry.

Because agriculture is critical to Brazil’s GDP, its government has been working to overcome near-term economic issues by extending credit to agricultural producers. It is also investing in infrastructure and developing longer-term plans to encourage growth in crop production.

SOUTHEAST ASIA

Southeast Asia is the world’s leading producer of oil palm and rubber, both nutrient-intensive crops. In the last 10 years, Indonesia and Malaysia have more than doubled their palm oil production, and it is expected to grow by almost 4 percent annually over the next decade, driven primarily by rising demand for edible oils in China, India and Southeast Asia.

Keyword Online: Our Business, Markets 11

KEY 2

Among nutrients, the
potash business has advantages

When it comes to the fertilizer business, not all nutrients are created equal. Potash -the quality nutrient — is unequaled in its ability to enhance the size, color and flavor of food. It increases a crop’s protein, oil and vitamin C content, improves storage and shipping qualities, and enhances the effectiveness of other nutrients within the plant.

It is also rarest of the three nutrients, with production occurring in only 12 countries and half of the world’s reserves located in Saskatchewan, Canada. Deposits are costly to access, with a price tag for a conventional 2-million-tonne mine in Saskatchewan estimated at CDN $2.8 billion, not including related investment in roads, rail, utility systems, port facilities and other off-site infrastructure.

Fewer players and higher start-up costs are not the only benefits of the potash business. Minimum development lead times of seven years offer a longer view of the competitive horizon. With demand accelerating in developing nations, supply challenges are expected over the coming years as global producers continue to be pushed against their capacity limits.

Keyword Online: Our Business, Potash 13

KEY 3

Potash is the core of our business

While our world-class phosphate and nitrogen assets make us the #3 producer in both industries, potash is the namesake of our company and the focal point of our business.

With 22 percent of global capacity at our Canadian operations, we have more potash than any other company — a position we’ve built patiently through acquisitions and internal investments.

We add to this strength with ownership interests in four global potash businesses:

• Arab Potash Company Ltd. (APC) in Jordan and Israel Chemicals Ltd. (ICL) in Israel, key producers and suppliers of potash to Mediterranean and East Asian markets.

• Sociedad Quimica y Minera de Chile S.A. (SQM) in Chile, a specialty potash, iodine and lithium producer.

• Sinofert Holdings Limited (Sinofert), the largest distributor of potash and other fertilizers in China.

These investments enhance our bottom line and better position us to benefit from growth in key world potash markets.

14

KEY 4

Our strategies emphasize earnings growth
with reduced volatility

Potash First. It’s a simple strategy – one that drives our business decisions and provides our best opportunity for long-term growth. With the greatest potential to grow volumes, realize higher prices and lower per-tonne fixed costs while reducing volatility, our potash business offers more earnings quality than other fertilizer businesses.

We prioritize choices that enhance our leading potash position, investing within and outside our company to best prepare for the opportunities that will arise as potash demand continues to increase. Our world-class phosphate and nitrogen businesses complement our Potash First strategy.

Our strategies within each nutrient segment are designed to use our competitive strengths to minimize volatility while maximizing margins:

Potash – match supply to market demand, a strategy we’ve followed for more than two decades.

Phosphate – optimize our product mix by using our high-quality rock to create the most profitable combination of fertilizer and less-cyclical feed and industrial products.

Nitrogen – leverage our lower-cost Trinidad natural gas contracts — which are linked to ammonia selling prices - to stabilize earnings and achieve cost advantages over US producers.

16 Keyword Online: Our Business, Strategies

KEY 5

JIM DIETZ
Executive Vice President and COO

“The world needs to produce more per acre, and that means more potash. Our projects help us deliver that potash more quickly and at less cost than new development.”

We are uniquely prepared to meet growing potash demand

With more potash capacity than any other global producer – and resources that enable us to add to that total more quickly and cost–effectively than most competitors – we are uniquely positioned to capitalize on the expected growth in demand.

Anticipating tightening market conditions, we began plans to add to our capacity in 2003, leveraging our existing facilities to bring on new supply capability. Funded primarily by available cash flow, these expansions are growing even more valuable in a global climate marked by tightened access to credit and higher geopolitical risk.

By using our unparalleled assets and expertise to build on our competitive advantage, we improve our industry-leading position and provide long-term value for our stakeholders.

Our debottlenecking and expansion projects will raise constructed capacity to 18 million tonnes by 2012, approximately double our 2005 capability.

Keyword Online: Our Business, Operations 19

KEY 5      We Are Uniquely Prepared To Meet Growing Potash Demand

22

KEY 6

BUILDING RELATIONSHIPS

PotashCorp employees building
low-income housing for Habitat
for Humanity in Saskatoon, SK.

“It helped our community and
drew us together as a group,” said
Karen Chasez, PotashCorp Vice
President, Procurement.

We live by our Core Values

Our Core Values define and guide the way we do business. They remind us that our responsibilities extend beyond financial performance, and beyond the walls of our facilities.

By committing to and living by our Core Values, we create long-term value for our shareholders, build support among stakeholders, engender accountability in our employees, deepen our relationships with customers and partners, and improve quality of life in our communities.

CORE VALUES

We Operate with Integrity

We hold all employees to the highest standards of business conduct. We treat people fairly and communicate promptly, completely and accurately with all stakeholders.

Our Overriding Concern Is the Safety of People and the Environment

We strive to do no harm to people and no damage to the environment. Our commitment to safety and environmental stewardship is deeply embedded in our culture and operations.

We Listen to All PotashCorp Stakeholders

We diligently monitor stakeholder feedback and cultivate relationships that keep us engaged with and responsive to the people upon whom our long-term success relies.

We Seek Continuous Improvement

We refine practices throughout our operations to build value, increase efficiency and foster an atmosphere of responsive innovation.

We Share What We Learn

We inform and train our employees and contractors to ensure they are committed to our vision and values. We teach safety to our communities and offer programs to explain how our products benefit the world.

We Are Accessible, Accountable and Transparent

We publicly set goals and objectives for our economic, environmental and social performance through initiatives like our triple-bottom-line sustainability report. We are accessible to all stakeholders, helping them understand the company’s direction, values and progress.

Keyword Online: Core Values 23

PotashCorp Board of Directors

Front [L to R]

Dallas J. Howe (Chair) ^A

Calgary, AB

Owner and CEO of DSTC Ltd.

William J. Doyle

Winnetka, IL

President and CEO of PotashCorp

Back [L to R]

Elena Viyella de Paliza ^C

Dominican Republic

President of Inter-Quimica, S.A.,

Monte Rio Power Corp and
Indescorp, S.A.

Keith G. Martell ^B,D

Saskatoon, SK

Executive Chairman of

First Nations Bank of Canada

Paul J. Schoenhals ^B,C

Calgary, AB

Retired President and CEO of Enform

and Chairman of the PCS Crown

corporation from 1987 to 1989

Alice D. Laberge ^A,D

Vancouver, BC

Corporate Director and former

President and CEO of Fincentric

Corporation

John W. Estey ^B,C

Glenview, IL

President and CEO of S&C Electric Co.

Wade Fetzer III ^A,B

Glencoe, IL

Director of Sinofert and Retired Partner

with Goldman Sachs

E. Robert Stromberg, QC ^C

Jackfish Lake, SK

Formerly associated with the law firm

Robertson Stromberg Pedersen

C. Steven Hoffman ^C,D

Lincolnshire, IL

Former senior executive

of IMC Global Inc.

Mary Mogford ^A,D

Newcastle, ON

Corporate Director and former

Ontario Deputy Minister of Finance

and Natural Resources

Jeffrey J. McCaig ^B,D

Calgary, AB

Chairman and CEO of

Trimac Group of Companies

Committees:    A Corporate Governance and Nominating    B Compensation    C Safety, Health and Environment    D Audit

24

Corporate Officers & Senior Management

L to R

Denis A. Sirois

Vice President

and Corporate Controller

Denita C. Stann

Senior Director

Investor Relations

Joseph A. Podwika

Senior Vice President

General Counsel and Secretary

Robert A. Jaspar

Senior Vice President

Information Technology

Daphne J. Arnason

Vice President

Internal Audit

Wayne R. Brownlee

Executive Vice President

and Chief Financial Officer

William J. Doyle

President and

Chief Executive Officer

Thomas J. Regan, Jr.

President

PCS Phosphate and PCS Nitrogen

James F. Dietz

Executive Vice President

and Chief Operating Officer

G. David Delaney

President

PCS Sales

Stephen F. Dowdle

Senior Vice President

Fertilizer Sales, PCS Sales

Karen G. Chasez

Vice President

Procurement

John R. Hunt

Vice President

Safety, Health and Environment

Barbara Jane Irwin

Senior Vice President

Administration

Garth W. Moore

President

PCS Potash

25

Shareholder Information

Annual Meeting

The Annual Shareholders Meeting will be held at 10:30 a.m. Central Standard Time May 7, 2009 in the Grand Salon, TCU Place, 35 - 22nd Street East, Saskatoon, Saskatchewan.

It will be carried live on the company’s website, www.potashcorp.com.

Holders of common shares as of March 12, 2009 are entitled to vote at the meeting and are encouraged to participate.

Dividends

Dividend amounts paid to shareholders resident in Canada are adjusted by the exchange rate applicable on the dividend record date. Dividends are normally paid in February, May, August and November, with record dates normally set approximately three weeks earlier. Future cash dividends will be paid out of, and are conditioned upon, the company’s available earnings. Shareholders who wish to have their dividends deposited directly to their bank accounts should contact the transfer agent and registrar, CIBC Mellon Trust Company.

Registered shareholders can have dividends reinvested in newly issued common shares of PotashCorp at prevailing market rates.

Information for Shareholders Outside Canada

Dividends paid to residents in countries with which Canada has bilateral tax treaties are generally subject to the 15 percent Canadian non-resident withholding tax. Shareholders in the United States who have not filed a W-9 are also subject to the backup withholding tax (currently 28 percent). There is no Canadian tax on gains from the sale of shares (assuming ownership of less than 25 percent) or debt instruments of the company owned by non-residents not carrying on business in Canada. No government in Canada levies estate taxes or succession duties.

Investor Inquiries

Denita Stann, Senior Director, Investor Relations
Canada: (800) 667-0403     US: (800) 667-3930
e-mail: ir@potashcorp.com
Visit us at www.potashcorp.com

Common Share Transfer Agent

CIBC Mellon Trust Company	BNY Mellon Shareholder Services
P.O. Box 7010	480 Washington Blvd - 27th floor
Adelaide Street Postal Station	Jersey City, NJ 07310
Toronto, ON M5C 2W9
Phone: (416) 643-5500
(800) 387-0825
inquiries@cibcmellon.com
www.cibcmellon.com

Shareholders with address changes or inquiries concerning their Potash Corporation of Saskatchewan Inc. stock are invited to contact CIBC Mellon Trust (address above), or Joseph A. Podwika, Corporate Secretary, PotashCorp (Canadian address below)

Ownership

On February 20, 2009, there were 1,792 holders of record of the company’s common shares.

Shares Listed

Toronto Stock Exchange
New York Stock Exchange
Ticker Symbol: POT

Financial Reports and News Releases

Annual reports, interim reports and news releases are available on our website or by contacting the Investor Relations department.

NYSE Corporate Governance

Disclosure contemplated by 303A.11 of the NYSE’s listed company manual is available on our website at www.potashcorp.com. The company has filed annual written affirmations/certifications pursuant to the NYSE listing company manual. The certifications required by Section 302 of the Sarbanes-Oxley Act of 2002 are filed as exhibits to our 2008 Annual Report on Form 10-K.

Corporate Offices

Canada:	US:
Suite 500, 122 - 1st Ave S	Suite 400, 1101 Skokie Blvd
Saskatoon SK S7K 7G3	Northbrook IL 60062
Phone: (306) 933-8500	Phone: (847) 849-4200

26 Keyword Online: Shareholder Info

Common Share Prices and Volumes

This table sets forth the high and low prices, as well as the volumes, for the company’s common shares as traded on the Toronto Stock Exchange and the New York Stock Exchange (composite transactions) on a quarterly basis. Potash Corporation of Saskatchewan Inc. is on the S&P/TSX 60 and the S&P/TSX Composite indices.

	Toronto Stock Exchange1						New York Stock Exchange
	High*		Low*		Volume		High*		Low*		Volume
2008
Q1		167.80		109.00		103,153,851		165.00		105.52		481,399,952
Q2		246.29		155.03		118,100,762		241.62		150.44		725,191,906
Q3		231.28		131.43		111,838,148		229.95		126.49		783,581,966
Q4		142.00		61.81		165,047,982		133.44		47.54		1,153,295,676
Year 2008		246.29		61.81		498,140,743		241.62		47.54		3,143,469,500
2007
Q1		65.31		51.92		51,599,528		56.35		44.05		221,025,369
Q2		86.21		61.02		51,480,129		80.85		52.82		220,781,704
Q3		108.92		76.96		65,980,291		109.40		71.50		189,289,076
Q4		148.89		94.30		67,978,612		151.90		97.36		239,545,310
Year 2007		148.89		51.92		237,038,560		151.90		44.05		870,641,459
2006
Q1		37.96		30.50		63,024,657		33.08		26.05		165,652,500
Q2		39.00		28.93		56,060,451		35.47		26.28		162,390,900
Q3		39.49		30.67		42,424,140		35.49		27.34		123,589,800
Q4		56.96		37.75		58,463,577		49.06		33.83		185,087,100
Year 2006		56.96		28.93		219,972,825		49.06		26.05		636,720,300

Source: Thomson Reuters ¹ Trading prices are in CDN $

* Data are adjusted for a two-for-one stock split in August 2004 and a three-for-one stock split in May 2007

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Forward-looking Statements

This 2008 Summary Annual Report contains forward-looking statements. These statements can be identified by expressions of belief, expectation or intention, as well as those statements that are not historical fact. These statements are based on certain factors and assumptions as set forth in this Summary Annual Report, including foreign exchange rates, expected growth, results of operations, performance, business prospects and opportunities, and effective income tax rates. While the company considers these factors and assumptions to be reasonable based on information currently available, they may prove to be incorrect. Several factors could cause actual results to differ materially from those in the forward-looking statements, including, but not limited to: fluctuations in supply and demand in fertilizer, sulfur, transportation and petrochemical markets; changes in competitive pressures, including pricing pressures; the current global financial crisis and conditions and changes in credit markets; the results of negotiations with China and India; timing and amount of capital expenditures; risks associated with natural gas and other hedging activities; changes in capital markets and corresponding effects on the company’s investments; changes in currency and exchange rates; unexpected geological or environmental conditions, including water inflow; strikes or other forms of work stoppage or slowdowns; changes in, and the effects of, government policy and regulations; and earnings, exchange rates and the decisions of taxing authorities, all of which could affect our effective tax rates. Additional risks and uncertainties can be found in our Form 10-K for the fiscal year ended December 31, 2008 under the captions “Forward-Looking Statements” and “Item 1A – Risk Factors” and in our filings with the US Securities and Exchange Commission and the Canadian provincial securities commissions. Forward-looking statements are given only as at the date of this report and the company disclaims any obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Market and Industry Data Statement

Some of the market and industry data contained in this Summary Annual Report are based on internal surveys, market research, independent industry publications or other publicly available information. Although we believe that the independent sources used by us are reliable, we have not independently verified and cannot guarantee the accuracy or completeness of this information. Similarly, we believe our internal research is reliable, but such research has not been verified by any independent sources.

Information in the preparation of this Summary Annual Report is based on statistical data and other material available at February 20, 2009.

Sources, Abbreviations, Terms and Measures

Abbreviated Company Names and Sources*
APC	Arab Potash Company Ltd. (Amman: ARPT), Jordan
British Sulphur	British Sulphur Consultants, UK
Canpotex	Canpotex Limited, Canada
Doane	Doane Advisory Services, USA
FAPRI	Food and Agricultural Policy Research Institute, USA
Fertecon	Fertecon Limited and Fertecon Research Centre Limited, UK
ICL	Israel Chemicals Ltd. (Tel Aviv: ICL), Israel
NYSE	New York Stock Exchange, USA
Sinofert	Sinofert Holdings Limited (HKSE, 0297.HK), China
SQM	Sociedad Quimica y Minera de Chile S.A.
	(Santiago Bolsa de Comercio Exchange, NYSE: SQM), Chile
Thomson Reuters	Thomson Reuters, USA
TSX	Toronto Stock Exchange, Canada
USDA	US Department of Agriculture, USA

* Where PotashCorp is listed as a source in conjunction with external sources, we have supplemented the external data with internal analysis.

Fertilizer Measures
K2O tonne	Measures the potassium content of fertilizers having different chemical analyses
P2O5 tonne	Measures the phosphorus content of fertilizers having different chemical analyses
N tonne	Measures the nitrogen content of fertilizers having different chemical analyses
Product tonne	Standard measure of the weights of all types of potash, phosphate and nitrogen products
Glossary of Terms
2008E	2008 Estimated
2009F	2009 Forecast
Canpotex	An export company owned by all Saskatchewan producers of potash (PotashCorp, Mosaic and Agrium)
CDN	Canadian dollars
Constructed Capacity	Equipment in a state of readiness to produce. While constructed capacity is increased at mechanical completion of a project, a period of ramp-up may be required to achieve full operating levels
Greenfield	New operation built on undeveloped site
MMT	Million tonnes
MT	Tonne
North America	The North American market includes Canada and the United States
Offshore	Offshore markets include all markets except Canada and the United States
PotashCorp	Potash Corporation of Saskatchewan Inc. (PCS) and its direct or indirect subsidiaries, individually or in any combination, as applicable
Shipments	Imports plus domestic producer sales
Scientific Terms
Nitrogen	NH3	ammonia (anhydrous), 82.2% N
	HNO3	nitric acid, 22% N (liquid)
	UAN	nitrogen solutions, 28-32% N (liquid)
Phosphate	P2O5	phosphoric acid (liquid)
	MGA	merchant grade acid, 54% P2O5 (liquid)
	DAP	diammonium phosphate, 46% P2O5 (solid)
	MAP	monoammonium phosphate, 52% P2O5 (solid)
	SPA	superphosphoric acid, 70% P2O5 (liquid)
	MCP	monocalcium phosphate, 48.1% P2O5 (solid)
	DCP	dicalcium phosphate, 42.4% P2O5 (solid)
	DFP	defluorinated phosphate, 41.2% P2O5 (solid)
Potash	KCI	potassium chloride, 60-63.2% K2O (solid)

28