10-K

POTASH CORPORATION OF SASKATCHEWAN INC.

ANNUAL REPORT ON FORM 10-K

FOR THE YEAR ENDED DECEMBER 31, 2007

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, 2007

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.

               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, 2007, the aggregate market value of the 315,096,653 (post three-for-one stock split in May 2007) Common Shares held by non-affiliates of the registrant was approximately $24,568,086,076.33. At February 20, 2008, the registrant had 315,554,501 Common Shares outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s Financial Review Annual Report for the fiscal year ended December 31, 2007 (the “2007 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 8, 2008 (the “2008 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, 2007

Table of Contents

FORWARD-LOOKING STATEMENTS		1
PART I		3
Item 1.	Business	3
	General	3
	Potash Operations	4
	Nitrogen Operations	8
	Phosphate Operations	10
	Marketing	14
	Distribution and Transportation	16
	Competition	17
	Employees	18
	Royalties and Certain Taxes	19
	Environmental Matters	19
	Our Executive Officers	24
	Presentation of Financial Information	24
	Where You Can Find More Information	24
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	28
PART II		29
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	29
Item 6.	Selected Financial Data	29
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	30
Item 8.	Financial Statements and Supplementary Data	30
Item 9.	Changes In and Disagreements With Accountants on Accounting and Financial Disclosure	30
Item 9A.	Controls and Procedures	30
Item 9B.	Other Information	30
PART III		31
Item 10.	Directors, Executive Officers and Corporate Governance	31
Item 11.	Executive Compensation	31
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	31
Item 13.	Certain Relationships and Related Transactions, and Director Independence	31
Item 14.	Principal Accounting Fees and Services	31
PART IV		32
Item 15.	Exhibits and Financial Statement Schedules	32
	List of Documents Filed as Part of this Report	32
SIGNATURES		37
Exhibit 10(n)
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;

•  changes in competitive pressures, including pricing pressures;

•  the results of negotiations with China and India;

•  timing and amount of capital expenditures;

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

•  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;

•  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;

•  unexpected geological conditions, including water inflows;

•  imprecision in reserve estimates;

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

•  the outcome of legal proceedings;

•  strikes or other forms of work stoppage or slowdown;

•  changes in, and the effects of, government 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.

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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.

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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 2007, we estimate our potash operations represented 17% of global production and 22% of global potash capacity. We are the second largest nitrogen producer worldwide by ammonia capacity. In 2007, we estimate our nitrogen operations produced 2% of the world’s ammonia production. We are the third largest producer of phosphates worldwide by capacity. In 2007, we estimate our phosphate operations produced 6% of world phosphoric acid 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 the one in New Brunswick.

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.

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, six phosphate feed plants in the United States and one feed plant in Brazil. In addition, we can produce a variety of phosphate products at our Geismar, Louisiana facility.

We indirectly hold all outstanding interests in PCS Joint Venture, Ltd. (“PCS Joint Venture”), which formerly manufactured, processed and distributed fertilizer and other agricultural supplies from plants located in Florida and Georgia. In 2006 and 2007, PCS Joint Venture sold virtually all of its assets and remaining inventory.

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 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;

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

•  approximately 9% of the outstanding 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%;

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

•  20% of the total outstanding equity 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 indirect interest in SQM, resulting in an indirect holding of 24.99% of the outstanding equity of SQM. In October and December 2006 and July 2007, we increased our investments in SQM to 32% of SQM’s outstanding equity;

•  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 approximately 28%; and

•  9.99% 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 10.01% 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 January 2008, we acquired approximately 194.3 million additional shares of Sinofert, restoring our ownership interest to approximately 20%.

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, 2008, 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 to as Penobsquis), a new area of potash mineralization called the Picadilly deposit. Enough detailed exploration (3D seismic and drilling) took place to

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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.

We control the right to mine 646,096 acres of land in Saskatchewan. Included in these holdings are mineral rights to 539,340 acres contained in blocks around the six mines in which we have an interest, of which acres approximately 34% we own, approximately 52% are under lease from the Province of Saskatchewan and approximately 14% are leased from other parties. Our remaining 106,756 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. Approximately 11 grades of potash are produced to suit different preferences of the various markets.

In 2007, our conventional potash operations (excluding Esterhazy) mined 24.863 million tonnes of ore at an average grade of 23.18% potassium oxide (“K₂O”). In 2007, our potash production from all our operations (including Esterhazy) consisted of 9.159 million tonnes of potash (“KCl” or “finished product”) with an average grade of 61.02% K₂O, representing 48% of North American production.

Our present annual potash production 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 2007, our production capacity represented an estimated 57% 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 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.

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The New Brunswick mine is a conventional cut and fill underground mining operation. In addition to potash production, this mine also produced 0.63 million tonnes of sodium chloride (salt) in 2007. 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		2007 Production						2006 Production						2005 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		7.201		20.07		1.907		5.416		20.16		1.471		7.439		20.33		2.023
Rocanville		3.044		7.657		24.26		2.647		5.675		23.99		1.897		7.519		24.70		2.573
Allan		1.885		4.906		25.66		1.744		2.984		25.14		0.992		4.323		24.19		1.431
Cory		1.361		2.672		24.20		0.768		2.545		25.12		0.772		2.753		24.90		0.826
Patience Lake(1)		1.033						0.257		–		–		0.190		–		–		0.251
Esterhazy(2)		1.313						1.043		–		–		0.953		–		–		0.953
New Brunswick		0.785		2.427		22.89		0.793		2.273		23.03		0.743		2.284		23.37		0.759
Totals		13.249		24.863				9.159		18.893				7.018		24.318				8.816

(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 37 to 42 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 24 years. In New Brunswick reserves are estimated by identifying material in place delineated by drilling or mining with results projected conservatively from these intersections.

A historical extraction ratio from the 24 to 42 years of mining results is applied to estimate the mineable reserves. The Company’s estimated recoverable ore (reserve tonnage only) as of December 31, 2007 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		316		25.9%		78
Cory		224		25.1%		84
Lanigan		513		22.0%		77
Rocanville		422		22.5%		61
Patience Lake(5)		–		–		–
Esterhazy(6)		13		24.5%		4
New Brunswick(7)		196		24.6%		84

(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.

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(3)	The concentration of recoverable ore tonnes to finished product (KCl) for each of the divisions is as follows (three-year running average): Allan 2.93, Cory 3.37, Lanigan 3.71, Rocanville 2.93 and New Brunswick 3.04.
(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 4.07, Cory 2.66, Lanigan 6.69, Rocanville 6.95 and New Brunswick 2.33. 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 2.8% of the Company’s potash production in 2007.
(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 2008 and the maximum amount of product under the agreement for subsequent years will be received by the Company.
(7)	At New Brunswick, as a result of additional study and analysis in 2007, a portion of the Picadilly potash mineralization, reported as a measured mineral resource in previous years, has been recategorized as a reserve.

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.

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;

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•  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, 2007 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		1,112		–		3,977
Cory		958		148		3,069
Lanigan		1,309		2,183		1,755
Rocanville		–		–		1,056
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.

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.

Nitrogen Operations

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

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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)	Ammonia, nitric acid and nitrogen solutions
Lima, Ohio(2)	Ammonia, urea, nitric acid and nitrogen solutions
Point Lisas, Trinidad	Ammonia and urea

(1)	In June 2003, we suspended production of ammonia and nitrogen solutions at Geismar due to high U.S. natural gas costs and low product margins. On September 15, 2005, nitrogen solutions production in Geismar was restarted.
(2)	INEOS USA LLC operated the Lima facility under an operating agreement with the Company which terminated on December 31, 2007, after which the Company commenced operating the facility.

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. We can produce ammonia at all domestic plants and in Trinidad. 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		2007		2006		2005
	Capacity		Production		Production		Production
Trinidad		2.177		2.077		1.932		1.887
Augusta, GA		0.688		0.610		0.633		0.655
Lima, OH		0.588		0.531		0.339		0.382
Geismar, LA(2)		0.483		–		–		–
Total		3.936		3.218		2.904		2.924

(1)	A substantial portion is upgraded to value added products.
(2)	Indefinitely shut down production of ammonia and nitrogen solutions on June 4, 2003; restarted nitrogen solutions production on September 15, 2005 on a demand basis.

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 from 2008 to 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 78% 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.

FORM 10-K ï Part I

Page  9

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 a silicon tetrafluoride (“STF”) plant. STF Plant No. 1 began production in March 2007 and has an annual capacity of 6,800 tonnes. STF Plants No. 2, 3 and 4 are scheduled to begin production in early 2008. When completed, the four STF plants will have a total annual capacity of 27,200 tonnes of STF.

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 plants, a SPA plant, a dicalcium phosphate plant and a DFP plant located at the Suwannee River complex and two sulfuric acid plants, a phosphoric acid plant 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.

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; Joplin, Missouri; and Sao Vincente, Brazil;

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

•  terminal facilities at Morehead City, North Carolina and Savannah, Georgia.

FORM 10-K ï Part I

Page  10

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
Sao Vincente, Brazil	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 2007, the Aurora facility’s total production of phosphate rock was 4.09 million tonnes and the White Springs facility’s total production of phosphate rock was 3.23 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 during the second quarter of 2008. 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 ammonia. Much of the ammonia that we purchase from third parties is produced in Russia and imported through an ammonia terminal which we operate located within the Port of Savannah. Our operations at the Port of Savannah will cease in December 2008. The Company has made and will make additional arrangements to purchase ammonia through alternate ports or from Company-owned ammonia production facilities.

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.

FORM 10-K ï Part I

Page  11

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		2007				2006				2005
	Capacity		Production		% P2O5		Production		% P2O5		Production		% P2O5
Aurora, NC		6.0		4.086		27.39		4.577		27.62		4.417		27.68
White Springs, FL		3.6		3.226		29.87		3.114		29.79		3.186		30.28
Geismar, LA		–				–		–		–		–		–
Total		9.6		7.312				7.691				7.603

Phosphoric Acid
(Millions of tonnes P2O5)
	Annual		2007		2006		2005
	Capacity		Production		Production		Production
Aurora, NC		1.202		1.083		1.080		1.048
White Springs, FL		0.966		0.925		0.881		0.865
Geismar, LA		0.202		0.156		0.147		0.184
Total		2.370		2.164		2.108		2.097

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.

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 three years.

FORM 10-K ï Part I

Page  12

The following table sets forth the Company’s estimated proven and probable phosphate reserves for Aurora and White Springs as at December 31, 2007 at an average grade of 30.7% P₂O₅.

	Tonnes of
	Phosphate Rock		Average Grade
	(Millions of tonnes)		% P2O5
Aurora		344		30.7%
White Springs		50		30.7%
Total		394

The reserves set forth above for Aurora would permit mining to continue at annual production rates for about 88 years. This mine life is based on an average annual production rate of approximately 3.92 million tonnes of 30.7% concentrate over the three-year period ended December 31, 2007. 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 3.10 million tonnes of 30.7% concentrate over the three-year period ended December 31, 2007.

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  13

Marketing

The following table summarizes our sales from potash, nitrogen and phosphate products (by geographical distribution) in the past three fiscal years. Certain of the prior years’ figures have been reclassified to conform with the current year’s presentation.

	2007		2006		2005
	(millions of dollars)
Potash
Canada	$	88.0	$	65.7	$	69.3
United States		764.7		557.5		576.6
Canpotex(1)		782.7		467.1		577.1
Other		161.8		137.2		118.1
Total	$	1,797.2	$	1,227.5	$	1,341.1
Nitrogen
Canada	$	1.3	$	13.9	$	16.8
United States		1,651.0		1,185.2		1,262.1
Other		147.6		85.0		89.9
Total	$	1,799.9	$	1,284.1	$	1,368.8
Phosphates
Canada	$	125.7	$	78.1	$	89.1
United States		1,076.2		799.9		754.3
PhosChem(1)		264.6		232.2		166.7
Other		170.6		144.9		127.2
Total	$	1,637.1	$	1,255.1	$	1,137.3

(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 “Business Segment Review” on pages 35 through 43 in our 2007 Financial Review, attached as Exhibit 13, and Note 19, Segment Information, to our 2007 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 2007 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 2007.

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, nitrogen and phosphate products in Canada. PCS Sales (USA), Inc. executes marketing and sales for our potash, nitrogen and phosphate 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.

North American Marketing

In 2007, North American sales from potash products represented 47% 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.

FORM 10-K ï Part I

Page  14

In 2007, North American sales from nitrogen products represented 92% of our total nitrogen sales and our total non-fertilizer products accounted for 61% of our total nitrogen revenue. Typically, North American nitrogen fertilizer sales are greatest in the second calendar quarter. In 2007, 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.

In 2007, North American sales from phosphate products represented 73% of our total phosphate sales, substantially all of which were attributable to phosphate customers in the United States. In 2007, 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.

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 specified times 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 2007, we supplied 55% of Canpotex’s requirements. Canpotex generally sells potash to private firms and government agencies pursuant to contracts at negotiated prices or by spot sales.

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

	2007			2006			2005
Asia		69	%		70	%		73	%
Latin America		26			22			19
Oceania		4			5			6
Europe		1			3			2
Total		100	%		100	%		100	%

For 2007, sales to Canpotex represented 44% 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 9% of our total potash sales in 2007.

Ammonia and urea predominate offshore sales of nitrogen and originate primarily from Trinidad, with other sales coming from purchased product locations. For 2007, our offshore sales of nitrogen products represented 8% of our total nitrogen sales.

FORM 10-K ï Part I

Page  15

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 to export their fertilizer products exclusively through PhosChem, except for exports to Canada, Puerto Rico, any member state of the European Union or the European Economic Area, sales through the U.S. Agency for International Development Tenders and sales to certain buyers affiliated with members. Historically, PhosChem negotiated prices and other terms for the export sale of its members’ phosphate fertilizer products. According to the terms of a PhosChem agreement effective January 1, 1995, Mosaic Global Operations Inc. is responsible for the marketing of solid fertilizers (DAP, MAP and GTSP), and PCS Sales (USA), Inc., is responsible for the marketing of liquid merchant grade phosphoric acid to export countries. Total sales for 2007 (on a P2O5 basis) were apportioned as follows: 75% to Mosaic Crop Nutrition LLC; 18% to PCS Sales (USA), Inc., and 7% to CF Industries, Inc. The PhosChem agreement is renewed annually.

Revenue from sales to PhosChem accounted for 16% of our total phosphate sales in 2007. Other offshore phosphate sales accounted for 10% of our total phosphate sales in 2007. All of our phosphate fertilizer sales to China were made through PhosChem. In 2007, 90% 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:

	2007			2006			2005
Asia		62	%		71	%		79	%
Latin America		34			23			16
Oceania		3			4			4
Other		1			2			1
Total		100	%		100	%		100	%

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 2007, we owned or leased approximately 168 terminal and warehouse facilities, some of which have multi-product capability for a total of 206 strategically located distribution points in Canada and the United States to serve our customers. To complement our distribution system in Canada and the United States, we also own or lease approximately 8,570 rail cars. In the offshore market, the Company owns or leases two warehouses in Brazil and one in China.

In 2006 and 2007, the industry experienced significant cost increases with regard to leasing ocean vessels for dry cargo shipments as a result of greater demand than available supply.

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.

FORM 10-K ï Part I

Page  16

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.

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 approximately 20 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 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.

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 receive ammonia for our phosphate operations at White Springs and Aurora primarily through our ammonia terminal in Savannah, Georgia; the ammonia is shipped by rail from Savannah to the White Springs and Aurora facilities. Our operations at Savannah will cease in December 2008. The Company has made and will make additional arrangements to purchase ammonia through alternate ports or from Company-owned ammonia production facilities.

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.

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.

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 the developed world have led to plant closures, since natural gas is up to 90% of the cash cost of producing ammonia in these developed countries. The resulting tight supply has increased prices, attracting less expensive imports from areas of lower-cost natural gas such as Trinidad, Venezuela and the Middle East.

FORM 10-K ï Part I

Page  17

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 from inexpensive offshore production are expected to continue.

Markets for 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 substantially 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 the traditionally important U.S. export markets of China and India have impacted U.S. export sales to those countries.

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.

Employees

At December 31, 2007, we employed 5,003 persons, of whom 1,730 were salaried and 3,273 were hourly paid. Of these employees, our potash operations employed 1,773 people, our nitrogen operations 680 and our phosphate operations 2,078. Our sales and transportation and distribution functions were handled by 182 employees in Northbrook, Illinois and various other locations in the United States and Brazil and 20 employees in Saskatoon, Saskatchewan. Excluding sales personnel, the Saskatoon and Northbrook offices had a staff of 270.

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, 2008. The Lanigan agreement expires on January 31, 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. In addition, the agreement between INEOS USA LLC and the union representing employees at the Lima plant terminated on December 31, 2007. On January 1, 2008, the Company commenced operating the Lima plant, but it did not assume any obligations of INEOS USA LLC under the terminated collective bargaining agreement. The Company and the union representing employees at the Lima plant have commenced negotiations for a new collective bargaining agreement. We believe our relations with our employees to be good.

FORM 10-K ï Part I

Page  18

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 profits tax (“Potash Production Tax”). In addition to the Potash Production Tax, rental fees, taxes and royalties are payable to the Province of Saskatchewan, municipalities and others by potash producers in respect of potash sales, production or property in the Province of Saskatchewan. Our taxes, fees and royalty expenses were $129.3 million in 2007.

As a resource corporation in the Province of Saskatchewan, we are subject to 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 2007, we paid total capital tax of $46.9 million.

We pay royalties to the New Brunswick government on the basis of production from our New Brunswick mine. In addition, we pay municipal taxes. Our expenses for such royalties and municipal taxes were $10.5 million in 2007.

For 2007, miscellaneous taxes paid (not included above) totaled $4.0 million. We do not make royalty payments in connection with our nitrogen and phosphate operations.

Income Taxes

PCS and certain subsidiaries are subject to federal income taxes (which include the Large Corporations Tax) 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 consolidated reported income tax rate for 2007 was approximately 27% compared to approximately 20% in 2006 and the consolidated effective income tax rate was 30% (2006 – 30%). 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 were offset by a higher percentage of consolidated income earned in higher-tax jurisdictions during 2007 compared to 2006. In 2007 the Government of Canada enacted reductions to the federal corporate income tax rate. This reduced our future income tax liability by $40.1 million.

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.

Our operating expenses, other than those associated with asset retirement obligations, relating to compliance with environmental laws and regulations governing ongoing operations were approximately $104.8 million for the year ended December 31, 2007, as compared to $92.6 million and $87.2 million for the years ending December 31, 2006 and December 31, 2005, 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 2007, capital expenditures of $44.2 million (2006 – $13.6 million) were incurred to meet pollution prevention and control objectives and $0.5 million (2006 – $0.2 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 2008 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.

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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.

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 nitrogen oxide (“NOx”) emissions and other 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, both from a “good corporate citizen” and regulatory point of view, pursue a greenhouse gas mitigation strategy. We have assembled a multidisciplinary task force to assess both the revenue opportunities and the corporate costs of doing so.

The USEPA announced an 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 at our Aurora and White Springs plants. We and other industry members have met with representatives of the U.S. Department of Justice, 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. 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.

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 during the second quarter of 2008. Failure to secure the required approvals for continuation of the mining operations on acceptable terms would negatively affect our reserves and costs.

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In 2003, the Corps issued a federal wetlands impact permit, expiring in 2040, for mining operations covering nearly all remaining reserves in the White Springs project area. State approvals were granted in 2003 for the same area with no expiration date. Local (Hamilton County) approval was granted in 2003 for a corresponding area, with provision for a five-year compliance review and renewal of the permit, contingent upon a finding of compliance with permit conditions at the time of renewal. The Hamilton County renewal was applied for in August 2007. The compliance review was contracted by Hamilton County and was underway as of the end of 2007.

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, 2007, we had accrued a total of $116.6 million for asset retirement obligations. The current portion totaled $10.2 million.

Lands mined by White Springs after July 1, 1975 and unmined lands used in certain mining operations after July 1, 1984 are subject to mandatory reclamation requirements of the State of Florida. Reclaimed lands include uplands, wetlands and lakes. Wetlands must be reclaimed on an acre-for-acre basis. For certain wetlands mined prior to 2003, alternative mitigation standards are established by a Memorandum of Agreement between us and the Florida Department of Environmental Protection pursuant to which we contributed $8.5 million through the end of 2007 for the acquisition of environmentally sensitive lands. Current reclamation practices emphasize wetland restoration and commercial forestry. White Springs is continuing planning efforts for other post-reclamation land uses that meet both environmental and economic objectives.

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 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 and are awaiting a response from the Province. The Company is unable to predict, at this time, the outcome of the ongoing review of the plans or the timing of implementation and structure of any financial assurance requirements.

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

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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.

In 1994, PCS Joint Venture responded to information requests from the US Environmental Protection Agency (“USEPA”) and the Georgia Department of Natural Resources, Environmental Protection Division (“GEPD”) regarding conditions at its Moultrie, Georgia location. PCS Joint Venture believes that the lead-contaminated soil and groundwater found at the site are attributable to former operations at the site prior to PCS Joint Venture’s ownership. In 2005, the GEPD approved a Corrective Action Plan to address environmental conditions at this location. As anticipated, the approved remedy requires some excavation and off-site disposal of impacted soil and installation of a groundwater recovery and treatment system. PCS Joint Venture began the remediation in November 2005 and completed soil excavation in March 2006, and it is proceeding consistent with the projected schedule and budget.

In 1998, the Company, along with other parties, was notified by the USEPA of potential liability under the 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 on 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 shared the cost 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 by the end of 2008. The USEPA has issued letters to PCS Joint Venture and five other alleged potentially responsible parties and 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 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. 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. PCS Nitrogen has 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. PCS Nitrogen expects the Court will rule on the motion for certification in the first quarter of 2008. PCS Nitrogen has also filed third-party complaints in the case against owners and operators that it believes should be responsible parties with respect to the site. In the event PCS Nitrogen is unsuccessful in its appeal of the Court’s order, PCS Nitrogen will pursue the third-party complaints in the second phase of the case during which the Court will enter a final decision regarding the allocation and amount of any such liability. PCS Nitrogen denies that it is a potentially responsible party and is vigorously defending its interests in these actions.

PCS Phosphate Company, Inc. (“PCS Phosphate”), along with several other entities, has received notice from parties to an Administrative Settlement Agreement (“Settling Parties”) with 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

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Settling Parties in the performance of the removal action and the payment of other costs associated with the Site, including reimbursement of USEPA’s past costs. The cost of performing the removal at the Site is estimated at $30.0 million. The removal activities commenced at the Site in August 2007. We anticipate recovering some portion of our expenditures in this matter from other liable parties. USEPA is evaluating response actions for PCB impacted sediments downstream of the Site but has not issued a final remedy for those sediments.

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 GEPD in conjunction with PCS Nitrogen Fertilizer’s purchase of certain real property 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.

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, the Company does not believe, except as set out herein, that its future obligations and potential liabilities 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.

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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, 2008 is as follows:

			Served
Name	Age		Since		Position Held
William J. Doyle		57		1987	President and Chief Executive Officer
Wayne R. Brownlee		55		1988	Executive Vice President, Treasurer and Chief Financial Officer
James F. Dietz		61		1997	Executive Vice President and Chief Operating Officer
Barbara Jane Irwin		52		2000	Senior Vice President, Administration
Robert A. Jaspar		49		1997	Senior Vice President, Information Technology
Joseph A. Podwika		45		1997	Senior Vice President, General Counsel and Secretary
G. David Delaney		47		1997	President, PCS Sales
Garth W. Moore		59		1982	President, PCS Potash
Thomas J. Regan, Jr.		63		1995	President, PCS Phosphate and PCS Nitrogen
Stephen F. Dowdle		57		1999	Senior Vice President, Fertilizer Sales, PCS Sales
Daphne J. Arnason		52		1988	Vice President, Internal Audit
Karen G. Chasez		54		2000	Vice President, Procurement
John R. Hunt		49		1997	Vice President, Safety, Health and Environment
Denis A. Sirois		52		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
Robert A. Jaspar	December 2000 – June 2003	Vice President, Internal Audit
Joseph A. Podwika	January 2005 – December 2005	Vice President, General Counsel and Secretary
	March 2002 – December 2004	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
	March 2000 – October 2003	General Manager, Memphis Plant

Presentation of Financial Information

We have three principal business segments: potash, nitrogen and phosphate. 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, 2007 and 2006 and for each of the years in the three-year period ended December 31, 2007, 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 2007 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

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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 could be materially 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 stock. We use an 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 29 and 30 in our 2007 Financial Review, attached as Exhibit 13, incorporated herein by reference. See also note regarding “Forward-Looking Statements,” earlier in this report.

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.

We supply product both in North America and offshore and demand for our product is affected by regional and global markets. 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. Growth in demand that exceeds our expectations results in lost opportunity to produce and sell our products and may harm the credibility of our business strategy. Growth in demand below expectations reduces our expected sales and creates excess inventory and unwanted costs. A decrease in demand could result from a variety of factors, including increasing agricultural input costs, depressed commodity prices, adverse weather conditions, economic downturns, foreign currency fluctuations or changes in agricultural practices.

Inflows of water into 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 into such mines. It is difficult to predict if water inflow will occur at our mines or mines in which we have an interest. We are currently managing 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 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.

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

Many of our products are commodities and the markets for these products are highly competitive. We compete with other producers on price, product quality and service. An increase in the competitive supply of our products that

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outpaces the growth in world consumption could depress prices for a prolonged period and could negatively affect the Company’s financial performance.

Potash

With rising prices for potash products, producers have been, and will likely continue to be, engaged in expansion and development projects to increase production. Many of the proposed projects to increase potash production are speculative. However, a potash supply increase beyond market demand could depress prices and negatively affect the Company’s financial performance.

Nitrogen

The barriers to entry into the nitrogen business are relatively low. Nitrogen is taken from the air and reacted with a hydrogen source, usually natural gas reformed with steam, to produce ammonia. Ammonia is then used to produce nitrogen products for a wide variety of uses. Countries with large reserves of natural gas and low production costs can produce a large supply of ammonia cheaply for the export market. While the Company’s lower cost nitrogen operations in Trinidad provide us with advantages, the Company is affected by the higher cost natural gas markets in the United States.

Phosphate

Phosphate producers are both private and government enterprises. In addition, governments influence a significant proportion of world capacity for diammonium phosphate (“DAP”), the major phosphate fertilizer product. Through subsidy, control or ownership, governments may encourage overproduction of DAP. Furthermore, governments may forego profit on DAP sales to support domestic employment. Such policies increase the risk of a supply/demand imbalance and could lower prices for our products.

Cyclicality in supply and demand can result in unfavorable market conditions and lower profits.

The market for crop nutrients, particularly certain phosphate and nitrogen products, tends to move in cycles. Periods of high demand, increasing profits and high capacity utilization generally lead to new plant investment and increased production. This growth increases supply until the market is over-saturated, leading to declining prices and declining capacity utilization until the cycle repeats. This cyclicality in prices can result in supply/demand imbalances, pressure on prices, profit margins and profitable operations; and, eventually, shutdown costs. The fertilizer business is dependent on conditions in the economy generally and the agriculture sector in particular, both in North America and offshore. The agricultural sector can be affected by adverse weather conditions, cost of inputs, commodity prices, animal diseases, the availability of government support programs and other uncertainties that may affect sales of fertilizer products, and in turn affects our financial performance.

The Company is subject to risks associated with international operations, which could negatively affect sales to customers in foreign countries as well as the operations and assets in such countries.

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.

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. Moreover, global expansion opportunities with the lowest cost and the highest synergies are sometimes located in politically sensitive regions. 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

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abrupt political change, forced divestiture, selective discrimination, inconvertibility of funds, armed conflict, terrorist activity and unexpected changes in regulatory requirements, social, political, labor and economic conditions.

Inadequate transportation and distribution infrastructure and capacity could limit our growth and, a shortage of railcars and bulk ships and increased transit time could result in customer dissatisfaction, loss of sales and higher transportation costs.

Inadequate transportation and distribution infrastructure and capacity could limit our growth. 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. A strong world economy fuels increased demand and higher dry bulk freight rates for ocean transport. The shipping industry has a shortage of ships and the substantial time frame needed to build new ships prevents rapid market response. 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.

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.

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

Our financial performance is dependent on a reliable and productive work force. Unsuccessful contract negotiations or adverse labor relations could result in strikes or slowdowns. These disruptions may decrease our production and sales or impose additional costs to resolve disputes. The risk of adverse labor relations may increase during periods of high profitability because labor unions’ expectations and demands generally rise at those times.

Damage to our reputation could negatively affect our performance.

Loss of our reputation can be the consequence of a number of events. Reputation loss cuts across all risk categories and may result in loss of investor confidence, loss of customer confidence, poor community relations and employee apathy. Loss of our reputation 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.

Other risks may hurt our operating results.

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,

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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.

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.

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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 112 in our 2007 Financial Review, attached as Exhibit 13, is incorporated herein by reference and “11 Year Report” on page 65 in our 2007 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 of 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 quarter of 2006, the Company paid a cash dividend of $0.05 per common share, for a total of $0.20 for the year. 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.

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.

During the quarter ended December 31, 2007, the Company did not purchase any of its equity securities registered pursuant to Section 12 of the Securities Exchange Act of 1934.

Item 6. Selected Financial Data.

The information under “11 Year Report” on page 65 in our 2007 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	2007			2006		2005		2004		2003
Net income (loss)		1,061.5			625.8		532.7		290.5		(84.2	)
Net income (loss) per share – basic(2)		3.36			2.01		1.64		0.90		(0.27	)
Total assets		9,483.6			7,038.9		5,841.8		5,202.7		4,520.0
Long-term obligations		1,358.3	(1)		1,339.8		1,257.6		1,258.6		1,268.6

(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.)
(2)	Adjusted to reflect three-for-one stock split in May 2007.

FORM 10-K ï Part II

Page  29

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 65 and “Appendix” on page 113 in our 2007 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 pages 58 and 59 in our 2007 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 69 through 111 in our 2007 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 and Review of Fourth-Quarter Performance” on pages 47 through 49 in our 2007 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.

Item 9A. Controls and Procedures.

As of December 31, 2007, 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, 2007, 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, 2007 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 69 and 70 in our 2007 Financial Review, attached as Exhibit 13, are incorporated herein by reference.

Item 9B. Other Information.

None.

FORM 10-K ï Part II

Page  30

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 two paragraphs under “Appointment of Auditors and Report of Audit Committee — Report of the Audit Committee” in our 2008 Proxy Circular, attached as Exhibit 99(a), is incorporated herein by reference. Information concerning executive officers is set forth under “Our Executive Officers” in Part I.

We have adopted a 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 our Code of Conduct, or any waivers of our 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 2008 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 “‘At-Risk’ Investment and Year Over Year Changes” and “Equity Compensation Plan Information” in our 2008 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 11 through 13 in our 2008 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 2008 Proxy Circular, attached as Exhibit 99(a), is incorporated herein by reference.

FORM 10-K ï Part III

Page  31

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 69 through 111 in our 2007 Financial Review, attached as Exhibit 13, are incorporated under Item 8 by reference.

Reports of Independent Registered Chartered Accountants	70-71
Consolidated Statements of Financial Position	72
Consolidated Statements of Operations and Retained Earnings	73
Consolidated Statements of Cash Flow	74
Notes to the Consolidated Financial Statements	75-111

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, 2007 and 2006, and for each of the three years in the period ended December 31, 2007, and the Company’s internal control over financial reporting as of December 31, 2007, and have issued our reports thereon (which reports (1) express an unqualified opinion on the consolidated financial statements and includes an explanatory paragraph referring to changes in the Company’s accounting for financial instruments and for mine stripping costs and (2) express an unqualified opinion on the effectiveness of internal control over financial reporting), dated February 15, 2008; such consolidated financial statements and reports are included in your 2007 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 15, 2008

FORM 10-K ï Part IV

Page  32

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
2007		4.7		1.9		0.7		5.9
2006		5.1		0.7		1.1		4.7
2005		4.6		0.5		–		5.1
Allowance for inventory valuation
2007		8.9		4.7		7.3		6.3
2006		12.9		2.4		6.4		8.9
2005		14.5		7.1		8.7		12.9
Allowance for deferred income tax assets
2007		53.1		0.3		43.0		10.4
2006		45.5		11.2		3.6		53.1
2005		29.4		16.1		–		45.5

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		9/21/2004
	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  33

				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		11/29/2006

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

FORM 10-K ï Part IV

Page  34

				Incorporated By Reference
Exhibit					Filing Date/
Number			Description of Document	Form	Period End Date
	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		9/30/2006
	10	(r)	Form of Letter of amendment to existing supplemental income plan agreements of the registrant.	10-K		12/31/2002
	10	(s)	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	(t)	Supplemental Retirement Benefits Plan for U.S. Executives dated effective January 1, 1999.	10-Q		6/30/2002
	10	(u)	Forms of Agreement dated December 30, 1994, between the registrant and certain officers of the registrant.	10-K		12/31/1995
	10	(v)	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	(w)	Resolution and Form of Agreement of Indemnification dated January 24, 2001.	10-K		12/31/2000
	10	(x)	Resolution and Form of Agreement of Indemnification – July 21, 2004.	10-Q		6/30/2004
	10	(y)	Chief Executive Officer Medical and Dental Benefits.	10-K		12/31/2004
	10	(z)	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	(aa)	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	(bb)	Deferred Share Unit Plan for Non-Employee Directors.	S-8 (File No. 333-75742)		12/21/2001

FORM 10-K ï Part IV

Page  35

				Incorporated By Reference
Exhibit					Filing Date/
Number			Description of Document	Form	Period End Date
	10	(cc)	Potash Corporation of Saskatchewan Inc. 2005 Performance Option Plan and Form of Option Agreement, as amended.	10-K		12/31/2006
	10	(dd)	Potash Corporation of Saskatchewan Inc. 2006 Performance Option Plan and Form of Option Agreement, as amended.	10-K		12/31/2006
	10	(ee)	Potash Corporation of Saskatchewan Inc. 2007 Performance Option Plan and Form of Option Agreement.	10-Q		3/31/2007
	10	(ff)	Medium Term Incentive Plan of the registrant effective January 2006.	10-K		12/31/2005
	11		Statement re Computation of Per Share Earnings.
	12		Computation of Ratio of Earnings to Fixed Charges.
	13		2007 Financial Review Annual Report. The 2007 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)	2008 Notice of Meeting, Proxy Circular and Form of Proxy. The 2008 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)	2007 Summary Annual Report. The 2007 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  36

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 28, 2008

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 28, 2008
/s/  WAYNE R. BROWNLEE Wayne R. Brownlee	Executive Vice President, Treasurer and Chief Financial Officer (Principal financial and accounting officer)	February 28, 2008
/s/  WILLIAM J. DOYLE William J. Doyle	President and Chief Executive Officer	February 28, 2008
/s/  FREDERICK J. BLESI Frederick J. Blesi	Director	February 28, 2008
/s/  JOHN W. ESTEY John W. Estey	Director	February 28, 2008
/s/  WADE FETZER III Wade Fetzer III	Director	February 28, 2008
/s/  ALICE D. LABERGE Alice D. Laberge	Director	February 28, 2008
/s/  KEITH G. MARTELL Keith G. Martell	Director	February 28, 2008
/s/  JEFFREY J. McCAIG Jeffrey J. McCaig	Director	February 28, 2008

FORM 10-K ï Signatures

Page  37

Signature	Title	Date
/s/  MARY MOGFORD Mary Mogford	Director	February 28, 2008
/s/  PAUL J. SCHOENHALS Paul J. Schoenhals	Director	February 28, 2008
/s/  E. ROBERT STROMBERG, Q.C. E. Robert Stromberg, Q.C.	Director	February 28, 2008
/s/  ELENA VIYELLA DE PALIZA Elena Viyella de Paliza	Director	February 28, 2008

FORM 10-K ï Signatures

Page  38

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		9/21/2004
	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		11/29/2006

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

				Incorporated By Reference
Exhibit					Filing Date/
Number			Description of Document	Form	Period End Date
	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
	10	(q)	Amended and restated Supplemental Retirement Income Plan of the registrant and text of amendment to existing supplemental income plan agreements.	10-Q		9/30/2006
	10	(r)	Form of Letter of amendment to existing supplemental income plan agreements of the registrant.	10-K		12/31/2002
	10	(s)	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	(t)	Supplemental Retirement Benefits Plan for U.S. Executives dated effective January 1, 1999.	10-Q		6/30/2002

				Incorporated By Reference
Exhibit					Filing Date/
Number			Description of Document	Form	Period End Date
	10	(u)	Forms of Agreement dated December 30, 1994, between the registrant and certain officers of the registrant.	10-K		12/31/1995
	10	(v)	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	(w)	Resolution and Form of Agreement of Indemnification dated January 24, 2001.	10-K		12/31/2000
	10	(x)	Resolution and Form of Agreement of Indemnification – July 21, 2004.	10-Q		6/30/2004
	10	(y)	Chief Executive Officer Medical and Dental Benefits.	10-K		12/31/2004
	10	(z)	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	(aa)	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	(bb)	Deferred Share Unit Plan for Non-Employee Directors.	S-8 (File No. 333-75742)		12/21/2001
	10	(cc)	Potash Corporation of Saskatchewan Inc. 2005 Performance Option Plan and Form of Option Agreement, as amended.	10-K		12/31/2006
	10	(dd)	Potash Corporation of Saskatchewan Inc. 2006 Performance Option Plan and Form of Option Agreement, as amended.	10-K		12/31/2006
	10	(ee)	Potash Corporation of Saskatchewan Inc. 2007 Performance Option Plan and Form of Option Agreement.	10-Q		3/31/2007
	10	(ff)	Medium Term Incentive Plan of the registrant effective January 2006.	10-K		12/31/2005
	11		Statement re Computation of Per Share Earnings.
	12		Computation of Ratio of Earnings to Fixed Charges.
	13		2007 Financial Review Annual Report. The 2007 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)	2008 Notice of Meeting, Proxy Circular and Form of Proxy. The 2008 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)	2007 Summary Annual Report. The 2007 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

Short-Term

Incentive Plan

Effective January 1,

2000 

Potash Corporation of

Saskatchewan Inc.

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	1
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	4
2.19     Non-recurring/Unusual Items	4
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     Year	5
Section 3—Participation	5
3.01     Participation Requirements	5
Section 4—Award Payments	6
4.01     Eligibility	6
4.02     Calculation of Award Payment	6
4.03     Entitled Operations Employees	6
4.04     Limitation of Award Payments and General Discretion	7
4.05     Timing of Award Payments	8
Section 5—Administration of the Plan	8
5.01     Administration	8
Section 6—Transfer of Employment	8
6.01     Transfer of Employment	8

i  

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	9
7.05     Interpretation	9
7.06     Withholding of Taxes	9
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.

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.
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

1

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, 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:

(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

2

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
	Accrued Incentive Awards, plus
	Depreciation and Amortization, minus
	Current Taxes

DIVIDED BY

(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

3

Average cash and cash equivalents, minus

Average Non-Interest Bearing Current Liabilities,

	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.

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

4

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”.
2.26	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.

5

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:
	(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 20% 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,

6

(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 20% 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.
(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

7

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.

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 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.

8

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.
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.

9

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.

10

Appendix “A”—Award Percentage

Tier		Group	Target			Award	Award Percentage	Award
			Percentage			Percentage	When CFR Equals	Percentage at
						When CFR is	or is Greater Than	Maximum
						Less Than	Target CFR	CFR (150% of
						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 534 to 774		10	%	10% multiplied by ACFR	(20% multiplied by ACFR) minus 10%		20	%
	11	Staff Hay Points 0 to 533 Hourly employees		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).

11

EX-11

Exhibit 11

POTASH CORPORATION OF SASKATCHEWAN INC.
COMPUTATION OF PER SHARE EARNINGS
FOR THE YEARS ENDED DECEMBER 31⁽¹⁾

	2007			2006
A Net income as reported, Canadian GAAP ($ millions)		1,103.6			631.8
B Items adjusting net income ($ millions)		(42.1	)		(6.0	)
C Net income, US GAAP ($ millions)		1,061.5			625.8
D Weighted average number of shares outstanding		315,641,000			311,880,000
E Net additional shares issuable for diluted earnings per share calculation (Canadian GAAP)		8,667,000			6,809,000
F Net additional shares issuable for diluted earnings per share calculation (US GAAP)		8,651,000			6,789,000
CANADIAN GAAP
Basic earnings per share (A/D)		3.50			2.03
Diluted earnings per share (A/(D+E))		3.40			1.98
UNITED STATES GAAP
Basic earnings per share (C/D)		3.36			2.01
Diluted earnings per share (C/(D+F))		3.27			1.96

(1) Share and per-share data have been adjusted to reflect three-for-one stock split in May 2007.

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
	2007			2006			2005			2004			2003
Canadian GAAP
Net income (loss)	$	1,103.6		$	631.8		$	542.9		$	298.6		$	(126.3	)
Income taxes		416.2			158.1			267.4			131.7			(20.6	)
Share of earnings of equity investees		(76.2	)		(54.4	)		(52.1	)		(30.9	)		(12.4	)
Fixed charges		187.5			183.5			149.1			132.4			117.8
Distributed income of equity investees		40.6			29.9			18.6			8.7			4.0
Interest capitalized		(21.8	)		(19.1	)		(5.7	)		(2.5	)		(1.5	)
Total Earnings Available for Fixed Charges	$	1,649.9		$	929.8		$	920.2		$	538.0		$	(39.0	)
Fixed Charges
Interest expensed and capitalized	$	165.4		$	163.6		$	127.2		$	112.8		$	105.7
Amortization of debt issue costs		2.3			1.0			2.2			2.2			2.1
Estimated portion of rent expense representing interest		19.8			18.9			19.7			17.4			10.0
Total Fixed Charges	$	187.5		$	183.5		$	149.1		$	132.4		$	117.8
Ratio of Earnings to Fixed Charges		8.80			5.07			6.17			4.06			–

(1)  Earnings were inadequate to cover fixed charges by $156.8 million for the year ended December 31, 2003.

US GAAP
Net income (loss)	$	1,061.5		$	625.8		$	532.7		$	290.5		$	(84.2	)
Income taxes		452.3			174.4			288.0			151.9			7.4
Share of earnings of equity investees		(74.3	)		(54.9	)		(55.8	)		(30.9	)		(12.4	)
Fixed charges		187.5			183.5			149.1			132.4			117.8
Distributed income of equity investees		40.6			29.9			18.6			8.7			4.0
Interest capitalized		(21.8	)		(19.1	)		(5.7	)		(2.5	)		(1.5	)
Total Earnings Available for Fixed Charges	$	1,645.8		$	939.6		$	926.9		$	550.1		$	31.1
Fixed Charges
Interest expensed and capitalized	$	165.4		$	163.6		$	127.2		$	112.8		$	105.7
Amortization of debt issue costs		2.3			1.0			2.2			2.2			2.1
Estimated portion of rent expense representing interest		19.8			18.9			19.7			17.4			10.0
Total Fixed Charges	$	187.5		$	183.5		$	149.1		$	132.4		$	117.8
Ratio of Earnings to Fixed Charges		8.78			5.12			6.22			4.15			–

(2)  Earnings were inadequate to cover fixed charges by $86.7 million for the year ended December 31, 2003.

EX-13

Exhibit 13

     2007 Financial Review Annual Report

fertile future

PotashCorp: Supplying Fertilizer to the World

Through our growth from the largest Canadian potash company yesterday to the global leader of today with the promise of even more tomorrow, some things have never changed. For almost two decades we have helped farmers produce quality crops. Our help is needed even more today, because millions of people in booming offshore countries can now afford better, healthier diets and the modern consumer goods made with our products. Our high-quality resources – nitrogen, phosphate and particularly potash – are in demand as world requirements for food, fuel, feed and fiber increase. And PotashCorp delivers, operating with care for the environment, our employees and the communities we serve, because we will be here tomorrow, too, fulfilling our long-term promise.

     

TABLE OF CONTENTS

Introduction
Letter from the CFO			2
Peer Comparisons			3
Management’s Discussion & Analysis
Our Global Story			4
Company Overview			6
	Potash
		Overview	10
		Strategy	13
		Delivering	14
		Risks	16
	Nitrogen
		Overview	17
		Strategy	20
		Delivering	20
		Risks	20
	Phosphate
		Overview	21
		Strategy	24
		Delivering	24
		Risks	24
Key Performance Drivers			25
Rewarding Results			28
Risk Management			29
Factors That Shaped our Business in 2007			31
2007 Financial Overview			34
Business Segment Review			35
2008 Outlook			50
Liquidity and Capital Resources/Management			53
Accounting Estimates and Changes			60
11 Year Report			65
Financials
Financial Performance Indicators			66
Independent Registered Chartered
Accountants’ Reports			70
Consolidated Financial Statements			72
Appendix			113

learn even more online

This Financial Review Annual Report contains the heart of the 2007 PotashCorp story – the foundation built yesterday, our performance today, and the promise of a bright tomorrow. Much more detail is available in our online version, at PotashCorp2007AR.com, with keywords provided throughout this report to help locate specific information.

Financial data in this report are stated in US dollars unless otherwise noted.

Share and per-share data have been adjusted to reflect our three-for-one stock split in May 2007.

2

        LETTER FROM THE CFO

WAYNE R. BROWNLEE

EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER

Preparing for tomorrow has long been a cornerstone of PotashCorp’s approach to business, and now we are designing strategies that will direct our future growth.

Our goal is to maximize growth and minimize volatility, using our abundant and increasing cash flow to generate long-term shareholder value. With a constant focus on the areas of our business that we expect will generate cash flow returns in excess of our cost of capital, we believe we can achieve this goal.

Our Potash First strategy is based on the expectation of a potash environment of tight supply and growing demand over the next several years. By expanding our world-class operations, we plan to capitalize on selling more tonnes at higher prices while per-tonne fixed costs and mining taxes decline with higher volumes, significantly boosting our potash gross margin and bottom line.

We continue to explore ways to use our cash flow to reward loyal investors, with reinvestment in our own potash capacity being top priority. Even so, we expect to continue generating substantial excess cash, so after splitting our stock three-for-one and doubling our dividend in 2007, we announced in early 2008 plans to repurchase up to 5 percent of our shares. We believe PotashCorp has consistently proven to be the best investment in the fertilizer industry, and will continue to be. We invite you to compare our performance against industry peers as proof.

The bottom line is that we are in a very strong financial position and poised to build on it as demand for fertilizer, especially potash, grows. Ultimately, our goal is to put our strengths – and cash – to work for our investors, building an even stronger company for tomorrow.

“OUR POTASH POTENTIAL IS TREMENDOUS. WITH HIGHER

DEMAND AND PRICES, AND AVERAGING A MILLION

TONNES OF NEW OPERATIONAL CAPACITY EACH YEAR FOR

FIVE YEARS, POTASH GROSS MARGIN COULD RISE

SIGNIFICANTLY.”

  P E E R    C O M P A R I S O N S 3 

PEERS IN OUR INDUSTRY

In our efforts to achieve the highest sustainable results for our shareholders, management evaluates our performance against basic materials indices and our peers in the fertilizer sector. Some of the key metrics tracked are set out below.

NET INCOME ($US MILLIONS)

CASH FLOW FROM OPERATIONS($US MILLIONS)

CAPITAL EXPENDITURES¹ ($US MILLIONS)

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.

Sources: Company financial reports

1	Capital expenditures = additions to property, plant and equipment
2	Year ended December 31, 2007
3	Most recent four fiscal quarters ended November 30, 2007
4	Most recent four fiscal quarters ended September 30, 2007
5	Yara net income, cash flow from operations and capital expenditures translated at 1 USD = NOK 5.8775, average exchange rate for 2007 as provided from company reports
6	K+S net income, cash flow from operations and capital expenditures translated by quarter at: Q4 2006 1 USD = EUR 0.7760; Q1 2007 1 USD = EUR 0.7634; Q2 2007 1 USD = EUR 0.7419; and Q3 2007 1 USD = EUR 0.7280; average exchange rates in each quarter per Bloomberg

POTASHCORP 2007 FINANCIAL REVIEW

MANAGEMENT’S DISCUSSION & ANALYSIS
of Financial Condition and Results of Operations (in US Dollars)

The following discussion and analysis is the responsibility of management and is as of February 20, 2008. 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.

             OUR GLOBAL STORY
 

Cocoa, the main Ingredient in chocolate, is grown in Brazil.                     

THE WORLD NEEDS MORE FERTILIZER

For years, we have been telling our stakeholders that global development is the fundamental, long-term growth driver of our business and our industry.

In the past – yesterday – we were able to report that some factors of this global development affected our business favorably, but never did the drivers of our business line up as we believed they could. Never, that is, until today. In 2007, modern agriculture stepped into the global spotlight and proved its vital role in feeding, fueling and clothing people across the globe.

As the world’s largest fertilizer enterprise by capacity, PotashCorp’s success now – and tomorrow – is tied to the ability of farmers around the world to respond successfully to the ever-increasing needs of nations hungry for agricultural products of all kinds. They can meet this challenge with the help of fertilizer,

increasing their output to provide healthy food, renewable fuels and desirable industrial products without plowing up the parks, gardens, habitats and rainforests that protect the planet and sustain the human spirit.

FERTILIZER IS AN ESSENTIAL PART

OF TOMORROW’S SOLUTION

The world needs more quality crops to provide food, animal feed, fuel and fiber for its rising human and animal populations. Available land is limited but it can grow enough to meet all these needs, even as populations rise – if it is adequately fertilized. Today, after decades of imbalanced soil nutrition in many countries, one of the most effective actions farmers can take is to add the right amounts of fertilizer, especially potash, to their soil. We believe potash will continue to grow in importance – as will our company.

POTASHCORP 2007 FINANCIAL REVIEW

Learn more in our online report:     
     5 

Population and incomes are growing	Demand for more and better  food is rising	Grain inventories are at a  record low
In recent years, world population has risen annually by 75 million, mainly in developing nations with emerging economies. Continued economic growth in China, India and other Asian and Latin American countries easily outpaced a slowing US economy in 2007 and drove world GDP up by nearly 5 percent. Millions of people in these countries, especially China and India, now have higher incomes and more purchasing power.	Although 80 percent of the world’s population still earns less than $3,000 per year, better-quality food rich in protein is becoming more common and affordable in developing countries. Studies show that as incomes in this category rise, the increase is allotted first to improved diet, particularly to meat. This has pushed up the demand for grain as animal feed. At the same time, Asia’s demand for fruits and vegetables is displacing cereals from cropland.	Although record amounts of grain and oilseeds were grown in the 2007/08 crop year, global consumption exceeded production, just as it did in seven of the last eight years – long before biofuels became much of an additional draw on global crop production. USDA forecasts that grain inventories will fall to just 14 percent of consumption by the end of the current crop year, the lowest level ever recorded and not enough to feed the world for two months. Stocks of rice and soybeans are also falling.
Sustained high crop prices support fertilizer demand	Farmers’ investment in fertilizer pays off	More fertilizer required to nurture soils for more crops
In response to strong demand, prices of almost every globally significant crop rose substantially in 2007, often to record levels. This encouraged farmers to maximize yields by optimizing fertilizer applications. Futures prices for corn, soybeans and wheat in 2009 are more than double 2006 levels.	Everywhere that crops are grown, the economics of buying and using fertilizer are compelling. The excellent value it provides for the world’s farmers was confirmed by a recent International Plant Nutrition Institute (IPNI) survey, which took into consideration higher crop prices and much higher fertilizer costs. Most crops in the survey returned more than $3 for every $1 invested in N, P and K fertilization. Oil palm from a mature Malaysian plantation returned $9 per $1 invested in fertilization.	Crops are nourished by nitrogen, phosphate and potash. Applied to the soil in the right quantities at the right time, these nutrients work synergistically to improve yields, quality and disease resistance. Historical under-application of fertilizer – especially potash – by farmers in countries like China, India and Brazil has led to chronic low yields there. These farmers are now investing in fertilizer. Potash fertilizer consumption grew annually by an average of 5.6 percent in the last five years, phosphate by 3.8 percent and nitrogen by 2.7 percent, and more growth is expected.

POTASHCORP 2007 FINANCIAL REVIEW

6

          C O M P A N Y   O V E R V I E W  

¹ Public trading began November 2

² December 31

PotashCorp Is the World’s Largest
Fertilizer Enterprise

While our world-class assets in Canada, the United States, Trinidad and Brazil give us leverage in all three primary nutrients, potash provides our greatest strength. Our potash capacity far exceeds that of other global fertilizer companies and we are increasing it year by year with debottlenecking and expansion projects.

P O T A S H C O R P  –  A N  O V E R V I E W

A GLOBAL SUCCESS STORY

Yesterday, PotashCorp was a large Canadian potash company. Today, we are a thriving international fertilizer enterprise – the global leader in potash (K) with high-quality nitrogen (N) and phosphate (P) operations and widespread strategic investments. We are preparing to meet tomorrow’s need for potash.

We sell our products in more than 50 countries, to three markets:

• Fertilizer, focused on balanced plant nutrition (N, P, K)

• Feed supplements, focused on animal nutrition (mainly P)

• Industrial, focused on products for high-grade food, technical and other applications (N, P as phosphoric acid, K).

Our offshore potash and phosphate sales are made primarily to government agencies and private importers. Most of our nitrogen, more than two-thirds of our phosphate and more than one-third of our potash is sold in North America, through our fertilizer, feed, industrial nitrogen and purified acid sales teams.

FERTILIZER IS OUR BUSINESS

PotashCorp strives to be the highest quality low-cost producer and sustainable gross margin leader in the products we sell and the markets we serve. We seek to be the supplier of choice to high-volume, high-margin customers with the lowest credit risk. To meet our goal of being the partner of choice, we continually look for ways to create superior value for all our stakeholders.

For the last four years, fertilizer has generated 60 percent of our sales and 70 percent of gross margin. Half of our fertilizer sales volumes, primarily potash and phosphate, went offshore in 2007. The rest, including most of our nitrogen fertilizers, was sold to North American retailers, cooperatives and distributors that provide storage and application services to farmers, the end-users.

Fertilizers are mainly applied in spring and fall in both the Northern and Southern hemispheres. Customer purchases are affected by crop prices (profitability), choice of crop, soil quality and conditions, climate and weather, and government policies and subsidies.

Among major crops, rice, corn, wheat and cotton require all three nutrients, while soybeans need mainly potash and phosphate.

          C O M P A N Y   O V E R V I E W   Learn more in our online report:

7 

BUILDING EXCELLENCE ON POTASH FIRST

Potash Is the Heart of Our Business

Our biggest earnings contributor, generating almost half of our total gross margin in 2007, potash offers our greatest growth potential. Therefore, it is the focus of our long-term strategic plan – our Potash First strategy.

Potash also provides significant global reach, in end-markets and through our investments in related offshore companies. Almost 60 percent of our production is used in growing international markets for agricultural commodities such as rice, soybeans, corn, palm oil, sugar, rubber, bananas, oranges and coffee. The remainder goes to offshore industrial uses and to the North American market, which has historically been stable due to the maturity of its agriculture system.

Nitrogen and Phosphate Add Depth and Breadth

PotashCorp is also a major global producer of nitrogen and phosphate. In 2007, our nitrogen business generated about 28 percent of our gross margin, while phosphate produced about 23 percent.

Our nitrogen operations are divided between Trinidad, where we have long-term, lower-cost gas contracts with National Gas Company of Trinidad and Tobago Limited, and the US. We produce approximately two-thirds of our ammonia in Trinidad while emphasizing industrial products in the US.

As the most diversified global phosphate producer, we offer a full product range: phosphoric acid, liquid and solid fertilizers, feed supplements for livestock and poultry, and products used by industry, such as purified acid.

Feed and Industrial Are Stable Businesses

Our feed and industrial sales are considerably less seasonal and cyclical – and therefore less volatile – than fertilizer sales, which increases the quality of earnings in these segments.

We sell feed products primarily to US bulk feed producers that blend them into animal feeds. Latin America and Asia are our largest offshore feed markets.

Nitrogen, phosphate and potash are used by industry to make important products for modern living, such as

2007 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	K	Nitrogen	N	Phosphate                     P
	Base Product	Potassium chloride (KCl)		Ammonia (NH3)		Phosphoric acid (P2O5)
	Availability of Raw Materials 1	Very limited		Abundant (natural gas)		Limited
	Cost of New Capacity 2	$2.5 billion* / 2 MMT KCl		$1.0 billion / 1 MMT NH3**		$1.5 billion / 1 MMT P2O5
	Greenfield 3 Development Time 4	5-7 years		3 years		3-4 years
	Producing Countries 5	12		~ 60		~ 40 (based on phosphoric acid)
	State- or Subsidy-Controlled Capacity 6	19%		57%		47%
	Industry Operating Rate 7	91%		86%		86%
	PotashCorp Nameplate Capacity 8	13.2 MMT potassium chloride		3.9 MMT ammonia		2.4 MMT phosphoric acid
	PotashCorp % of World Capacity	22		2		6
	PotashCorp World Position by Capacity 9	#1		#2		#3
	5-Year Demand Growth CAGR 10	5.6%		3.4%		3.7%

*  Cost of greenfield in Saskatchewan, excluding infrastructure outside plant gate

** Ammonia/urea complex

1-10, See Appendix – Footnotes, Page 113.

POTASHCORP 2007 FINANCIAL REVIEW

8

     C O M P A N Y  O V E R V I E W 

RECORD
1.1	BILLION
	2007 NET INCOME
88%
INCREASE IN GROSS MARGIN
31%	INCREASE IN
	POTASH
PRODUCTION & SALES

adhesives, resins and foams for the construction and automotive industries, soft drinks, metal cleaners, computer and TV screens, soaps, de-icers and water softeners. Rising incomes in developing countries are driving growth in offshore demand for these products.

Availability of Supply and Quality Matter

In the current robust agricultural markets, availability of supply is customers’ first concern in their buying decisions for our products. PotashCorp ranks well above the industry average in reliability of supply and product quality, according to our annual customer surveys.

OUR VALUE PROPOSITION

Potash for Growth, Trinidad Nitrogen and Phosphate Diversity for Earnings Stability

We strive to generate long-term growth while minimizing fluctuations in our earnings.

To maximize long-term value, we concentrate on areas of our business that generate the highest margins – potash, Trinidad nitrogen and our diverse phosphate products. Sustained margins in these businesses are supported by our lower-cost production capabilities. Our long-term natural gas contracts in Trinidad and proximity to the US market give us significant cost advantages in nitrogen, just as our high-quality rock enables us to make the entire range of phosphate products.

DELIVERING TODAY WHILE MAPPING OUR FUTURE

In current market conditions, we are generating substantial free cash flow – and we expect to continue to do so. We carefully weigh the choices for our cash, evaluating the best return on any investment that matches our Potash First strategy. Our goal is to have cash flow return materially exceed cost of capital.

POTASHCORP 2007 FINANCIAL REVIEW

   C O M P A N Y  O V E R V I E W 9  

We have always exercised great discipline in capital allocation so much of our cash flow is, and will be, invested in expanding our own potash capacity. At the same time, we seek to increase our offshore potash investments and explore other merger and acquisition opportunities that fit the Potash First strategy.

We also consider share repurchase and increased dividends as effective ways to maximize shareholder value over the long term. We used our strong cash flow to repurchase 28.5 million shares in 2005, confident that our potash assets are the best in the world. At an average cost of almost $30 per share, this added significant shareholder value. We announced another repurchase in January 2008 of up to 15.8 million shares, viewing this as an opportunity to add further value. In conjunction with a three-for-one stock split in May 2007, we doubled our quarterly dividend.

CAPABILITY TO DELIVER

To ensure we can deliver on our value proposition and support our vision and strategy, we rely on several key assets:

• An experienced management team that takes a broad view of our business, develops long-term strategies and commits the company to them

• A solid capital structure that enables us to take advantage of opportunities and withstand normal 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 coordinated transportation network.

Our Cash Flow Is Solidifying the
Company of Tomorrow

We are investing our abundant cash flow in expanding our own low-cost, high-quality potash assets so we can deliver this vital nutrient to the world’s farmers. Most of our capital spending over the next five years will focus on potash.

Many spices, including cardamom,
are grown in India.

POTASHCORP 2007 FINANCIAL REVIEW

 10

     P O T A S H 

#1	PRODUCER OF
	POTASH
8	MILLION
	TONNES
INCREASE IN PRODUCTION
(From 2007 actual to 2015 potential)
4.5	BILLION
IN PROJECTS ANNOUNCED IN 2007

POTASHCORP – THE GLOBAL POTASH LEADER

OVERVIEW

The World of Potash and Our Place in It

PotashCorp is the world’s largest potash producer, with almost one-quarter of global capacity. We own and operate six mines in Saskatchewan and New Brunswick, with mineral rights at another Saskatchewan mine. We have announced plans to raise production potential by more than 70 percent from 2007 levels by the end of 2012 and, by 2015, up to 90 percent.

Potash: The Best Long-Term Fertilizer Enterprise

Potash has many structural advantages over the other primary nutrient businesses.

Good Deposits Are Rare

Few good potash deposits exist that are economical to mine, so only 12 countries produce significant amounts. Two-thirds of world production and three-quarters of reserves are in Canada, Russia and Belarus.

Ownership Is Primarily Private

Most global potash ownership is in the private sector, where decisions are more likely to be made for economic rather than political reasons. This means that reinvestment and supply fundamentals are more market-oriented and predictable. Only in Belarus is there significant government ownership, and its economy and GDP growth depend heavily on US dollar potash sales.

Significant Barriers to Entry

With limited quality deposits worldwide and high and rapidly increasing costs for a greenfield mine, entry into the potash business is a formidable undertaking. Companies considering new mines in Saskatchewan and elsewhere face capital costs estimated at $2.5 billion or more and five to seven years in development time. This excludes infrastructure costs outside the plant for such necessary items as access roads, power and natural gas lines, rail lines and cars, and port facilities and related storage, which could significantly exceed $500 million, depending on location. With no positive cash flow over the lengthy construction period, a greenfield mine carries considerable risk.

“WE’VE BEEN IN THIS BUSINESS FOR DECADES, COMPLETING

MANY PROJECTS THAT ADDED SUBSTANTIAL CAPACITY. WE

HAVE THE EXPERIENCE AND THE RESOURCES TO SUCCESSFULLY

EXECUTE ALL OF OUR NEW EXPANSION PROJECTS.”

GARTH MOORE, PRESIDENT PCS POTASH

P O T A S H Learn more in our online report:

11 

STRENGTHS

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

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

•    Declining per-tonne production costs and mining taxes with expanded volumes

•    Long reserve lives from existing mine shafts

•    Offshore potash-related investments add considerably to overall profitability

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

•    Few world producers, little government ownership

•    No substitutable products for potash

WEAKNESSES

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

•    Water inflows at New Brunswick and Esterhazy increase production costs there and risk 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

•    Global food story, complemented by biofuels, is accelerating long-term growth expectations for potash consumption

•    With competitors at or near maximum operating rates and limited expansion potential, planned capacity additions should enable PotashCorp to increase our percentage participation in a growing market

THREATS

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

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

•    Substantial upward pricing trend may attract greenfield projects

•    PotashCorp would be disproportionately affected by market weakness, particularly in the short term

POTASHCORP 2007 FINANCIAL REVIEW

 12

     P O T A S H 

PotashCorp: A Long-Term Potash Enterprise

With 22 percent of world potash capacity, significant plans for growth and plentiful high-quality reserves, PotashCorp can provide this vital nutrient to the world’s farmers far into the future. While we are a major supplier to North America, we sell nearly two-thirds of our potash offshore, particularly to developing nations. Their demand is rising sharply, and our sales are increasing with it. Our potash-related investments reinforce this major segment of our enterprise.

Potash Sales and Logistics: Offshore

PotashCorp is the largest contributor (55 percent) to Canpotex Limited (Canpotex), the offshore marketing company for Saskatchewan’s three producers (others: Mosaic, Agrium). Other global marketing agencies such as Belarusian Potash Company (for Belaruskali and

interior. Approximately 40 percent of Canpotex customers buy at the port where the product is loaded and pay their own freight costs (FOB). Canpotex pays the freight for customers who buy on a delivered (CFR) basis. Thus, changing ocean freight rates can substantially affect margins.

Potash Sales and Logistics: North America

We sell to the eastern United States from our New Brunswick operation and to the rest of the US from Saskatchewan – particularly our Rocanville plant, which is just 95 miles from the US border. Our North American customers, who buy mainly on a CFR basis, are wholesalers, retailers and cooperatives that purchase on the spot market from PCS Sales. We do not sell directly to farmers. We own or lease more than 200 distribution points in the US, with most leases the variable cost type –

We have announced $4.5 billion of debottlenecks and expansions

to raise our operational capacity to 15.7 million tonnes by the end

of 2012, and potentially to 17.2 million tonnes three years later.

Uralkali) and International Potash Company (for Silvinit), and producers such as ICL and K+S, compete with Canpotex in the key offshore markets of China, India, Brazil and Southeast Asia. The location of our New Brunswick operation gives PotashCorp an advantage in supplying Brazil and other Latin American countries.

The largest offshore customers purchase in different ways.

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

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

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

By marketing jointly through Canpotex we reduce our transportation and distribution costs, which can be considerable when shipping product from Canada’s

available if needed and paid for only when used. We own or lease almost 8,600 railcars. Product flow is managed by our transportation and distribution group.

Global and North American Competitors

China, India, Brazil and Southeast Asia are the principal markets for both FSU producers and Canpotex, and FSU producers also ship into the European Union. Europe and Brazil are the main K+S markets, while ICL ships to India, China, Southeast Asia, Brazil and Europe.

Our main North American competitors are Mosaic and Agrium. Our share of Canadian producers’ sales to the North American market was 42 percent in 2007.

Strategic Investments Enhance Our Enterprise

Investments in global potash-related companies provide strategic opportunities and significant contributions to our bottom line. Our 32 percent ownership of SQM in Chile gives us an influential position in the world’s leading producer of specialty potassium, iodine and lithium

POTASHCORP 2007 FINANCIAL REVIEW

P O T A S H 13 

products. With 28 percent ownership of Arab Potash Company Ltd. (APC) in Jordan – which has a significant logistical advantage in delivering to India and other Asian markets – we appoint the top four management positions. We own 10 percent of ICL in Israel, and now own 20 percent of fertilizer distributor Sinofert Holdings Limited (Sinofert) in China, the largest potash distributor in the world’s fastest growing market. Sinofert distributes approximately 60 percent of the fertilizer imported into China. It handles all product of Qinghai Salt Lake Potash Company (QSLP), the country’s largest producer, in which it owns an 18 percent interest. The largest offshore purchaser of Canadian potash, Sinofert generates more than half its gross margin through potash sales.

 OUR STRATEGY

RAISE CAPACITY TO MEET RISING DEMAND

It is no accident that PotashCorp has the world’s greatest potash capacity when demand for this nutrient is climbing swiftly. We began preparing yesterday for the catch-up demand of today – with strategic purchases that consolidated our Saskatchewan base and added an operation in New Brunswick, Canada’s only East Coast producer. We also invested in offshore companies to extend our global reach. We are preparing for tomorrow by bringing on capacity through debottlenecking and expansion projects at our existing mines for substantially less than the cost of greenfield capacity. We continue to look for opportunities to extend our global enterprise through strategic investments or acquisitions.

Timing Capacity Additions to Market Need

Our potash value proposition requires us to time the completion of our expansion projects to the expected growth in offshore demand. This is more of an art than a science, since demand rarely moves in a straight line upward. The substantial increase in 2007, however, demonstrated that it is better to be slightly ahead of the curve in getting additional production capacity ready for the market.

Producing to Meet Market Demand

For almost two decades, we have sought to minimize downside risk by following the strategy of matching our production to market demand. This has caused some fluctuations in our sales volumes, as temporary events can negatively affect short-term buying patterns even when the long-term trend is upward. This is particularly true when growth depends on offshore markets.

Greenfield Unlikely Threat to Our Strategy

With no significant greenfield projects announced and long lead times for new developments, we do not expect new competitor mines for at least five to seven years.

POTASHCORP 2007 FINANCIAL REVIEW

 14

     P O T A S H 

While rising potash prices and profitability increase the possibility that greenfield mines could be developed, the cost and time required to establish a world-scale mine, mill and supporting infrastructure remain a major impediment.

 DELIVERING ON OUR POTASH PROMISE

Preparing for Tomorrow’s Needs

In 2007, we announced almost $4.5 billion in new projects at our Patience Lake, Cory, Rocanville and New Brunswick operations. Debottlenecking should be complete at Patience Lake by the end of 2008, while Cory’s debottleneck/expansion is expected to be completed by mid-2010. We expect ramp-up at our new mine and expanded mill at New Brunswick to begin by the end of 2011, and a large mine and mill expansion project at Rocanville is expected to be complete one year later.

We expect to develop an additional 1.5 million tonnes of potential capacity in Saskatchewan by 2015, and we are updating long-standing plans for a greenfield mine at Bredenbury, Saskatchewan.

Investing in Transportation and Distribution
Infrastructure

Raising our operational capacity by approximately 5 million tonnes over five years requires investment in our

transportation and distribution infrastructure and close cooperation with our rail transportation partners.

Because most long-term growth in demand is expected to come from offshore markets, Canpotex increased capacity at its Portland, Oregon terminal by 1 million tonnes in 2007. It is also considering expansion alternatives for Vancouver’s Neptune terminal, and a potential new West Coast export terminal.

To meet rising Brazilian demand, two bulk fertilizer warehouses, one at Lavras that we own and another at the Port of Santos – the Perola Bulk Fertilizer Terminal that we lease through a joint venture company in which we are the majority shareholder – became fully operational in 2007. Perola’s capacity is now estimated at 750,000 tonnes. Since construction began in 2005, we have invested more than $10 million in these facilities.

In 2007, Canpotex ordered 1,000 new specialized potash railcars to add to the 3,500 it already leases, and it proposes to add more over the next few years.

By investing $85 million in efficiency improvements and new automation technology for rail and loadout facilities at Allan and Lanigan, we are increasing throughput capacity to move more product faster.

Our existing contract with Canadian National Railway continues until 2010 while Canpotex has a contract with CP Rail until 2012.

Our Debottlenecking and Expansion Projects Should Enable Us to Meet Expected World Demand

Location	Investment		Standard	Compaction	Expected Construction
	Billion $ CDN		Capacity Added	Capacity Added	Completion
Rocanville	$	0.13	0.75 MMT	1.50 MMT	Complete (2005)
Allan	$	0.21	0.40 MMT	0.50 MMT	Complete (2007)
Lanigan	$	0.41	1.50 MMT	0.75 MMT	Q2 2008
Patience Lake	$	0.11	0.36 MMT	—	Q4 2008
Cory	$	0.89	1.20 MMT	0.75 MMT	Q2 2010
New Brunswick	$	1.66	1.20 MMT	0.75 MMT	Q4 2011
Rocanville	$	1.80	2.00 MMT	To be determined	Q4 2012
Total	$	5.21	7.41 MMT

POTASHCORP 2007 FINANCIAL REVIEW

P O T A S H 15 

Record US Crops Drive Potash Demand, Prices

The record 2007 US corn crop removed significant levels of nutrients from the soil, which should be replaced to ensure a good crop in 2008. Corn is a heavy user of potash, and the resulting demand tightened market conditions to the point that PotashCorp was required to sell product on an allocation basis to all customers. Over the year, we announced US price increases that totaled $194 per short ton for 2007 and first-quarter 2008.

Rising Prices Reflect Growing World Demand

The world’s farmers recognize the value of potash to improve their crops, and prices have significantly increased in response to market demand. Spot market prices to Brazil and Southeast Asia nearly doubled in 2007, sharply widening the gaps with contract prices paid by China and India. We expect current supply/demand fundamentals to narrow these differences considerably.

World KCl Sales and Consumption Growth

World demand for potash can be temporarily affected, as occurred in 2006 when sales were essentially suspended during lengthy price negotiations with China and India. Fertilizer consumption, however, continued to grow, significantly depleting world inventories. Global consumption has risen steadily, averaging 5.6 percent annually over the last five years.

POTASHCORP 2007 FINANCIAL REVIEW

 16

     P O T A S H 

 RISKS TO OUR POTASH STRATEGY

Since potash is the heart of our company and our largest gross margin contributor, we pay particular attention to risks to its success and act quickly and firmly to mitigate them. In 2007, the following risks were viewed as most important:

Suppressed Demand Creating Market Imbalance

If expected growth in demand fails to materialize, negatively affecting sales volumes and price realizations, our potash success could be threatened. While we anticipate long-term growth in consumption, fluctuations in demand are inherent to the global potash market. We attempt to mitigate this risk by matching our production to market demand, thereby protecting our margins.

Lack of Adequate Transportation and Distribution Infrastructure

Without adequate transportation and distribution infrastructure, we could find it difficult to achieve our growth plans. In the short term, railcar shortages, slow turn times and disruptions such as strikes, derailments and/or adverse weather could prevent us from delivering product in a timely manner to North American customers or ports on both coasts. This could result in customer dissatisfaction, loss of sales and higher distribution costs.

Directly and through Canpotex, we mitigate this risk by working with major rail carriers to ensure sufficient investment is made in transportation infrastructure to help potash move as smoothly as possible.

To further manage this risk, both Canpotex and PotashCorp have purchased railcars or leased them long-term to facilitate the movement of potash. In Brazil, we have invested in two terminals for better throughput.

Risks Particular to Underground Mines

Unexpected underground rock falls can result in life-threatening injuries, a risk that all mining companies face. Several ground falls have occurred in our potash mines in the last three years, and our mitigation actions have included developing a mining machine canopy to protect our employees.

Many underground mines around the world – including our potash mines – must deal with water-bearing strata that carry the risk of water inflow. We are successfully managing water inflows at our New Brunswick operation, and inflows are being managed at Esterhazy, where we currently have a 25 percent interest. Our other conventional mines are currently dry.

Advanced geoseismic monitors record micro-events, provide information to help predict ground falls and help us avoid areas with unusual ground conditions that could carry the danger of water inflow. Our Earth Sciences group is also developing ground-penetrating radar that could help determine such conditions.

New Supply Creating Market Imbalance

Recent growth in demand for potash has outpaced the historical trend, requiring producers to increase operating rates and pushing up prices. Those higher prices could attract credible new competitor supply in the form of greenfield mines, which could outpace the growth in world demand, reducing prices and potash margins.

To mitigate this risk, we continue to follow a strategy of producing to meet market demand to protect our margins.

POTASHCORP 2007 FINANCIAL REVIEW

     N I T R O G E N  Learn more in our online report:            17 

POTASHCORP — OUR TRINIDAD ADVANTAGE

OVERVIEW

The World of Nitrogen and Our Place in It

Two factors determine the success and sustainability of a nitrogen business: access to a long-term, lower-cost natural gas source to make ammonia and downstream products, and proximity to the primary end-user. PotashCorp, with operations in Trinidad and the US, has both.

Nitrogen Is a Regional Business

Nitrogen is widely produced and used, making it a globally fragmented business. China, Russia, India and the US are the largest producing countries. The largest private sector companies – Yara (Norway), PotashCorp, Koch (US), Togliatti (Russia), Terra (US) and Agrium (Canada) – produce only 13 percent of the world total. China is by far the largest consumer, followed by the US and India.

Widespread Ammonia Production, Limited Trade

Ammonia is the feedstock for all downstream nitrogen products and can be manufactured wherever there is accessible natural gas. A country that does not consume all its gas may choose to monetize it by converting it into a transportable nitrogen product or to liquefied natural gas (LNG), mainly for export.

Ammonia is difficult and costly to transport, and less than 13 percent trades across borders. The necessary refrigerated and pressurized rail and ocean vessels are in short supply.

Governments Invest in Nitrogen

Because governments own more than half of world ammonia capacity, investment and production decisions may be made for political reasons and can negatively impact global nitrogen markets.

The Strong Nitrogen Market Continues

In the last decade, high natural gas prices forced the permanent shutdown of 31 percent of US capacity and 21 percent of European capacity. This tightened supply and, coupled with strong growth in agriculture and industrial consumption, pushed up prices. Now, in the US, supply/demand fundamentals – and not the cost of natural gas – are driving prices.

“OUR EXCEPTIONAL LONG-TERM, LOWER-COST

NATURAL GAS CONTRACTS MAKE TRINIDAD THE FOCUS

OF OUR NITROGEN ENTERPRISE. IN 2007, BOTH TRINIDAD

AND OUR US PLANTS PERFORMED WELL GENERATING

RECORD NITROGEN GROSS MARGIN.”

THOMAS REGAN, JR., PRESIDENT PCS PHOSPHATE AND PCS NITROGEN

# 2	IN WORLD
	AMMONIA
	CAPACITY
65%	OF AMMONIA
	PRODUCED
	IN TRINIDAD
95%
AVERAGE TRINIDAD NATURAL GAS VOLUMES LOCKED IN 2008 THROUGH 2012 (73% 2008 THROUGH 2018)

 18

     N I T R O G E N 

STRENGTHS
•	Long-term, lower-cost natural gas contracts in Trinidad
•	Almost two-thirds of our ammonia production in Trinidad, close to the world’s largest importer, the US
•	US-manufactured ammonia operations somewhat geographically insulated, and make more than 80 percent of sales to stable industrial customers
•	Hedging program mitigates natural gas price risk related to US production
WEAKNESSES
•	One-third of our ammonia production in the US, using higher-cost natural gas
•	Contractual commitments to US industrial customers may force us to operate unprofitably amid rising gas prices
•	Many nitrogen plants globally, with significant government ownership and influence
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 discourage greenfield plants
•	Higher ocean freight costs discourage nitrogen imports into the US from Eastern Europe and the Middle East
THREATS
•	Abundant low-cost natural gas in developing countries may lead to its monetization as nitrogen products
•	Shorter construction period means new capacity can impact the market more quickly than for other primary nutrients
•	Pending changes in transport regulations in North America could substantially increase costs of shipping ammonia and difficulty in siting terminals

POTASHCORP 2007 FINANCIAL REVIEW

N I T R O G E N 19 

The N Game

Cost, product availability, ease of transport, ease and safety of application, type of crop and effectiveness of seed/plant uptake influence farmers’ choice of nitrogen fertilizer. Granular urea is preferred, as it contains more N than nitrogen solutions, is more plentiful due to ease of manufacture and transport, and is safer and easier to apply in a blend with phosphate and potassium. Nitrogen solutions – easy-to-use liquids that don’t require timely rains to dissolve – are an effective pre-plant and side-dress source of nitrogen on certain crops at certain stages of growth. Ammonia, a hazardous material but the most efficient source of

PotashCorp: Building on Trinidad and Industrial

Because our natural gas contracts in Trinidad – a country with extensive gas reserves and a stable government – are indexed to ammonia prices, our nitrogen produced there is profitable even when US gas costs are high. Our large Trinidad operation is less than a week’s sailing time from the US, the world’s largest ammonia importer and our primary nitrogen market.

Our Trinidad production supplies both fertilizer and industrial markets in the US. Industrial sales are traditionally more stable. Of our US production, almost two-thirds of urea and more than 80 percent of ammonia go to industrial customers.

Driven by strong world demand and higher Russian and European gas prices, nitrogen prices in the US have decoupled from gas costs, considerably improving profitability.

nitrogen, has a short window for successful application. Phosphate fertilizers DAP and MAP are another N source for farmers.

In 2007, the need to increase crop production and the preference for urea by large agricultural markets such as the US and India led to strong demand for this product. India purchased nearly 35 times more urea — 6.7 million tonnes — than just five years ago. With more than 15 million more acres of corn planted in the US than in 2006, demand for nitrogen solutions increased substantially.

Higher Costs Delay Greenfield Projects

Because of increased construction costs, greenfield nitrogen projects are not coming on stream in low-cost gas regions as quickly as they did during previous periods of high profitability. Several projects planned in the Middle East and Trinidad have been deferred or abandoned, extending the current positive market conditions in nitrogen.

Nitrogen Sales and Logistics

Our North American customers buy nitrogen products from PCS Sales on the spot market and sales are made on a delivered basis. Logistics and transportation costs regionalize sales, particularly for ammonia. Imports move more easily into the US Gulf than into the interior and therefore most affect competitors close to the Gulf or the Mississippi River. We shuttered ammonia production at Geismar in 2003 mainly because of imports, but Augusta and Lima operate in interior regions and are somewhat insulated.

We lower transportation costs and ensure economical delivery of Trinidad product to the US through long-term leases on ammonia vessels at fixed prices. Ownership or major supply contracts at six deepwater US ports give us logistical strength and flexibility for these imports.

We deliver most of our US-produced ammonia via pipeline to stable industrial customers that require product quality and reliable delivery to keep their plants running efficiently.

POTASHCORP 2007 FINANCIAL REVIEW

20

     N I T R O G E N

OUR STRATEGY

BUILDING ON OUR TRINIDAD ASSET TO MINIMIZE VOLATILITY

Our nitrogen strategy has two components. First, we seek to enhance our overall strategy of growth with reduced volatility by maximizing our Trinidad production with its advantageous natural gas costs. Our second goal is to maximize our stable US industrial sales.

Margin volatility due to natural gas costs has historically affected how we operate our US plants. When US gas is high-priced, we may reduce operating rates and purchase product to meet customer commitments. However, with today’s strong demand and pricing environment and with more stable US gas prices, each facility produced the combination of products that provided the highest overall nitrogen segment gross margin. For example, we used our nitrogen solutions production capability at Geismar in 2007 to meet market demand and attain favorable margins.

Natural Gas Reliability and Price Are Linked

Europe’s marginal nitrogen producers, whose natural gas costs are linked to higher oil prices and pricing pressure from Russia’s Gazprom, have replaced marginal US firms as the world’s swing producers. Gas prices in North America are lower than in Europe, and strong supply/demand fundamentals are driving the US nitrogen industry and prices.

2007

Over the longer term, we would consider strategic partnerships that leverage our marketing and operations expertise in low-cost natural gas regions, doing so on a fee basis and minimizing up-front investment risk.

DELIVERING ON EFFICIENT PRODUCTION

MAXIMIZING PRODUCTION AND STRENGTHENING OUR TRINIDAD ADVANTAGE

Our investment in debottlenecking our four Trinidad ammonia units in 2005 and 2006 paid off with record production and added efficiency in 2007. Upgrades at Lima in mid-2006 resulted in much higher and more efficient production there, as well. These investments allowed us to generate higher overall cash flows and margins in this segment.

In the current market and price environment, we continue to evaluate the possibility of additional capacity, perhaps through a fifth ammonia plant at our Trinidad complex and/or further debottlenecking projects at our US plants.

NITROGEN RISK

Risk of Cyclicality

The involvement by governments in nitrogen creates a risk that supply will be brought on stream without consideration of demand. This can create price cyclicality due to competitive costs, availability of supply and world demand. To mitigate this risk, we maximize our lower-cost Trinidad production while focusing on less cyclical US industrial markets. At our US plants, we employ gas price risk hedging strategies and, during periods of high gas costs, reduce operating rates.

POTASHCORP 2007 FINANCIAL REVIEW

P H O S P H A T E  Learn more in our online report:
21 

POTASHCORP – FLEXIBILITY OF PRODUCTION

OVERVIEW

The World of Phosphate and Our Place in It

PotashCorp is a diversified and flexible global phosphate producer, with 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 by industry.

Strong Phosphate Companies Start with Good Rock

Global Phosphate Rock Deposits

Phosphate rock deposits are not rare. Production takes place in approximately 30 countries. China, the US and Morocco are the largest producing countries, with a total of 68 percent of global production. Morocco alone accounts for almost half of world phosphate rock exports.

Dramatic Turnaround in 2007

The global phosphate industry was transformed in 2007. For decades, Morocco’s Office Cherifien des Phosphates (OCP) produced and exported rock at low prices to companies that upgraded it to produce more valuable downstream products. In 2007, new OCP management recognized the value of its rock and instituted a market-oriented approach in an already tight global market. It raised spot prices for rock by more than 300 percent, which impacted prices for all downstream products and increased the value of rock reserves everywhere.

Price Push from Sulfur

A stable, consistent and economical supply of sulfur – a byproduct of oil and gas production – is crucial for converting phosphate rock into an intermediate phosphoric acid product that can be sold or processed further. Supply became short in 2007, particularly in the international market, and prices quadrupled in many markets.

Record rock and sulfur costs are particularly painful for the almost 10 percent of global phosphate producers that import both to make phosphoric acid and solid fertilizers.

“UNPRECEDENTED MARKET CONDITIONS IN 2007 DRAMATICALLY

INCREASED THE VALUE OF POTASHCORP’S PHOSPHATE ASSETS,

ALLOWING US TO GENERATE RECORD GROSS MARGINS ACROSS

OUR DIVERSE PRODUCT LINES.”

DAVID DELANEY, PRESIDENT PCS SALES

^# 3 IN GLOBAL
CAPACITY

^# 1
WORLD PRODUCER OF
SPECIALTY PHOSPHATE
PRODUCTS

LARGEST
LOWEST COST
US ROCK DEPOSITS ^# 1

22 

P H O S P H A T E

Limited New Solid Fertilizer Capacity

Other than China, which is building mainly for domestic consumption, new solid fertilizer capacity is expected to be limited until Saudi Arabia’s 3-million-tonne Ma’aden facility is operational. Morocco plans to bring on phosphoric acid plant expansions in 2008 and 2009 that will enable it to increase DAP production, to capture more of the social and economic benefits of upgrading its rock. Until Ma’aden begins producing in 2011 or 2012, global demand is expected to exceed this new Moroccan capacity, keeping markets tight.

PotashCorp: Specializing in Diversity

We Begin with Quality Phosphate Rock

PotashCorp has abundant and accessible phosphate rock with low levels of impurities, which results in low production costs. Because of this high-quality rock, we can allocate about 40 percent of our phosphoric acid to high-margin industrial and feed products outside the more volatile fertilizer commodity cycle. At the same time, we are well balanced with exposure to the strong and rising profitability of liquid and solid fertilizers.

Industry Demands Purified Phosphoric Acid

Wet process technology and Aurora’s superior rock have made us a significant player in this business. Global demand for industrial phosphate products is rising, and closure of several energy-intensive thermal plants by competitors has restructured US production.

Feed Supplements for Animals and Poultry

We are one of only a few producers of dical and monocal phosphate animal feed supplements, used primarily in beef and pork production. Aurora’s quality rock also gives us a competitive edge in producing DFP for poultry. Although the current fertilizer market is attractive, we continue to be a major player in this high-margin feed business. US feed consumption is stable, and rising global demand for meat, combined with higher prices in a tight global market for phosphoric acid, makes the current feed environment and longer-term outlook favorable.

Phosphate Sales and Logistics

Approximately 70 percent of our phosphate sales are focused on North America, where we typically benefit from higher realized prices. Sales are made on both a

Extremely tight supply/demand fundamentals in fertilizer resulted in a

rational, market-oriented pricing response across all products. This dramatically

improved the fortunes of PotashCorp’s phosphate fertilizer business.

spot and contract basis, depending on the product, and include freight. PCS Sales handles this North American business. PhosChem, a US marketing association that includes Mosaic, sells our phosphate fertilizers offshore.

Global and North American Competitors

OCP is our major offshore competitor, while we compete in North America with Mosaic, CF Industries, Mississippi Phosphate, Agrifos and Agrium. Moroccan and Israeli imports vie with us for North American industrial sales while producers in China compete for feed sales.

POTASHCORP 2007 FINANCIAL REVIEW

P H O S P H A T E 23 

POTASHCORP 2007 FINANCIAL REVIEW

STRENGTHS
•	Significant high-quality, low-cost phosphate rock reserves
•	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 and feed phosphate 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
•	Tight phosphate rock, phosphoric acid and solid fertilizer supply/demand fundamentals
•	Few companies globally with rock of sufficient quality to economically produce purified acid
•	We believe that fewer greenfield projects gives 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

24

      P H O S P H A T E

OUR STRATEGY

USE OUR PRODUCT FLEXIBILITY TO MAXIMIZE RETURNS, ENHANCE STABILITY

We seek to use the flexibility made possible by our high-quality rock to optimize our product sales mix, maximize gross margin on a long-term basis and thereby enhance earnings stability.

In the stable US industrial phosphate business, our strategy is to capture growing demand on an opportunistic basis. Purified acid generates strong margins, and we have expanded to gain market share as competitors closed high-cost, energy-intensive plants. In phosphate feed supplements, we focus on profitability rather than sales volumes.

Our strategy in phosphate fertilizers is to allot phosphoric acid not suitable for feed and industrial products to the most profitable combination of the liquid and solid fertilizers in high demand in the current robust, agriculture-driven market. Maintaining high operating rates results in lower per-tonne fixed costs.

DELIVERING ON PRODUCT DIVERSITY

Consistent with our strategy of leveraging our rock quality to further strengthen product and margin diversity, we have begun a $260 million debottlenecking project at Aurora. A new sulfuric acid plant, expected to be completed in 2009, will make possible an additional 180,000 tonnes of annual phosphoric acid production

that can be used in any combination of downstream products that maximizes phosphate gross margin.

PHOSPHATE RISKS

Risk of Cyclicality

Short-term price cyclicality due to competitive costs, availability of supply and government involvement has historically added considerable risk in phosphate. Over the next five years, increasing competitive supply of solid fertilizer, particularly DAP, may outpace growth in world consumption, potentially depressing prices and risking our phosphate margins. In mitigation, we are leveraging our strengths in specialty industrial and feed products while streamlining fertilizer production to minimize production costs.

United States Environmental Protection Agency

The US phosphate industry, including PotashCorp, is subject to an industry-wide initiative of the United States Environmental Protection Agency (USEPA), which has challenged industry’s implementation of a particular exemption for mineral processing wastes under the hazardous waste program. Potential violations at our various phosphate facilities stemming from inspections conducted by the USEPA under this program could lead to financial penalties. We address this risk by working with other phosphate industry members and in company-specific meetings with representatives of the Department of Justice, the USEPA and state environmental agencies regarding potential resolution, through litigation or otherwise, of any matters identified in the inspections.

POTASHCORP 2007 FINANCIAL REVIEW

     K E Y  P E R F O R M A N C E  D R I V E R S 25 

Each year we set corporate-level targets – key performance indicators (KPIs) – to advance our goals and drive desired results, always striving to maximize shareholder value. 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.

l ACHIEVED PARTIALLY ACHIEVED ¡ DID NOT ACHIEVE

PEOPLE	Encourage and Reward Performance
	• To have motivated and productive employees committed to our long-term goals.
	Prevent Harm to People

2007 TARGETS		2007 RESULTS
Fill at least 75 percent of senior staff openings with internal candidates.	l	85 percent of senior staff openings were filled with internal candidates.
Improve employee engagement, as measured by surveys, by 10 percent from 2006.		Employee engagement improved by 3 percent.
Reduce recordable injury rate by 15 percent from 2006.	¡	Recordable injury rate increased by 9 percent.
Reduce lost-time injury rate by 40 percent from 2006.	l	Lost-time injury rate was reduced by 48 percent.

2008 TARGETS
1	Achieve an average employee engagement score that is in the top quartile as determined by the annual employee engagement survey.
2	Fill at least 75 percent of senior staff openings with internal candidates.
3	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.

POTASHCORP 2007 FINANCIAL REVIEW

    26

     K E Y  P E R F O R M A N C E  D R I V E R S

   ACHIEVED        PARTIALLY ACHIEVED        DID NOT ACHIEVE

COMMUNITY	Have Positive Impact on Communities in which We Operate
	§   To strengthen relationships with and improve the socio-economic well-being of our communities
	Prevent Damage to Environment
	§   To have no accidents and no damage to the environment
2007 TARGETS		2007 RESULTS
Reduce reportable releases and permit excursions by 10 percent from 2006.			Total reportable releases and permit excursions remained unchanged.
Achieve a 10 percent increase in individual participation in the matching gift program and a 20 percent increase in total donations.			Achieved a 15 percent increase in individual participation in the matching gift program and a 15 percent increase in total donations.
2008 TARGETS
1  Reduce company-wide greenhouse gas emissions per tonne of product by 10 percent by the end of 2012, compared to 2007.
2  Maintain energy usage per tonne of product produced at 2007 levels.
3  Reduce reportable releases and permit excursions by 15 percent from 2007 levels.
4  Achieve 4 out of 5 on each community leaders survey.
5  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.
6  Achieve a local purchasing level of 60 percent, excluding purchases of energy, transportation and raw materials.

CUSTOMER	Provide High-Quality Service, Provide High-Quality Products
	§    To meet customer needs and expectations.
2007 TARGET		2007 RESULT
Outperform competitors on quality and service as measured by customer surveys.			Based on results of 2007 customer surveys, we outperformed all our competitors in customer service in all four product groups, outperformed all competitors for product quality for two product groups, finished second of eight competitors in fertilizer quality ratings and third in purified phosphoric acid quality ratings.
2008 TARGET
Outperform competitors on quality and service as measured by customer surveys.

POTASHCORP 2007 FINANCIAL REVIEW

K E Y  P E R F O R M A N C E  D R I V E R S 27

   ACHIEVED        PARTIALLY ACHIEVED        DID NOT ACHIEVE

SHAREHOLDER	Increase High-Margin Stable Sales, Reduce Cash Costs §  To meet the needs and expectations of our providers of capital
2007 TARGETS		2007 RESULTS
Exceed total shareholder return performance for our sector* and companies on the DJUSBM1 for 2007.			We achieved total shareholder return in 2007 of 202 percent, exceeding the 141 percent generated by our sector and the 30 percent return of the DJUSBM.
Carry a higher multiple than the average of our sector on both earnings and cash flow.			Throughout 2007, our multiples were higher than the average of other fertilizer companies on both earnings and cash flow.
Achieve gross margin compound annual growth rate (CAGR) of 15 percent over next five years.			Achieved 88 percent growth in gross margin over 2006 and a five-year gross margin compound annual growth rate of 44 percent.
Potash gross margin to exceed $800 million, more than 40 percent above 2006.			Potash gross margin was $912 million, 63 percent higher than 2006 levels.
Phosphate gross margin to be up by 50 percent from 2006.			Phosphate gross margin rose 245 percent from 2006 levels.
Nitrogen gross margin to exceed $325 million.			Nitrogen gross margin was $536 million.
Achieve 3 percent reduction in per-tonne potash conversion costs on a Canadian dollar basis.			Excluding the impact of natural gas and brine inflow costs, per-tonne potash costs were 10 percent below 2006 levels.
Improve energy efficiency in Trinidad by 3 percent from 2006.			Trinidad energy efficiency improved by 2 percent from 2006 levels.
Achieve rock costs at Aurora and White Springs 1 percent below 2006.			Rock costs at these sites rose 4 percent from 2006 levels.
Maintain cash conversion costs for P2O5 at 2006 levels.			Cash conversion costs for P2O5 rose by 3 percent from 2006 levels.
Reduce/avoid transportation and distribution expenses to achieve a level 3 percent below market rates.			Our transportation and distribution costs were 8 percent below market rates.
Remain in the top quartile of governance practices as measured by external reviews.			Target achieved, including placing eighth among more than 270 S&P/TSX companies evaluated by Report on Business.
2008 TARGETS
1  Exceed total shareholder return for our sector and companies on the DJUSBM for 2008.
2  Remain in the top quartile of governance practices as measured by external reviews.

1	Dow Jones US Basic Materials Index
*	Sector = Mosaic, Agrium, Yara, ICL, SQM and K+S

POTASHCORP 2007 FINANCIAL REVIEW

28

             R E W A R D I N G  R E S U L T S

PHILOSOPHY, REWARD STRUCTURE AND OVERSIGHT

Our executive compensation policies are designed to achieve our objective of attracting and keeping world-class talent that drives our business forward and maximizes shareholder value. Our underlying principle is “pay for performance”. Therefore, most compensation is variable, fluctuating based on individual and corporate performance.

Four primary elements comprise executive compensation, as explained in the detail below: base salary, short-term incentives, performance units under a Medium-Term

Incentive Plan (MTIP) and performance stock options issued as long-term incentives. Medium- and long-term variable components like MTIP and performance stock options comprise about 60 percent of the total compensation package, while short-term incentives account for about 15 percent. Base salary makes up the remaining 25 percent.

The compensation committee of the Board of Directors oversees our executive compensation program and, among other responsibilities, carefully monitors the proportion of remuneration that is performance-related on a short-, medium- and long-term basis.

Compensation			Performance
Element	Form	Eligibility	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 and corporate performance.
Short-term incentives	Cash	All executives and most salaried staff and 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	Performance share units	All executives and senior management(67 people)	3 years	•      Units issued at our 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 in accordance with specific total shareholder return (TSR)1 targets and half vest in accordance with our TSR relative to a selected peer group’s TSR. •      Payout value is based on 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 select management (241 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.

“WE WANT TO ATTRACT, MOTIVATE AND RETAIN WORLD-CLASS

TALENT THAT CAN DRIVE OUR BUSINESS FORWARD, ENCOURAGING

INDIVIDUALS TO PERFORM AND DELIVER RESULTS THAT PROVIDE

SUSTAINING SHAREHOLDER VALUE.”

JANE IRWIN, SENIOR VICE PRESIDENT ADMINISTRATION

R E W A R D I N G  R E S U L T S 29

We do not have any non-qualified deferred compensation arrangements in place for management. Additionally, 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 of our shares on the day before the options are granted.

PERFORMANCE OPTIONS ALIGN EXECUTIVE COMPENSATION, SHAREHOLDER INTERESTS

We place significant emphasis on pay-for-performance, with “at risk” components of total compensation linked directly to the enhancement of cash flow return and total shareholder return. An example of the performance conditions that must be achieved before vesting will

occur in our performance option plans is set out here. For additional information, please refer to our 2008 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%

R I S K    M A N A G E M E N T

MANAGING RISKS TO OUR ENTERPRISE

Effective planning and execution of our strategy require careful analysis of all risks associated with PotashCorp’s goals and objectives. Based on their likelihood, severity and ability to adversely affect the company, we prioritize the risks and select the ones to manage, and, through mitigation responses, accept, control, share, transfer, diversify or avoid each.

Risk to Reputation

The most severe risk, always, is loss of reputation. Continually building goodwill and communicating with stakeholders, using best practices, committing to sustainability, ensuring transparency and practicing leading-edge corporate governance are ways we mitigate this risk.

PotashCorp’s Global Risk Environment

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     R I S K  M A N A G E M E N T

RISK MANAGEMENT METHODOLOGY

Recognizing the integrated nature of the risk categories encompassed within our business, we think about PotashCorp’s global risk universe as a continuum. Our understanding of the inherent and relative risks within the categories and their interrelationships allows us to design and implement risk management activities that give us the opportunity to execute our strategies and meet our business goals and objectives with acceptable relative risk.

The Risk Ranking Matrix

We identify risks in our global environment and allocate them to six categories: Markets/business, distribution, operational, financial and information technology, regulatory and integrity/empowerment.

When we identify an inherent risk, we assess it against our risk ranking matrix as if no mitigation measures had been taken. We then evaluate the risk in light of any mitigation actions to determine the residual risk.

The matrix is used to assess the severity and likelihood of such a potential event in our overall business, and establish relative risk levels identified by the letters A, B, C, D and E. “A” represents the highest level risk, “E” the lowest.

A	Extreme: Initiate risk management activities immediately to reduce risk. If such activities cannot sufficiently reduce risk level, consider discontinuation of the applicable business operation in order to avoid the risk.
B	Major: Initiate risk management 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 current Risk Management Policy. No additional risk management activities required.
D	Low: Monitor risk according to Risk Management Policy requirements, but no additional risk management activities required.
E	Negligible: Consider discontinuing any related risk management activities in order to direct resources to higher-value activities, providing such discontinuance does not adversely affect any other risk areas.

Relative risk can be lowered by either reducing the likelihood of the initiating event occurring or reducing the significance of the consequence should it actually occur.

Residual risk is what is left after applying mitigation or control measures to an identified inherent risk. Our objective is to ensure that we are fully aware of all potential inherent risks that could adversely impact the company, and are making appropriate choices about the levels of residual risk to accept.

Our Risk Management Process Is Continuous

Every quarter we re-evaluate risks and address new risks that result from changes in operations, external factors or increase in risks previously identified. Management reports quarterly to the Board of Directors about risk management actions and plans.

POTASHCORP RISK MANAGEMENT RANKING METHODOLOGY
			SEVERITY OF CONSEQUENCE
Risk Ranking Matrix			1	2	3	4	5
			Negligible < $10M	Low < $40M	Medium < $150M	Major < $500M	Extreme > $500M
	1	Probable (annual)	C	B	B	A	A
	2	High (2-3 years)	D	C	B	B	A
	3	Medium (4-10 years)	D	D	C	B	B
	4	Low (11-30 years)	E	D	D	C	B
	5	Remote (31-100 years)	E	E	D	D	C

POTASHCORP 2007 FINANCIAL REVIEW

F A C T O R S  T H A T  S H A P E D  O U R  B U S I N E S  I N  2 0 0 7 31

1 World Economy Continued to Climb

Led by developing countries – China with 11.4 percent growth, India 8.9 percent, Brazil 4.4 percent – the global economy extended the strong performance begun in 2004 into the most robust four-year period in more than three decades. The disruptions in the US credit markets contributed to US growth slowing to 2.2 percent but agriculture was relatively unaffected. Strong offshore economies provided people with the means to eat better and, buoyed primarily by the increased global demand for food, supplemented by rising biofuels production, crop prices strengthened.

2 Global Grain Consumption Exceeded Production

World grain production has failed to keep up with rising demand in seven of the past eight crop years beginning with 1999/00. The current crop year, 2007/08, is projected to make it eight out of nine years. This repeated shortfall indicates that current practices of the world’s farmers are unable to meet the needs of the growing global population.

3 Thirst for Oil Pushed Up Prices

Strong economic growth in developing countries and increasing world population intensified the thirst for oil as fuel and industrial feedstock. The weaker US dollar, rising geopolitical tensions and the cost of pumping oil from ever more challenging deposits pushed the price to nearly $100/barrel late in 2007, an all-time high even on an inflation-adjusted basis.

4 Biofuels Production Jumped

The rising cost of oil and increased efforts by many countries to reduce reliance on foreign supply propelled expansion of the biofuels industry, with developmental programs in more than 35 countries. World ethanol production rose by 30 percent and biodiesel production by more than 50 percent in 2007. Brazil produced 5 billion gallons of ethanol. US production of 6.5 billion gallons outpaced the oil industry’s installation of blending capacity, and prices briefly dropped to 50-60 cents per gallon below the gasoline price. Lower profit margins discouraged investment in new ethanol plants, while the substantial price differential, together with a 51-cent-per-gallon blending subsidy, attracted private investment, enabling blending capacity to catch up. A new Energy Bill

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     F A C T O R S  T H A T  S H A P E D  O U R  B U S I N E S S  I N  2 0 0 7

World N, P and K Demand
	Potash						Nitrogen						Phosphate
	2007			2006			2007			2006			2007			2006
Total World Demand11 (Million Product Tonnes)		55.2			48.0			155.8			149.1			65.6			63.0
PotashCorp Share of World Production 12		17	%		15	%		2	%		2	%		6	%		6	%
11-12, See Appendix – Footnotes, Page 113

was enacted that mandated large increases in US use of renewable fuels in future years.

5 Major Crop Inventories Continued to Shrink

With less-than-optimal fertilizer application in many developing countries and adverse weather in several regions, world grain production is expected to be below crop-year demand. When the current crop year ends, global inventories are expected to hold only enough wheat and coarse grains for 1.7 months – the lowest level ever recorded by USDA. A simultaneous decline in corn, wheat and rice stocks drove up prices enough to encourage farmers to grow more. Competition among these crops for available acres raised prices for crops such as soybeans that are expected to have less acreage.

6 Demand for N, P and K Accelerated

Stronger fertilizer demand reflected rising food requirements, dietary demand for higher protein content and declining crop inventories. World potash sales rose by 15 percent and sales of both nitrogen and phosphate by 4 percent, combining with tight supply to provide strong markets for each.

7 US Farm Prices Set New Records

US prices for wheat, corn and soybeans set records, buoyed by strong food demand, rising biofuel requirements for corn and declining global inventories. Farmgate prices for the 2007/08 crop year are projected to average $6.65 per bushel for wheat, $10.40 for soybeans and $4.00 for corn.

8 Potash in Demand Worldwide

Potash imports rebounded in China and India to meet the heavy crop uptake of this nutrient and to begin replenishing the potash pipelines depleted during 2006 price negotiations. Southeast Asia and Brazil, motivated by strengthening crop prices, began the lengthy process of restoring depleted soil nutrient levels. The US imported heavily to maximize yields from corn and other crops selling at or near record prices. The strong demand led to higher potash prices, which were partially offset in the international market by rising ocean freight rates. The effect of the weakening US dollar on foreign exchange benefited potash importers.

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F A C T O R S   T H A T   S H A P E D   O U R   B U S I N E S S   I N   2 0 0 7 33

9 The Global Phosphate Market Tightened

While phosphoric acid capacity elsewhere has fallen, China is now producing more than it can consume, permitting export of around 4 million tonnes of DAP and MAP in 2007. This was absorbed as global demand rose by 2.8 million tonnes, close to 6 percent, and US exports fell by 1.6 million tonnes. As a result, the world phosphoric acid operating rate reached 86 percent, and prices rose dramatically. The benchmark Tampa DAP price jumped by 130 percent over the year while India’s contract price for phosphoric acid rose from $461 per tonne P₂O₅ to $566. Morocco’s OCP raised its phosphate rock price from $45 per tonne FOB Casablanca to around $190 per tonne on new contracts at the end of 2007. Sharply higher international freight rates, a 600 percent increase in sulfur prices in key markets and a jump of close to 20 percent in US demand for DAP/MAP also affected prices.

10 Strong Demand for Feed and Industrial Phosphates

The market for feed and industrial phosphates grew by 4 percent to meet demand of the buoyant economies in the developing world. Prices for domestic and offshore feed, as well as industrial products, rose.

11 Higher Natural Gas Prices, Competition Stiffened

Petrochemical facilities and higher global LNG trade competed with new nitrogen projects for low-cost natural

gas in 2007. Ukraine producers had to pay 46 percent more for Russian gas, reducing their competitiveness. Their ammonia exports fell by about 20 percent, contributing to the tight global nitrogen supply, which maintained strong markets in North America.

12 Strong US, Indian Imports Tightened Urea Supply/Demand

Fast-rising demand for urea in India and the US to boost crop production outshone more moderate growth in import demand elsewhere. India imported about 50 percent more than 2006 levels, and with US imports made up close to 85 percent of the 14 percent growth in urea trade.

13 High Capital Costs Limited Growth in Fertilizer Capacity

Many proposed fertilizer projects have been deferred or cancelled due to high capital costs and longer construction schedules. The strength of developing world economies and the many infrastructure projects tightened supplies of raw materials, construction materials and skilled labor in 2007. In one year, the spot price for iron ore rose by 71 percent in Brazil and 145 percent in India. Demand for ocean transport took the Baltic Dry Index for solid shipments to a record high before softening in the last quarter of the year. The estimated cost for a 2-million-tonne greenfield potash project in Saskatchewan rose significantly.

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34  

     F I N A N C I A L  R E V I E W  

2007 FINANCIAL OVERVIEW

This section provides an overview of our financial performance based on our consolidated financial statements on Pages 72 to 111. 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 (Decrease)
	2007		2006		2005		2007		2006
Sales	$	5,234.2	$	3,766.7	$	3,847.2		39		(2	)
Gross Margin	$	1,881.2	$	1,002.0	$	1,125.0		88		(11	)
Operating Income	$	1,588.5	$	875.5	$	892.6		81		(2	)
Net Income	$	1,103.6	$	631.8	$	542.9		75		16
Net Income per Share – Diluted	$	3.40	$	1.98	$	1.63		72		21

2007 Earnings Compared to Guidance				2007 Earnings Compared to 2006
The company’s initial midpoint estimate for 2007 EPS, based on the Outlook and assumptions described in our 2006 Financial Review Annual Report, was approximately $2.25 per share. The final result was $3.40 per share. The primary causes of this variance from our guidance midpoint were:				The company’s EPS for 2006 was $1.98 per share. The final EPS for 2007 was $3.40 per share. The primary causes of this increase from last year’s actuals were:
					Effect
				Cause	on EPS
				Potash offshore realized prices higher	$	0.31
	Effect			Potash North American realized prices higher		0.15
Cause	on EPS			Potash offshore sales volumes higher		0.26
Potash realized prices higher	$	0.23		Potash North American sales volumes higher		0.19
Potash sales volumes higher		0.13		Increased potash costs due to foreign exchange		(0.07	)
Increased potash costs due to foreign exchange		(0.06	)	Lower potash other operating costs		0.04
Increased brine inflow costs		(0.11	)	Increased brine inflow costs		(0.11	)
Increased potash other operating costs		(0.04	)	Higher provincial mining taxes		(0.14	)
Lower provincial mining taxes		0.02		Subtotal potash		0.63
Subtotal potash		0.17		Nitrogen realized prices higher (exclusive
Nitrogen realized prices higher (exclusive				of purchased and miscellaneous product)		0.43
of purchased and miscellaneous product)		0.49		Manufactured nitrogen sales volumes higher		0.19
Manufactured nitrogen sales volumes higher		0.17		Increased net cost of natural gas and higher
Increased net cost of natural gas		(0.06	)	purchased and miscellaneous product margin		(0.03	)
Increased nitrogen other operating costs				Increased nitrogen other operating costs (exclusive
(exclusive of cost of natural gas) and higher				of cost of natural gas and purchased ammonia)		(0.11	)
purchased and miscellaneous product margin		(0.12	)	Subtotal nitrogen		0.48
Subtotal nitrogen		0.48		Phosphate realized prices higher		0.70
Phosphate realized prices higher		0.70		Phosphate sales volumes higher		0.07
Phosphate sales volumes higher		0.08		Increased input costs for sulfur, rock and ammonia		(0.04	)
Increased input costs for sulfur, rock and ammonia		(0.10	)	Phosphate other operating costs higher		(0.05	)
Phosphate other operating costs higher		(0.11	)	Subtotal phosphate		0.68
Subtotal phosphate		0.57		Increase in other income (exclusive of provision
Increase in other income (exclusive of provision				for auction rate securities)		0.12
for auction rate securities)		0.13		Provision for auction rate securities in 2007		(0.06	)
Provision for auction rate securities in 2007		(0.06	)	Increase in selling and administrative		(0.13	)
Increase in selling and administrative		(0.11	)	Foreign exchange variance and
Foreign exchange variance		(0.14	)	decrease in interest expense		(0.13	)
Subtotal other		(0.18	)	Subtotal other		(0.20	)
Subtotal of the above		1.04		Subtotal of the above		1.59
Higher weighted averaged number of shares outstanding		(0.01	)	Higher weighted average number of shares outstanding		(0.05	)
Canadian federal income tax rate reductions during 2007		0.12		Income tax refunds and higher rate reductions during 2006		(0.12	)
Total variance from 2007 diluted EPS guidance	$	1.15		Total variance from 2006 diluted EPS	$	1.42

B U S I N E S S  S E G M E N T  R E V I E W  35 

BUSINESS SEGMENT REVIEW

We report our results of operations in three business segments: potash, nitrogen and phosphate. 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 potash, nitrogen and phosphate 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.

Our discussion of segment operating performance is set out below and includes nutrient product and/or market performance where applicable to give further insight into these results.

POTASH RESULTS

							% Increase											% Increase											% Increase
	Dollars (millions)						(Decrease)					Tonnes (thousands)						(Decrease)					Average Price per Tonne						(Decrease)
	2007		2006		2005		2007		2006			2007		2006		2005		2007		2006			2007		2006		2005		2007		2006
Sales	$	1,797.2	$	1,227.5	$	1,341.1		46		(8	)
Freight		178.1		130.5		129.7		36		1
Transportation
and distribution		39.1		38.8		34.5		1		12
Net sales	$	1,580.0	$	1,058.2	$	1,176.9		49		(10	)
Manufactured product
Net sales
North American	$	656.9	$	470.5	$	495.6		40		(5	)		3,471		2,785		3,144		25		(11	)	$	189.26	$	168.95	$	157.64		12		7
Offshore		909.6		576.0		668.3		58		(14	)		5,929		4,411		5,020		34		(12	)	$	153.41	$	130.56	$	133.13		18		(2	)
		1,566.5		1,046.5		1,163.9		50		(10	)		9,400		7,196		8,164		31		(12	)	$	166.65	$	145.42	$	142.57		15		2
Cost of goods sold		658.8		489.3		459.6		35		6													$	70.09	$	67.99	$	56.30		3		21
Gross margin		907.7		557.2		704.3		63		(21	)												$	96.56	$	77.43	$	86.27		25		(10	)
Other miscellaneous
and purchased product
Net sales		13.5		11.7		13.0		15		(10	)
Cost of goods sold		8.9		7.8		9.9		14		(21	)
Gross margin		4.6		3.9		3.1		18		26
Gross Margin	$	912.3	$	561.1	$	707.4		63		(21	)												$	97.05	$	77.97	$	86.65		24		(10	)
Note 19 to the consolidated financial statements provides information pertaining to our business segments.

  Manufactured potash gross margin variance attributable to:

  Dollars (millions)

			2007 vs 2006
	Change in		Change in Prices/Costs						Total Manufactured Potash
	Sales Volumes		Net Sales			Cost of Goods Sold			Gross Margin Variance
Manufactured product
North American	$	84.0	$	70.5		$	(17.1	)	$	137.4
Offshore		124.8		135.5			(47.3	)		213.0
Change in market mix		6.8		(6.5	)		(0.2	)		0.1
Total	$	215.6	$	199.5		$	(64.6	)	$	350.5

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B U S I N E S S  S E G M E N T  R E V I E W

2007 vs 2006

Highlights

• 2007 potash gross margin was a record $912.3 million, 63 percent higher than 2006 when offshore volumes were impacted by lengthy price negotiations with China and India, and 29 percent above the previous high of $707.4 million in 2005.

• Exceptionally tight potash market conditions led to products being sold on an allocation basis to all customers for much of the last half of 2007. Sales prices and volumes were higher than in 2006 in both the North American and offshore markets. Sales volumes of 9.4 million tonnes established a new company record and were 31 percent higher than in 2006.

• Farmers outside of North America are working to correct decades of under-application of potash and, while this will take many years to accomplish, potash is vital to improving crop quality and gives plants the capability to better utilize nitrogen and phosphate. As a result, demand rose in 2007, taking reported producer inventories to historically low levels and contributing to further offshore spot market price increases during the year. Even with production 31 percent higher than in 2006, our year-end potash inventories of approximately 680,000 tonnes were 27 percent below 2006 year-end levels and represented our second-lowest year-end inventory since 1991.

• To meet increasing global demand, we raised our production to 9.2 million tonnes in 2007; this compares to 7.0 million tonnes in 2006. Despite higher production levels, cost of goods sold per tonne increased due to additional costs for brine inflow management at Esterhazy and New Brunswick and the impact of a stronger Canadian dollar.

Sales and Cost of Goods Sold

The most significant contributors to the $351.2 million increase in total gross margin were as follows:

• Canpotex shipped 9.3 million tonnes (PotashCorp’s share was 55 percent) in 2007 as all major markets increased consumption, driven significantly by rising demand and higher commodity prices, particularly for grain, soybeans, corn and palm oil. When considering our share of sales through Canpotex and sales directly from our facility in New Brunswick, Brazil was our largest market in 2007, taking 24 percent of our total offshore shipments as higher soybean and corn prices led to an increase in acres planted there and a corresponding increase in potash imports. China was next at 23 percent and India followed at

	9 percent, while Indonesia, Malaysia and Vietnam together represented 16 percent. In North America, sales volumes were up 25 percent as stronger dealer fill and field application of potash, due to higher commodity prices and more acreage planted, led to higher demand.
•	Offshore prices were up 18 percent as price increases in major markets were announced throughout 2007. In early February, Canpotex reached an agreement with Sinofert in China on a $5-per-tonne increase for shipments in 2007. Canpotex implemented price increases in Brazil that totaled $175 per tonne by year-end while in India, a $50-per-tonne increase took effect on imports in the second quarter. Southeast Asian customers saw a total of $195 per tonne in price increases over the course of 2007. The full benefit of announced offshore price increases was not captured because of higher ocean freight rates and locked-in contract pricing to China and India. Higher ocean freight rates had a negative impact of about $15 per tonne on all delivered-basis (CFR) sales. Prices in the North American market were up 12 percent or $20 per tonne, significantly due to the price increases implemented throughout 2007, which totaled $82 per tonne by year-end. North American prices were $36 per tonne, or 23 percent, higher than offshore prices. The gap is due in part to offshore contracts with prices that lag behind the North American spot market price. It also reflects product mix, as North American customers prefer granular product that commands a premium over standard product more typically consumed offshore.
•	Higher production levels and 47 fewer shutdown weeks significantly reduced cost of goods sold compared to 2006 when production shutdowns occurred as we remained true to our strategy of matching production to market demand. However, the effect of increased production and lower natural gas costs and consumption was more than offset by higher brine inflow management costs and the impact of foreign exchange on potash operating costs. Brine inflow management costs at New Brunswick and Esterhazy incrementally increased total average costs by almost $5.50 per tonne ($51.5 million) while a stronger Canadian dollar relative to the US dollar negatively impacted cost of goods sold by more than $3 per tonne. Since the costs of brine inflow were attributed to production of potash that was mainly sold in the offshore market, the negative price component of the cost of goods sold variance was higher for the offshore market than for North America.

POTASHCORP 2007 FINANCIAL REVIEW

B U S I N E S S  S E G M E N T  R E V I E W 37

2006 vs 2005

Highlights

• PotashCorp entered 2006 with potash shipments to China at a virtual standstill as fertilizer buyers negotiated price with suppliers. India followed the same course – and both countries deferred purchases, drawing down inventories until price settlements were reached in the third quarter. The China agreement called for a base price increase of $25 per tonne over the 2005 contract price. The signing of the China deal served to spur shipments across Southeast Asia and Latin America, where customers had delayed purchasing ahead of the price settlement. Offshore sales volumes increased in the latter half of the year, but still, annual sales volumes were 12 percent lower than 2005.

• North American potash demand was constrained during the first three quarters of the year as customers delayed purchasing and relied on inventories in the face of high fuel costs and low crop prices.

• Reduced sales volumes raised the per-tonne fixed distribution costs for the year and, combined with softening prices due to extended contract negotiations, resulted in declining margins on offshore potash sales in 2006. Although North American sales volumes were down 11 percent compared to 2005, realized prices were 7 percent higher.

• Following our strategy of producing to meet market demand increased our costs per tonne during 2006. We incurred 66 plant shutdown weeks, up from 24 weeks during 2005. In response to increased demand in the latter part of the year, PotashCorp

produced a record 2.4 million tonnes during the fourth quarter, raising 2006 production to 7.0 million tonnes, down from 8.8 million tonnes in 2005.

Sales and Cost of Goods Sold

The most significant contributors to the $146.3 million decline in total gross margin were as follows:

• Sales by Canpotex were reduced from 8.2 million to 6.7 million tonnes, contributing to the 12 percent decline in our offshore sales volumes. Canpotex shipments to China and India totaled 2.0 million tonnes, down 40 percent from the 3.3 million tonnes shipped in 2005. Except for certain shipments from Russia, China was virtually absent from the market until late in July 2006 as it waited to conclude new pricing contracts with suppliers. Brazil took approximately 1.0 million tonnes of potash from Canpotex in 2006, a reduction of 4 percent from 2005, although taking 30 percent more potash in fourth-quarter 2006 than in fourth-quarter 2005. Brazil continued to be affected by a strong real relative to the US dollar and lower soybean prices. This pressured margins for Brazilian farmers and limited credit availability, leading to fewer acres being planted and a decrease in imported crop inputs. Hesitancy to purchase large positions in potash until conclusion of the Chinese negotiations led Brazilian customers to delay purchases. Following the negotiations and coupled with improving market conditions, Brazil’s volumes increased sharply. Sales volumes in 2006 increased to many smaller potash-consuming countries such as Indonesia, Malaysia, the Philippines, Taiwan and Vietnam, which together took 1.7 million tonnes from Canpotex, an increase of 20 percent over 2005.

Potash Production (million tonnes KCl)

									Mine Site
			Production						Employees
	Capacity		2007		2006		2005		(active)
Lanigan SK		3.828		1.907		1.471		2.023		441
Rocanville SK		3.044		2.647		1.897		2.573		354
Allan SK		1.885		1.744		0.992		1.431		336
Cory SK		1.361		0.768		0.772		0.826		233
Patience Lake SK		1.033		0.257		0.190		0.251		70
Esterhazy SK*		1.313		1.043		0.953		0.953		0
New Brunswick NB		.785		0.793		0.743		0.759		332
TOTAL		13.249		9.159		7.018		8.816		1,766

* PotashCorp’s mineral rights at Esterhazy are mined by Mosaic Potash Esterhazy Canada Limited Partnership under a mining and processing agreement. For calendar year 2008, our production allocation is 1.125 million tonnes.

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38

B U S I N E S S  S E G M E N T  R E V I E W  

• North American sales volumes dropped for the year despite a rebound in the fourth quarter. First- and second-quarter reductions resulted from reduced field applications due to low crop prices, high energy input costs and, to a lesser degree, weather. Sales volumes were relatively flat in the third quarter; however, with demand growing and record-low inventories, prices for many crops – including corn, wheat and soybeans – began to rise significantly, giving farmers the motivation and the resources to boost their fertilizer use.

• Realized prices in the offshore market were negatively impacted initially by higher per-unit throughput distribution costs resulting from the reduced sales volumes. Higher prices were realized during the latter part of the year as potash flowing to China through Canpotex was at the higher 2006 price. Realized prices were lower on sales to Brazil due to increased competition in the marketplace early in the year, although they rebounded strongly after completion of the price negotiations with China and India.

NITROGEN RESULTS

Realized prices in the North American market were 7 percent higher as price increases announced during 2005 held into the first half of 2006, but dropped off during the third quarter as higher producer inventories at the start of the quarter contributed to heightened competitive pressures. Prices rose in the fourth quarter as our North American price increase announced for October 1 began to be realized in November. Prices in the North American market were $38 per tonne, or 29 percent, higher than offshore prices.

•

The change in gross margin was negatively impacted by higher cost of goods sold. Production shutdowns, higher depreciation charges due to completion of some of our expansion projects, higher natural gas prices earlier in the year and escalating prices for supplies and services throughout the year increased unit cost of goods sold. The impact of a stronger average Canadian dollar for most of the year also negatively impacted cost of goods sold, by more than $3.50 per tonne.

							% Increase												% Increase											% Increase
	Dollars (millions)						(Decrease)						Tonnes (thousands)						(Decrease)					Average Price per Tonne						(Decrease)
	2007		2006		2005		2007			2006			2007		2006		2005		2007		2006			2007		2006		2005		2007		2006
Sales	$	1,799.9	$	1,284.1	$	1,368.8		40			(6	)
Freight		55.6		36.8		39.9		51			(8	)
Transportation and distribution		51.6		52.2		49.5		(1	)		5
Net sales	$	1,692.7	$	1,195.1	$	1,279.4		42			(7	)
Manufactured product
Net sales
Ammonia	$	664.3	$	499.7	$	490.0		33			2			2,132		1,695		1,672		26		1		$	311.55	$	294.84	$	293.05		6		1
Urea		468.6		317.8		369.5		47			(14	)		1,333		1,199		1,321		11		(9	)	$	351.63	$	264.97	$	279.63		33		(5	)
Nitrogen solutions, nitric acid, ammonium nitrate		437.8		305.4		284.2		43			7			2,266		1,781		1,850		27		(4	)	$	193.21	$	171.45	$	153.67		13		12
		1,570.7		1,122.9		1,143.7		40			(2	)		5,731		4,675		4,843		23		(3	)	$	274.07	$	240.16	$	236.16		14		2
Cost of goods sold		1,055.6		821.2		845.2		29			(3	)												$	184.19	$	175.63	$	174.52		5		1
Gross margin		515.1		301.7		298.5		71			1													$	89.88	$	64.53	$	61.64		39		5
Other miscellaneous and purchased product
Net sales		122.0		72.2		135.7		69			(47	)
Cost of goods sold		101.0		58.3		115.5		73			(50	)
Gross margin		21.0		13.9		20.2		51			(31	)
Gross Margin	$	536.1	$	315.6	$	318.7		70			(1	)												$	93.54	$	67.51	$	65.81		39		3
Note 19 to the consolidated financial statements provides information pertaining to our business segments.

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B U S I N E S S  S E G M E N T  R E V I E W  39 

Manufactured nitrogen gross margin variance attributable to:
Dollars (millions)
			2007 vs 2006
	Change in		Change in Prices/Costs						Total Manufactured Nitrogen
	Sales Volumes		Net Sales			Cost of Goods Sold			Gross Margin Variance
Manufactured product
Ammonia	$	53.3	$	35.9		$	(15.1	)	$	74.1
Urea		11.7		115.5			(13.0	)		114.2
Solutions, NA, AN		15.3		49.2			(24.0	)		40.5
Hedge		–		–			(14.5	)		(14.5	)
Change in product mix		5.2		(6.1	)		–			(0.9	)
Total	$	85.5	$	194.5		$	(66.6	)	$	213.4

2007 vs 2006

Highlights

• Nitrogen generated gross margin of $536.1 million, surpassing the previous record of $318.7 million set in 2005 and representing an increase of 70 percent over that in 2006.

• In Trinidad, where we have long-term, lower-cost natural gas price contracts, we generated $298.9 million in gross margin in 2007. Our North American facilities contributed $178.2 million, while our natural gas hedging program added $59.0 million.

• Strong fundamentals led to realized price increases in all major nitrogen products year over year, with the exception of ammonium nitrate. Manufactured fertilizer sales volumes increased 39 percent with higher fertilizer demand, as we had more product to sell than in 2006.

• Transportation and distribution costs declined despite the increase in sales in 2007 compared to 2006. A change in sales volumes with certain customers lowered transportation and storage requirements. North American sales volumes (which had lower transportation and distribution costs but higher freight) increased. Freight increased with higher sales, higher market freight rates and a 10 percent increase in volume of CFR urea sales.

• Cost of goods sold was negatively impacted by natural gas costs that, including our hedge, were 12 percent higher than 2006. Our hedge gains were $14.5 million lower than 2006.

Sales and Cost of Goods Sold

Total gross margin increased $220.5 million, primarily as a result of the following changes:

• Realized prices for urea were up 33 percent on strong agricultural demand, supplemented by production disruptions in the Middle

	East and delays in new capacity early in 2007. Realized prices for ammonia increased only 6 percent as we recovered through the year from a decline in the first quarter when high natural gas costs from the aftermath of Hurricane Katrina increased prices. Tight fundamentals that pushed ammonia prices up early in 2007, decoupling them from the price of natural gas, continued, driven by strong North American agricultural demand and low product inventories. Price increases in nitrogen solutions contributed $62.0 million to the gross margin increase for the year, as price increases were significant through the second, third and fourth quarters. These price increases were partially offset by a 9 percent decline in per-tonne realized price for ammonium nitrate prills because our primary customer contracts are impacted by natural gas prices on a time-lag basis. This negatively impacted gross margin by $14.1 million.
•	Manufactured ammonia sales volumes were up 26 percent as we benefited from the strong overall demand for nitrogen, the additional tonnes available from the final stage of our Trinidad debottlenecking projects and from fewer shutdown days at Lima, despite a planned 35-day turnaround at Augusta during the fourth quarter. Manufactured urea sales volumes also increased, due in large part to significant demand for field application. Total manufactured fertilizer sales tonnes were up 39 percent on strong demand, compared to last year when US farmers were purchasing less as we believe they were anticipating lower prices. Total industrial demand remained strong, rising 15 percent from last year and representing 64 percent of manufactured nitrogen sales volumes.
•	Cost of goods sold increased, negatively impacting gross margin. Our average natural gas cost was $4.30 per MMBtu, 12 percent higher than 2006. Costs associated with production start-ups last year after completion of the debottlenecking projects in Trinidad and mechanical problems at our Lima facility raised costs for

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40

     B U S I N E S S  S E G M E N T  R E V I E W

 Nitrogen Production (million tonnes)

	Annual			Production
	Capacity			2007		2006		2005
Ammonia1
Trinidad		2.177			2.077		1.932		1.887
Augusta GA		.688			.610		.633		.655
Lima OH		.588			.531		.339		.382
Geismar LA4		.483			–		–		–
TOTAL		3.936			3.218		2.904		2.924
Urea Solids
Trinidad		.709			.710		.688		.748
Augusta GA		.431			.312		.323		.360
Lima OH		.329			.292		.186		.225
Geismar LA		–			–		–		–
TOTAL		1.469			1.314		1.197		1.333
Nitrogen Solutions2
Trinidad		–			–		–		–
Augusta GA		.581			.239		.197		.242
Lima OH		.227			.082		.071		.079
Geismar LA4		1.028			.520		.098		.118
TOTAL		1.836			.841		.366		.439
Nitric Acid1,3
Trinidad		–			–		–		–
Augusta GA		.541			.525		.529		.518
Lima OH		.100			.100		.098		.098
Geismar LA		.844			.699		.531		.568
TOTAL		1.485			1.324		1.158		1.184
Ammonium Nitrate Solids
Trinidad		–			–		–		–
Augusta GA		.538			.540		.536		.503
Lima OH		–			–		–		–
Geismar LA		–			–		–		–
TOTAL		.538			.540		.536		.503
Employees
Trinidad		409
Augusta GA		118
Lima OH		13	5
Geismar LA		62
TOTAL		602	6

1	A substantial portion is upgraded to value-added products.
2	Based on 32% N content.
3	As 100% HNO3 tonnes.
4	Indefinitely shut down production of ammonia and nitrogen solutions June 4, 2003; restarted nitrogen solutions production on September 15, 2005 on a demand basis.
5	INEOS USA LLC operated the Lima facility under an operational agreement with PCS Nitrogen until December 31, 2007.
6	492 contract employees work at the nitrogen plants, for a total active workforce of 1,094.

ammonia and related downstream products that were not incurred in 2007. The price component of the cost of goods sold variance was higher in other products than in ammonia and urea; the cost of a planned turnaround at Augusta increased the costs of nitrogen solutions and ammonium nitrate, while higher production of nitrogen solutions from Geismar, where we purchase ammonia, further increased the relative cost for that product. Our US natural gas hedging activities contributed $59.0 million to gross margin, compared to $73.5 million last year.

2006 vs 2005

Highlights

• Rising global natural gas prices led to nitrogen production curtailments, particularly in Western Europe, and high prices overseas in 2006. With higher ocean freight also a factor, less nitrogen from Baltic and Arabian Gulf producers found its way to the US, reducing competitive pressures in North America.

• North American natural gas spot prices dropped significantly throughout 2006 compared to the high levels seen in late 2005 during the aftermath of hurricanes in the US Gulf region, which negatively affected realized prices. However, ammonia and urea prices strengthened significantly later in the year as heightened demand and tight global supply conditions led to a decoupling from US natural gas costs.

• Our Trinidad facility, which benefits from long-term, lower-cost natural gas price contracts, delivered $182.5 million (or 58 percent) of nitrogen gross margin for the year. Our US operations contributed $59.6 million in gross margin, and we gained $73.5 million from our natural gas hedges during the year.

Sales and Cost of Goods Sold

Total gross margin declined $3.1 million, primarily as a result of the following changes:

• High natural gas prices that were sustained at more than $13 per MMBtu during the fourth quarter of 2005 caused ammonia prices to climb rapidly in late 2005 and led to industry production curtailments, tightening market supply. Though North American natural gas spot prices dropped significantly during the first half of 2006, ammonia and urea prices continued to exceed 2005 levels until the third quarter. Tight global supply conditions led to nitrogen prices decoupling from gas costs through the second half of 2006, but fourth-quarter ammonia and urea prices were lower compared to the peaks reached in fourth-quarter 2005 when the aftermath of Hurricane Katrina was still affecting natural gas costs. Realized

POTASHCORP 2007 FINANCIAL REVIEW

B U S I N E S S  S E G M E N T  R E V I E W  41 

	annual manufactured ammonia prices were 1 percent higher than in 2005 although manufactured urea prices were 5 percent lower. Realized prices for manufactured nitric acid and ammonium nitrate generally followed the rise in ammonia prices. Higher manufactured ammonium nitrate realized prices contributed a favorable $29.6 million to the change in gross margin as a result of our customer contracts tied to either natural gas prices or the NOLA ammonia price, but on a quarterly time-lag basis.
•	Total manufactured nitrogen sales volumes declined by 3 percent. Manufactured nitrogen fertilizer sales represented the majority of this drop, down 23 percent primarily due to mechanical production problems and gas input supply constraints.
•	Cost of goods sold declined on a per-tonne basis, positively contributing to the change in gross margin by $2.6 million. Higher natural gas costs earlier in 2006 curtailed production at Augusta and Lima. Mechanical problems at Lima also limited its production in the second and third quarters. Finally, reduced production at our 01 and 02 plants in Trinidad due to additional plant turnarounds related to debottlenecking projects increased costs. These were partially offset by lower natural gas costs later in the

year. Natural gas costs continue to be the single most important contributor to cost of goods sold, typically representing between 75 percent and 90 percent of the cash cost of producing one tonne of ammonia. The company’s total average natural gas cost, including the benefit of our hedge and lower-cost Trinidad gas contracts, was $3.83 per MMBtu, 14 percent lower than in 2005. Our US natural gas hedging activities contributed $73.5 million to gross margin, compared to $48.6 million last year.

PHOSPHATE RESULTS

							% Increase											% Increase												% Increase
	Dollars (millions)						(Decrease)					Tonnes (thousands)						(Decrease)						Average Price per Tonne						(Decrease)
	2007		2006		2005		2007			2006		2007		2006		2005		2007			2006			2007		2006		2005		2007		2006
Sales	$	1,637.1	$	1,255.1	$	1,137.3		30			10
Freight		112.4		88.5		80.1		27			10
Transportation and distribution		33.4		43.1		37.9		(23	)		14
Net sales	$	1,491.3	$	1,123.5	$	1,019.3		33			10
Manufactured product
Net sales
Fertilizer – liquids	$	283.4	$	206.6	$	175.2		37			18		983		911		818		8			11		$	288.37	$	226.89	$	214.21		27		6
Fertilizer – solids		607.5		391.6		346.7		55			13		1,623		1,634		1,516		(1	)		8		$	374.22	$	239.64	$	228.61		56		5
Feed		272.7		238.4		222.2		14			7		814		778		862		5			(10	)	$	335.03	$	306.63	$	257.72		9		19
Industrial		277.4		239.7		231.2		16			4		731		647		664		13			(3	)	$	379.47	$	370.33	$	348.12		2		6
		1,441.0		1,076.3		975.3		34			10		4,151		3,970		3,860		5			3		$	347.14	$	271.14	$	252.62		28		7
Cost of goods sold		1,019.5		958.7		881.8		6			9													$	245.60	$	241.52	$	228.40		2		6
Gross margin		421.5		117.6		93.5		258			26													$	101.54	$	29.62	$	24.22		243		22
Other miscellaneous
and purchased product
Net sales		50.3		47.2		44.0		7			7
Cost of goods sold		39.0		39.5		38.6		(1	)		2
Gross margin		11.3		7.7		5.4		47			43
Gross Margin	$	432.8	$	125.3	$	98.9		245			27													$	104.26	$	31.56	$	25.62		230		23

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

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     B U S I N E S S  S E G M E N T  R E V I E W

Manufactured phosphate gross margin variance attributable to:
Dollars (millions)
				2007 vs 2006
	Change in			Change in Prices/Costs					Total Manufactured Phosphate
	Sales Volumes			Net Sales		Cost of Goods Sold			Gross Margin Variance
Manufactured product
Fertilizer – liquids	$	10.3		$	59.7	$	(5.7	)	$	64.3
Fertilizer – solids		(1.1	)		218.8		(2.6	)		215.1
Feed		6.7			23.1		(16.7	)		13.1
Industrial		20.7			6.6		(16.1	)		11.2
Change in product mix		(8.9	)		6.8		2.3			0.2
Total	$	27.7		$	315.0	$	(38.8	)	$	303.9

2007 vs 2006

Highlights

• While strategic focus on our unique ability to produce and market specialty phosphate products has brought stability and increased profitability to the phosphate segment in recent years, strengthening global agricultural fundamentals have begun to demonstrate the value of our leverage in liquid and solid phosphate fertilizers. Phosphate gross margin was $432.8 million, surpassing our previous record of $230.1 million set in 1998.

• Solid fertilizers generated $205.8 million in gross margin during 2007, while liquid fertilizers added $88.2 million, feed $67.3 million and industrial products $60.2 million.

• Transportation and distribution costs declined 23 percent in 2007 despite the increase in sales, for offshore sales volumes of solid fertilizers fell as the company focused on the North American market. Freight increased more than sales due to higher market freight rates and changes in customer and destination mix that required more freight.

Sales and Cost of Goods Sold

The total gross margin increase of $307.5 million was largely attributable to the following changes:

• Realized prices were up in all major product categories, for two main reasons: strong agricultural demand and the global impact of higher demand for inputs such as sulfur, phosphate rock and ammonia. As producers around the world allocated more phosphoric acid to manufacturing solid fertilizers, markets for liquid, feed and industrial products were squeezed. Pricing for phosphate products sold on spot markets moved up significantly, while certain industrial products rose on a delayed basis. Realized prices for manufactured solid and liquid fertilizers increased by 56 percent and 27 percent, respectively, while manufactured feed prices rose by 9 percent and industrial manufactured prices by 2 percent.

• Manufactured solid fertilizer sales volumes declined 1 percent overall as we sold fewer tonnes in order to deliver on liquid phosphate demand. Our liquid phosphate fertilizer capability

Phosphate Feed Production (million tonnes)
	Annual		Production						Employees
	Capacity		2007		2006		2005		(active)
Marseilles IL		.278		.132		.119		.127		25
White Springs FL (Monocal)		.272		.191		.192		.190		26
Weeping Water NE		.209		.110		.117		.119		34
Joplin MO		.163		.071		.082		.080		25
Aurora NC (DFP)		.159		.084		.085		.115		28
White Springs FL (DFP)1		.100		–		–		.044		0
Fosfatos do Brasil		.110		.056		.049		.076		82
TOTAL		1.291		.644		.644		.751		220
1 Ceased production July 31, 2005.

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B U S I N E S S  S E G M E N T  R E V I E W  43 

allowed us to capitalize on significantly higher US demand, selling 15 percent more there than in the same period last year as we focused on these markets ahead of lower-netback offshore regions. Total manufactured liquid fertilizer sales volumes increased 8 percent. Manufactured industrial sales volumes were 13 percent higher due to increased production at our newest Aurora purified acid plant. Manufactured feed sales volumes were up 5 percent.

•

Rising costs for ammonia, sulfur and phosphate rock negatively impacted phosphate gross margin. Greater demand from the phosphate sector challenged global sulfur supply in the latter part of 2007, particularly in the international market. The impact of this was also felt in North America and, as a result, our sulfur costs rose 4 percent and negatively impacted gross margin by $6.2 million compared to 2006. Ammonia costs, which were 5 percent higher, reduced gross margin by $5.9 million compared to 2006. Costs were further increased by 5 percent higher rock costs resulting from higher electrical and chemical processing costs at Aurora and White Springs and two planned dragline turnarounds at Aurora. These higher prices were partially offset as the company had recognized in 2006 an impairment loss of $6.3 million within the liquid fertilizer component. The unfavorable cost variance in feed and industrial was higher than in solid and liquid fertilizers. In feed, higher maintenance costs

negatively impacted costs. Industrial was negatively impacted by higher electricity costs, higher maintenance and a higher proportionate share of Geismar fixed costs allocated to it after the shutdown of two product lines there in 2006. Despite the higher ammonia cost noted above, solid fertilizer costs were relatively constant due, in part, to a change in product mix within the solid fertilizer category as we produced less DAP and more MAP, which consumes less ammonia.

2006 vs 2005

Highlights

• In 2006, phosphate generated $125.3 million in gross margin, 27 percent higher than the $98.9 million in 2005. Phosphate gross margin was negatively impacted by a $6.3 million writedown of assets at Geismar during 2006.

 Purified Acid Production (million tonnes P₂O₅)

	Annual		Production
	Capacity		2007		2006		2005
Aurora NC		.333		.268		.245		.248

Purified acid is a feedstock for production of downstream industrial products including metal brighteners and cola drinks.

 Rock and Acid Production

	Phosphate Rock Production (million tonnes)								Phosphoric Acid (million tonnes P2O5)
	Annual				Production				Annual				Production				Employees
	Capacity		2007		2006		2005		Capacity		2007		2006		2005		(active)
Aurora NC		6.000		4.086		4.577		4.417		1.202		1.083		1.080		1.048		1,043
White Springs FL		3.600		3.226		3.114		3.186		.966		.925		.881		.865		875
Geismar LA		–		–		–		–		.202		.156		.147		.184		77
TOTAL		9.600		7.312		7.691		7.603		2.370		2.164		2.108		2.097		1,995

 Phosphate Production (million tonnes product)

	Aurora									White Springs									Geismar
	Annual			Production						Annual			Production						Annual			Production
	Capacity			2007		2006		2005		Capacity			2007		2006		2005		Capacity			2007		2006		2005
Liquids: MGA1		1.835			1.740		1.722		1.697		1.908			–		–		–		.337			.258		.241		.304
SPA		.676			.376		.353		.149		1.138			.793		.655		.719		.196			–		.015		.059
Solids (total)		1.247	DAP		.548		.609		.495		.710	DAP		.375		.495		.477		–	DAP		–		–		–
			MAP		.389		.372		.413			MAP		.286		.159		.172			MAP		–		–		–
DAP/MAP (total)					.937		.981		.908					.661		.654		.649					–		–		–

 ¹ A substantial portion of Aurora and Geismar production and all White Springs production is consumed internally to make downstream products. The balance is exported to phosphate fertilizer producers and sold domestically to dealers who custom-mix liquid fertilizer.

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     E X P E N S E S  &  O T H E R  I N C O M E

  Phosphate Products for Food and Technical Applications

  Cincinnati, OH

	2007	2006	2005
Purified acid feedstock utilized (tonnes P2O5)	13,465	13,303	13,426
Product tonnes processed:
Acid phosphates	17,473	17,253	17,430
Specialty phosphates	11,281	11,201	11,607

• Price increases were realized in all major product categories, in response to continuing high input costs and reasonably tight supply/demand fundamentals.

• Specialty products remained the foundation of our phosphate business, proving their value as stable, higher-margin businesses. Manufactured feed and industrial products contributed $54.3 million and $49.2 million of 2006 gross margin, respectively, while liquid fertilizer, which was directly impacted by the above-mentioned writedown, added $24.2 million for the year after the writedown. Within industrial, purified phosphoric acid was again the most profitable product, generating gross margin of $47.3 million for the year, representing 27 percent of net sales.

Sales and Cost of Goods Sold

Total gross margin increased by $26.4 million, largely as a result of the following changes:

• Higher prices realized in the feed and fertilizer markets,
due to tight industry fundamentals, were supplemented by
industrial price increases implemented in 2005 that held
through 2006.

	Higher feed prices implemented as a result of a strong pricing stance over volumes contributed $38.8 million to the gross margin increase. Of this increase, monocal represented $22.6 million due to higher realized prices achieved in both the North American and offshore markets. Fertilizer prices contributed positively to the change in gross margin due to stronger demand.
•	Manufactured sales volumes were relatively flat, although there was a change in product mix. Manufactured fertilizer sales volumes improved, contributing $31.7 million to the change in gross margin, as supply/demand fundamentals were strong. This was partially offset by a 10 percent decline in manufactured feed sales volumes resulting from our decision to remain firm on pricing and reduce sales of lower-margin products, and a 3 percent decline in manufactured industrial sales volumes due to reduced market demand.
•	The price variance in cost of goods sold negatively impacted the change in gross margin by $84.1 million, primarily due to higher raw material costs and a change in product mix. However, 8 percent higher sulfur prices and 7 percent higher ammonia prices combined to reduce gross margin by $11.4 million and $8.1 million, respectively. Phosphate rock costs were up 5 percent as a result of higher costs for purchased rock at Geismar and higher electrical and chemical processing costs at Aurora and White Springs. The writedown of assets, a change in product mix (requiring more ammonia to be used), higher depreciation charges and escalating prices for supplies and services throughout the year further increased costs.

EXPENSES AND OTHER INCOME

	Dollars (millions), except percentage amounts													% Increase (Decrease)
		2007	% of Sales			2006		% of Sales			2005	% of Sales			2007		2006
Selling and administrative	$	212.6		4	$	158.4			4	$	144.5		4		34		10
Provincial mining and other taxes		135.4		3		66.5			2		137.2		4		104		(52	)
Foreign exchange loss (gain)		70.2		1		(4.4	)		–		12.5		–		n/m		n/m
Other income		125.5		2		94.0			2		61.8		2		34		52
Interest expense		68.7		1		85.6			2		82.3		2		(20	)	4
Income tax expense		416.2		8		158.1			4		267.4		7		163		(41	)
n/m = not meaningful

POTASHCORP 2007 FINANCIAL REVIEW

E X P E N S E S   &  O T H E R   I N C O M E   45 

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. 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 component increased $59.3 million in 2007 compared to 2006, as a result of two factors. First, the profit tax component, which is calculated on a per-tonne basis, is reduced by capital expenditures (portions of which are grossed up by 20 percent for profit tax purposes); the per-tonne impact of these annual expenditures reduced 2006 potash production tax more significantly than in 2007. In addition, gross potash revenue on a per-tonne basis was higher in 2007 than in 2006. Second, Saskatchewan-produced potash sales volumes rose by 34 percent in 2007, which increased profit per tonne as the fixed costs on a per-tonne basis were reduced. The 40 percent or $13.3 million increase in corporate capital tax expense resulted from higher potash sales revenues. It 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 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 year.

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 last year. Partially offsetting these increases was a $26.5 million provision for other-than-temporary impairment of auction rate securities recorded in other income in 2007.

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. These 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 issued 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.

Our consolidated reported income tax rate for 2007 was approximately 27 percent (2006 – 20 percent) and the consolidated effective income tax rate was 30 percent (2006 – 30 percent). Items to note include the following:

• 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.

• During the fourth quarter of 2007, the Government of Canada enacted a reduction of the federal corporate income tax rate from

POTASHCORP 2007 FINANCIAL REVIEW

46

    E X P E N S E S   &   O T H E R   I N C O M E   

	21 percent in 2007 to 15 percent by 2012. This was in addition to a small change enacted in the second quarter of 2007. These changes reduced our 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.

Aside from the impact of income tax refunds received and the effect of Canadian tax rate changes on our future income tax liability recognized during each year, 65 percent of the effective rate pertained to current income taxes in 2007 as compared to 60 percent in 2006. The increase in 2007 is largely due to the increase in nitrogen and phosphate operating income in the US, a jurisdiction where, as of December 31, 2006, we had federal income tax loss carryforwards of approximately $372.3 million that were available to offset this income; this total was reduced to nil as of December 31, 2007.

2006 vs 2005

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), higher stock option expense (as costs associated with both the 2005 and 2006 Performance Option Plans were recognized during 2006 compared to only the 2005 Performance Option Plan during 2005) and increased corporate amortization costs were incurred during 2006.

Provincial mining and other taxes declined 52 percent in 2006 compared to 2005, principally due to decreases in the Saskatchewan Potash Production Tax and corporate capital tax. The profit tax component declined significantly as a result of the deductibility of our capital expenditures to bring back idled potash capacity. This component was enhanced by high capital expenditures and 12 percent lower potash sales volumes. In addition, during the second quarter of 2006, the Province of Saskatchewan enacted changes to reduce the capital tax resource surcharge over the next three years, with a 0.3 percentage point reduction effective July 1, 2006.

Treasury activity and the year-end translation of Canadian dollar-denominated monetary items on the Consolidated Statement of Financial Position contributed to a net foreign exchange gain of

$4.4 million in 2006. The Canadian dollar gained strength against the US dollar over the first half of 2006, then weakened during the second half. The strengthening of the Canadian dollar relative to the US dollar during 2005 contributed to foreign exchange losses of $12.5 million that year.

Other income increased by $32.2 million as a $3.0 million dividend was received from Sinofert during 2006 and dividend income from our investment in ICL increased by $8.9 million compared to 2005. A reduction in loss on disposal of assets compared to that recognized during 2005 and a higher gain on sale of property, plant and equipment (including a $4.4 million gain on the sale of four of the company’s PCS Joint Venture Ltd. properties) further contributed to the increase. These were complemented by a slightly higher share of earnings from equity investees during 2006.

Including the current portion, weighted average long-term debt outstanding during 2006 was $1,296.7 million (2005 – $1,266.3 million) with a weighted average interest rate of 6.9 percent (2005 – 6.9 percent). The weighted average interest rate on short-term debt outstanding in 2006 was 5.2 percent (2005 – 3.5 percent) and the weighted average short-term debt outstanding was $518.8 million (2005 – $115.9 million). Although the average balance of short-term debt outstanding was higher at higher interest rates, the interest expense category increased only $3.3 million due to the impact of higher capitalized interest because of expansion and other projects and interest income recognized on income tax refunds received during 2006.

The company’s consolidated reported income tax rate for 2006 was approximately 20 percent (2005 – 33 percent). The reduction was due to the following:

• During 2006, we reduced our consolidated effective income tax rate from 33 percent to 30 percent, primarily due to two factors that occurred during the year. First, the Province of Saskatchewan enacted changes to the corporate income tax, reducing the rate from 17 percent to 12 percent over the next three years. The impact of this change, reducing our future income tax liability by $21.9 million, was also recognized during the year. Second, we revised our estimated allocation of annual income before income taxes by jurisdiction as a result of a decrease in expected potash operating income in Canada.

• During 2006, the Government of Canada enacted changes to the federal corporate income tax and the corporate surtax. The corporate income tax rate will be reduced from 21 percent to 19 percent over the next four years and the corporate surtax will be reduced from 1.12 percent to nil in 2008. The $22.9 million

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Q U A R T E R L Y  R E S U L T S   47 

	impact of this change that reduced our future income tax liability was recognized during 2006.
•	Income tax refunds totaling $34.1 million were recorded, relating to a recent Canadian appeal court decision (pertaining to a uranium producer) that affirmed the deductibility of the Saskatchewan capital tax resource surcharge.

The combination of income tax refunds received, changes in tax rates and lower operating income led to a decline in income tax expense

of $109.3 million compared to 2005. For 2006, 60 percent of the effective rate pertained to current income taxes and 40 percent to future income taxes, aside from the impact of the aforementioned income tax refunds and the effect of the Canadian tax rate changes on the company’s future income tax liability recognized during the year. The decrease in the current tax provision from 85 percent last year is largely due to the significant decrease in potash operating income in Canada and the change in mix and levels of income earned in the company’s other tax jurisdictions.

Impact of Foreign Exchange

Because of 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 covering such currencies have varied substantially over the last three years. The sharp decline in the US dollar has had a significant unfavorable 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. This results in higher translated expenses without any offsetting increase in revenues.

The following table shows the impact on net income if the 2007 exchange rate had remained at the 2006 year-end rate of 1.1653,

and the impact on 2006 net income had the rate remained at the 2005 year-end rate of 1.1659:

Impact on net income
Dollars (millions), except per-share amounts
		2007		2006
Operating income increase before income taxes	$	40.5	$	8.6
Net income increase		28.3		6.0
Diluted net income per share increase		0.09		0.02

A general description of our hedging activities to help mitigate volatility is outlined on Page 59.

QUARTERLY RESULTS AND REVIEW OF FOURTH-QUARTER PERFORMANCE

(unaudited, in millions of US dollars except per-share amounts)

					2007										2006
	Q1		Q2		Q3		Q4		Total		Q1		Q2		Q3		Q4		Total
Sales	$	1,154.7	$	1,353.1	$	1,295.0	$	1,431.4	$	5,234.2	$	861.6	$	928.7	$	953.5	$	1,022.9	$	3,766.7
Less: Freight		81.9		92.3		80.6		91.3		346.1		54.9		62.3		65.6		73.0		255.8
Transportation and distribution		31.0		32.6		31.0		29.5		124.1		31.2		35.8		37.6		29.5		134.1
Cost of goods sold		672.1		726.8		708.3		775.6		2,882.8		572.0		577.2		604.5		621.1		2,374.8
Gross margin		369.7		501.4		475.1		535.0		1,881.2		203.5		253.4		245.8		299.3		1,002.0
Operating income		308.3		422.3		406.2		451.7		1,588.5		192.1		194.7		223.2		265.5		875.5
Net income		198.0		285.7		243.1		376.8		1,103.6		125.5		175.1		145.2		186.0		631.8
Net income per share – basic		0.63		0.91		0.77		1.19		3.50		0.40		0.56		0.47		0.59		2.03
Net income per share – diluted		0.62		0.88		0.75		1.16		3.40		0.40		0.55		0.46		0.58		1.98
Potash gross margin		174.2		260.4		221.3		256.4		912.3		90.8		132.8		153.6		183.9		561.1
Nitrogen gross margin		131.3		144.2		123.9		136.7		536.1		79.4		91.7		62.4		82.1		315.6
Phosphate gross margin		64.2		96.8		129.9		141.9		432.8		33.3		28.9		29.8		33.3		125.3

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.

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    Q U A R T E R L Y   R E S U L T S  

With strong market conditions and rising prices for all three nutrients, gross margin for the quarter climbed to a record $535.0 million, up $235.7 million from last year’s fourth quarter. Cash flow from operations of $531.6 million was the second highest quarterly total in our history, while the $1,688.9 million achieved for the year exceeded the 2005 record by 95 percent.

Highlights of our 2007 fourth quarter include:

• Potash gross margin of $256.4 million approached the record $260.4 million of this year’s second quarter and was 39 percent higher than the $183.9 million of last year’s fourth quarter. As a percentage of net sales, potash gross margin increased to 60 percent from 57 percent in last year’s fourth quarter, and from 58 percent in the third quarter of 2007. Realized prices to offshore markets were up $36 per tonne over 2006, but the full benefit of announced offshore price increases was not captured because of higher ocean freight rates and locked-in contract pricing to China and India. In the North American spot market, our realized prices were $48 per tonne higher than in 2006 and $19 per tonne above last quarter. Total potash sales volumes of 2.3 million tonnes were 5 percent above last year, when offshore markets were actively restocking after purchasing delays earlier in 2006. Offshore, sales volumes of 1.5 million tonnes were 10 percent higher than in the previous year. Our North American sales volumes were just slightly lower than the previous year’s very strong fourth-quarter sales. Our potash production reached a quarterly record of 2.5 million tonnes, 6 percent higher than in 2006 as we saw the benefit of additional tonnes after the completion of our Allan project in 2007. The stronger Canadian dollar raised potash cost of goods sold by about $8 per tonne compared to last year, while continuing higher brine inflow costs at New Brunswick and Esterhazy had a further negative impact of $6 per tonne.

• On the foundation of continuing strong agricultural demand and higher natural gas prices, nitrogen gross margin of $136.7 million was the second highest quarterly total in company history, 67 percent above the same quarter in 2006 and trailing only the second quarter of 2007. Our Trinidad operation generated $73.9 million in gross margin, while our US operations added $45.1 million and natural gas hedging gains contributed $17.7 million. With the continuation of tight supply/demand fundamentals, realized prices for manufactured ammonia and urea were up 9 percent (+$25 per tonne) and 46 percent (+$120 per tonne), respectively, from 2006. The significant price improvements for these products were achieved since the third quarter of 2007, with ammonia 11 percent higher (+$31 per

tonne) and urea up 14 percent (+$46 per tonne). Prices for nitrogen solutions were up 52 percent quarter over quarter. Total manufactured nitrogen sales volumes of 1.4 million tonnes were up 19 percent from 2006 levels, built on strong US agricultural demand. This was achieved even though production was flat, as our Augusta facility took a planned 35-day turnaround during the quarter. We again opportunistically produced nitrogen solutions at our Geismar facility from imported ammonia and purchased carbon dioxide, enabling us to increase total manufactured sales volumes for this product by 160 percent quarter over quarter and add an extra $13.6 million to the gross margin increase.

•

Driven by continued strong sales volumes and higher pricing in all major product categories, phosphate generated record quarterly gross margin of $141.9 million in the fourth quarter of 2007, exceeding the total in the same quarter of 2006 by $108.6 million. Solid phosphate fertilizers continued their strong turnaround, generating $70.3 million in gross margin, while liquid fertilizer at $31.5 million, feed at $22.3 million and industrial products at $14.9 million were consistent contributors. Our realized prices were up from a year earlier in all major product categories, in part because of strong agricultural demand and in part due to the global impact of higher costs for inputs such as sulfur, phosphate rock and ammonia. Pricing for phosphate products sold on spot markets moved dramatically upward, while certain industrial products rose on a delayed basis. Our manufactured solid fertilizer realized prices were up 82 percent (+$192 per tonne) compared to the same quarter in 2006, while liquid fertilizer rose 37 percent (+$86 per tonne), feed 22 percent (+$67 per tonne) and industrial products 6 percent (+$22 per tonne). North American manufactured sales volumes for liquid fertilizer were up 9 percent and solid fertilizers were 22 percent higher than the previous year’s fourth quarter, as we focused on these markets ahead of lower-netback offshore regions. Total liquid and solid fertilizer manufactured sales volumes were 2 percent higher and 3 percent lower than in 2006, respectively. Manufactured feed sales volumes rose 12 percent quarter over quarter, driven by a 32 percent increase in sales to offshore markets, primarily in Latin America. Manufactured industrial sales volumes were 17 percent higher than the fourth quarter of 2006 as a result of stronger demand for phosphoric acid and retail technical grade purified acid. Our sulfur costs rose 49 percent from the fourth quarter of 2006 and 30 percent from the trailing quarter.

• Selling and administrative expenses were substantially higher in 2007, due largely to valuation of deferred share units that were directly impacted by the significant upward movement in our share price.

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K E Y  E A R N I N G S  S E N S I T I V I T I E S   49 

• The Canadian dollar strengthened slightly against the US dollar during the fourth quarter of 2007 and the translation of Canadian dollar-denominated monetary items contributed to a $2.8 million foreign exchange loss during this period. This compared to a gain of $13.6 million during last year’s fourth quarter when the US dollar’s strengthening had a significant effect.

• Other income declined $7.5 million despite dividend income increasing $10.6 million and our share of earnings from equity investees contributing an additional $2.6 million, as a $26.5 million provision for other-than-temporary impairment

of investments in auction rate securities held within our trading account was recognized during the quarter.

•

Reductions to the Canadian federal corporate income tax rate between 2008 and 2012 were enacted in the quarter, which decreased our future income tax liability and income tax expense by $35.4 million and contributed to the reduction in our consolidated effective income tax rate from the previous 33 percent estimate back down to 30 percent. This was supplemented by more permanent deductions generated in the US than previously forecast and a reduction in our US blended state income tax rate.

KEY EARNINGS SENSITIVITIES

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 2008 earnings guidance provided January 24, 2008 of $6.25 to $7.25 per share.

INPUT COST SENSITIVITIES		Effect	PRICE AND VOLUME SENSITIVITIES		Effect
		on EPS			on EPS
NYMEX gas price increases by $1/MMBtu	Nitrogen	+ 0.03	Price	Potash changes by $20/tonne	± 0.34
	Potash	- 0.02		DAP/MAP changes by $20/tonne	± 0.06
Sulfur changes by $20/long ton				Ammonia increases by $20/tonne
	Phosphate	± 0.09		• Nitrogen	+ 0.04
				• Phosphate	- 0.01
Canadian to US dollar strengthens by $0.01	Canadian operating expenses net of provincial taxes			Urea changes by $20/tonne	± 0.05
		- 0.01	Volume	Potash changes by 100,000 tonnes	± 0.05
				Nitrogen changes by 50,000 N tonnes	- 0.03
	Translation gain/loss	- 0.01		Phosphate changes by 50,000 P2O5 tonnes	- 0.05

The above sensitivities affect cash flow as well, except the translation gain/loss which is primarily non-cash.

INDICATORS TO WATCH IN 2008
Fertilizer		Feed and Industrial
• Weather and global acreage planted • Ethanol and biodiesel developments • US corn acres • US dollar exchange rates with global currencies • Global crop prices • Ocean freight rates • Prices for natural gas, ammonia and sulfur • EU and US nitrogen curtailments • Brazil’s weather, soybean prices, credit policy, soybean acres planted	• China’s agricultural taxes, subsidies, corn exports, soybean imports • China’s policy on exporting phosphate rock, DAP/MAP and urea • India’s subsidy policy • India’s urea and DAP production levels • US progress on new Farm Bill • Project capital costs • New capital project announcements	• Health of US and world economies • Effect of livestock-based disease restrictions on world trade, e.g. avian flu, foot and mouth disease • Potential tightening of restrictions on the use of meat and bone meal in animal feeds • Impact of residual grain from ethanol production on US feed phosphate consumption • Consumer spending, housing starts, household improvements, and vehicle production and sales

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     2 0 0 8   O U T L O O K

1 Economy

The International Monetary Fund forecasts continuing strong world economic growth averaging about 5 percent annually for the period 2008-2012. Led by China and India, the booming Asian economies should continue their robust growth, enabling their people to enjoy better diets and broaden their lifestyles with a wide range of products from industry. The slowing US economy is expected to grow by only 1.5 percent in 2008. Despite this, US net cash farm income is projected to exceed a record $95 billion.

2 Global Protein Consumption

People in developing countries currently consume less than half the protein of those in developed countries. Strong GDP growth in those countries in 2008 and beyond is expected to continue to provide higher incomes, allowing people there to increase the protein content of their diets. Much of this protein is expected to be supplied by domestic meat animals, which consume significant amounts of crops such as corn. Production of these crops is expected to continue lagging consumption.

3 Biofuels

Oil prices projected to be substantially above $50 per barrel for the rest of the decade are expected to maintain the momentum of global biofuel programs. The US Energy Bill signed in late 2007 committed the country to use 9 billion gallons of ethanol in 2008, 15 billion gallons of corn-based ethanol by 2015 and 36 billion gallons of renewable fuels by 2022. The 2015 and 2022 targets are more than double and more than five times the 2007 level, respectively. Biofuels are expected to be a necessary part of the energy equation for years to come.

Brazil’s farmers are expected to plant more sugar cane during the next few years to meet anticipated growth in demand for ethanol for both domestic and export markets. High palm oil prices should raise oil palm plantings in Malaysia and Indonesia to supply longer-term demand growth, while increased food use of this product may slow short-term growth in production of export biodiesel for Europe.

4 Crop Prices

With global inventories for wheat and coarse grains projected to fall to record lows by the end of the 2007/08 crop year, prices for these crops are expected to remain strong in 2008 and beyond. Competition for planted acreage is projected to support high prices for other crops such as soybeans, while a robust pricing environment for key global crops such as oil palm, coffee, bananas, cocoa and rubber should continue.

5 N, P and K

More fertilizer is expected to be applied around the world to meet the growing demand for food, animal feed, fiber and fuel. With strong crop prices motivating a push for higher yields, global potash demand is forecast to grow by 5 percent, phosphoric acid by 5 percent and nitrogen by 2.5 percent in 2008.

6 Potash

With projections for ongoing 3-4 percent average growth in annual demand, world potash supply is expected to remain tight for several years. Given the five- to seven-year lead time for greenfield projects – and no announcements to date – significant new production is not anticipated in that period. Some producers are expected to complete small expansions of existing operations in the next five years. PotashCorp, the largest producer, has announced plans to

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2 0 0 8   O U T L O O K   51 

bring on approximately 5 million tonnes of operational capacity by the end of 2012. Even with additional incremental capacity, the market is expected to remain reasonably tight. The very positive agriculture and potash market conditions should encourage higher potash prices, but perhaps at more moderate growth rates than the unprecedented upward movement of the last six months.

7 Natural Gas

The futures market reflects 2008-2010 US natural gas prices between $7.50 and $9.50/MMBtu and European natural gas prices between $9.00 and $11.00/MMBtu. The cost of Russian gas delivered to the EU is expected to continue to rise, and to Ukraine to average $5.75 in 2008 and exceed $6.00 to the end of the decade. Development of new capacity now costs more everywhere. The rising demand for gas to produce LNG and industrial products is expected to continue to reduce the price gap between lower-cost and higher-cost gas regions. This, together with high shipping costs, may discourage countries with surplus low-cost gas from monetizing it by producing nitrogen products for export.

8 Nitrogen

Rising global need for crops is expected to increase nitrogen fertilizer consumption by 2.5 percent in 2008. Continuing high import demand, lower marginal export supply from former Soviet Union countries and less US and EU domestic supply may counter the new urea and ammonia export capacity expected in 2008, potentially putting moderate downward pressure on markets. Current project plans together with anticipated market growth are expected to maintain reasonable market strength over the next few years.

9 Phosphates

Relatively strong phosphate markets are expected through the end of the decade due to growing demand, recent US shutdowns and few new projects coming on stream in the near future. Rising costs of rock and sulfur are expected to put pressure on phosphate prices in 2008 and underscore the advantage of owning integrated, high-quality rock reserves. However, sulfur costs may in the short term rise significantly faster than some phosphate prices, given the nature of the business with certain customers for certain products.

Substantial new capacity is expected in Saudi Arabia in 2011 or 2012. This could potentially soften markets at that time; however, other global producers reliant on imported production inputs, particularly phosphate rock, may be forced to curtail production, offsetting new capacity. India’s DAP production is expected to continue substantially below capacity due to delays in government subsidy payouts and inefficient operations. US producers will likely continue to focus on domestic markets and convenient offshore markets such as Latin America.

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52 

     F I N A N C I A L   C O N D I T I O N   R E V I E W

FINANCIAL CONDITION REVIEW

Effective January 1, 2007, we adopted new accounting standards for financial instruments and hedging activities on a prospective basis; accordingly, comparative amounts for prior periods have not been restated. The new standards had the following impact on our Consolidated Statements of Financial Position as of December 31, 2007:

• The fair values of available-for-sale investments are recorded as assets on the Consolidated Statements of Financial Position. The company classified its investments in ICL and Sinofert as available-for-sale and therefore has recorded these investments at their fair value, resulting in a balance of unrealized holding gains in investments of $2,334.1 million, accumulated other comprehensive income of $2,133.7 million and future income tax liability of $200.4 million as of December 31, 2007. The total balance recorded in investments related to ICL and Sinofert as of December 31, 2007 was $2,725.5 million. In previous periods these investments had been recorded at cost which, as of December 31, 2006 and December 31, 2007, was $167.7 million for ICL and $223.7 million for Sinofert.

• Derivative instruments are generally recorded on the Consolidated Statements of Financial Position at fair value. At December 31, 2007, the fair value of our derivative instrument assets represented a current asset of $30.8 million and a long-term asset of $104.2 million. Of the total, $127.7 million related to natural gas swap, option and physical gas purchase contracts, with $127.6 million of the swap contracts designated as accounting hedges, and $7.3 million related to foreign currency and other forward purchase contracts. As of December 31, 2006, no such derivative instrument assets were recorded on the balance sheet. As of December 31, 2007, the current portion of derivative instrument liabilities of $0.2 million related to natural gas contracts was included in accounts payable and accrued charges. Net gains of $73.5 million on the contracts designated as accounting hedges have been recognized in accumulated other comprehensive income, net of income taxes, as of December 31, 2007, to the extent those hedges are effective; ineffectiveness of $9.6 million arising from January 1 to December 31, 2007 has been recognized as an increase through net income. The future income tax liability associated with these instruments was $50.3 million. Net realized and unrealized gains recognized in net income on physical gas purchase contracts and options not qualifying for hedge accounting arising from January 1 to December 31, 2007 were insignificant; no amounts were

recorded in net income during 2006. Hedge ineffectiveness existing on derivative instruments as of January 1, 2007 was recorded as a cumulative effect adjustment to opening retained earnings, net of income tax, resulting in an increase in retained earnings of $0.2 million and a decrease in accumulated other comprehensive income of $0.2 million.

•

Bond issue costs were reclassified from other assets to long-term debt and deferred swap gains were reclassified from other non-current liabilities to long-term debt, resulting in a reduction in other assets of $23.9 million, a reduction in other non-current liabilities of $6.6 million and a reduction in long-term debt of $17.3 million at January 1, 2007. These costs are amortized using the effective interest rate method, and will continue to be amortized over the term of the related liability. As of December 31, 2007, unamortized bond issue costs reduced long-term debt by $24.6 million while unamortized deferred swap gains increased it by $5.3 million.

During 2007, we recorded investments in auction rate securities in investments, which we classified as available-for-sale. As of December 31, 2007, the balance recorded in investments was $56.0 million (face value $132.5 million), resulting in a balance of unrealized holding losses of $76.5 million. The unrealized losses represent our estimate of diminution in value as of December 31, 2007, resulting from the lack of current liquidity for these investments at year-end and uncertainty as to the ultimate recoverability. Of the total unrealized loss, $26.5 million has been considered other-than-temporary and therefore reduced net income before income taxes, while $50.0 million has been considered temporary and reduced other comprehensive income before income taxes. In prior years, auction rate securities were included with cash and cash equivalents. The company has not reclassified prior years as the adjustments are not considered material.

Total assets were $9,716.6 million at December 31, 2007, an increase of $3,499.6 million or 56 percent over December 31, 2006. During the same period, total liabilities increased by $261.2 million to $3,697.9 million, and total shareholders’ equity increased by $3,238.4 million to $6,018.7 million.

The largest contributors to the increase in assets during 2007 were investments in available-for-sale securities and derivative instruments as described above, cash and cash equivalents, property, plant and equipment and accounts receivable. Cash and cash equivalents increased $393.8 million, largely due to cash flow from operations which was $1,688.9 million during 2007. Accounts

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receivable increased $153.9 million or 35 percent compared to December 31, 2006, which is consistent with the 43 percent increase in sales in the last month of the year. These increases were partially offset by a $73.2 million decline in inventories as they were drawn down due to strong demand that exceeded the company’s production, which was interrupted due to regularly scheduled maintenance at certain locations.

Liabilities increased despite cash flow from operations being used to repay $67.9 million of short-term debt obligations and $400.4 million of long-term debt obligations during 2007, including $400.0 million of 7.125 percent 10-year bonds at maturity. This reduction was more than offset by higher future income tax liability and accounts payable and accrued charges. Future income tax liability increased $356.0 million, of which $250.7 million was attributable to the adoption of new accounting standards for financial instruments and hedging activities as described above, with the remainder primarily driven by the impact of the strengthening Canadian dollar and higher income earned during 2007. Accounts payable and accrued charges were $366.5 million higher than at December 31, 2006 as income taxes payable were up $118.4 million with higher income earned in 2007 combined with a lower Canadian installment base; trade payables were up $99.1 million due to work on the company’s potash expansion projects; accrued payroll was up $42.9 million due to higher incentive plan accruals related to share price appreciation and stronger results year over year; deferred revenue increased $17.3 million as a result of customers prepaying for product to lock in pricing ahead of announced price increases; and dividends payable were up $15.9 million as we doubled our quarterly cash dividend in May 2007.

Share capital, retained earnings and contributed surplus all increased at December 31, 2007 compared to December 31, 2006.

Share capital was $29.7 million higher due to the issuance of common shares upon stock option exercises and under our dividend reinvestment plan. Recognition of compensation cost associated with our stock-based compensation plans increased contributed surplus by $38.6 million while the issuance of common shares arising from stock option exercises reduced the balance, for a net increase of $36.6 million. Net earnings of $1,103.6 million for 2007 increased retained earnings while dividends declared of $110.6 million and a cumulative effect adjustment related to the adoption of new accounting standards (as described above) reduced the balance, for a net increase in retained earnings of $993.2 million at December 31, 2007 compared to December 31, 2006. We also added a new line in the equity section of the Consolidated Statements of Financial Position for accumulated other comprehensive income as a result of new accounting standards effective January 1, 2007, as described above. Balances comprising accumulated other comprehensive income included (net of related income taxes) $2,098.7 million in net unrealized holding gains on our available-for-sale securities, $73.5 million in net unrealized gains on our natural gas derivatives that qualify for hedge accounting and $6.7 million in unrealized foreign exchange gains on translation of our self-sustaining foreign operations.

LIQUIDITY AND CAPITAL RESOURCES

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 balance sheet and meet our commitments and obligations in the most cost-effective manner possible.

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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 Payments Due by Period – Dollars (millions)
	Total		Within 1 year		1 to 3 years		3 to 5 years		Over 5 years
Long-term debt obligations	$	1,358.5	$	0.2	$	2.1	$	606.2	$	750.0
Estimated interest payments on long-term debt obligations		1,134.4		96.8		193.7		123.1		720.8
Operating leases		657.2		97.4		168.8		136.8		254.2
Purchase obligations		914.2		272.1		221.0		148.3		272.8
Other commitments		88.3		22.7		38.2		7.6		19.8
Other long-term liabilities		1,263.7		49.2		78.4		38.5		1,097.6
Total	$	5,416.3	$	538.4	$	702.2	$	1,060.5	$	3,115.2

Long-Term Debt Obligations

Long-term debt obligations consists of $1,350.0 million of senior notes that were issued under US shelf registration statements, 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 $2.6 million payable over the next five years.

The senior notes represent more than 99 percent of our total long-term debt obligations 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. Senior notes in the principal amount of $400.0 million were repaid in full at maturity in June 2007. 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, 2007. Under certain conditions related to 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.

The estimated interest payments on long-term debt obligations in the table above 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, 2007.

Operating Leases

We have long-term operating lease agreements for buildings, port facilities, equipment, ocean-going transportation vessels and railcars, the latest of which expires in 2022. The most significant operating leases consist of three items. The first is our lease of railcars, which extends to approximately 2022. The second is the lease of port facilities at the Port of Saint John for shipping New Brunswick potash offshore, which runs until 2018. The third 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. 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 above are based on 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 above are based on floor prices and minimum purchase quantities.

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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 54 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 2028.

Other Long-Term Liabilities

Other long-term liabilities consist primarily of net 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 54.

Capital Expenditures

Based on our current exchange rate expectations, during 2008 we expect to incur capital expenditures, including capitalized interest, of approximately $1,090 million for opportunity capital, approximately $310 million to sustain operations at existing levels and approximately $30 million for site improvements.

Investment Liquidity

Investments

Investments include auction rate securities. All securities continue to be rated AAA, with the exception of one investment (face value $19.9 million) which has a split rating. Although this investment

is rated AAA by one ratings agency, another has it sub AAA although still investment grade. Maturities extend through 2046. The securities include collateralized loan obligations with a face value of $48.3 million and collateralized debt obligations with a face value of $84.2 million. As of December 31, 2007, the balance recorded in investments related to these auction rate securities was $56.0 million (face value $132.5 million), resulting in an unrealized loss of $76.5 million. The unrealized loss represents the company’s estimate of diminution in value as of December 31, 2007 resulting from the current lack of liquidity for these investments at year-end and uncertainty as to the ultimate recoverability. Of the decline in value, $50.0 million is presently considered temporary and $26.5 million is considered other-than-temporary. 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.

We are exposed to liquidity and credit risk on investments in auction rate securities due to the current lack of liquidity that has existed since August 2007; therefore the securities are being held in our account for longer than the approximate 28 days that was originally anticipated. We are uncertain as to when the liquidity for such securities will improve. As a result, during the fourth quarter we reclassified the investments from short-term to long-term, reflecting that liquidity may not return within one year and, further, that we may hold the investments for a longer period of time, as we are able to do.

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)
		2007			2006			2005			2007		2006
Cash provided by operating activities	$	1,688.9		$	696.8		$	865.1			142		(19	)
Cash (used in) investing activities	$	(758.1	)	$	(839.7	)	$	(555.3	)		(10	)	51
Cash (used in) provided by financing activities	$	(537.0	)	$	374.7		$	(674.8	)		n/m		n/m
Increase (decrease) in cash and cash equivalents	$	393.8		$	231.8		$	(365.0	)		70		n/m
n/m = not meaningful
Dollars (millions) except ratio and percentage amounts
	December 31			December 31			December 31			% Increase (Decrease)
		2007			2006			2005			2007		2006
Current assets	$	1,811.3		$	1,310.2		$	1,110.8			38		18
Current liabilities	$	(1,001.9	)	$	(1,103.5	)	$	(1,096.1	)		(9	)	1
Working capital	$	809.4		$	206.7		$	14.7			292		n/m
Current ratio		1.81			1.19			1.01			52		18
n/m = not meaningful

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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 statements, and long-term debt drawn down under our syndicated credit facility. Our primary uses of funds are operational expenses, sustaining and opportunity capital spending, intercorporate investments, dividends, and interest and principal payments on our debt securities.

Cash provided by operating activities grew to $1,688.9 million in 2007, an increase of 142 percent compared to 2006, largely attributable to net income of $1,103.6 million which was $471.8 million higher than in 2006. The strengthening of the Canadian dollar against the US dollar in 2007 increased the reconciliation of net income to cash provided by operating activities by $51.9 million compared to 2006, when the impact was negligible. The increase in provision for future income taxes positively impacted the change in reconciliation of net income to cash provided by operating activities by $69.6 million, and higher depreciation and amortization expense in 2007 due to recent expansion projects now being depreciated improved it by an additional $48.9 million compared to 2006. The change in accounts payable and accrued charges of $250.9 million contributed a further $520.0 million in additional cash flows for 2007 compared to 2006. Accounts payable and accrued charges increased during 2007 with higher incentive plan accruals, trade accounts payable, income taxes payable, deferred revenues and dividends payable. This compares to 2006 when the change in accounts payable represented a cash outflow of $269.1 million due to (1) reductions in income tax payable because of paying 2005 Canadian income taxes due in first-half 2006 and making Canadian income tax installments for 2006 based on expectations higher than actual results; (2) lower hedging margin deposits as a result of falling natural gas prices and reduced volume of derivative instruments outstanding; and (3) payments of incentive compensation accruals related to performance units granted under the company’s medium-term incentive plan (which is evaluated on a three-year cycle and paid every three years). These were partially offset by the change in other long-term liabilities which negatively impacted the reconciliation of net income to cash provided by operating activities by $57.9 million in 2007 compared to a positive impact of $13.4 million in 2006, a change of $71.3 million that was significantly attributable to increased pension funding during 2007. Further, the change in accounts receivable negatively impacted 2007 operating cash flows by $154.6 million compared to a positive impact of $11.0 million in 2006, as accounts

receivable increased more at the end of 2007 than 2006 with significantly higher product pricing.

Cash used in investing activities declined $81.6 million year over year. The most significant cash outlays included:

• During the first quarter of 2007, $9.7 million was paid to settle outstanding amounts related to the December 2006 purchase of additional shares in SQM. During the third quarter of 2007, we purchased an additional 1,011,062 shares of SQM for cash consideration of $16.8 million, which was financed by cash on hand. Our ownership interest in SQM remains at approximately 32 percent. During 2006, we acquired additional interests in Sinofert, APC and SQM for cash consideration of $352.5 million. The Sinofert purchase price was financed by short-term debt; the purchase prices of APC and SQM were financed by cash on hand.

• Our spending on property, plant and equipment was $607.2 million in 2007, an increase of $98.6 million over 2006. Approximately 56 percent (2006 — 58 percent) of our consolidated capital expenditures related to the potash segment.

• We invested $132.5 million in investments in the form of auction rate securities during 2007.

Cash used in financing activities increased $911.7 million during 2007 compared to the cash inflow from financing activities in 2006. During 2007, we repaid $400.0 million of 10-year bonds that matured in June 2007 while we received $483.9 million proceeds from issuance of long-term debt (net of discount and issue costs) in 2006. Dividend payments increased as we doubled our quarterly dividend in May 2007 (from $0.05 per share to $0.10 per share), using an additional $32.7 million, while $26.4 million lower repayments of short-term debt (as the balance was reduced through 2006) partially offset this.

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 2008, exclusive of any possible acquisitions, as was the case in 2007. 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.

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CAPITAL STRUCTURE AND MANAGEMENT

Capital Structure Dollars (millions), except as noted

	December 31, 2007		December 31, 2006
Short-term debt obligations	$	90.0	$	157.9
Current portion of long-term debt obligations		0.2		400.4
Long-term debt obligations		1,358.3		1,357.1
Deferred debt costs and swap gains included in long-term debt		(18.9)		–
Total debt		1,429.6		1,915.4
Shareholders’ equity	$	6,018.7	$	2,780.3
Total debt to capital		19%		41%
Fixed rate debt obligations as a percentage of total debt obligations		93%		91%
Common shares outstanding		316,411,209		314,403,147
Stock options outstanding		14,006,984		14,305,644
Dividend payout ratio		10%		10%

Principal Debt Instruments Dollars (millions) at December 31, 2007

	Total		Amount		Amount		Amount
	Amount		Outstanding		Committed		Available
Syndicated credit facility	$	750.0	$	–	$	90.0	$	660.0
Line of credit		75.0		–		23.9		51.1
Commercial paper		750.0		90.0		–		660.0
US shelf registrations		4,000.0		1,350.0		–		2,250.0	1

  ¹ $400.0 million of senior notes issued under one of the company’s US shelf registration statements were repaid in full at maturity; no additional amount is available in respect of the principal of these senior notes.

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 fixed rates on our long-term debt.

We have a $750.0 million syndicated credit facility that provides for unsecured advances. The credit facility was renewed in September 2005 for a five-year term, extended in September 2006 for one additional year, and extended in October 2007 through May 31, 2013. The amount available to us is the total facility amount less direct borrowings and amounts committed in respect of commercial paper outstanding. No funds were borrowed under the facility as of December 31, 2007. The line of credit was renewed in September 2007 for the period to May 2009; it will be renewable annually beginning in May 2009. Outstanding letters of credit and direct borrowings reduce the amount available. Both the line of credit and the syndicated credit facility have financial tests and other covenants with which we must comply at each quarter-end. Principal covenants under the credit facility 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 syndicated credit facility 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 the related debt and amount due under the line of credit, and termination of the line of credit. We were in compliance with all covenants as at December 31, 2007.

The commercial paper market is a source of “same day” cash for the company. Access to this source of short-term financing depends primarily on maintaining our R1 low credit rating by DBRS and conditions in the money markets. 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. Our credit rating, as measured by Standard & Poor’s senior debt ratings and Moody’s senior debt ratings, remained unchanged from December 31, 2006 at BBB+ with a stable outlook and Baa1 with a stable outlook, respectively.

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     M A R K E T  R I S K S  A S S O C I A T E D  
     W I T H  F I N A N C I A L  I N S T R U M E N T S  

We also have US shelf registration statements, one of which was registered in 2007 for $2,000.0 million, under which we may issue up to an additional $2,250.0 million in unsecured debt securities.

For 2007, our weighted average cost of capital was 10.0 percent (2006 – 8.8 percent), of which 96 percent represented equity (2006 – 86 percent).

Outstanding Share Data

We had 316,411,209 common shares issued and outstanding at December 31, 2007, compared to 314,403,147 common shares issued and outstanding at December 31, 2006. The company issued 2,008,062 common shares pursuant to the exercise of stock options and under our dividend reinvestment plan.

During the second quarter, the 2007 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 that shall not be less than the quoted market 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, 2007, there were 14,006,984 options to purchase common shares outstanding under the company’s five stock option plans, as compared to 14,305,644 at December 31, 2006.

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 30 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. As a result of new accounting changes effective January 1, 2007,

as described in Note 3 to the consolidated financial statements, 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 54.

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. The following discussion provides additional detail regarding our exposure to the risks of changing commodity prices, interest rates and foreign exchange rates. A discussion of enterprise-wide risk management can be found on Pages 29 to 30. A discussion of certain liquidity and credit risk related to our investments can be found under “Liquidity and Capital Resources – Investment Liquidity” on Page 55.

Commodity Risk

Our natural gas purchase strategy is based on diversification for our total gas requirements (which represent the forecast consumption of natural gas volumes by our manufacturing and mining facilities). The 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.

Our US nitrogen results are significantly affected by the price of natural gas. As discussed above, we employ derivative commodity instruments related to a portion of our natural gas requirements (primarily futures, swaps and options) for the purpose of managing our exposure to commodity price risk in the purchase of natural gas, not for speculative or trading purposes. Changes in the market value of these derivative instruments have a high correlation to changes in the spot price of natural gas.

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A sensitivity analysis has been prepared to estimate our market risk exposure arising from derivative commodity instruments. The fair value of such instruments is calculated by valuing each position using quoted market prices where available or prices provided by other external sources. Market risk is estimated as the potential loss in fair value resulting from a hypothetical 10 percent adverse change in such prices. The results of this analysis indicate that as of December 31, 2007, our estimated derivative commodity instruments’ market risk exposure was $48.9 million (2006 – $30.5 million), based on our gas hedging contracts fair-valued at $127.5 million (2006 – $120.3 million). Actual results may differ from this estimate. Changes in the fair value of such derivative instruments, with maturities in 2008 through 2017, will generally relate to changes in the spot price of natural gas purchases.

Interest Rate Risk

We address 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.

As at December 31, 2007, our short-term debt (comprised of commercial paper) was $90.0 million, our current portion of long-term debt obligation maturities was $0.2 million and our long-term portion of debt obligation maturities was $1,358.3 million. Long-term debt obligation maturities, including the current portion, are comprised primarily of $1,350.0 million of senior notes that were issued under our US shelf registration statements. Since most of our outstanding borrowings have fixed interest rates, the primary market risk exposure is to changes in fair value. It is estimated that, all else constant, a hypothetical 10 percent change in interest rates would not materially impact our results of operations or financial position. If interest rates changed significantly, management would take appropriate actions to manage our exposure to the change. However, due to the uncertainty of the specific actions that would be taken and their possible effects, the sensitivity analysis assumes no changes in our financial structure.

We are also exposed to changes in interest rates related to our investments in marketable securities and auction rate securities. At December 31, 2007, our marketable securities in cash and cash equivalents had a face value and fair value of $719.5 million, and auction rate securities had a face value of $132.5 million and fair value of $56.0 million. Interest rates on marketable securities are floating and therefore vary directly with the Canadian and US market interest rates.

Interest rates on auction rate securities 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 current negative conditions in the global credit markets, auctions for the investments in these securities that are held in the company’s trading account have recently failed to settle on their respective settlement dates and instead have paid interest based on the prescribed spread to LIBOR. As of December 31, 2007, our estimated interest rate risk exposure on our marketable securities was minimal due to the short-term nature of the investments, as was the impact on auction rate securities since the provisions of those agreements, in the current market situation, guarantee a fixed spread regardless of where the market interest rates move. It is estimated that, all else constant, a hypothetical 10 percent change in interest rates would not materially impact our results of operations or financial position.

Foreign Exchange Risk

We also enter into foreign currency forward contracts for the primary purpose of limiting exposure to exchange rate fluctuations relating to Canadian dollar operating and capital expenditures and capital expenditures denominated in currencies other than the US or Canadian dollar. These contracts are not designated as hedging instruments for accounting purposes. Gains or losses resulting from foreign exchange contracts are recognized in earnings in the period in which changes in fair value occur.

As at December 31, 2007, we had entered into foreign currency forward contracts to sell US dollars and receive Canadian dollars in the notional amount of $60.0 million (2006 – $100.0 million) at an average exchange rate of 1.0176 (2006 – 1.1478) per US dollar and to sell US dollars and receive Hong Kong dollars in the notional amount of $174.5 million (2006 – $NIL) at an average exchange rate of 7.7937 (2006 – NIL) per US dollar. The company had also entered into other small forward contracts. Maturity dates for all forward contracts are within 2008 and 2009.

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, 2007 were $782.7 million (2006 – $467.1 million; 2005 – $577.1 million). Sales to Canpotex are at prevailing market prices and are settled on normal trade terms.

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    C R I T I C A L  A C C O U N T I N G  E S T I M A T E S 

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 estimation 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.

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.

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The following table provides the sensitivity of benefit obligations and expense for our major plans to changes in the discount rate, expected long-term 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	$	42.5		$	4.0		$	19.5		$	2.2
Increase in assumption		(38.3	)		(3.6	)		(18.3	)		(2.1	)
Expected long-term rate of return
Decrease in assumption		n/a			3.2			n/a			n/a
Increase in assumption		n/a			(3.2	)		n/a			n/a
Rate of compensation increase
Decrease in assumption		(6.9	)		(1.4	)		(0.2	)		–
Increase in assumption		7.0			1.5			0.2			–
Medical trend rate
Decrease in assumption		n/a			n/a			(15.2	)		(2.8	)
Increase in assumption		n/a			n/a			17.7			3.3

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, most particularly, phosphate mining operations. 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 our 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.

Accruals for asset retirement obligations and other environmental matters totaled $134.7 million at December 31, 2007 (2006 – $119.3 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. 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, and to the extent that the hedging derivatives are considered effective. 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 and other 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 that 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.

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    C R I T I C A L  A C C O U N T I N G  E S T I M A T E S 

There is currently no active market for the auction rate securities in our trading account and therefore fair value is based on valuation techniques that reflect our own expectations about the assumptions that market participants would use in pricing the asset in a current transaction (including information obtained on transactions in the marketplace for other investments that may be considered similar, information on expected cash flows based on our position of priority within the tranches, information on 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. Futures contracts are exchange-traded and fair value is determined based on exchange prices. Other forward contracts are based on underlyings that are exchange-traded and therefore fair value is determined based on these prices. Swaps and option agreements are traded in the over-the-counter market and fair value is calculated based on models and other valuation techniques that include prices sourced from observable data.

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 tax assets recognized will be realized prior to their expiration. 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, 2007, 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 sooner 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 our trading account to be $56.0 million as of

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December 31, 2007, representing an impairment of $76.5 million as compared to the par value of the securities. Of the total impairment, $50.0 million has been classified as temporary and $26.5 million 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. Two were identified as being other-than-temporarily impaired based on the vintage of the underlying securities and complexity of the structures. The entire impairment on these two securities was therefore classified as other-than-temporary. For those investments for which the impairment in fair value is considered temporary, the company has the ability to hold the securities until the temporary impairment in fair value is recovered, which may not be until a recovery of the auction process or until maturity. However, the estimated fair value of the investments in auction rate securities could decline in future periods based on market conditions, which could result in additional impairment charges. None of our other investments were considered impaired, either temporarily or other-than-temporarily, as of December 31, 2007.

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.

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 62, 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 AND EFFECTIVE DATES

Refer to Note 3 to the consolidated financial statements for information pertaining to accounting changes effective in 2007, and Notes 2 and 33 to the consolidated financial statements for information on issued accounting pronouncements that will be effective in future years.

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          F O R W A R D  –  L O O K I N G  S T A T E M E N T S 

FORWARD-LOOKING STATEMENTS

This 2007 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 2007 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. A number of 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 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, 2007 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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FINANCIAL DATA (in millions of US dollars except share, per-share and percentage amounts)

	2007			2006		2005		2004		2003			2002		2001		2000			1999			1998		19971
Sales Potash		1,797.2			1,227.5		1,341.1		1,056.1		758.7			669.0		655.2		710.3			688.6			663.3		644.0
Nitrogen		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		939.3
Phosphate		1,637.1			1,255.1		1,137.3		977.9		883.9			714.0		732.1		868.1			922.3			1,099.5		1,036.7
Total sales		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		2,620.0
5-year CAGR 2		18.7%
10-year CAGR 2		7.2%
Gross margin Potash		912.3			561.1		707.4		422.8		203.7			218.0		248.1		307.4			304.2			319.2		261.4
Nitrogen		536.1			315.6		318.7		242.8		193.2			47.4		94.7		104.7			(21.4	)		64.8		133.0
Phosphate		432.8			125.3		98.9		15.8		(16.5	)		41.9		64.5		76.8			130.5			230.1		196.6
Total gross margin		1,881.2			1,002.0		1,125.0		681.4		380.4			307.3		407.3		488.9			413.3			614.1		591.0
5-year CAGR 2		43.7%
10-year CAGR 2		12.3%
Depreciation and amortization Potash		71.7			58.3		64.5		66.4		52.4			46.3		34.1		40.9			37.2			36.2		39.6
Nitrogen		88.2			77.6		72.0		79.7		86.4			88.0		72.8		66.1			83.5			86.7		69.0
Phosphate		121.1			94.6		95.6		84.4		78.9			76.8		72.0		68.1			61.8			59.1		55.1
Other		10.3			11.9		10.3		9.5		9.7			8.0		6.8		11.9			8.6			8.9		6.3
Total depreciation and amortization		291.3			242.4		242.4		240.0		227.4			219.1		185.7		187.0			191.1			190.9		170.0
Operating income (loss)		1,588.5			875.5		892.6		514.3		(55.6	)		166.9		269.7		326.8			(353.0	)		442.3		442.0
Net income (loss)*3		1,103.6			631.8		542.9		298.6		(126.3	)		53.6		121.2		198.0			(412.0	)		261.0		297.1
5-year CAGR 2		83.1%
10-year CAGR 2		14.0%
Net income (loss) per share – basic 4		3.50			2.03		1.67		0.92		(0.40	)		0.17		0.39		0.63			(1.27	)		0.80		0.95
Net income (loss) per share – diluted 4		3.40			1.98		1.63		0.90		(0.40	)		0.17		0.39		0.63			(1.27	)		0.80		0.94
Dividends per share		0.35			0.20		0.20		0.18		0.17			0.17		0.17		0.17			0.17			0.16		0.17
Cash provided by operating activities		1,688.9			696.8		865.1		658.3		385.5			316.4		75.7		480.4			343.6			578.0		467.8
Working capital		809.4			206.7		14.7		539.9		176.1			8.6		47.1		(148.7	)		(104.8	)		329.2		281.7
Total assets		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		4,427.6
Long-term debt obligations		1,358.3	5		1,357.1		1,257.6		1,258.6		1,268.6			1,019.9		1,013.7		413.7			437.0			933.3		1,130.0
Shareholders’ equity		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		2,227.9
Shares outstanding at the end of the year (thousands) 4,6		316,411			314,403		310,782		331,893		318,672			312,468		311,712		311,046			322,164			325,464		323,376

OPERATING DATA (thousands)

	2007		2006		2005		2004		2003		2002		2001		2000		1999		1998		19971
Employees at year-end (actual #)		5,003		4,871		4,879		4,906		4,904		5,199		4,997		5,338		5,498		5,744		5,751
Potash production (KCl) tonnage		9,159		7,018		8,816		7,914		7,094		6,447		6,128		7,149		6,388		6,995		6,483
Nitrogen production (N) tonnage		2,986		2,579		2,600		2,558		2,619		2,990		3,032		2,706		3,138		3,121		2,349
Phosphate production (P2O5) tonnage		2,164		2,108		2,097		1,962		1,861		1,512		1,573		2,042		2,124		2,363		2,282
Potash sales – manufactured KCl tonnes		9,400		7,196		8,164		8,276		7,083		6,327		6,243		6,912		6,474		6,283		6,640
Nitrogen sales – manufactured product tonnes		5,731		4,675		4,843		4,734		5,367		5,911		5,753		5,864		6,271		6,032		4,927
Phosphate sales – manufactured product tonnes		4,151		3,970		3,860		3,675		3,560		2,809		2,987		3,861		4,002		4,627		4,434

1	Data for 1997 and thereafter reflect the acquisition of Arcadian Corporation on March 6, 1997.
2	Compound annual growth rate expressed as a percentage.
3	There were no extraordinary items or discontinued operations in any of the accounting periods.
4	All share and per-share data have been retroactively restated to reflect the stock dividend of two common shares for each share owned by shareholders of record at the close of business on May 22, 2007. The stock dividend had the same effect as a three-for-one stock split.
5	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.)
6	Common shares were repurchased in 2005, 2000 and 1999 in the amounts of 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

* The after-tax effects of asset impairment, plant shutdown, plant closure and office consolidation charges and the gain on sale of long-term investments are included (as applicable) in the data for 2007, 2006, 2004, 2003, 2000 and 1999 in the amounts of $18.6, $4.5, $(30.8), $203.2, $1.5 and $547.1, respectively.

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     F I N A N C I A L  P E R F O R M A N C E  I N D I C A T O R S

SUMMARY (in millions of US dollars except share, per-share and tonnage amounts)

	2007		2006		2005			2004		2003			2002		2001			2000		1999			1998			1997
Net income (loss) 1		1,103.6		631.8		542.9			298.6		(126.3	)		53.6		121.2			198.0		(412.0	)		261.0			297.1
Net income (loss) share – diluted		3.40		1.98		1.63			0.90		(0.40	)		0.17		0.39			0.63		(1.27	)		0.80			0.94
EBITDA 2		1,879.8		1,117.9		1,135.0			754.3		171.8			386.0		455.4			513.8		(161.9	)		633.2			612.0
Cash flow prior to working capital changes 3		1,525.3		940.8		860.3			538.3		368.5			289.2		345.8			405.1		319.6			556.2			489.3
Cash provided by operating activities		1,688.9		696.8		865.1			658.3		385.5			316.4		75.7			480.4		343.6			578.0			467.8
Return on assets		11.4%		10.2%		10.1%			5.8%		(2.8%	)		1.1%		2.6%			4.8%		(10.5%	)		5.8%			6.7%
Cash flow return 4		20.4%		14.5%		14.7%			11.1%		2.9%			6.3%		8.5%			10.5%		(3.7%	)		12.6%			13.0%
Weighted average cost of capital		10.0%		8.8%		8.3%			8.4%		7.3%			7.3%		7.7%			8.7%		8.7%			8.3%			8.8%
Total shareholder return		201.6%		79.6%		(2.7%	)		93.4%		37.5%			5.2%		(20.4%	)		64.6%		(23.0%	)		(21.9%	)		(1.1%	)
Total debt to capital		19.2%		40.8%		41.5%			36.4%		42.3%			41.7%		42.1%			31.1%		31.9%			29.5%			35.7%
Net debt to capital 5		10.6%		36.4%		39.9%			27.5%		42.2%			41.3%		41.3%			28.7%		30.8%			28.1%			35.5%

RECONCILIATIONS AND CALCULATIONS (in millions of US dollars except share, per-share and tonnage amounts)

	2007			2006			2005			2004			2003			2002			2001			2000			1999			1998			1997
Net income (loss) 1		1,103.6			631.8			542.9			298.6			(126.3	)		53.6			121.2			198.0			(412.0	)		261.0			297.1
Income taxes		416.2			158.1			267.4			131.7			(20.6	)		30.2			68.2			67.2			7.5			117.5			69.1
Interest expense		68.7			85.6			82.3			84.0			91.3			83.1			80.3			61.6			51.5			63.8			75.8
Depreciation and amortization		291.3			242.4			242.4			240.0			227.4			219.1			185.7			187.0			191.1			190.9			170.0
EBITDA 2		1,879.8			1,117.9			1,135.0			754.3			171.8			386.0			455.4			513.8			(161.9	)		633.2			612.0
5-year CAGR 7		37.2%
10-year CAGR 7		11.9%
Cash flow prior to working capital changes 3		1,525.3			940.8			860.3			538.3			368.5			289.2			345.8			405.1			319.6			556.2			489.3
Accounts receivable		(154.6	)		11.0			(107.6	)		(51.9	)		(39.5	)		(11.1	)		69.9			(52.2	)		33.8			48.8			23.5
Inventories		60.3			13.9			(119.9	)		(10.5	)		11.8			(18.2	)		(76.1	)		(27.4	)		(16.1	)		(7.9	)		19.9
Prepaid expenses and other current assets		7.0			0.2			(5.8	)		(6.3	)		11.4			(3.9	)		2.3			(3.1	)		3.2			(16.6	)		3.7
Accounts payable and accrued charges		250.9			(269.1	)		238.1			188.7			33.3			60.4			(266.2	)		158.0			3.1			(2.5	)		(68.6	)
Changes in non-cash operating working capital		163.6			(244.0	)		4.8			120.0			17.0			27.2			(270.1	)		75.3			24.0			21.8			(21.5	)
Cash provided by operating activities		1,688.9			696.8			865.1			658.3			385.5			316.4			75.7			480.4			343.6			578.0			467.8
Net income (loss)		1,103.6			631.8			542.9			298.6			(126.3	)		53.6			121.2			198.0			(412.0	)		261.0			297.1
Total assets		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			4,427.6
Return on assets		11.4%			10.2%			10.1%			5.8%			(2.8%	)		1.1%			2.6%			4.8%			(10.5%	)		5.8%			6.7%
Net income (loss)		1,103.6			631.8			542.9			298.6			(126.3	)		53.6			121.2			198.0			(412.0	)		261.0			297.1
Income taxes		416.2			158.1			267.4			131.7			(20.6	)		30.2			68.2			67.2			7.5			117.5			69.1
Interest expense		68.7			85.6			82.3			84.0			91.3			83.1			80.3			61.6			51.5			63.8			75.8
Current income taxes		(296.6	)		(108.1	)		(227.3	)		(105.4	)		–			(24.2	)		(20.5	)		(32.6	)		(14.7	)		(19.4	)		(34.6	)
Depreciation and amortization		291.3			242.4			242.4			240.0			227.4			219.1			185.7			187.0			191.1			190.9			170.0
Cash flow 4		1,583.2			1,009.8			907.7			648.9			171.8			361.8			434.9			481.2			(176.6	)		613.8			577.4
Total assets		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			4,427.6
Cash and cash equivalents		(719.5	)		(325.7	)		(93.9	)		(458.9	)		(4.7	)		(24.5	)		(45.3	)		(100.0	)		(44.0	)		(68.0	)		(8.8	)
Fair value of natural gas hedging derivative assets		(127.6	)		–			–			–			–			–			–			–			–			–			–
Accumulated depreciation of property, plant and equipment		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			662.0
Net unrealized gains on available-for-sale securities		(2,284.1	)		–			–			–			–			–			–			–			–			–			–
Accumulated amortization of other assets and intangible assets		47.0			72.6			66.4			65.1			70.1			59.1			42.0			38.0			42.0			49.2			17.7
Accumulated amortization of goodwill		7.3			7.3			7.3			7.3			7.3			7.3			7.3			4.3			1.4			27.4			12.7
Accounts payable and accrued charges		(911.7	)		(545.2	)		(842.7	)		(599.9	)		(380.3	)		(347.0	)		(271.4	)		(525.9	)		(349.1	)		(349.7	)		(348.1	)
Adjusted assets		8,008.7			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			4,763.1
Average adjusted assets		7,754.3			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			4,447.0
Cash flow return 4		20.4%			14.5%			14.7%			11.1%			2.9%			6.3%			8.5%			10.5%			(3.7%	)		12.6%			13.0%
See footnotes on Page 68.

POTASHCORP 2007 FINANCIAL REVIEW

F I N A N C I A L  P E R F O R M A N C E  I N D I CAT O R S 67 

RECONCILIATIONS AND CALCULATIONS continued (in millions of US dollars except share, per-share and tonnage amounts)

	2007			2006			2005			2004			2003			2002			2001			2000			1999			1998			1997
Weighted average cost of capital		10.0%			8.8%			8.3%			8.4%			7.3%			7.3%			7.7%			8.7%			8.7%			8.3%			8.8%
End of year closing price (dollars)		143.96			47.83			26.74			27.69			14.41			10.60			10.23			13.05			8.03			10.65			13.83
Beginning of year opening price (dollars)		47.83			26.74			27.69			14.41			10.60			10.23			13.05			8.03			10.65			13.83			14.17
Change in share price (dollars)		96.13			21.09			(0.95	)		13.28			3.81			0.37			(2.82	)		5.02			(2.62	)		(3.18	)		(0.34	)
Dividends paid per share (dollars)		0.30			0.20			0.20			0.18			0.17			0.17			0.17			0.17			0.17			0.16			0.17
Total shareholder return		201.6%			79.6%			(2.7%	)		93.4%			37.5%			5.3%			(20.3%	)		64.6%			(23.0%	)		(21.8%	)		(1.2%	)
Short-term debt		90.0			157.9			252.2			93.5			176.2			473.0			501.1			488.8			474.5			94.9			101.9
Current portion of long-term debt		0.2			400.4			1.2			10.3			1.3			3.4			–			5.7			7.4			0.4			2.7
Long-term debt		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			1,130.0
Total debt		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			1,234.6
Cash and cash equivalents		(719.5	)		(325.7	)		(93.9	)		(458.9	)		(4.7	)		(24.5	)		(45.3	)		(100.0	)		(44.0	)		(68.0	)		(8.8	)
Net debt 5		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			1,225.8
Shareholders’ equity		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			2,227.9
Total debt to capital		19.2%			40.8%			41.5%			36.4%			42.3%			41.7%			42.1%			31.1%			31.9%			29.5%			35.7%
Net debt to capital 5		10.6%			36.4%			39.9%			27.5%			42.2%			41.3%			41.3%			28.7%			30.8%			28.1%			35.5%
Current assets		1,811.3			1,310.2			1,110.8			1,243.6			733.9			832.0			819.6			871.7			726.2			774.2			734.5
Current liabilities		(1,001.9	)		(1,103.5	)		(1,096.1	)		(703.7	)		(557.8	)		(823.4	)		(772.5	)		(1,020.4	)		(831.0	)		(445.0	)		(452.8	)
Working capital		809.4			206.7			14.7			539.9			176.1			8.6			47.1			(148.7	)		(104.8	)		329.2			281.7
Cash and cash equivalents		(719.5	)		(325.7	)		(93.9	)		(458.9	)		(4.7	)		(24.5	)		(45.3	)		(100.0	)		(44.0	)		(68.0	)		(8.8	)
Short-term debt		90.0			157.9			252.2			93.5			176.2			473.0			501.1			488.8			474.5			94.9			101.9
Current portion of long-term debt		0.2			400.4			1.2			10.3			1.3			3.4			–			5.7			7.4			0.4			2.7
Non-cash operating working capital		180.1			439.3			174.2			184.8			348.9			460.5			502.9			245.8			333.1			356.5			377.5
Sales		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			2,620.0
Freight		346.1			255.8			249.7			238.7			234.5			215.2			216.7			222.1			212.5			216.5			226.6
Transportation and distribution		124.1			134.1			121.9			104.3			98.7			80.5			83.3			83.1			77.0			77.9			61.7
Net sales 6		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			2,331.7
Potash net sales
North American		656.9			470.5			495.6			347.5			230.6			215.3			232.1			237.8			237.4			227.6			210.2
Offshore		909.6			576.0			668.3			504.6			336.2			300.7			293.4			340.9			325.9			317.9			294.0
Miscellaneous and purchased product		13.5			11.7			13.0			42.7			52.3			28.5			6.3			3.4			2.3			2.9			3.8
Total		1,580.0			1,058.2			1,176.9			894.8			619.1			544.5			531.8			582.1			565.6			548.4			508.0
Potash sales (thousands KCl tonnes)
North American		3,471			2,785			3,144			3,246			2,870			2,780			2,894			2,939			2,871			2,702			3,017
Offshore		5,929			4,411			5,020			5,030			4,213			3,547			3,349			3,973			3,603			3,581			3,623
Total		9,400			7,196			8,164			8,276			7,083			6,327			6,243			6,912			6,474			6,283			6,640
Weighted average shares outstanding
Basic (thousands)		315,641			311,880			325,704			323,901			313,380			312,126			311,274			314,460			325,380			325,062			313,650
Diluted (thousands)		324,308			318,689			333,234			332,217			313,380			313,896			313,116			316,218			325,380			327,009			316,926

Certain of the prior years’ figures have been reclassified to conform with the current year’s presentation.

See footnotes on Page 68.

POTASHCORP 2007 FINANCIAL REVIEW

68

       F I N A N C I A L  P E R F O R M A N C E  I N D I C A T O R S

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	The after-tax effects of asset impairment, plant shutdown, plant closure and office consolidation charges and the gain on sale of long-term investments are included (as applicable) in the data for 2007, 2006, 2004, 2003, 2000 and 1999 in the amounts of $18.6, $4.5, $(30.8), $203.2, $1.5 and $547.1, respectively.
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 asset impairment, plant shutdown, plant closure and office consolidation charges, nor the gain on sale of long-term investments. The non-cash effects of these items applicable to 2007, 2006, 2004, 2003, 2000 and 1999 were $26.5, $6.3, $(30.8), $245.9, $(5.6) and $563.7, respectively. Considering the effects of these non-cash items, adjusted EBITDA for 2007, 2006, 2004, 2003, 2000 and 1999 would have been $1,906.3, $1,124.2, $723.5, $417.7, $508.2 and $401.8, respectively.
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 long-term investments

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 + interest – current income taxes + depreciation and amortization

Cash flow return = cash flow / average (total assets – cash and cash equivalents + accumulated depreciation and amortization – accounts payable and accrued charges)

Current income taxes = income tax expense (recovery) – provision for (recovery of) future income tax

Debt to capital = total debt / (total debt + total shareholders’ equity)

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 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 2007 FINANCIAL REVIEW

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M A N A G E M E N T ’ S  R E S P O N S I B I L I T Y		69

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 2007 included on Page 71.

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, 2007. The effectiveness of the company’s internal control over financial reporting as of December 31, 2007 has been audited by Deloitte & Touche LLP, as reflected in their report for 2007 included on Page 70.

W. Doyle	W. Brownlee
President and	Executive Vice President and
Chief Executive Officer	Chief Financial Officer
February 15, 2008

POTASHCORP 2007 FINANCIAL REVIEW

 70

     A C C O U N T A N T S ’  R E P O R T S

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, 2007, 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, 2007, 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 of the Company as of and for the year ended December 31, 2007 and our report dated February 15, 2008 expresses an unqualified opinion on these consolidated financial statements and includes an explanatory paragraph referring to changes in the Company’s accounting for financial instruments and for mine stripping costs.

Independent Registered Chartered Accountants
Saskatoon, Canada

February 15, 2008

POTASHCORP 2007 FINANCIAL REVIEW

A C C O U N T A N T S ’  R E P O R T S 71

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, 2007 and 2006, the related consolidated statements of operations and retained earnings and cash flow for each of the three years in the period ended December 31, 2007, and the related consolidated statements of comprehensive income and accumulated other comprehensive income for the year ended December 31, 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, 2007 and 2006, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2007 in conformity with Canadian generally accepted accounting principles.

As discussed in Note 3 to the consolidated financial statements, in 2007 the Company: (1) changed its method of accounting for financial instruments to conform to Canadian Institute of Chartered Accountants (“CICA”) Handbook Sections 1530 Comprehensive Income, 3251 Equity, 3855 Financial Instruments – Recognition and Measurement, and 3865 Hedges, and (2) changed its method of accounting for mine stripping costs to conform to CICA Emerging Issues Committee Abstract No. 160 Stripping Costs Incurred in the Production Phase of a Mining Operation.

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, 2007, 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 15, 2008 expresses an unqualified opinion on the Company’s internal control over financial reporting.

Independent Registered Chartered Accountants
Saskatoon, Canada

February 15, 2008

POTASHCORP 2007 FINANCIAL REVIEW

72

   C O N S O L I D A T E D  F I N A N C I A L  S T A T E M E N T S 

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

as at December 31	in millions of US dollars except share amounts
	2007		2006
Assets
Current assets
Cash and cash equivalents	$	719.5	$	325.7
Accounts receivable (Note 4)		596.2		442.3
Inventories (Note 5)		428.1		501.3
Prepaid expenses and other current assets		36.7		40.9
Current portion of derivative instrument assets (Note 6)		30.8		–
		1,811.3		1,310.2
Derivative instrument assets (Note 6)		104.2		–
Property, plant and equipment (Note 7)		3,887.4		3,525.8
Investments (Note 8)		3,581.5		1,148.9
Other assets (Note 9)		210.7		105.8
Intangible assets (Note 10)		24.5		29.3
Goodwill (Note 10)		97.0		97.0
	$	9,716.6	$	6,217.0
Liabilities
Current liabilities
Short-term debt (Note 11)	$	90.0	$	157.9
Accounts payable and accrued charges (Note 12)		911.7		545.2
Current portion of long-term debt (Note 13)		0.2		400.4
		1,001.9		1,103.5
Long-term debt (Note 13)		1,339.4		1,357.1
Future income tax liability (Note 25)		988.1		632.1
Accrued pension and other post-retirement benefits (Note 15)		244.8		219.6
Accrued environmental costs and asset retirement obligations (Note 16)		121.0		110.3
Other non-current liabilities and deferred credits		2.7		14.1
		3,697.9		3,436.7
Commitments, Contingencies and Guarantees (Notes 14, 29 and 30, respectively)
Shareholders’ Equity
Share capital (Note 17)		1,461.3		1,431.6
Unlimited authorization of common shares without par value; issued and outstanding 316,411,209 and 314,403,147 shares at December 31, 2007 and 2006, respectively
Unlimited authorization of first preferred shares; none outstanding
Contributed surplus (Note 18)		98.9		62.3
Accumulated other comprehensive income		2,178.9		–
Retained earnings		2,279.6		1,286.4
		6,018.7		2,780.3
	$	9,716.6	$	6,217.0

(See Notes to the Consolidated Financial Statements)

Approved by the Board of Directors,

Director	Director

POTASHCORP 2007 FINANCIAL REVIEW

C O N S O L I D A T E D     F I N A N C I A L    S T A T E M E N T S  73 

CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS

for the years ended December 31	in millions of US dollars except per-share amounts
	2007			2006			2005
Sales (Note 19)	$	5,234.2		$	3,766.7		$	3,847.2
Less: Freight		346.1			255.8			249.7
Transportation and distribution		124.1			134.1			121.9
Cost of goods sold (Note 20)		2,882.8			2,374.8			2,350.6
Gross Margin		1,881.2			1,002.0			1,125.0
Selling and administrative (Note 21)		212.6			158.4			144.5
Provincial mining and other taxes (Note 22)		135.4			66.5			137.2
Foreign exchange loss (gain)		70.2			(4.4	)		12.5
Other income (Note 23)		(125.5	)		(94.0	)		(61.8	)
		292.7			126.5			232.4
Operating Income		1,588.5			875.5			892.6
Interest Expense (Note 24)		68.7			85.6			82.3
Income Before Income Taxes		1,519.8			789.9			810.3
Income Taxes (Note 25)		416.2			158.1			267.4
Net Income		1,103.6			631.8			542.9
Retained Earnings, Beginning of Year		1,286.4			716.9			701.5
Change in Accounting Policy (Note 3)		0.2			–			–
Repurchase of Common Shares (Note 17)		–			–			(462.5	)
Dividends		(110.6	)		(62.3	)		(65.0	)
Retained Earnings, End of Year	$	2,279.6		$	1,286.4		$	716.9
Net Income per Share – Basic (Note 26)	$	3.50		$	2.03		$	1.67
Net Income per Share – Diluted (Note 26)	$	3.40		$	1.98		$	1.63
Dividends per Share	$	0.35		$	0.20		$	0.20

(See Notes to the Consolidated Financial Statements)

POTASHCORP 2007 FINANCIAL REVIEW

74 

C O N S O L I D A T E D     F I N A N C I A L    S T A T E M E N T S 

CONSOLIDATED STATEMENTS OF CASH FLOW

for the years ended December 31		in millions of US dollars
		2007				2006				2005
Operating Activities
Net income		$	1,103.6			$	631.8			$	542.9
Adjustments to reconcile net income to cash provided by operating activities
Depreciation and amortization	291.3				242.4				242.4
Stock-based compensation	38.6				29.5				27.5
Loss (gain) on disposal of property, plant and equipment and long-term investments	7.9				(8.6	)			11.8
Provision for auction rate securities	26.5				–				–
Provision for plant shutdowns – phosphate segment	–				6.3				–
Foreign exchange on future income tax	52.4				0.5				8.9
Provision for future income tax	119.6				50.0				40.1
Undistributed earnings of equity investees	(35.6	)			(24.5	)			(33.5	)
Unrealized gain on derivative instruments	(21.1	)			–				–
Other long-term liabilities	(57.9	)			13.4				20.2
Subtotal of adjustments			421.7				309.0				317.4
Changes in non-cash operating working capital
Accounts receivable	(154.6	)			11.0				(107.6	)
Inventories	60.3				13.9				(119.9	)
Prepaid expenses and other current assets	7.0				0.2				(5.8	)
Accounts payable and accrued charges	250.9				(269.1	)			238.1
Subtotal of changes in non-cash operating working capital			163.6				(244.0	)			4.8
Cash provided by operating activities			1,688.9				696.8				865.1
Investing Activities
Additions to property, plant and equipment			(607.2	)			(508.6	)			(382.7	)
Purchase of long-term investments			(30.7	)			(352.5	)			(190.9	)
Purchase of investments in auction rate securities			(132.5	)			–				–
Proceeds from disposal of property, plant and equipment and long-term investments			4.5				22.0				12.4
Other assets and intangible assets			7.8				(0.6	)			5.9
Cash used in investing activities			(758.1	)			(839.7	)			(555.3	)
Cash before financing activities			930.8				(142.9	)			309.8
Financing Activities
Proceeds from long-term debt obligations			1.5				483.9				–
Repayment and issue costs of long-term debt obligations			(403.6	)			(1.3	)			(10.1	)
(Repayment of) proceeds from short-term debt obligations			(67.9	)			(94.3	)			158.7
Dividends			(93.6	)			(60.9	)			(65.4	)
Repurchase of common shares			–				–				(851.9	)
Issuance of common shares			26.6				47.3				93.9
Cash (used in) provided by financing activities			(537.0	)			374.7				(674.8	)
Increase (Decrease) in Cash and Cash Equivalents			393.8				231.8				(365.0	)
Cash and Cash Equivalents, Beginning of Year			325.7				93.9				458.9
Cash and Cash Equivalents, End of Year		$	719.5			$	325.7			$	93.9
Cash and cash equivalents comprised of:
Cash		$	23.1			$	7.9			$	18.4
Short-term investments			696.4				317.8				75.5
		$	719.5			$	325.7			$	93.9
Supplemental cash flow disclosure
Interest paid		$	93.9			$	106.8			$	86.3
Income taxes paid		$	221.0			$	226.8			$	141.6

(See Notes to the Consolidated Financial Statements)

POTASHCORP 2007 FINANCIAL REVIEW

C O N S O L I D A T E D  F I N A N C I A L  S T A T E M E N T S  75 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

for the year ended December 31, 2007 in millions of US dollars

	Before						Net of
	Income Taxes			Income Taxes			Income Taxes
Net Income	$	1,519.8		$	416.2		$	1,103.6
Other comprehensive income
Net increase in unrealized gains on available-for-sale securities1		1,396.2			87.1			1,309.1
Net gains on derivatives designated as cash flow hedges2		49.4			14.8			34.6
Reclassification to income of net gains on cash flow hedges2		(57.8	)		(17.3	)		(40.5	)
Unrealized foreign exchange gains on translation of self-sustaining foreign operations		6.7			–			6.7
Other Comprehensive Income	$	1,394.5		$	84.6		$	1,309.9
Comprehensive Income	$	2,914.3		$	500.8		$	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.

² Cash flow hedges are comprised of natural gas derivative instruments.

CONSOLIDATED STATEMENT OF ACCUMULATED OTHER COMPREHENSIVE INCOME

as at and for the year ended December 31, 2007 in millions of US dollars

	Net unrealized			Net unrealized			Unrealized foreign
	gains on			gains on derivatives			exchange gains
	available-for-sale			designated as			on self-sustaining
(Net of related income taxes)	securities			cash flow hedges			foreign operations			Total
Cumulative effect adjustment at January 1, 2007 (Note 3)	$	789.6		$	79.4		$	–		$	869.0
Increase (decrease) for 2007		1,309.1			(5.9	)		6.7			1,309.9
Accumulated other comprehensive income, December 31, 2007	$	2,098.7	1	$	73.5	2	$	6.7	3	$	2,178.9
Retained earnings, December 31, 2007											2,279.6
Accumulated Other Comprehensive Income and Retained Earnings, December 31, 2007										$	4,458.5

¹  $2,284.1 before income taxes.    ²  $119.6 before incone taxes.    ³  $6.7 before income taxes.

(See Notes to the Consolidated Financial Statements)

Notes to the PotashCorp Consolidated Financial Statements 

IN MILLIONS OF US DOLLARS EXCEPT SHARE AND PER-SHARE AMOUNTS

1.	Description of Business	76
2.	Significant Accounting Policies	76
3.	Changes in Accounting Policies	81
4.	Accounts Receivable	82
5.	Inventories	82
6.	Derivative Financial Instruments	83
7.	Property, Plant and Equipment	83
8.	Investments	84
9.	Other Assets	85
10.	Intangible Assets and Goodwill	85
11.	Short-Term Debt	85
12.	Accounts Payable and Accrued Charges	85
13.	Long-Term Debt	86

14.	Commitments	87
15.	Pension and Other Post-Retirement Benefits	87
16.	Environmental Costs and Asset Retirement Obligations	91
17.	Share Capital	92
18.	Contributed Surplus	93
19.	Segment Information	93
20.	Cost of Goods Sold	95
21.	Selling and Administrative	96
22.	Provincial Mining and Other Taxes	96
23.	Other Income	96
24.	Interest Expense	96

25.	Income Taxes	96
26.	Net Income per Share	98
27.	Stock-Based Compensation	98
28.	Financial Instruments and Risk Management	100
29.	Contingencies	101
30.	Guarantees	103
31.	Related Party Transactions	103
32.	Comparative Figures	104
33.	Reconciliation of Canadian and United States Generally Accepted Accounting Principles	104
34.	Subsequent Events	111

POTASHCORP 2007 FINANCIAL REVIEW

76 

 Notes to the PotashCorp 2007 Consolidated Financial Statements 

IN MILLIONS OF US DOLLARS EXCEPT SHARE AND PER-SHARE AMOUNTS

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 and one in Brazil

– 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 168 terminal and warehouse facilities, some of which have multi-product capability, for a total of 206 strategically located distribution points, and services customers with a fleet of approximately 8,570 railcars. In the offshore market, the company owns or leases two warehouses in Brazil and one in China.

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, nitrogen and phosphate products in North America, and execute offshore marketing and sales for the company’s New Brunswick potash. PCS Sales (USA), Inc. generally executes offshore marketing and sales for the company’s nitrogen products. 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.

2. SIGNIFICANT ACCOUNTING POLICIES

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”)

· PCS Fosfatos do Brasil Ltda.

All significant intercompany balances and transactions have been eliminated.

Cash Equivalents

Highly liquid investments with an original maturity of three months or less are considered to be cash equivalents.

Inventories

Inventories of finished products, raw materials and intermediate products are valued at the lower of cost and market. Cost for substantially all product inventories is determined using the weighted average cost method. Certain inventories of materials and supplies are valued at the lower of average cost and replacement cost, and certain inventories of materials and supplies are valued at the lower of average cost and market.

Notes to the PotashCorp 2007 Consolidated Financial Statements  77 

IN MILLIONS OF US DOLLARS EXCEPT SHARE AND PER-SHARE AMOUNTS

2. Significant Accounting Policies continued

Prepaid Expenses

Prepaid expenses include prepaid freight and throughput costs relating to product inventory stored at warehouse and terminal facilities.

Derivative Financial Instruments

See Note 3 for changes in accounting policies in 2007. The following reflects policies in place for 2007.

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 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 hedged items. A hedging relationship is terminated if the hedge ceases to be effective; if the underlying asset or liability being hedged is derecognized or if it is no longer probable that the anticipated transaction will occur; or if

the derivative instrument is no longer designated as a hedging instrument. If a hedging relationship is terminated, 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 as gains, losses, revenue and expenses of the previously hedged item are recognized.

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.

• 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.

• 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 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 are recognized through other income in earnings.

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 unit-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.

78 

 Notes to the PotashCorp 2007 Consolidated Financial Statements 

IN MILLIONS OF US DOLLARS EXCEPT SHARE AND PER-SHARE AMOUNTS

2. Significant Accounting Policies continued

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 specific identification 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.

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.

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.

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 up-front lease costs are capitalized to other assets and amortized over the life of the leases, the latest of which is expected to extend through 2038 when finalized.

Intangible Assets

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.

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.

Leases

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.

Long-Term Debt

See Note 3 for changes in accounting policies in 2007. The following reflects policies in place for 2007.

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.

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.

Notes to the PotashCorp 2007 Consolidated Financial Statements  79 

IN MILLIONS OF US DOLLARS EXCEPT SHARE AND PER-SHARE AMOUNTS

2. Significant Accounting Policies continued

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 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, those 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 actual long-term 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.

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.

Income Taxes

Taxation on earnings comprises current and future income tax. Taxation is recognized in the income statement 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.

Stock-Based Compensation Plans

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

80 

  Notes to the PotashCorp 2007 Consolidated Financial Statements 

IN MILLIONS OF US DOLLARS EXCEPT SHARE AND PER-SHARE AMOUNTS

2. Significant Accounting Policies continued

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 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.

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.

Fair Value

Fair value represents point-in-time estimates that may change in subsequent reporting periods due to market conditions or other factors.

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.

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. Futures contracts are exchange-traded and fair value is determined based on exchange prices. Fair value for other forward contracts with underlyings that are exchange-traded is determined based on these prices. Swaps and option agreements are traded in the over-the-counter market and fair value is calculated based on models and other valuation techniques that include prices sourced from observable data. Fair value for 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. 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 that reflect the company’s own expectations about the assumptions that market participants would use in pricing the asset in a current transaction (including information obtained on transactions in the marketplace for other investments that may be considered similar, 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.

Revenue Recognition

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.

Recent Accounting Pronouncements

Determining the Variability to be Considered in Applying the Variable Interest Entity Standards

In September 2006, the Emerging Issues Committee issued Abstract No. 163, “Determining the Variability to be Considered in Applying AcG-15” (“EIC-163”). This guidance provides additional clarification on how to analyze and consolidate a variable interest entity (“VIE”). EIC-163 concludes that the “by-design” approach should be the method used to assess variability (that is created by risks the entity is designed to create and pass along to its interest holders) when applying the VIE standards. The “by-design” approach focuses on the substance of the risks created over the form of the relationship. The guidance may be applied to all entities (including newly created entities) with which an enterprise first becomes involved, and to all entities previously required to be analyzed under the VIE standards when a reconsideration event has occurred, effective January 1, 2007. The implementation of this guidance did not have a material impact on the company’s consolidated financial statements.

Capital Disclosures

In December 2006, the Canadian Institute of Chartered Accountants (“CICA”) issued Section 1535, “Capital Disclosures”. This Section establishes standards for disclosing information about an entity’s capital and how it is managed. This Section applies to interim and annual financial statements relating to fiscal years beginning on or after October 1, 2007, and is not expected to have a material impact on the company’s consolidated financial statements.

Financial Instruments

Effective January 1, 2007, the company adopted CICA Section 3861, “Financial Instruments – Disclosure and Presentation”, which

Notes to the PotashCorp 2007 Consolidated Financial Statements  81 

IN MILLIONS OF US DOLLARS EXCEPT SHARE AND PER-SHARE AMOUNTS

2. Significant Accounting Policies continued

requires entities to provide disclosures in their financial statements that enable users to evaluate: (1) the significance of financial instruments for the entity’s financial position and performance; and (2) the nature and extent of risks arising from financial instruments to which the entity is exposed during the period and at the balance sheet date, and how the entity manages those risks.

In December 2006, the CICA issued Section 3863, “Financial Instruments – Presentation”, to enhance financial statement users’ understanding of the significance of financial instruments to an entity’s financial position, performance and cash flows. This Section 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. This standard harmonizes disclosures with International Financial Reporting Standards. This Section applies to interim and annual financial statements relating to fiscal years beginning on or after October 1, 2007, and is not expected to have a material impact on the company’s consolidated financial statements.

In March 2007, the CICA issued Section 3862, “Financial Instruments – Disclosures”, which replaces Section 3861 and provides expanded disclosure requirements that provide additional detail by financial asset and liability categories. This standard harmonizes disclosures with International Financial Reporting Standards. This Section applies to interim and annual financial statements relating to fiscal years beginning on or after October 1, 2007, and is not expected to have a material impact on the company’s consolidated financial statements.

Inventories

In June 2007, the CICA issued Section 3031, “Inventories”, which replaces Section 3030 and harmonizes the Canadian standard related to inventories with International Financial Reporting Standards. This Section provides more extensive guidance on the determination of cost, including allocation of overhead; narrows the permitted cost formulas; requires impairment testing; and expands the disclosure requirements to increase transparency. This Section applies to interim and annual financial statements relating to fiscal years beginning on or after January 1, 2008, and is not expected to have a material impact on the company’s consolidated financial statements.

International Financial Reporting Standards

In May 2007, the CICA published an updated version of its “Implementation Plan for Incorporating International Financial Reporting Standards (“IFRS”) into Canadian GAAP”. This plan includes an outline of the key decisions that the CICA will need to make as it implements the Strategic Plan for publicly accountable enterprises that will converge Canadian generally accepted

accounting principles with IFRS. The changeover date from Canadian GAAP to IFRS is for annual and interim financial statements relating to fiscal years beginning on or after January 1, 2011.

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 harmonizes Canadian standards with International Financial Reporting Standards and applies to annual and interim financial statements relating to fiscal years beginning on or after October 1, 2008. It is not expected to have a material impact on the company’s consolidated financial statements.

3. CHANGES IN ACCOUNTING POLICIES

Comprehensive Income, Equity, Financial Instruments and Hedges

Effective January 1, 2007, the company adopted CICA Section 1530, “Comprehensive Income”, Section 3251, “Equity”, Section 3855, “Financial Instruments – Recognition and Measurement” and Section 3865, “Hedges”. These pronouncements increase harmonization with US GAAP. Under the standards:

• Financial assets are classified as loans and receivables, held-to-maturity, held-for-trading or available-for-sale. Loans and receivables include all loans and receivables except debt securities and are accounted for at amortized cost. Held-to-maturity classification is restricted to fixed maturity instruments that the company intends and is able to hold to maturity and are accounted for at amortized cost. Held-for-trading instruments include all derivative financial instruments not included in a hedging relationship and any designated instruments and are recorded at fair value with realized and unrealized gains and losses reported in net income. The remaining financial assets are classified as available-for-sale. These are recorded at fair value with unrealized gains and losses reported in a new category of the Consolidated Statements of Financial Position under shareholders’ equity called AOCI;

• Financial liabilities are classified as either held-for-trading or other. Held-for-trading instruments are recorded at fair value with realized and unrealized gains and losses reported in net income. Other instruments are accounted for at amortized cost with gains and losses reported in net income in the period that the liability is derecognized; and

• Derivative instruments (“derivatives”) are classified as held-for-trading unless designated as hedging instruments. All derivatives are recorded at fair value on the Consolidated Statements of Financial

82 

   Notes to the PotashCorp 2007 Consolidated Financial Statements 

IN MILLIONS OF US DOLLARS EXCEPT SHARE AND PER-SHARE AMOUNTS

3. Changes in Accounting Policies continued

Position. For derivatives that hedge the changes in fair value of an asset or liability, changes in the derivatives’ fair value are reported in net income and are substantially offset by changes in the fair value of the hedged asset or liability attributable to the risk being hedged. For derivatives that hedge variability in cash flows, the effective portion of the changes in the derivatives’ fair value is initially recognized in OCI and the ineffective portion is recorded in net income. Amounts temporarily recorded in AOCI will subsequently be reclassified to net income in the periods when net income is affected by the variability in the cash flows of the hedged item.

These standards have been applied prospectively; accordingly, comparative amounts for prior periods have not been restated. The adoption of these standards resulted in the following adjustments as of January 1, 2007 in accordance with the transition provisions:

(1) Available-for-sale securities

• The company’s investments in Israel Chemicals Ltd. (“ICL”) and Sinofert Holdings Limited (“Sinofert”) have been classified as available-for-sale and recorded at fair value in the Consolidated Statements of Financial Position, resulting in an increase in investments of $887.8, an increase to AOCI of $789.6 and an increase in future income tax liability of $98.2;

(2) Deferred debt costs

• Bond issue costs were reclassified from other assets to long-term debt and deferred swap gains were reclassified from other non-current liabilities to long-term debt, resulting in a reduction in other assets of $23.9, a reduction in other non-current liabilities of $6.6 and a reduction in long-term debt of $17.3;

(3) Natural gas derivatives

• The company employs futures, swaps and option agreements to establish the cost of a portion of its natural gas requirements. These derivative instruments generally qualify for hedge accounting. Derivative instruments were recorded on the Consolidated Statements of Financial Position at fair value, resulting in an increase in current portion of derivative instrument assets of $50.9, an increase in derivative instrument assets (non-current) of $69.4, an increase in future income tax liability of $45.6 and an increase in AOCI of $74.7;

• Hedge ineffectiveness on these derivative instruments was recorded as a cumulative effect adjustment to opening retained earnings, net of tax, resulting in an increase in retained earnings of $0.2 and a decrease in AOCI of $0.2. The effect on basic and diluted earnings per share was not significant; and

• Deferred realized hedging gains were reclassified from inventory to AOCI, resulting in an increase in inventory of $8.0, an increase in future income tax liability of $3.1 and an increase in AOCI of $4.9.

Accounting Changes

In July 2006, the CICA revised Section 1506, “Accounting Changes”, which requires that: (1) voluntary changes in accounting policy are made only if they result in the financial statements providing reliable and more relevant information; (2) changes in accounting policy are generally applied retrospectively; and (3) prior period errors are corrected retrospectively. Section 1506 is effective for fiscal years beginning on or after January 1, 2007. The implementation of this guidance did not have a material impact on the company’s consolidated financial statements.

Stripping Costs Incurred in the Production Phase of
a Mining Operation

In March 2006, the Emerging Issues Committee issued Abstract No. 160, “Stripping Costs Incurred in the Production Phase of a Mining Operation” (“EIC-160”). EIC-160 discusses the treatment of costs associated with the activity of removing overburden and other mine waste minerals in the production phase of a mining operation. It concludes that such stripping costs should be accounted for according to the benefit received by the entity and recorded as either a component of inventory or a betterment to the mineral property, depending on the benefit received. The implementation of EIC-160, effective January 1, 2007, resulted in a decrease in inventory of $21.1, a decrease in other assets of $7.4 and an increase in property, plant and equipment of $28.5.

4. ACCOUNTS RECEIVABLE

	2007			2006
Trade accounts – Canpotex	$	110.2		$	84.1
– Other		439.0			329.3
Non-trade accounts		52.9			33.6
		602.1			447.0
Less allowance for doubtful accounts		(5.9	)		(4.7	)
	$	596.2		$	442.3

5. INVENTORIES

	20071		2006
Finished products	$	186.6	$	237.1
Intermediate products		70.7		98.5
Raw materials		68.0		62.4
Materials and supplies		102.8		103.3
	$	428.1	$	501.3

¹ See changes in accounting policies (Note 3).

Notes to the PotashCorp 2007 Consolidated Financial Statements  83 

IN MILLIONS OF US DOLLARS EXCEPT SHARE AND PER-SHARE AMOUNTS

6. DERIVATIVE FINANCIAL INSTRUMENTS

	20071
	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

¹ See changes in accounting policies (Note 3).

At times the company employs futures, swaps and option agreements to establish the cost of a portion of its natural gas requirements. These instruments are intended to hedge the future cost of the anticipated natural gas purchases for its US nitrogen and phosphate plants. Under these arrangements, the company receives or makes payments based on the differential between a specified price and the actual spot price of natural gas. The company has certain available lines of credit that are used to reduce cash margin requirements to maintain the derivatives. At December 31, 2007, it had collected cash margin requirements of $33.9 (2006 – $22.8), which were included in accounts payable and accrued charges (see Note 12).

As at December 31, 2007, the company had derivatives qualifying for hedge accounting in the form of swaps which represented a notional amount of 69.4 million MMBtu with maturities in 2008 through 2017. For the year ended December 31, 2007, gains of $48.1 were recognized in cost of goods sold excluding ineffectiveness, which resulted in an additional gain of $9.6 for the year. Of the gains and losses at December 31, 2007, approximately $23.9 of net gains will be reclassified to cost of goods sold within the next 12 months. As at December 31, 2007, gains from settled hedging transactions deferred in inventory were $NIL (2006 – $8.0). The fair value of the company’s natural gas hedging contracts at December 31, 2007 approximated $127.5 (including liabilities of $0.1 recorded in accounts payable and accrued charges) (2006 – $120.3), using discount rates between 3.82 percent and 4.70 percent (2006 – between 5.06 percent and 5.37 percent) depending on the settlement date.

As at December 31, 2007, the company had entered into foreign currency forward contracts to sell US dollars and receive Canadian dollars in the notional amount of $60.0 (2006 – $100.0) at an average exchange rate of 1.0176 (2006 – 1.1478) per US dollar and to sell US dollars and receive Hong Kong dollars in the notional amount of $174.5 (2006 – $NIL) at an average exchange rate of 7.7937 (2006 – NIL) per US dollar. The company had also entered into other small forward contracts. Maturity dates for all forward contracts are within 2008 and 2009. The company recognized a gain of $13.0 for the year ended December 31, 2007 in foreign exchange (gain) loss related to foreign currency forward contracts classified as held-for-trading. As at December 31, 2007, the company had entered into an agreement for the forward purchase of shares of Sinofert that

settled in January 2008. The fair value of these contracts at December 31, 2007 was a gain of $7.3.

The current portion of derivative instrument assets and liabilities represents unrealized gains and losses with settlement dates in the next 12 months.

7. PROPERTY, PLANT AND EQUIPMENT

	20071
			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

¹ See changes in accounting policies (Note 3).

	2006
			Accumulated
			Depreciation and		Net Book
	Cost		Amortization		Value
Land and improvements	$	233.3	$	51.9	$	181.4
Buildings and improvements		547.9		206.4		341.5
Machinery and equipment		4,618.0		1,750.4		2,867.6
Mine development costs		200.4		65.1		135.3
	$	5,599.6	$	2,073.8	$	3,525.8

Depreciation and amortization of property, plant and equipment included in cost of goods sold and in selling and administrative expenses was $279.8 (2006 – $226.3; 2005 – $227.4). The net carrying amount of property, plant and equipment not being amortized at December 31, 2007 because it was under construction or development was $608.8 (2006 – $381.6).

During the year, the company recorded an impairment charge of $NIL (2006 – $6.3; 2005 – $NIL) relating to certain assets. As at December 31, 2007, the company determined that there were no triggering events requiring impairment analysis. Interest capitalized to property, plant and equipment during the year was $21.8 (2006 – $19.1; 2005 – $5.7).

The opening balance of pre-stripping costs at January 1, 2007 was $28.5, additions during 2007 were $24.8 and amortization was $19.9, for a balance at December 31, 2007 of $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

84 

   Notes to the PotashCorp 2007 Consolidated Financial Statements 

IN MILLIONS OF US DOLLARS EXCEPT SHARE AND PER-SHARE AMOUNTS

7. Property, Plant and Equipment continued

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 2007 was $59.8 (2006 – $(2.6), 2005 – $26.0).

8. INVESTMENTS

	20071		2006
Investments at equity
Sociedad Quimica y Minera de Chile S.A. (“SQM”) – 32 percent ownership; quoted market value of $1,751.7	$	550.0	$	514.7
Arab Potash Company (“APC”) – 28 percent ownership; quoted market value of $1,121.5		231.2		223.7
Other		18.8		19.1
Available-for-sale investments
Sinofert – 19 percent ownership		1,081.2		223.7
ICL – 10 percent ownership		1,644.3		167.7
Auction rate securities		56.0		–
	$	3,581.5	$	1,148.9

¹ See changes in accounting policies (Note 3).

During 2007, the company acquired an additional 1,011,062 shares of SQM for cash consideration of $16.8 which was financed by cash on hand. The company’s ownership interest in SQM remained at approximately 32 percent. During July 2007, the company’s ownership interest in Sinofert was diluted from 20 percent to approximately 19 percent due to issuance of shares of Sinofert.

There were no amounts accrued related to acquisitions of long-term investments as of December 31, 2007 or 2005. At December 31, 2006, the company had amounts in accounts payable related to the acquisition of SQM shares. As a result, the company reclassified $12.5 in its Consolidated Statements of Cash Flow from operating accounts payable to reduce the cash outflow related to the purchase of long-term investments for the year; the cash outflow was recognized in 2007.

At December 31, 2007, the difference between the carrying value of SQM and the proportionate share of net book value was $196.9 (2006 – $190.7). The differences were allocated to the fair value of the reserves and mining concessions and will be recognized as a reduction in the future share of earnings from SQM on a unit 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 $65.4 (2006 – $72.1). 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 unit 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 $76.2 (2006 – $54.4; 2005 – $52.1) is included in other income (see Note 23). Dividends received from equity investees were $40.6 (2006 – $29.9; 2005 – $18.6).

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 worsening negative conditions in the global credit markets, auctions for the auction rate securities held in the company’s account have continued to fail to settle on their respective settlement dates. Consequently, the investments are not currently liquid and 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. The company has determined the fair value to be $56.0 as of December 31, 2007, representing an impairment of $76.5 as compared to the par value of the securities. Of the total impairment, $50.0 has been classified as temporary and $26.5 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. Two securities were identified as being other-than-temporarily impaired based on the vintage of

Notes to the PotashCorp 2007 Consolidated Financial Statements  85 

IN MILLIONS OF US DOLLARS EXCEPT SHARE AND PER-SHARE AMOUNTS

8. Investments continued

the underlying securities and complexity of the structures. The entire impairment on these two securities was therefore classified as other-than-temporary. For those investments for which the impairment in fair value is considered temporary, the company has the ability to hold the securities until the temporary impairment in fair value is recovered, which may not be until a recovery of the auction process or until 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.

In prior years, auction rate securities were included with cash and cash equivalents. The company has not reclassified prior years as the adjustments are not considered material.

9. OTHER ASSETS

	20071		2006
Deferred charges – net of accumulated amortization of $16.9 (2006 – $50.0)	$	24.0	$	44.5
Accrued pension benefit asset		111.7		26.8
Up-front lease costs – net of accumulated amortization of $2.2 (2006 – $NIL)		24.7		–
Other		50.3		34.5
	$	210.7	$	105.8

¹ See changes in accounting policies (Note 3).

Amortization of deferred charges included in cost of goods sold and in selling and administrative expenses was $5.4 (2006 – $9.2; 2005 – $10.9).

10. INTANGIBLE ASSETS AND GOODWILL

	2007		2006
Intangible assets – net of accumulated amortization of $27.9 (2006 – $22.6)	$	24.5	$	29.3
Goodwill – net of accumulated amortization of $7.3 (2006 – $7.3)	$	97.0	$	97.0

Intangible assets relate primarily to production and technology rights and computer software. 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 2007 was $6.1 (2006 – $6.9; 2005 – $4.1). Amortization expense in each of the next five years calculated upon such assets held as at December 31, 2007 is estimated to be $3.9 for 2008, $3.8 for 2009, $3.3 for 2010, $1.0 for 2011 and $1.0 for 2012.

Substantially all of the company’s recorded goodwill relates to the nitrogen segment.

11. SHORT-TERM DEBT

Short-term debt was $90.0 at December 31, 2007 (2006 – $157.9). The weighted average interest rate on this debt was 5.17 percent (2006 – 5.51 percent). The company had an unsecured line of credit available for short-term financing (net of letters of credit of $23.9 and direct borrowings of $NIL) in the amount of $51.1 at December 31, 2007 (2006 – $57.7). In addition, the company is authorized to borrow a further $660.0 under its commercial paper program.

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. Outstanding letters of credit and direct borrowings reduce the amount available. The line of credit is 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 is 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 its termination. The company was in compliance with the above-mentioned covenants at December 31, 2007.

12. ACCOUNTS PAYABLE AND ACCRUED CHARGES

	2007		2006
Trade accounts	$	371.0	$	242.9
Income taxes		188.4		70.0
Accrued compensation		94.0		49.5
Deferred revenue		42.1		25.2
Margin deposits		33.9		22.8
Other taxes		32.2		12.9
Dividends		32.0		16.1
Accrued deferred share units		29.7		10.2
Accrued interest		29.2		24.6
Current portion accrued environmental costs and asset retirement obligations		13.7		9.0
Current portion pension and other post-retirement benefits		7.9		8.9
Other payables		37.6		53.1
	$	911.7	$	545.2

86

      Notes to the PotashCorp 2007 Consolidated Financial Statements 

IN MILLIONS OF US DOLLARS EXCEPT SHARE AND PER-SHARE AMOUNTS

13. LONG-TERM DEBT

	20071						2006
				Effective
				Interest Rate 2
Notes Payable
7.125% notes payable June 15, 2007	$	–			–		$	400.0
7.750% notes payable May 31, 2011		600.0			7.65	%		600.0
4.875% notes payable March 1, 2013		250.0			5.08	%		250.0
5.875% notes payable December 1, 2036		500.0			6.11	%		500.0
The above series of notes were issued under US shelf registration statements covering up to $4,000.0 of debt securities. The 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 at least equal to the principal amount of the notes to be redeemed, plus accrued interest. Under certain conditions related to 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.
Other		8.5			7.60	%		7.5
		1,358.5						1,757.5
Less net unamortized debt costs		(24.6	)					–
Add unamortized interest rate swap gains		5.3						–
		1,339.2						1,757.5
Less current maturities		(0.2	)					(400.4	)
Add current portion of amortization		0.4						–
	$	1,339.4					$	1,357.1

¹ See changes in accounting policies (Note 3).

² 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 it 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 (2006 – $5.9) pursuant to these arrangements. The company incurred $3.2 of debt issue costs as a result of one such arrangement entered into during 2007, which were included as a reduction to long-term debt and are being amortized using the effective interest rate method over the term of the related liability.

The company has a syndicated revolving credit facility which provides for unsecured advances of up to $750.0 (less the amount of direct borrowings and commercial paper outstanding). The facility was renewed in September 2005 for a five-year term, extended in September 2006 for one additional year, and extended in October 2007 through May 31, 2013. As at December 31, 2007, no amounts were outstanding and $660.0 was available under the facility. Principal covenants and events of default under the credit facility requirements are the same as those under the line of credit 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, 2007.

Long-term debt at December 31, 2007 will mature as follows:

2008	$	0.2
2009		0.3
2010		1.8
2011		600.3
2012		5.9
Subsequent years		750.0
	$	1,358.5

 Notes to the PotashCorp 2007 Consolidated Financial Statements 87

IN MILLIONS OF US DOLLARS EXCEPT SHARE AND PER-SHARE AMOUNTS

14. COMMITMENTS

Lease Commitments

The company has various long-term operating lease agreements for buildings, port facilities, equipment, ocean-going transportation vessels and railcars, the latest of which expires in 2022. Rental expense for operating leases for the years ended December 31, 2007, 2006 and 2005 was $79.3, $75.4 and $78.9, 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 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 2028.

Minimum future commitments under these contractual arrangements for the next five years and thereafter are shown below.

	Operating		Purchase		Other
	Leases		Commitments		Commitments
2008	$	97.4	$	272.1	$	22.7
2009		89.5		119.0		19.5
2010		79.3		102.0		18.7
2011		70.2		82.3		3.9
2012		66.6		66.0		3.7
Thereafter		254.2		272.8		19.8
Total	$	657.2	$	914.2	$	88.3

15. PENSION AND OTHER POST-RETIREMENT BENEFITS

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

The company has defined benefit pension plans that cover a substantial majority of its employees. 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.

88

     Notes to the PotashCorp 2007 Consolidated Financial Statements

IN MILLIONS OF US DOLLARS EXCEPT SHARE AND PER-SHARE AMOUNTS

15. Pension and Other Post-Retirement Benefits continued

Defined Benefit Plans

The components of net expense for the company’s pension and other post-retirement benefit plans, computed actuarially, were as follows:

	Pension									Other
	2007			2006			2005			2007			2006			2005
Costs arising in the period
Service cost for benefits earned during the year	$	15.3		$	14.2		$	13.8		$	6.1		$	4.7		$	5.7
Interest cost on projected benefit obligations		36.5			33.5			31.1			14.9			12.4			13.3
Actual return on plan assets		(44.3	)		(42.1	)		(34.3	)		–			–			–
Actuarial (gain) loss		(33.5	)		8.9			27.9			(12.0	)		18.4			(12.7	)
Plan amendments		0.3			1.4			3.5			–			(1.7	)		11.5
Plan curtailments		–			–			0.4			–			–			–
Change in valuation allowance		–			2.0			2.4			–			–			–
Costs arising in the period		(25.7	)		17.9			44.8			9.0			33.8			17.8
Difference between costs arising in the period and costs recognized in the period in respect of:
Return on plan assets		1.5			3.9			(2.7	)		–			–			–
Actuarial loss (gain)		40.8			(1.7	)		(23.6	)		16.4			(16.4	)		15.4
Plan amendments		1.5			1.0			(2.3	)		(2.9	)		(1.1	)		(13.0	)
Transitional obligation		0.9			1.6			1.4			0.2			0.4			0.3
Net expense	$	19.0		$	22.7		$	17.6		$	22.7		$	16.7		$	20.5

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
	2007			2006			2005			2007		2006		2005
Discount rate – obligation		6.50	%		5.85	%		5.70	%		6.50%		5.85%		5.70%
Discount rate – expense		5.85	%		5.70	%		5.75	%		5.85%		5.70%		5.75%
Long-term rate of return on assets		8.00	%		8.00	%		8.50	%		n/a		n/a		n/a
Rate of increase in compensation levels		4.00	%		4.00	%		4.00	%		n/a		n/a		n/a

The average remaining service period of the active employees covered by the company’s pension plans is 12.0 years (2006 – 11.5 years). The average remaining service period of the active employees covered by the company’s other benefits plans is 12.1 years (2006 – 11.8 years).

The assumed health-care cost trend rates are as follows:

	2007		2006		2005
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		2007		2006		2005

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, 2007 measurement date will be used to determine expense for fiscal 2008.

 Notes to the PotashCorp 2007 Consolidated Financial Statements 89

IN MILLIONS OF US DOLLARS EXCEPT SHARE AND PER-SHARE AMOUNTS

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 historic 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, 2007, and the next required valuations are as of January 1, 2008. The change in benefit obligations and change in plan assets for the above pension and other post-retirement plans were as follows:

	Pension						Other						Total
	2007			2006			2007			2006			2007			2006
Change in benefit obligations
Balance, beginning of year	$	626.4		$	595.3		$	247.4		$	222.6		$	873.8		$	817.9
Service cost		15.3			14.2			6.1			4.7			21.4			18.9
Interest cost		36.5			33.5			14.9			12.4			51.4			45.9
Participants’ contributions		0.3			0.3			–			0.1			0.3			0.4
Actuarial (gain) loss		(33.5	)		8.9			(12.0	)		18.4			(45.5	)		27.3
Foreign exchange rate changes		6.4			2.0			3.6			(0.2	)		10.0			1.8
Plan amendments		0.3			1.4			–			(1.7	)		0.3			(0.3	)
Benefits paid		(28.3	)		(29.2	)		(8.2	)		(8.9	)		(36.5	)		(38.1	)
Balance, end of year		623.4			626.4			251.8			247.4			875.2			873.8
Change in plan assets
Fair value, beginning of year		519.9			480.8			–			–			519.9			480.8
Actual return on plan assets		44.3			42.1			–			–			44.3			42.1
Employer contributions		99.6			24.7			8.2			8.8			107.8			33.5
Participants’ contributions		0.3			0.3			–			0.1			0.3			0.4
Foreign exchange rate changes		2.4			1.2			–			–			2.4			1.2
Benefits paid		(28.3	)		(29.2	)		(8.2	)		(8.9	)		(36.5	)		(38.1	)
Fair value, end of year		638.2			519.9			–			–			638.2			519.9
Funded status		14.8			(106.5	)		(251.8	)		(247.4	)		(237.0	)		(353.9	)
Valuation allowance		(16.1	)		(16.1	)		–			–			(16.1	)		(16.1	)
Unamortized net actuarial loss		76.9			117.4			42.0			58.0			118.9			175.4
Unamortized prior service cost		3.6			5.7			(15.0	)		(18.5	)		(11.4	)		(12.8	)
Unamortized transitional obligation		4.2			5.1			0.4			0.6			4.6			5.7
Accrued pension and other post-retirement benefit asset (liability)	$	83.4		$	5.6		$	(224.4	)	$	(207.3	)	$	(141.0	)	$	(201.7	)
Amounts included in:
Other assets (Note 9)	$	111.4		$	26.4		$	0.3		$	0.4		$	111.7		$	26.8
Liabilities
Current (Note 12)		–			(0.3	)		(7.9	)		(8.6	)		(7.9	)		(8.9	)
Long-term		(28.0	)		(20.5	)		(216.8	)		(199.1	)		(244.8	)		(219.6	)
	$	83.4		$	5.6		$	(224.4	)	$	(207.3	)	$	(141.0	)	$	(201.7	)

Letters of credit secured certain of the unfunded defined benefit plans as at December 31, 2007 and 2006.

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” 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 $4.2 (2006 – $2.4).

90

     Notes to the PotashCorp 2007 Consolidated Financial Statements

IN MILLIONS OF US DOLLARS EXCEPT SHARE AND PER-SHARE AMOUNTS

15. Pension and Other Post-Retirement Benefits continued

The accumulated benefit obligation for all defined benefit pension plans was $562.7 and $557.8 at December 31, 2007 and 2006, respectively. The aggregate projected benefit obligation, accumulated benefit obligation and aggregate fair value of plan assets for pension plans with accumulated benefit obligations in excess of plan assets were as follows:

	2007		2006
Projected benefit obligation	$	91.3	$	597.5
Accumulated benefit obligation		85.0		543.4
Fair value of plan assets		59.7		457.7

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:

	2007			2006			2005
As reported:
Benefit obligation	$	251.8		$	247.4		$	222.6
Aggregate of service and interest cost		21.0			17.1			19.0
Impact of increase of 1.0 percentage point:
Benefit obligation		36.9			36.7			31.4
Aggregate of service and interest cost		3.9			2.8			3.2
Impact of decrease of 1.0 percentage point:
Benefit obligation		(29.7	)		(29.2	)		(27.8	)
Aggregate of service and interest cost		(3.0	)		(2.2	)		(2.9	)

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		2007		2006
Equity securities		65%		64%		66%
Debt securities		35%		36%		34%
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.

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 3 percent (to a maximum of 6 percent) of salary depending on employee contributions and company performance. The company’s 2007 contributions were $6.4 (2006 – $6.2; 2005 – $6.1).

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 3 percent (to a maximum of 6 percent) of salary based on company performance. The company’s contributions in 2007 were $4.8 (2006 – $3.9; 2005 – $4.4).

 Notes to the PotashCorp 2007 Consolidated Financial Statements 91

IN MILLIONS OF US DOLLARS EXCEPT SHARE AND PER-SHARE AMOUNTS

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 2007 were $5.7 (2006 – $5.0; 2005 – $4.5).

Cash Payments

Total cash payments for pensions and other post-retirement benefits for 2007, 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 $124.8. Approximately $53.0 is expected to be contributed by the company to all plans during 2008.

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
2008	$	29.6	$	10.5	$	1.0	$	9.5
2009		32.6		11.5		1.2		10.3
2010		33.1		12.5		1.3		11.2
2011		35.2		13.6		1.5		12.1
2012		39.0		14.5		1.7		12.8
2013-2017		232.3		89.6		11.7		77.9

16. ENVIRONMENTAL COSTS AND ASSET RETIREMENT OBLIGATIONS

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 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 company estimates that the undiscounted cash flows required to settle the asset retirement obligations approximate $4,050. The estimated cash flows have been discounted at credit-adjusted risk-free rates ranging from 5.6 percent to 6.8 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, 2007 totaled $116.6 (2006 – $100.7), as set out in the table on Page 92. The asset retirement obligations are generally incurred over an extended period of time. The current portion totaled $10.2 (2006 – $7.2).

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, 2007, 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, 2007. 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 the company’s 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 (2006 – $18.6) 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 (2006 – $1.8). See Note 29, under Legal and Other Matters, for a more detailed discussion of site assessment and remediation costs.

92

     Notes to the PotashCorp 2007 Consolidated Financial Statements

IN MILLIONS OF US DOLLARS EXCEPT SHARE AND PER-SHARE AMOUNTS

16. Environmental Costs and Asset Retirement Obligations continued

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 2007 were approximately $104.8 (2006 – $92.6; 2005 – $87.2). 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 2007, capital expenditures of $44.2 (2006 – $13.6) were incurred to meet pollution prevention and control objectives and $0.5 (2006 – $0.2) were incurred to meet other environmental objectives.

Following is a reconciliation of asset retirement and other environmental obligations as at December 31:

	2007			2006
Asset retirement obligations, beginning of year	$	100.7		$	91.8
Liabilities incurred		6.8			7.2
Liabilities settled		(4.5	)		(3.6	)
Accretion expense		4.9			3.3
Revisions in timing and amount of estimated cash flows		8.7			2.0
Asset retirement obligations, end of year		116.6			100.7
Other environmental liabilities		18.1			18.6
Less current portion (Note 12)		(13.7	)		(9.0	)
	$	121.0		$	110.3

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 PCS Board of Directors. No first preferred shares have been issued.

Issued

	2007		2006		2005
	Consideration		Consideration		Consideration
Issued, beginning of year	$	1,431.6	$	1,379.3	$	1,408.4
Shares issued under option plans		28.6		50.9		95.7
Shares issued for dividend reinvestment plan		1.1		1.4		0.3
Shares repurchased		–		–		(125.1	)
Issued, end of year	$	1,461.3	$	1,431.6	$	1,379.3

	2007		2006		2005
	Number of		Number of		Number of
	Common Shares		Common Shares		Common Shares
Issued, beginning of year		314,403,147		310,781,376		331,891,509
Shares issued under option plans		1,995,460		3,581,424		7,378,782
Shares issued for dividend reinvestment plan		12,602		40,347		11,085
Shares repurchased		–		–		(28,500,000	)
Issued, end of year		316,411,209		314,403,147		310,781,376

Stock Split

On May 2, 2007, the Board of Directors of PCS approved a three-for-one 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 and share data have been retroactively adjusted to reflect the stock split.

Normal Course Issuer Bid

On January 25, 2005, the Board of Directors of PCS authorized a share repurchase program of up to 16,500,000 common shares (approximately 5 percent of the company’s issued and outstanding common shares) through a normal course issuer bid. On September 22, 2005, the Board of Directors authorized an increase in the number of common shares sought under the share repurchase program. This amendment allowed

 Notes to the PotashCorp 2007 Consolidated Financial Statements 93

IN MILLIONS OF US DOLLARS EXCEPT SHARE AND PER-SHARE AMOUNTS

17. Share Capital continued

the company to repurchase up to 12,000,000 additional common shares. Shares could be repurchased from time to time on the open market through February 14, 2006 at prevailing market prices. The timing and amount of purchases, if any, under the program were dependent upon the availability and alternative uses of capital, market conditions and other factors. The company completed the repurchase program by December 31, 2005. No further program was authorized in 2006 or 2007. On January 23, 2008, the Board of Directors of PCS authorized a share repurchase program of up to 15,820,000 common shares (see Note 34).

During 2005, the company repurchased for cancellation 28,500,000 common shares under the program, at a net cost of $851.9 and an average price per share of $29.89. The repurchase resulted in a reduction of share capital of $125.1, and the excess net cost over the average book value of the shares was recorded as a reduction of contributed surplus of $264.3 and a reduction of retained earnings of $462.5.

18. CONTRIBUTED SURPLUS

	2007		2006		2005
Balance, beginning of year	$	62.3	$	36.3	$	275.7
Stock-based compensation		36.6		26.0		24.9
Share repurchases (Note 17)		–		–		(264.3	)
Balance, end of year	$	98.9	$	62.3	$	36.3

19. SEGMENT INFORMATION

The company has three reportable business segments: potash, nitrogen and phosphate. 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.

2007
	Potash		Nitrogen		Phosphate		All others		Consolidated
Sales	$	1,797.2	$	1,799.9	$	1,637.1	$	–	$	5,234.2
Freight		178.1		55.6		112.4		–		346.1
Transportation and distribution		39.1		51.6		33.4		–		124.1
Net sales – third party		1,580.0		1,692.7		1,491.3		–
Cost of goods sold		667.7		1,156.6		1,058.5		–		2,882.8
Gross margin		912.3		536.1		432.8		–		1,881.2
Inter-segment sales		–		112.3		1.9		–		–
Depreciation and amortization		71.7		88.2		121.1		10.3		291.3
Goodwill		–		96.6		–		0.4		97.0
Assets		1,809.6		1,646.4		1,955.4		4,305.2		9,716.6
Additions to property, plant and equipment		338.2		89.7		176.2		3.1		607.2

2006
	Potash		Nitrogen		Phosphate		All others		Consolidated
Sales	$	1,227.5	$	1,284.1	$	1,255.1	$	–	$	3,766.7
Freight		130.5		36.8		88.5		–		255.8
Transportation and distribution		38.8		52.2		43.1		–		134.1
Net sales – third party		1,058.2		1,195.1		1,123.5		–
Cost of goods sold		497.1		879.5		998.2		–		2,374.8
Gross margin		561.1		315.6		125.3		–		1,002.0
Inter-segment sales		5.7		112.4		7.2		–		–
Depreciation and amortization		58.3		77.6		94.6		11.9		242.4
Goodwill		–		96.6		–		0.4		97.0
Assets		1,478.0		1,480.7		1,753.9		1,504.4		6,217.0
Additions to property, plant and equipment		293.2		75.5		119.7		20.2		508.6

94 

 Notes to the PotashCorp 2007 Consolidated Financial Statements 

IN MILLIONS OF US DOLLARS EXCEPT SHARE AND PER-SHARE AMOUNTS

19. Segment Information continued

2005

	Potash		Nitrogen		Phosphate		All others		Consolidated
Sales	$	1,341.1	$	1,368.8	$	1,137.3	$	–	$	3,847.2
Freight		129.7		39.9		80.1		–		249.7
Transportation and distribution		34.5		49.5		37.9		–		121.9
Net sales – third party		1,176.9		1,279.4		1,019.3		–
Cost of goods sold		469.5		960.7		920.4		–		2,350.6
Gross margin		707.4		318.7		98.9		–		1,125.0
Inter-segment sales		5.8		100.7		14.0		–		–
Depreciation and amortization		64.5		72.0		95.6		10.3		242.4
Goodwill		–		96.6		–		0.4		97.0
Assets		1,236.8		1,526.5		1,723.0		871.6		5,357.9
Additions to property, plant and equipment		165.5		99.3		109.5		8.4		382.7

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
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

Notes to the PotashCorp 2007 Consolidated Financial Statements  95 

IN MILLIONS OF US DOLLARS EXCEPT SHARE AND PER-SHARE AMOUNTS

19. Segment Information continued

	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

	Country of Origin
	Canada		United States		Trinidad		Other		Consolidated
2005
Sales to customers outside the company
Canada	$	69.3	$	105.9	$	–	$	–	$	175.2
United States		576.6		1,470.9		545.5		–		2,593.0
PhosChem (PhosChem’s 2005 sales were made to: India 29%, China 29%, other Asian countries 22%, Latin America 14%, other countries 6%)		–		166.7		–		–		166.7
Canpotex (Canpotex’s 2005 sales were made to: China 29%, India 11%, other Asian countries 33%, Brazil 13%, other countries 14%)		577.1		–		–		–		577.1
Mexico		10.5		64.5		–		–		75.0
Brazil		60.3		3.7		–		23.7		87.7
Colombia		19.3		9.3		28.7		–		57.3
Other Latin America		28.0		5.7		31.6		–		65.3
Other		–		23.6		26.3		–		49.9
	$	1,341.1	$	1,850.3	$	632.1	$	23.7	$	3,847.2
Operating income	$	464.1	$	170.2	$	199.3	$	59.0	$	892.6
Capital assets and goodwill	$	954.6	$	1,751.1	$	612.4	$	41.7	$	3,359.8

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 its Geismar, Louisiana location due to higher input costs and lower product margins for those products at that location, compared to the company’s other

96 

 Notes to the PotashCorp 2007 Consolidated Financial Statements 

IN MILLIONS OF US DOLLARS EXCEPT SHARE AND PER-SHARE AMOUNTS

20. Cost Of Goods Sold continued

facilities. No employee positions were terminated. The plants have not been restarted since that time and company management has determined that there are no immediate intentions of restarting the plants.

In connection with the shutdowns, 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, equal to the amount by which the carrying amount of the asset groups exceeded their respective fair values, was recognized. Fair values were determined based on an estimate of future cash flows resulting from the use of the assets and their eventual disposition. All of the impairment loss related to property, plant and equipment and is included in cost of goods sold.

21. SELLING AND ADMINISTRATIVE

The primary components of selling and administrative are compensation, employee benefits, supplies, communications, travel, professional services, and depreciation and amortization.

22. PROVINCIAL MINING AND OTHER TAXES

Provincial mining and other taxes consist of:

	2007		2006		2005
Potash Production Tax	$	84.2	$	28.6	$	94.8
Saskatchewan corporate capital taxes and other		51.2		37.9		42.4
	$	135.4	$	66.5	$	137.2

23. OTHER INCOME

	2007			2006		2005
Share of earnings of equity investees	$	76.2		$	54.4	$	52.1
Dividend income		58.1			21.1		9.2
Other		17.7			18.5		0.5
Provision for auction rate securities (Note 8)		(26.5	)		–		–
	$	125.5		$	94.0	$	61.8

24. INTEREST EXPENSE

	2007			2006			2005
Interest expense on
Short-term debt	$	8.7		$	34.5		$	7.0
Long-term debt		111.6			97.6			94.1
Interest capitalized to property, plant and equipment		(21.8	)		(19.1	)		(5.7	)
Interest income		(29.8	)		(27.4	)		(13.1	)
	$	68.7		$	85.6		$	82.3

25. INCOME TAXES

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:

Notes to the PotashCorp 2007 Consolidated Financial Statements  97 

IN MILLIONS OF US DOLLARS EXCEPT SHARE AND PER-SHARE AMOUNTS

25. Income Taxes continued

	2007			2006			2005
Income before income taxes
Canada	$	495.5		$	338.2		$	381.5
United States		634.1			219.3			170.0
Trinidad		268.6			148.5			175.6
Other		121.6			83.9			83.2
	$	1,519.8		$	789.9		$	810.3
Federal and provincial statutory tax rates		35.55%			39.25%			42.52%
Tax at statutory rates	$	540.3		$	310.0		$	344.5
Adjusted for the effect of:
Recoveries upon Canadian tax rate reductions		(40.1	)		(44.8	)		–
Refunds upon deduction of Saskatchewan resource surcharge		–			(34.1	)		–
Net non-deductible provincial taxes and royalties and resource allowances		–			(6.3	)		(1.2	)
Production-related deductions		(17.6	)		–			–
Stock-based compensation deduction		(0.1	)		(5.8	)		(13.2	)
Additional tax deductions		(15.4	)		(15.5	)		(14.8	)
Difference between Canadian rate and rates applicable to subsidiaries in other countries		(45.9	)		(43.8	)		(48.9	)
Other		(5.0	)		(1.6	)		1.0
Income tax expense	$	416.2		$	158.1		$	267.4

Details of income tax expense are as follows:

	2007			2006			2005
Canada
Current	$	154.1		$	51.8		$	170.5
Future		(17.6	)		(4.3	)		12.6
United States – Federal
Current		32.4			2.3			0.8
Future		137.6			43.7			30.8
United States – State
Current		12.8			2.6			2.2
Future		0.7			5.7			(12.8	)
Trinidad and other
Current		97.3			51.4			53.8
Future		(1.1	)		4.9			9.5
Income tax expense	$	416.2		$	158.1		$	267.4

The tax effects of temporary differences that give rise to significant portions of the net future income tax liability are:

	2007		2006
Future income tax assets:
Loss and credit carryforwards	$	119.4	$	189.9
Accrued pension and other post-retirement benefits		51.5		44.5
Other		54.7		56.1
Total future income tax assets		225.6		290.5
Future income tax liabilities:
Basis difference in fixed assets		731.3		715.2
Basis difference in long-term debt		75.6		52.3
Basis difference in investments		213.8		10.3
Basis difference in cash flow hedges		50.3		–
Other		142.7		144.8
Total future income tax liabilities		1,213.7		922.6
Net future income tax liability	$	988.1	$	632.1

98 

 Notes to the PotashCorp 2007 Consolidated Financial Statements 

IN MILLIONS OF US DOLLARS EXCEPT SHARE AND PER-SHARE AMOUNTS

25. Income Taxes continued

At December 31, 2007, the company has income tax operating losses carried forward of $234.1, certain of which will begin to expire in 2021. As well, it has income tax capital losses carried forward of $222.0 that do not expire. In addition, it has alternative minimum tax credits of approximately $6.4 that carry forward indefinitely. The benefit relating to these amounts has been recognized by reducing future income tax liabilities. The company also has $38.5 of 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.

26. NET INCOME PER SHARE

	2007		2006		2005
Basic net income per share1
Net income available to common shareholders	$	1,103.6	$	631.8	$	542.9
Weighted average number of common shares	315,641,000		311,880,000		325,704,000
Basic net income per share	$	3.50	$	2.03	$	1.67
Diluted net income per share1
Net income available to common shareholders	$	1,103.6	$	631.8	$	542.9
Weighted average number of common shares	315,641,000		311,880,000		325,704,000
Dilutive effect of stock options	8,667,000		6,809,000		7,530,000
Weighted average number of diluted common shares	324,308,000		318,689,000		333,234,000
Diluted net income per share	$	3.40	$	1.98	$	1.63

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 potential 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.

No outstanding options were excluded from the calculation of diluted net income per share for 2007, 2006 or 2005 as a result of

the options’ exercise price being greater than the average market price of the common shares for the year.

27. STOCK-BASED COMPENSATION

The company has seven stock-based compensation plans, which are described below. The compensation cost charged against income for those plans in 2007 was $84.0 (2006 – $44.3; 2005 – $37.3).

Stock Option Plans

The company has five 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 PCS Board of Directors determined in 2003 to discontinue granting stock options to directors. Effective November 2006, the PCS 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

Notes to the PotashCorp 2007 Consolidated Financial Statements  99 

IN MILLIONS OF US DOLLARS EXCEPT SHARE AND PER-SHARE AMOUNTS

27. Stock-Based Compensation continued

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, which was approved on May 3, 2007, 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 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 2005, 2006 and 2007 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 weighted average cost of capital.

The company issues new common shares to satisfy stock option exercises.

A summary of the status of the plans as of December 31, 2007, 2006 and 2005 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
	2007			2006			2005			2007			2006			2005
Outstanding, beginning of year		6,199,800			3,558,000			–			8,105,844			11,687,268			19,202,190
Granted		1,730,550			2,684,700			3,565,500			–			–			–
Exercised		–			–			–			(1,995,460	)		(3,581,424	)		(7,378,782	)
Forfeited		(33,750	)		(42,900	)		(7,500	)		–			–			–
Expired		–			–			–			–			–			(136,140	)
Outstanding, end of year		7,896,600			6,199,800			3,558,000			6,110,384			8,105,844			11,687,268

Weighted Average Exercise Price

	Performance Option Plans						Officers, Employees and Directors Plans
	2007		2006		2005		2007		2006		2005
Outstanding, beginning of year	$	31.38	$	30.03	$	–	$	12.68	$	12.80	$	12.71
Granted		62.75		33.67		29.42		–		–		–
Exercised		–		–		–		13.31		13.31		12.71
Forfeited		39.26		30.30		30.13		–		–		–
Expired		–		–		–		–		–		13.68
Outstanding, end of year	$	40.08	$	31.38	$	30.03	$	13.48	$	12.68	$	12.80

The aggregate grant-date fair value of all options granted during the year was $39.2 (2006 – $34.5; 2005 – $35.4).

The following table summarizes information about stock options outstanding at December 31, 2007:

	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 $10.55		496,300		3	$	10.03		496,300	$	10.03
$10.56 to $14.10		3,403,958		5	$	11.67		3,403,958	$	11.67
$14.11 to $17.65		2,210,126		4	$	17.04		2,210,126	$	17.04
		6,110,384		4	$	13.48		6,110,384	$	13.48
Performance Option Plans
$29.00 to $39.00		6,174,300		8	$	33.14		–		–
$62.00 to $72.00		1,722,300		9	$	64.93		–		–
		7,896,600		8	$	40.08		–		–
		14,006,984		6	$	28.47		6,110,384	$	13.48

The foregoing options have expiry dates ranging from November 2008 to May 2017.

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 2005, 2006 and 2007:

100 

 Notes to the PotashCorp 2007 Consolidated Financial Statements 

IN MILLIONS OF US DOLLARS EXCEPT SHARE AND PER-SHARE AMOUNTS

27. Stock-Based Compensation continued

	Year of Grant
	2007		2006		2005		2003
Expected dividend		$0.40		$0.20		$0.20		$0.17
Expected volatility		29%		30%		28%		27%
Risk-free interest rate		4.48%		4.90%		3.86%		4.06%
Expected life of options in years		6.4		6.5		6.5		8

The expected dividend on the company’s stock was based on the current annualized dividend rate as at 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, 2007, 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, 2007		6,199,800		$	11.19
Granted		1,730,550			22.68
Vested		–			–
Forfeited		(33,750	)		14.12
Non-vested at December 31, 2007		7,896,600		$	13.70

As of December 31, 2007, 7,896,600 options remained unvested and there was $15.3 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, 2009.

Cash received from stock option exercises for the year ended December 31, 2007 was $26.6 (2006 - $47.3).

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 PCS 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 are settled in cash based on the common share price at that time. As of December 31, 2007, the total DSUs held by participating directors was 206,251 (2006 – 213,849; 2005 – 190,905).

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.

During 2006, cash of $34.5 was used to settle the company’s liability in respect of its performance unit incentive plan for the performance period January 1, 2003 to December 31, 2005. Other cash payments made in respect of the company’s stock-based compensation plans during 2006 and 2007 were not significant.

28. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

The company manages interest rate exposures by using a diversified portfolio of fixed and floating rate instruments. Its sensitivity to fluctuations in interest rates is substantially limited to certain of its cash and cash equivalents, investments in auction rate securities, short-term debt and long-term debt. During 2007, the company did not enter into any interest rate swaps. During 2006, the company terminated its interest rate swap contracts that effectively converted a notional amount of $300.0 of fixed rate debt (due 2011) into floating rate debt for cash proceeds of $5.2 and a gain of $5.1. Hedge accounting was discontinued prospectively. The associated gains are being amortized over the remaining term of the related debt as a reduction to interest expense. No interest rate swap contracts were outstanding as at December 31, 2007 or 2006.

The company is exposed to credit-related losses in the event of non-performance by counterparties to derivative financial instruments. It anticipates, however, that counterparties will be able to fully satisfy their obligations under the contracts. The major concentration of credit risk arises from the company’s receivables. A majority of its sales are in North America and are primarily for use in the agricultural industry. The company seeks to manage the credit risk relating to these sales through a credit management program. Internationally, the company’s products are sold primarily through two export associations whose accounts receivable are substantially insured or secured by letters of credit. In addition, the company is exposed to liquidity and credit risk on investments in auction rate

Notes to the PotashCorp 2007 Consolidated Financial Statements 101 

IN MILLIONS OF US DOLLARS EXCEPT SHARE AND PER-SHARE AMOUNTS

28. Financial Instruments and Risk Management continued

securities due to the current lack of liquidity for the investments in auction rate securities held in the company’s trading account that has existed since August 2007. Due to the lack of liquidity, the securities have been held longer than the approximately 28 days that was originally anticipated. The auction rate securities consist of collateralized loan obligations consisting primarily of corporate bonds with a face value of $48.3 and collateralized debt obligations consisting primarily of publicly traded debt with a face value of $84.2. Of the total $76.5 unrealized decrease in the fair value of investments in auction rate securities, $50.0 is included in OCI and $26.5 is included in net income (see Note 8). The company is uncertain as to when the liquidity for such securities will improve.

Fair Value

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, 2007 was 13.40 percent (2006 – 5.33 percent). The effective interest rate on the company’s short-term debt at December 31, 2007 was 5.17 percent (2006 – 5.51 percent). The fair value of the company’s notes payable at December 31, 2007 approximated $1,364.8 (2006 – $1,776.8) and reflects a current yield valuation based on observed market prices. The current yield on the notes payable ranges from 4.64 percent to 6.45 percent (2006 – 5.47 percent to 6.16 percent). The fair value of the company’s other long-term debt instruments approximated carrying value.

29. 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 2007, 2006 or 2005.

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 which the company may have to pay for JIC’s remaining common

shares if there was 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 1994, PCS Joint Venture responded to information requests from the US Environmental Protection Agency (“USEPA”) and the Georgia Department of Natural Resources, Environmental Protection Division (“GEPD”) regarding conditions at its Moultrie, Georgia location. PCS Joint Venture believes that the lead-contaminated soil and groundwater found at the site are attributable to former operations at the site prior to PCS Joint Venture’s ownership. In 2005, the GEPD approved a Corrective Action Plan to address environmental conditions at this location. As anticipated, the approved remedy requires some excavation and off-site disposal of impacted soil and installation of a groundwater recovery and treatment system. PCS Joint Venture began the remediation in November 2005 and completed soil excavation in March 2006, and it is proceeding consistent with the projected schedule and budget.

• In 1998, the company, along with other parties, was notified by the 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 on 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 shared the cost 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 by the end of 2008. The USEPA has issued letters to PCS Joint Venture and five other alleged potentially responsible parties and 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

102 

    Notes to the PotashCorp 2007 Consolidated Financial Statements 

IN MILLIONS OF US DOLLARS EXCEPT SHARE AND PER-SHARE AMOUNTS

29. Contingencies continued

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. 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. PCS Nitrogen has 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. PCS Nitrogen expects that the Court will rule on the motion for certification in the first quarter of 2008. PCS Nitrogen has also filed third-party complaints in the case against owners and operators that it believes should be responsible parties with respect to the site. In the event PCS Nitrogen is unsuccessful in its appeal of the Court’s order, PCS Nitrogen will pursue the third-party complaints in the second phase of the case during which the Court will enter a final decision regarding the allocation and amount of any such liability. 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 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 other costs associated with the Site, including reimbursement of USEPA’s past costs. The cost of performing the removal at the Site is estimated at $30.0. 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. USEPA is evaluating response actions for PCB-impacted sediments downstream of the Site but has not issued a final remedy for those sediments.

• The USEPA announced an 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 Resource Conservation and Recovery Act at the company’s Aurora and White Springs plants. The company and other industry members have met with representatives of the US Department of Justice, USEPA and various state environmental agencies regarding potential resolution of these matters. During these meetings, the company was informed that the USEPA also believes the Geismar plant is in violation of these requirements. 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.

• 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 GEPD in conjunction with PCS Nitrogen Fertilizer’s purchase of certain real property 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.

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.

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 management’s belief that the ultimate resolution of such actions is not reasonably likely to have a material adverse effect on the company’s 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

 Notes to the PotashCorp 2007 Consolidated Financial Statements 103 

IN MILLIONS OF US DOLLARS EXCEPT SHARE AND PER-SHARE AMOUNTS

29. Contingencies continued

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 that 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.

30. 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, 2007, the maximum potential amount of future (undiscounted) payments under significant guarantees provided to third parties approximated $454.7. As many of these guarantees will not 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, 2007, no subsidiary balances subject to guarantees were outstanding in connection with the company’s cash management 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, and the cash margin requirements to maintain derivatives as disclosed in Note 12.

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. In February 2005, the Florida Environmental Regulation Commission approved certain modifications to the financial assurance requirements designed to ensure that responsible parties have sufficient resources to cover all closure and post-closure costs and liabilities associated with gypsum stacks in the state. The new requirements became effective in July 2005 and include financial strength tests that are more stringent than under previous law and a requirement that gypsum stack closure cost estimates include the cost of treating process water.

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 Environment for Saskatchewan provisionally approved the plans in July 2000. In July 2001, a Cdn $2.0 irrevocable letter of credit was posted. The company submitted a revised plan when it was due in 2006 and is awaiting a response from the Province. The company is unable to predict, at this time, the outcome of the ongoing review of the plans or the timing of implementation and structure of any financial assurance requirements.

The company has met its financial assurance responsibilities as of December 31, 2007. 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 year, the company entered into various other commercial letters of credit in the normal course of operations. As at December 31, 2007, $23.9 of letters of credit were outstanding (2006 – $17.3).

The company expects that it will be able to satisfy all applicable credit support requirements without disrupting normal business operations.

31. RELATED PARTY TRANSACTIONS

Sales to Canpotex are at prevailing market prices. Sales for the year ended December 31, 2007 were $782.7 (2006 – $467.1; 2005 – $577.1). Account balances resulting from the Canpotex transactions are included in the Consolidated Statements of Financial Position and settled on normal trade terms (see Note 4).

104 

  Notes to the PotashCorp 2007 Consolidated Financial Statements 

IN MILLIONS OF US DOLLARS EXCEPT SHARE AND PER-SHARE AMOUNTS

32. COMPARATIVE FIGURES

Certain of the prior years’ figures have been reclassified to conform with the current year’s presentation.

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: Prior to January 1, 2007, the company’s investments in ICL and Sinofert were stated at cost under Canadian GAAP. US GAAP requires that these investments be classified as available-for-sale and be stated at market value with the difference between market value and cost reported as a component of OCI. As described in Note 3, Canadian GAAP related to this matter was amended to be consistent with US GAAP on a prospective basis effective January 1, 2007.

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, 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 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 GAAP and US GAAP. In light of this, a difference between Canadian GAAP and US GAAP has been recorded for the effects of recognizing a pension valuation allowance and the changes therein under Canadian GAAP.

In addition, US GAAP requires the company 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) Derivative instruments and hedging activities: Prior to January 1, 2007 under Canadian GAAP, the company’s derivatives used for non-trading purposes that did not qualify for hedge accounting were carried at fair value on the Consolidated Statements of Financial Position, with changes in fair value reflected in earnings. Derivatives embedded within instruments were generally not separately accounted for except for those related to equity-linked deposit contracts, which are not applicable to the company. Gains and losses on derivative instruments held within an effective hedge relationship were recognized in earnings on the same basis and in the same period as the underlying hedged items. There was no difference in accounting between Canadian GAAP and US GAAP in respect of derivatives held by the company that do not qualify for

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IN MILLIONS OF US DOLLARS EXCEPT SHARE AND PER-SHARE AMOUNTS

33. Reconciliation of Canadian and United States Generally Accepted Accounting Principles continued

hedge accounting. Unlike Canadian GAAP, however, the company recognized all of its derivative instruments (whether designated in hedging relationships or not, or embedded within hybrid instruments) at fair value on the Consolidated Statements of Financial Position for US GAAP purposes. Under US GAAP, 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 changes in the fair value of the derivative is accumulated in OCI until the variability in cash flows being hedged is recognized in earnings in future accounting periods. For both fair value and cash flow hedges, if a derivative instrument is designated as a hedge and meets the criteria for hedge effectiveness, earnings offset is available, but only to the extent that the hedge is effective. Ineffective portions of fair value or cash flow hedges are recorded in earnings in the current period.

As described in Note 3, Canadian GAAP related to this matter was amended to be consistent with US GAAP on a prospective basis effective January 1, 2007.

(i) Comprehensive income: Comprehensive income is recognized and measured under US GAAP pursuant to SFAS No. 130, “Reporting Comprehensive Income”. This standard defines comprehensive income as all changes in equity other than those resulting from investments by owners and distributions to owners. Comprehensive income is comprised of net income and OCI. OCI refers to amounts that are recorded as an element of shareholders’ equity but are excluded from net income because these transactions or events were attributed to changes from non-owner sources. As described in Note 3, Canadian standards relating to comprehensive income are effective January 1, 2007 on a prospective basis.

(j) 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. Effective January 1, 2006, US GAAP requires that these liability awards be measured at fair value at each reporting period. As at December 31, 2007, the difference between Canadian GAAP and US GAAP was not significant. The company uses a Monte Carlo simulation model to estimate the fair value of its performance unit incentive plan liability for US GAAP purposes.

Under Canadian GAAP, stock options are recognized over the service period, which for the company 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 PotashCorp 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 PotashCorp 2007 Performance Option Plan, the service period commenced January 1, 2007 under Canadian GAAP and May 3, 2007 under US GAAP. This difference impacts the stock-based compensation cost recorded and may impact diluted earnings per share.

(k) 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. Effective January 1, 2006, 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. In accordance with US GAAP, the company has recorded the effect of initially applying this consensus as a cumulative-effect adjustment recognized in the opening balance of retained earnings as of January 1, 2006.

(l) 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 GAAP 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.

(m) 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.

(n) 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 uncertain income tax positions.

(o) 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.

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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.

	2007			2006			2005
Net income as reported – Canadian GAAP	$	1,103.6		$	631.8		$	542.9
Items increasing (decreasing) reported net income
Cash flow hedge ineffectiveness (h)		–			(4.5	)		2.3
Depreciation and amortization (c)		8.5			8.4			8.4
Stock-based compensation (j)		(1.7	)		1.3			–
Stripping costs (k)		(10.9	)		2.6			–
Exploration costs (d)		–			–			(6.4	)
Share of earnings of equity investees (a)		(1.9	)		0.5			3.7
Pension and other post-retirement benefits (f)		–			2.0			2.4
Deferred income taxes relating to the above adjustments (l)		(1.9	)		(3.0	)		(3.4	)
Income taxes related to US GAAP effective income tax rate (l, n)		(30.3	)		–			–
Income taxes related to stock-based compensation (m)		(18.4	)		(13.3	)		(17.2	)
Income taxes related to uncertain income tax positions (n)		14.5			–			–
Net income – US GAAP	$	1,061.5		$	625.8		$	532.7
Basic weighted average shares outstanding – US GAAP	315,641,000			311,880,000			325,705,000
Diluted weighted average shares outstanding – US GAAP	324,292,000			318,669,000			333,235,000
Basic net income per share – US GAAP	$	3.36		$	2.01		$	1.64
Diluted net income per share – US GAAP	$	3.27		$	1.96		$	1.60
Total assets as reported – Canadian GAAP	$	9,716.6		$	6,217.0
Items increasing (decreasing) reported total assets
Inventory and other current assets (h)		–			8.0
Available-for-sale securities (unrealized holding gain) (a)		–			889.9
Fair value of derivative instruments (h)		–			120.3
Property, plant and equipment (b)		(101.2	)		(109.7	)
Exploration costs (d)		(6.4	)		(6.4	)
Stripping costs (k)		(32.7	)		(21.8	)
Deferred debt costs		–			(23.9	)
Pension and other post-retirement benefits (f)		(66.7	)		6.7
Investment in equity investees (a)		2.3			5.5
Income tax asset related to uncertain income tax positions (n)		18.4			–
Goodwill (b)		(46.7	)		(46.7	)
Total assets – US GAAP	$	9,483.6		$	7,038.9
Total shareholders’ equity as reported – Canadian GAAP	$	6,018.7		$	2,780.3		$	2,132.5
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 (a)		–			792.0			236.3
Net gains on derivatives designated as cash flow hedges (h)		–			79.4			182.4
Cumulative effect adjustment in respect of uncertain income tax positions (n)		(1.2	)		–			–
Additional minimum pension liability (f)		–			–			(55.4	)
Pension and other post-retirement benefits (f)		(85.6	)		(117.9	)		–
Share of accumulated other comprehensive income of equity investees (a)		–			0.9			0.8
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)		70.1			61.6			53.2
Exploration costs (d)		(6.4	)		(6.4	)		(6.4	)
Stripping costs (k)		(32.7	)		2.6			–
Cash flow hedge ineffectiveness (h)		–			0.4			4.9
Pension and other post-retirement benefits (f)		16.1			16.1			14.1
Share of other comprehensive income of equity investees (a)		2.3			4.2			3.7
Deferred income taxes relating to the above adjustments (l)		30.4			24.0			27.0
Income taxes related to US GAAP effective income tax rate (l, n)		(30.3	)		–			–
Income taxes related to uncertain income tax positions (n)		14.5			–			–
Cumulative effect adjustment to retained earnings in respect of stripping costs (k)		–			(16.3	)		–
Cumulative effect adjustment to retained earnings in respect of uncertain income tax positions (n)		85.7			–			–
Shareholders’ equity – US GAAP	$	5,863.6		$	3,402.9		$	2,375.1

Notes to the PotashCorp 2007 Consolidated Financial Statements 107 

IN MILLIONS OF US DOLLARS EXCEPT SHARE AND PER-SHARE AMOUNTS

33. Reconciliation of Canadian and United States Generally Accepted Accounting Principles continued

Supplemental US GAAP Disclosure

Recent Accounting Pronouncements

Uncertainty in Income Taxes

In July 2006, the Financial Accounting Standards Board (“FASB”) issued FIN No. 48, “Accounting for Uncertainty in Income Taxes”. FIN No. 48 prescribes a comprehensive model for how a company should recognize, measure, present and disclose in its consolidated financial statements uncertain 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). Under the model, the consolidated financial statements will reflect expected future income tax consequences of such positions presuming the taxing authorities’ full knowledge of the position and all relevant facts, but without considering time values. The evaluation of tax positions under FIN No. 48 will be a two-step process, whereby: (1) the company determines whether it is more likely than not that the tax positions will be sustained based on the technical merits of the position; and (2) for those tax positions that meet the more-likely-than-not recognition threshold, the company would recognize the largest amount of tax benefit that is greater than 50 percent likely of being realized upon ultimate settlement with the taxing authority. FIN No. 48 also revises disclosure requirements and introduces a prescriptive, annual, tabular roll-forward of the unrecognized tax benefits.

The company adopted the provisions of FIN No. 48 effective January 1, 2007. As a result of the implementation of FIN No. 48, the company recognized a decrease in the net tax liability for unrecognized tax benefits, reducing the liability by $84.5 to $34.2 (including interest of $10.0). This was accounted for as a cumulative effect adjustment increasing the balance in retained earnings at January 1, 2007 by $85.7 and decreasing the balance in accumulated other comprehensive income by $1.2. At December 31, 2007, the company had an asset of $18.4 and a liability of $38.1 (including interest of $8.1) for previously unrecognized income tax benefits.

The reconciliation of the beginning and ending amount of unrecognized tax benefits, excluding interests, for the year is as follows:

Balance at January 1, 2007	$	24.2
Additions based on tax positions related to the current year		2.8
Additions for tax positions of prior years		12.3
Reductions for tax positions of prior years		(18.0	)
Settlements		(9.7	)
Balance at December 31, 2007	$	11.6

All of the tax positions included in the balance at January 1, 2007 would, if recognized, affect the company’s effective income tax rate.

It is reasonably possible that a reduction in a range of $8.0 to $12.0 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, 2007, $8.1 of interest was accrued to unrecognized tax benefits and for the year ended December 31, 2007, $1.9 of interest was recognized as a reduction of income tax expense. Tax years subject to examination by jurisdiction were as follows:

	Years
Canada	1997-present
US	2001-present
Trinidad	1999-present
Barbados	1999-present

Definition of Settlement Under FIN No. 48

In May 2007, the FASB issued FSP No. FIN 48, “The Definition of Settlement in FASB Interpretation No. 48”. It amended FIN No. 48 to provide guidance on how an enterprise should determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits. The guidance was effective January 1, 2007 and did not have a material impact on the company’s consolidated financial statements.

Planned Major Maintenance Activities

In September 2006, the FASB issued FSP No. AUG AIR-1, “Accounting for Planned Major Maintenance Activities”. The guidance in this FSP is applicable to entities in all industries. The FSP prohibits the use of the accrue-in-advance method of accounting for planned major maintenance activities in annual and interim financial reporting periods. The implementation of FSP No. AUG AIR-1, effective January 1, 2007, did not have a material impact on the company’s consolidated financial statements.

Framework for Fair Value Measurement

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”, which establishes a framework for measuring fair value. It also expands disclosures about fair value measurements and is effective for the first quarter of 2008. The company is currently reviewing the guidance to determine the potential impact, if any, on its consolidated financial statements.

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 statement 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 company is currently reviewing the

108

Notes to the PotashCorp 2007 Consolidated Financial Statements

IN MILLIONS OF US DOLLARS EXCEPT SHARE AND PER-SHARE AMOUNTS

33. Reconciliation of Canadian and United States Generally Accepted Accounting Principles continued

guidance, which is effective for the first quarter of 2008, to determine the potential impact, if any, on its consolidated financial statements.

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 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.

Deferred Income Taxes

The total valuation allowance recognized for deferred income tax assets in 2007 was $10.4 (2006 – $53.1). 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 seven stock-based compensation plans under US GAAP was $85.7 for the year ended December 31, 2007 (2006 – $43.0; 2005 – $37.3).

The aggregate intrinsic value of options outstanding at December 31, 2007 under the Performance Option Plans was $815.1, and the aggregate intrinsic value of options exercisable was $NIL. The

aggregate intrinsic value of options outstanding at December 31, 2007 under the Officers and Employees and Directors Plans was $792.3, and the aggregate intrinsic value of options exercisable was $792.3. The total intrinsic value of stock options exercised during the year ended December 31, 2007 was $137.4 (2006 – $72.9). No stock options vested during 2007.

As of December 31, 2007, there was $15.1 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, 2009.

The company issued 18,726 performance units during 2007 (2006 – 471,495) under the performance unit incentive plan at a weighted average grant-date fair value of $98.52 per unit (2006 – $26.16). As at December 31, 2007, 434,266 units remained unvested and outstanding. Total unrecognized compensation cost approximated $59.3, which is expected to be recognized over the period through December 31, 2008. However, such amount will be subject to change, as these liability awards are re-measured at fair value at each reporting period.

Derivative Instruments and Hedging Activities

The company has designated its natural gas derivative instruments as cash flow hedges.

During the year, gains of $57.7 (including ineffectiveness) were recognized in cost of goods sold (2006 – $73.5; 2005 – $48.6).

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 2008 is $6.0, $(0.8) and $2.2, 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 $29.7 (2006 – $16.0; 2005 – $12.6). These transactions were conducted in the normal course of business at the prevailing market prices and on normal trade terms.

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.

Notes to the PotashCorp 2007 Consolidated Financial Statements 109

IN MILLIONS OF US DOLLARS EXCEPT SHARE AND PER-SHARE AMOUNTS

33. Reconciliation of Canadian and United States Generally Accepted Accounting Principles continued

SUPPLEMENTAL SCHEDULE OF CONSOLIDATED FINANCIAL POSITION

As at December 31
	2007		2006
Assets
Current assets
Cash and cash equivalents	$	719.5	$	325.7
Accounts receivable		596.2		442.3
Inventories		428.8		494.9
Prepaid expenses and other current assets		36.7		40.9
Current portion of derivative instrument assets		30.8		50.9
		1,812.0		1,354.7
Derivative instrument assets		104.2		69.4
Property, plant and equipment		3,746.4		3,409.8
Investments		3,583.8		2,044.3
Other assets		144.0		81.1
Income taxes on uncertain income tax positions		18.4		–
Intangible assets		24.5		29.3
Goodwill		50.3		50.3
	$	9,483.6	$	7,038.9
Liabilities
Current liabilities
Short-term debt	$	90.0	$	157.9
Accounts payable and accrued charges		851.5		573.5
Current portion of long-term debt		0.2		400.4
		941.7		1,131.8
Long-term debt		1,339.4		1,339.8
Deferred income tax liability		903.0		668.5
Income taxes on uncertain income tax positions		38.1		–
Accrued pension and other post-retirement benefits		274.1		378.1
Accrued environmental costs and asset retirement obligations		121.0		110.3
Other non-current liabilities and deferred credits		2.7		7.5
		3,620.0		3,636.0
Shareholders’ Equity
Share capital		1,461.3		1,431.6
Additional paid-in capital		169.8		113.1
Accumulated other comprehensive income		2,071.2		733.5
Retained earnings		2,161.3		1,124.7
		5,863.6		3,402.9
	$	9,483.6	$	7,038.9

SUPPLEMENTAL SCHEDULE OF CONSOLIDATED ACCUMULATED OTHER COMPREHENSIVE INCOME

For the Years Ended December 31
	2007			2006			2005
Accumulated other comprehensive income, beginning of year	$	733.5		$	343.2		$	96.8
Other comprehensive income, net of related income taxes		1,338.9			461.1			246.4
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	$	2,071.2		$	733.5		$	343.2

110

Notes to the PotashCorp 2007 Consolidated Financial Statements

IN MILLIONS OF US DOLLARS EXCEPT SHARE AND PER-SHARE AMOUNTS

33. Reconciliation of Canadian and United States Generally Accepted Accounting Principles continued

SUPPLEMENTAL SCHEDULE OF CONSOLIDATED ACCUMULATED OTHER COMPREHENSIVE INCOME (continued)

The balances related to each component of accumulated other comprehensive income, net of related income taxes, are as follows:

	2007			2006			2005
Net unrealized holding gains on available-for-sale securities	$	2,098.7		$	792.0		$	236.3
Net unrealized gains on derivatives designated as cash flow hedges		73.5			79.4			182.4
Additional minimum pension liability		–			–			(55.4	)
Pension and other post-retirement benefits1		(85.6	)		(117.9	)		–
Share of other comprehensive income of equity investees		–			0.9			0.8
Unrealized foreign exchange gains on self-sustaining foreign operations		6.7			–			–
Foreign currency translation adjustment		(20.9	)		(20.9	)		(20.9	)
Cumulative effect adjustment in respect of uncertain income tax positions		(1.2	)		–			–
Accumulated other comprehensive income, end of year	$	2,071.2		$	733.5		$	343.2

¹ 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).

SUPPLEMENTAL SCHEDULE OF CONSOLIDATED OPERATIONS AND RETAINED EARNINGS

For the Years Ended December 31
	2007			2006			2005
Sales	$	5,234.2		$	3,766.7		$	3,847.2
Less: Freight		346.1			255.8			249.7
Transportation and distribution		124.1			134.1			121.9
Cost of goods sold		2,885.9			2,365.4			2,337.5
Gross Margin		1,878.1			1,011.4			1,138.1
Selling and administrative		213.6			158.0			144.5
Provincial mining and other taxes		135.4			66.5			137.2
Foreign exchange loss (gain)		70.2			(4.4	)		12.5
Share of earnings of equity investees		(74.3	)		(54.9	)		(55.8	)
Other income		(49.3	)		(39.6	)		(3.3	)
		295.6			125.6			235.1
Operating Income		1,582.5			885.8			903.0
Interest Expense		68.7			85.6			82.3
Income Before Income Taxes		1,513.8			800.2			820.7
Income Taxes		452.3			174.4			288.0
Net Income		1,061.5			625.8			532.7
Retained Earnings, Beginning of Year		1,124.7			577.5			572.3
Cumulative Effect Adjustment in Respect of Uncertain Income Tax Positions		85.7			–			–
Cumulative Effect Adjustment in Respect of Stripping Costs		–			(16.3	)		–
Repurchase of Common Shares		–			–			(462.5	)
Dividends		(110.6	)		(62.3	)		(65.0	)
Retained Earnings, End of Year	$	2,161.3		$	1,124.7		$	577.5
Net Income per Share – Basic	$	3.36		$	2.01		$	1.64
Net Income per Share – Diluted	$	3.27		$	1.96		$	1.60
Dividends per Share	$	0.35		$	0.20		$	0.20

SUPPLEMENTAL SCHEDULE OF CONSOLIDATED COMPREHENSIVE INCOME

For the Years Ended December 31
	2007			2006			2005
Net Income	$	1,061.5		$	625.8		$	532.7
Other comprehensive income
Net increase in unrealized gains on available-for-sale securities		1,394.1			534.7			193.5
Net gains (losses) on derivatives designated as cash flow hedges		49.4			(68.2	)		255.0
Reclassification to income of net gains on cash flow hedges		(57.8	)		(79.7	)		(53.5	)
Pension and other post-retirement benefits1		56.4			–			–
Unrealized foreign exchange gains on translation of self-sustaining foreign operations		6.7			–			–
Adjustment to additional minimum pension liability		–			11.7			(28.4	)
Share of other comprehensive income of equity investees		(1.3	)		0.2			1.1
Deferred income taxes related to other comprehensive income		(108.6	)		62.4			(121.3	)
Other Comprehensive Income		1,338.9			461.1			246.4
Comprehensive Income	$	2,400.4		$	1,086.9		$	779.1

¹ 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.

Notes to the PotashCorp 2007 Consolidated Financial Statements 111

IN MILLIONS OF US DOLLARS EXCEPT SHARE AND PER-SHARE AMOUNTS

33. Reconciliation of Canadian and United States Generally Accepted Accounting Principles continued

SUPPLEMENTAL SCHEDULE OF CONSOLIDATED CASH FLOW

For the Years Ended December 31
	2007			2006			2005
Operating Activities
Net income	$	1,061.5		$	625.8		$	532.7
Adjustments to reconcile net income to cash provided by operating activities
Depreciation and amortization		282.8			234.0			234.0
Stock-based compensation		40.3			28.5			27.5
Loss (gain) on disposal of property, plant and equipment and long-term investments		7.9			(8.6	)		11.8
Provision for auction rate securities		26.5			–			–
Provision for plant shutdowns – phosphate segment		–			6.3			–
Foreign exchange on deferred income tax		52.4			0.5			8.9
Provision for deferred income tax		137.3			52.7			43.5
Undistributed earnings of equity investees		(33.7	)		(25.0	)		(37.2	)
Unrealized gain on derivative instruments		(21.1	)		–			–
Other long-term liabilities		(57.9	)		13.4			20.2
Changes in non-cash operating working capital
Accounts receivable		(154.6	)		11.0			(107.6	)
Inventories		59.6			15.8			(122.2	)
Prepaid expenses and other current assets		7.0			(1.8	)		(8.2	)
Accounts payable and accrued charges		250.9			(269.1	)		238.1
Cash provided by operating activities		1,658.9			683.5			841.5
Investing Activities
Additions to property, plant and equipment		(595.6	)		(508.6	)		(376.3	)
Purchase of long-term investments		(30.7	)		(352.5	)		(190.9	)
Purchase of investments in auction rate securities		(132.5	)		–			–
Proceeds from disposal of property, plant and equipment and long-term investments		4.5			22.0			12.4
Other assets and intangible assets		7.8			(0.6	)		5.9
Cash used in investing activities		(746.5	)		(839.7	)		(548.9	)
Financing Activities
Proceeds from long-term debt obligations		1.5			483.9			–
Repayment and issue costs of long-term debt obligations		(403.6	)		(1.3	)		(10.1	)
(Proceeds from) repayment of short-term debt obligations		(67.9	)		(94.3	)		158.7
Dividends		(93.6	)		(60.9	)		(65.4	)
Repurchase of common shares		–			–			(851.9	)
Issuance of common shares		26.6			47.3			93.9
Income taxes related to stock-based compensation		18.4			13.3			17.2
Cash (used in) provided by financing activities		(518.6	)		388.0			(657.6	)
Increase (Decrease) in Cash and Cash Equivalents		393.8			231.8			(365.0	)
Cash and Cash Equivalents, Beginning of Year		325.7			93.9			458.9
Cash and Cash Equivalents, End of Year	$	719.5		$	325.7		$	93.9
Supplemental cash flow disclosure
Income taxes paid (o)	$	221.0		$	296.8		$	141.6

34. SUBSEQUENT EVENTS

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 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. The acquisition increases the company’s ownership interest in Sinofert to approximately 20 percent.

On January 23, 2008, the Board of Directors of PCS authorized, subject to regulatory approval, a share repurchase program of up to 15,820,000 common shares (approximately 5 percent of the company’s issued and outstanding common shares) through a normal course issuer bid. If considered advisable, shares may be repurchased from time to time on the open market through January 30, 2009 at prevailing market prices. The timing and amount of purchases, if any, under the program will be dependent upon the availability and alternative uses of capital, market conditions and other factors.

112	S H A R E H O L D E R   I N F O R M AT I O N
	POTASHCORP 2007 FINANCIAL REVIEW

Investor Inquiries

Denita Stann, Director, Investor Relations Canada: (800) 667-0403 US: (800) 667-3930 e-mail: ir@potashcorp.com
Visit us at www.potashcorp.com

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, 2008, there were 1,772 holders of record of the company’s common shares.

Corporate Offices

Canada:
Suite 500, 122 – 1st Avenue South
Saskatoon SK S7K 7G3
Phone: (306) 933-8500

US:
Suite 400, 1101 Skokie Boulevard
Northbrook IL 60062
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 Exchange1						New York Stock Exchange
	High		Low		Volume		High		Low		Volume
2007
First Quarter		65.31		51.92		51,599,528		56.35		44.05		221,025,369
Second Quarter		86.21		61.02		51,480,129		80.85		52.82		220,781,704
Third Quarter		108.92		76.96		65,980,291		109.40		71.50		189,289,076
Fourth Quarter		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
First Quarter		37.96		30.50		63,024,657		33.08		26.05		165,652,500
Second Quarter		39.00		28.93		56,060,451		35.47		26.28		162,390,900
Third Quarter		39.49		30.67		42,424,140		35.49		27.34		123,589,800
Fourth Quarter		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
2005
First Quarter		37.97		29.70		54,892,338		30.67		24.30		96,036,000
Second Quarter		44.04		32.80		40,296,027		35.56		26.42		89,500,200
Third Quarter		46.00		36.08		43,354,176		38.38		30.95		73,579,800
Fourth Quarter		36.30		28.25		66,542,436		31.11		24.26		138,311,700
Year 2005		46.00		28.25		205,084,977		38.38		24.26		397,427,700
	1Trading prices are in Cdn$						Source: Thomson Financial

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 2007 Annual Report on Form 10-K.

NOTE: Data are adjusted for a two-for-one stock split in August 2004 and a three-for-one stock split in May 2007.

A P P E N D I X	113
POTASHCORP 2007 FINANCIAL REVIEW

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, 2008.

FOOTNOTES, SOURCES, ABBREVIATIONS, TERMS AND MEASURES

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 Nameplate Capacity	Source: PotashCorp
9	PotashCorp World Position by Capacity	Source: Fertecon; Blue, Johnson; Agrium; Mosaic; Terra; PotashCorp
10	5-Year Demand Growth CAGR	Source: Fertecon
11	Total World Demand	Source: Fertecon, IFA, PotashCorp
12	PotashCorp Share of World Production	Source: Fertecon; Blue, Johnson; Agrium; Mosaic; PotashCorp

ABBREVIATED COMPANY NAMES AND SOURCES*
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
Canpotex	Canpotex Limited, Canada
CBOT	Chicago Board of Trade, USA
CF	CF Industries, Inc., USA
CNC	Caribbean Nitrogen Company, Trinidad
CP Rail	Canadian Pacific Railway, Canada
CVRD	Companhia Vale do Rio Doce, Brazil
Doane	Doane Agricultural Services, USA
DJUSBM	Dow Jones US Basic Materials Index, USA
EIA	Energy Information Administration, USA
EuroChem	EuroChem Mineral and Chemical Company, Russia
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
INEOS	INEOS USA LLC, USA
Intrepid	Intrepid Potash, USA
IPNI	International Plant Nutrition Institute, USA
K+S	K+S Group (Xetra: SDF), Germany
Koch	Koch Industries, Inc., USA
Mississippi Phosphate	Mississippi Phosphate Corporation, USA
Mosaic	The Mosaic Company (NYSE: MOS), USA
NOLA	New Orleans, Louisiana, 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 Chemical Export Association, Inc., USA
PIRA	PIRA Energy Group, 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

ABBREVIATED COMPANY NAMES AND SOURCES* CONTINUED
Terra	Terra Industries, Inc. (NYSE: TRA), USA
Tringen	Trinidad Nitrogen Co., Limited, Trinidad
TSX	Toronto Stock Exchange, Canada
Uralkali	JSC Uralkali, Russia
USDA	US Department of Agriculture, USA
USEPA	United States Environmental Protection Agency, USA
Yara	Yara International (Oslo: YAR), Norway
GLOSSARY OF TERMS
2007E	2007 Estimated
2008F	2008 Forecast
CAGR	Compound Annual Growth Rate
Canpotex	An export company owned by all Saskatchewan producers of potash (PotashCorp, Mosaic and Agrium).
CFR	Cost and Freight — for delivery of goods to destination
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.
Optional Capacity	Equipment in a state of readiness to produce. While operational capacity is increased at mechanical completion of a project, a period of ramp-up may be required to achieve full operating levels.
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)
	MCP	monocalcium phosphate, 48.1% P2O5 (solid)
	DCP	dicalcium phosphate, 42.4% P2O5 (solid)
	DFP	defluorinated phosphate, 41.2% P2O5 (solid)
Potash	KCl	potassium chloride, 60-63.2% (solid)
FERTILIZER MEASURES
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

* Where PotashCorp is listed as a source in conjunction with external sources, we have supplemented the external data with internal analysis.

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
Augusta Service Company, Inc.	Delaware
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

	Jurisdiction of
	Incorporation or
Name of Entity	Formation
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
PCS Sales (Indiana), Inc.	Indiana
PCS Sales (Iowa), Inc.	Iowa
PCS Sales (USA), Inc.	Delaware
PCS USA LLC	Delaware
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. 333-89350 on Form S-3;

•  Registration Statement No. 33-57920 on Form S-3;

•  Registration Statement No. 33-133854 on Form S-8;

•  Registration Statement No. 333-142615 on Form S-8; and

•  Registration Statement No. 333-148023 on Form S-3

of our reports dated February 15, 2008 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 financial instruments and for mine stripping costs and (2) express an unqualified opinion on the effectiveness of internal control over financial reporting), appearing in the Annual Report on Form 10-K of Potash Corporation of Saskatchewan Inc. for the year ended December 31, 2007.

/s/ Deloitte & Touche LLP

Independent Registered Chartered Accountants

Saskatoon, Canada

February 28, 2008

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 28, 2008

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 28, 2008

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, 2007 (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 28, 2008

By: /s/ WILLIAM J. DOYLE

William J. Doyle

President and Chief Executive Officer

Date: February 28, 2008

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

POTASH CORPORATION OF SASKATCHEWAN INC.

NOTICE OF ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS

AND MANAGEMENT PROXY CIRCULAR

ANNUAL AND SPECIAL MEETING

May 8, 2008

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		19
Adoption of 2008 Performance Option Plan		23
Corporate Governance		27
Compensation		31
Ownership of Shares		59
Directors’ and Officers’ Liability Insurance		60
Voting Shares		60
Shareholder Proposal		60
2009 Shareholder Proposals		60
Additional Information		60
Directors’ Approval		60
Appendices		61
Appendix A — Disclosure of Corporate Governance Practices		62
Appendix B — Resolution of Shareholders — 2008 Performance Option Plan		69
Appendix C — 2008 Performance Option Plan		70
Appendix D — Shareholder Proposal		76
Appendix E — Board of Directors Charter		79
Appendix F — Audit Committee Charter		82

Potash Corporation of Saskatchewan Inc.

February 20, 2008

Dear Shareholder:

On behalf of the Board of Directors, management and employees, we invite you to the 2008 Annual and Special Meeting of Shareholders which will take place on May 8, 2008 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, as well as provides information on executive compensation and the Corporation’s governance.

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 8, 2008.

Sincerely,
D. J. HOWE Board Chair	W. J. DOYLE 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 8, 2008
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, 2007 and the report of the auditors thereon;
2.	to elect the Board of Directors for 2008;
3.	to appoint auditors for 2008;
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, 2008.

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)	the consideration of the shareholder proposal.

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 13, 2008 (the “Record Date”) or their duly appointed representatives will be entitled to cast a vote.

As at February 20, 2008, 315,554,501 common shares in the capital of the Corporation (the “Shares”) are entitled to be voted at the Meeting.

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 6, 2008.
(4)	If you are a Non-Registered 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 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 Shareholders resident in Canada or the United States).

You will need the control number located on the enclosed proxy form.

QUESTIONS AND ANSWERS ON VOTING AND PROXIES

Page  3  

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 adjournment or postponement thereof. You may also revoke a proxy in any other manner permitted by law.

QUESTIONS AND ANSWERS ON VOTING AND PROXIES

Page  4  

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 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 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 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, 2008.

Unless otherwise specified, all dollar amounts are expressed in United States dollars.

Share and per-share data have been adjusted to reflect our three-for-one stock split in May 2007.

QUESTIONS AND ANSWERS ON VOTING AND PROXIES

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Business of the Meeting

Financial Statements

The Consolidated Financial Statements for the fiscal year ended December 31, 2007 are included in the Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 2007 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 7. 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 7. 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 as auditors of the Corporation.

Adoption of 2008 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 this Annual and Special 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.

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Board of Directors

	Page
Nominees for Election to the Board of Directors		7
Director Independence and Other Relationships		11
Attendance of Directors		13
Director Compensation		14
“At Risk” Investment and Year Over Year Changes		18

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, 2008 and their overall board and committee meeting attendance.

For further detailed information on director independence, attendance, at risk holdings and compensation, please see the tables and narrative following this table.

WILLIAM J. DOYLE

Age: 57

Winnetka, Illinois, USA

Director since 1989

Non-independent⁽²⁾

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 on the College Board of Advisors at Georgetown University.

Principal Areas of Expertise/Experience:	Value of At Risk Holdings(3):
Fertilizer/Mining/Chemical Industry	February 2008(4): $46,095,271
Global/International Commerce
Business Management

Board Committee Membership:	Board & Committee Attendance(6):
none	100%

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JOHN W. ESTEY

Age: 57

Glenview, Illinois, USA

Director since 2003

Independent⁽²⁾

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(3):
Global/International Commerce	February 2008(4): $4,546,464
Business Management

Board Committee Membership:	Board & Committee Attendance(6):
Compensation (chair)	100%
Safety, Health and Environment

WADE FETZER III ⁽¹⁾

Age: 70

Glencoe, Illinois, USA

Director since 2002

Independent⁽²⁾

Mr. Fetzer is a Retired Partner with the investment banking firm Goldman Sachs. He sits on the boards of Northern Star Broadcasting, University of Wisconsin Foundation and Rush-Presbyterian St. Luke’s Medical Center. He is also on the Kellogg Alumni Advisory Board. Mr. Fetzer currently serves on the Board of Directors of Sinofert Holdings Limited.

Principal Areas of Expertise/Experience:	Value of At Risk Holdings(3):
Finance	February 2008(4): $6,341,244
Investment Banking

Board Committee Membership:	Board & Committee Attendance(6):
Corporate Governance and	100%
Nominating
Compensation

CHARLES S. HOFFMAN

Age: 59

Lincolnshire, Illinois, USA

Independent⁽²⁾

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 Chemical Export Association (“Phoschem”) and a former Chairman of Canpotex.

Principal Areas of Expertise/Experience:	Value of At Risk Holdings(3):
Fertilizer/Mining/Chemical Industry	February 2008(4): $0
Global/International Commerce
Business Management

Board Committee Membership:	Board & Committee Attendance(6):
n/a	n/a

DALLAS J. HOWE

Age: 63

Calgary, Alberta, Canada

Director since 1991

Independent⁽²⁾

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 the PCS 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(3):
e-Commerce/Technology	February 2008(4): $13,743,444
Business Management

Board Committee Membership:	Board & Committee Attendance(6):
Board Chair	100%
Corporate Governance and Nominating

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ALICE D. LABERGE

Age: 51

Vancouver, British Columbia,

  Canada

Director since 2003

Independent⁽²⁾

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., Healthcare Benefit Trust, the United Way of the Lower Mainland and St. Paul’s Hospital Foundation in Vancouver.

Principal Areas of Expertise/Experience:	Value of At Risk Holdings(3):
e-Commerce/Technology	February 2008(4): $3,351,504
Finance
Accounting

Board Committee Membership:	Board & Committee Attendance(6):
Audit (chair)	100%
Safety, Health and Environment

KEITH G. MARTELL

Age: 45

Saskatoon, Saskatchewan,

  Canada

Director since 2007

Independent⁽²⁾

Mr. Martell is Executive Chairman of First Nations Bank of Canada. He is 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, Primrose Lake Trust and Flying Dust First Nations Treaty Land Entitlement Trust.

Principal Areas of Expertise/Experience:	Value of At Risk Holdings(3):
Finance/Accounting	February 2008(4): $132,912
First Nations
Business Management

Board Committee Membership:	Board & Committee Attendance(6):
Audit	100%

JEFFREY J. MCCAIG

Age: 56

Calgary, Alberta, Canada

Director since 2001

Independent⁽²⁾

Mr. McCaig is Chairman and Chief Executive Officer of the Trimac Group of Companies, North America’s premier 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., Stoneham Administration 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(3):
Transportation Industry	February 2008(4): $4,758,624
Legal
Business Management

Board Committee Membership:	Board & Committee Attendance(6):
Audit	100%
Compensation

MARY MOGFORD

Age: 63

Newcastle, Ontario, Canada

Director since 2001

Independent⁽²⁾

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., the Institute of Corporate Directors of Canada 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 2008(3): $5,612,880
Public Policy
Corporate Governance

Board Committee Membership:	Board & Committee Attendance(6):
Corporate Governance and Nominating (chair)	96%
Audit

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PAUL J. SCHOENHALS

Age: 66

Calgary, Alberta, Canada

Director since 1992

Independent⁽²⁾

Mr. Schoenhals recently retired as 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(3):
Public Policy	February 2008(4): $3,649,776
Business Management

Board Committee Membership:	Board & Committee Attendance(6):
Safety, Health and Environment (chair)	100%
Compensation

E. ROBERT STROMBERG, Q.C.

Age: 66

Jackfish Lake, Saskatchewan,

  Canada

Director since 1991

Non-independent⁽²⁾

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(3):
Global/International Commerce	February 2008(4): $7,884,708
Legal

Board Committee Membership(5):	Board & Committee Attendance(6):
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 interested parties but in which Mr. Stromberg has no interest. This relationship is described in greater detail below.

ELENA VIYELLA DE PALIZA

Age: 53

Dominican Republic

Director since 2003

Non-independent⁽²⁾

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(3):
Fertilizer Industry	February 2008(4): $3,700,320
Finance
Business Management

Board Committee Membership:	Board & Committee Attendance(6):
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.

Frederick J. Blesi, who has served since 2001 will retire from the Board on May 8, 2008.

(1)	Mr Fetzer is 70 as of the date of this Management Proxy Circular, the retirement age for directors. The Board has evaluated its guideline relating to the retirement age for directors and determined that it is appropriate for Mr. Fetzer to serve for an additional year to accommodate the Board’s succession plan relating to his area of expertise.
(2)	See “Director Independence and Other Relationships”.
(3)	See “At Risk Investments and Year Over Year Changes” for additional detail.
(4)	Based on the closing price per Share on the New York Stock Exchange of $156.00 on February 20, 2008.
(5)	Mr. Stromberg served on the Corporate Governance and Nominating Committee during 2007. In connection with the year end review of director independence, Mr. Stromberg is no longer a member of this committee. See “Director Independence and Other Relationships” for additional detail.
(6)	See “Attendance of Directors” for additional detail.

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Page  10  

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 Financial Officer of Fincentric Corporation from October 2000 to November 2003 and Chief Executive Officer from December 2003 to June 2005.

Director Independence and Other Relationships

	Independence Status of Director Nominees
					Not		Reason for
Name	Management		Independent		Independent		Non-independent Status
Frederick J. Blesi				x
William J. Doyle		x
John W. Estey				x
Wade Fetzer III				x
Charles S. 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

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 “Statement of 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:

1.  A director will not be considered independent if, currently or within the preceding three years, as applicable:

(a)  the director is, or was, an employee or executive officer of the Corporation, including any affiliated entity of the Corporation;

(b)	an immediate family member of the director is, or was, an executive officer of the Corporation, including any affiliated entity of the Corporation;
(c)	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;
(d)	an immediate family member of 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 as a partner, principal, manager or in any other capacity; or

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(e)  an executive officer of the Corporation serves or served on the compensation committee of an entity which, in turn, employs or employed either (i) the particular director as an executive officer or (ii) an immediate family member of such director as an executive officer.

2.

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 $100,000 in direct compensation, 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).

3.

A director will not be considered independent if the director has any of the following commercial or charitable relationships:

(a)

the director has served as an executive officer or employee of, or any of his or her immediate family members has served 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) $1,000,000 and (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, has served as an executive officer (or as an employee in the case of the director); or

(b)

the director has served as an officer, director or trustee of a charitable organization, and the Corporation’s discretionary charitable contributions to that organization exceeds 1.5 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).

4.  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 Vice Chairman of Canpotex Limited. The Corporation had sales of approximately $782.7 million to Canpotex Limited in 2007.

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 2007, sales to Fersan exceeded 2% of Fersan’s 2007 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.

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 2007, receipts and payments in the amount of Cdn$1.5 million 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.

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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 3(a) or covered pursuant to paragraph 4 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. Fetzer, Mr. McCaig and Mr. Schoenhals, (ii) any relationships falling below the threshold in paragraph 3(b), including certain relationships of Mr. Martell, 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. Fetzer, Mr. Howe, Ms. Laberge and Mr. McCaig.

Attendance of Directors

The following tables provide a summary of Board and Committee meetings held during fiscal 2007 and attendance thereat.

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”)		4

						Total Board/Committee
Director	Board meetings attended			Committee meetings attended		meetings attended
Frederick J. Blesi	9 of 9	100	%	9 of 9 AUD	100%	22 of 23	100%
				5 of 5 GOV	100%
William J. Doyle(1)	9 of 9	100	%			9 of 9	100%
John W. Estey	9 of 9	100	%	6 of 6 COMP (Chair)	100%	19 of 19	100%
				4 of 4 SHE	100%
Wade Fetzer III	9 of 9	100	%	6 of 6 COMP	100%	20 of 20	100%
				5 of 5 GOV	100%
Dallas J. Howe(2)	9 of 9 (Chair)	100	%	5 of 5 GOV	100%	14 of 14	100%
Alice D. Laberge	9 of 9	100	%	9 of 9 AUD (Chair)	100%	22 of 22	100%
				4 of 4 SHE	100%
Keith G. Martell(3)	5 of 5	100	%	4 of 4 AUD	100%	9 of 9	100%
Jeffrey J. McCaig	9 of 9	100	%	9 of 9 AUD	100%	24 of 24	100%
				6 of 6 COMP	100%
Mary Mogford	9 of 9	100	%	8 of 9 AUD	89%	22 of 23	96%
				5 of 5 GOV (Chair)	100%
Paul J. Schoenhals	9 of 9	100	%	6 of 6 COMP	100%	19 of 19	100%
				4 of 4 SHE (Chair)	100%
E. Robert Stromberg, Q.C.	9 of 9	100	%	5 of 5 GOV	100%	18 of 18	100%
				4 of 4 SHE	100%
Jack G. Vicq(4)	4 of 4	100	%	5 of 5 AUD	100%	9 of 9	100%
Elena Viyella de Paliza	9 of 9	100	%	4 of 4 SHE	100%	12 of 13	100%

(1)	At the invitation of applicable committees, Mr. Doyle attended all or a portion of many of the committee meetings held in 2007.
(2)	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 such committee meetings held in 2007.
(3)	Appointed a member of the Board and a member of the Audit Committee on May 3, 2007.
(4)	Served as a member of the Board and a member of the Audit Committee until his retirement from the Board on May 3, 2007.

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

2007 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.

On January 24, 2007, the Board discontinued discretionary grants of deferred share units (“Deferred Share Units”) pursuant to the Deferred Share Unit Plan for Non-Employee Directors (the “Plan”) and increased the amount of our outside directors’ annual retainer by the value of the discretionary Deferred Share Unit grants. On July 19, 2007, the Board approved further changes to the compensation package of outside directors to incorporate Board meeting fees into the annual retainer. The directors were not granted any stock options in 2007 and have not been granted any stock options since the Board’s decision in 2003 to discontinue stock option grants to outside directors.

Cash Compensation

During the first half of 2007, each outside director was paid a retainer at an annual rate of $105,000, a per diem fee of $1,500 for meetings he or she attended 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 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 $280,000, but did not receive per diem or travel fees.

On July 19, 2007, the Board approved the following changes, effective July 1, 2007, to the compensation package for outside directors:

(1)	Incorporated Board meeting fees into, and further increased, the annual retainer to an annual rate of $135,000;
(2)	Increased the additional amount payable to the chair of the Compensation Committee from $10,000 to $15,000; and
(3)	Increased the annual retainer of the Board Chair from $280,000 to $320,000.

The Board continues to receive per diem fees for committee meetings held on days when no Board meetings are held.

As described below, each outside director can defer, in the form of Deferred Share Units, up to 100% of the annual retainer fees and any other 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 and any other fees 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

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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 and other 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 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).

None of the outside directors elected to receive 2007 director retainer and/or other fees in the form of Deferred Share Units, except as follows: Mr. Estey, 100% of director retainer and 0% of fees; Ms. Laberge, 35% of director retainer and 0% of fees; Mr. Martell, 100% of director retainer and 50% of fees; and Mr. McCaig, 100% of director retainer and 0% of fees.

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, 2008, 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.

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The following table sets forth compensation earned by our directors during fiscal 2007 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 in value of Deferred Share Units received prior to, and during, 2007 pursuant to the Plan. The table in footnote (2) below sets forth further details, including the amount of each director’s 2007 annual retainer and meeting and other fees received in the form of cash and Deferred Share Units.

2007 Director Compensation

(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		148,500		2,211,233		—		—		—		1,861		2,361,594
William J. Doyle(7)		—		—		—		—		—		—		—
John W. Estey		26,500		2,200,310		—		—		—		1,952		2,228,762
Wade Fetzer III		137,000		1,024,946		—		—		—		1,904		1,163,850
Dallas J. Howe		300,000		3,511,515		—		—		—		2,323		3,813,838
Alice D. Laberge		118,375		1,514,968		—		—		—		324		1,633,667
Keith G. Martell*		4,155		122,628		—		—		—		2,676		129,459
Jeffrey J. McCaig		25,500		2,426,119		—		—		—		1,901		2,453,520
Mary Mogford		162,000		2,244,524		—		—		—		342		2,406,866
Paul J. Schoenhals		151,500		1,781,670		—		—		—		4,356		1,937,526
E. Robert Stromberg, Q.C.		139,000		1,612,525		—		—		—		2,835		1,754,360
Jack G. Vicq**		57,972		403,571		—		—		—		68		461,611
Elena Viyella de Paliza		139,000		1,416,741		—		—		—		2,347		1,558,088

*	Elected to the Board on May 3, 2007.
**	Retired from the Board on May 3, 2007.

(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 2007 that were received in the form of cash or deferred to Deferred Share Units.

Remuneration of Directors

For the Fiscal Year Ended December 31, 2007

					Meeting and						Percentage of
	Annual Retainer				Other Fees						Total
											Remuneration
			Deferred				Deferred		Total		in Deferred
	Cash		Share Units		Cash		Share Units		Remuneration		Share Units
Name	($)		($)		($)		($)		($)		(%)
Frederick J. Blesi		122,500		—		26,000		—		148,500		—
William J. Doyle		—		—		—		—		—		—
John W. Estey		—		127,500		26,500		—		154,000		82.79
Wade Fetzer III		120,000		—		17,000		—		137,000		—
Dallas J. Howe		300,000		—		—		—		300,000		—
Alice D. Laberge		82,875		44,625		35,500		—		163,000		27.38
Keith G. Martell		—		87,019		4,155		4,155		95,329		95.64
Jeffrey J. McCaig		—		122,500		25,500		—		148,000		82.77
Mary Mogford		127,500		—		34,500		—		162,000		—
Paul J. Schoenhals		125,000		—		26,500		—		151,500		—
E. Robert Stromberg, Q.C.		120,000		—		19,000		—		139,000		—
Jack G. Vicq		35,769		—		22,203		—		57,972		—
Elena Viyella de Paliza		120,000		—		19,000		—		139,000		—
Total		1,153,644		381,644		255,858		4,155		1,795,301		21.53

⁽³⁾  Reports the amounts recognized for fiscal year 2007 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

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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 2007, which value is based on the annual increase or decrease in the market price of our common shares as measured on the last trading day of each year, and (2) the value of Deferred Share Units received in 2007, 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 primarily reflect amounts recognized for the 2007 increase in the value of outstanding Deferred Share Units received prior to 2007. This increase in value is based on the 2007 increase in the price of our Shares on the NYSE from $47.83 to $143.96. The amounts set forth in column (c) also reflect amounts recognized for the value of Deferred Share Units received in 2007, which value is based on $143.96, the price of our Shares on the NYSE on the last trading day of 2007. Each outside director was permitted to defer, in the form of Deferred Share Units, up to 100% of the annual retainer fees and any other 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 elected to receive in Deferred Share Units, as opposed to cash, was determined by the closing price of our Shares on the last trading day of the quarter in which such fees were earned (on the basis of the closing price on the TSX for residents of Canada and on the basis of the closing price on the NYSE for all other participants) (Cdn$61.37 and $53.31 for the quarter ended March 31, 2007, Cdn$83.28 and $77.97 for the quarter ended June 30, 2007, Cdn$105.05 and $105.70 for the quarter ended September 30, 2007 and Cdn$143.49 and $143.96 for the quarter ended December 31, 2007).

The following table sets forth the amounts recognized for fiscal year 2007 US GAAP financial statement reporting purposes that are attributable to (a) appreciation in the value of Deferred Share Units received prior to, and during, 2007, (b) the value of Deferred Share Units received in 2007 for the deferral of the annual retainer and other fees and (c) the value of dividends received in 2007 in the form of Deferred Share Units.

	Frederick J.	John W.	Wade	Dallas J.	Alice D.	Keith G.	Jeffrey J.	Mary	Paul J.	E. Robert	Jack G.	Elena Viyella
	Blesi	Estey	Fetzer III	Howe	Laberge	Martell	McCaig	Mogford	Schoenhals	Stromberg, Q.C.	Vicq(a)	de Paliza
Appreciation	$2,204,360	$2,066,392	$1,021,760	$3,500,564	$1,465,769	$31,369	$2,296,428	$2,237,499	$1,776,113	$1,607,496	$402,294	$1,412,337
Deferred Fees	—	127,500	—	—	44,626	91,174	122,500	—	—	—	—	—
Dividends	6,873	6,418	3,186	10,951	4,573	85	7,191	6,976	5,557	5,029	1,277	4,404
Total	$2,211,233	$2,200,310	$1,024,946	$3,511,515	$1,514,968	$122,628	$2,426,119	$2,244,524	$1,781,670	$1,612,525	$403,571	$1,416,741

      ^(a)  Mr. Vicq, who served since 1989, retired from the Board on May 3, 2007. As such, Mr. Vicq received the payout value of his 12,641.77 outstanding Deferred Share Units in cash on August 2, 2007 in accordance with the Plan. Pursuant to the Plan, the payout value of each of Mr. Vicq’s Deferred Share Units was equal to $79.67, which represents the closing price of our Shares on the NYSE on August 1, 2007, the fourth trading day following the release of our quarterly results immediately following termination of Board service by Mr. Vicq.

⁽⁴⁾  As of December 31, 2007, the total number of all Deferred Share Units held by each outside director is as follows: Mr. Blesi, 22,958; Mr. Estey, 22,129; Mr. Fetzer, 10,642; Mr. Howe, 36,458; Ms. Laberge, 15,473; Mr. Martell, 852; Mr. McCaig, 24,486; Ms. Mogford, 23,304; Mr. Schoenhals, 18,498; Mr. Stromberg, 16,742; Mr. Vicq, 0; and Ms. Viyella de Paliza, 14,709.

The grant date fair value of each grant of Deferred Share Units received by each director in 2007 is as follows:

	February 12,	March 31,	May 11,	June 30,	August 10,	September 30,	November 12,	December 31,
	2007	2007	2007	2007	2007	2007	2007	2007
Name	(Dividend)	(Deferred Fees)	(Dividend)	(Deferred Fees)	(Dividend)	(Deferred Fees)	(Dividend)	(Deferred Fees)
Frederick J. Blesi	$1,143	—	$1,145	—	$2,291	—	$2,294	—
	(22.85 units)	—	(17.51 units)	—	(26.56 units)	—	(22.18 units)	—
John W. Estey	$1,030	$26,250	$1,056	$26,250	$2,147	$37,500	$2,185	$37,500
	(20.59 units)	(492.40 units)	(16.15 units)	(336.67 units)	(24.89 units)	(354.75 units)	(21.13 units)	(260.49 units)
Wade Fetzer III	$530	—	$531	—	$1,062	—	$1,063	—
	(10.59 units)	—	(8.11 units)	—	(12.31 units)	—	(10.28 units)	—
Dallas J. Howe	$1,820	—	$1,856	—	$3,598	—	$3,677	—
	(36.36 units)	—	(28.39 units)	—	(41.72 units)	—	(35.56 units)	—
Alice D. Laberge	$746	$9,188	$770	$9,188	$1,505	$13,125	$1,552	$13,125
	(14.92 units)	(175.27 units)	(11.78 units)	(120.79 units)	(17.45 units)	(132.21 units)	(15.00 units)	(88.46 units)
Keith G. Martell	—	—	—	$18,174	$24	$36,000	$61	$37,000
	—	—	—	(238.94 units)	(0.27 units)	(362.60 units)	(0.59 units)	(249.37 units)
Jeffrey J. McCaig	$1,149	$26,250	$1,175	$26,250	$2,490	$35,000	$2,377	$35,000
	(22.96 units)	(492.40 units)	(17.97 units)	(336.67 units)	(28.87 units)	(352.52 units)	(22.98 units)	(235.89 units)
Mary Mogford	$1,163	—	$1,187	—	$2,300	—	$2,350	—
	(23.24 units)	—	(18.15 units)	—	(26.67 units)	—	(22.73 units)	—
Paul J. Schoenhals	$923	—	$942	—	$1,826	—	$1,866	—
	(18.45 units)	—	(14.41 units)	—	(21.17 units)	—	(18.04 units)	—
E. Robert Stromberg, Q.C.	$836	—	$852	—	$1,652	—	$1,689	—
	(16.70 units)	—	(13.04 units)	—	(19.16 units)	—	(16.33 units)	—
Jack G. Vicq	$632	—	$645	—	—	—	—	—
	(12.64 units)	—	(9.87 units)	—	—	—	—	—
Elena Viyella de Paliza	$733	—	$733	—	$1,468	—	$1,470	—
	(14.64 units)	—	(11.22 units)	—	(17.02 units)	—	(14.21 units)	—

(5)	As of December 31, 2007, the total number of outstanding options held by each outside director is as follows: Mr. Blesi, 15,500; Mr. Estey, 0; Mr. Fetzer, 9,000; Mr. Howe, 79,200; Ms. Laberge, 0; Mr. Martell, 0; Mr. McCaig, 78,000; Ms. Mogford, 18,000; Mr. Schoenhals, 0; Mr. Stromberg, 39,600; Mr. Vicq, 0; and Ms. Viyella de Paliza, 0.
(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”.

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“At Risk” Investment and Year Over Year Changes

The following table provides ownership information as at February 20, 2008 and February 20, 2007, respectively. All ownership information has been adjusted to reflect the three-for-one stock split in May 2007.

												Value of
												Common
										Total At Risk		Shares/DSUs					Equity at		Shares
								Common		Value of		Needed to					Risk		Deemed to
								Shares		Common		Meet 2008					Multiple		be
				Common				and		Shares and		Ownership		Ownership			of 2008		Beneficially
	Director			Shares		DSUs		DSUs		DSUs		Guideline		Guideline			Annual		Owned
	Since		Year	(#)		(#)(1)		(#)		($)(2)		($)		Compliance(3)			Retainer		(#)(4)(5)
Frederick J. Blesi		2001	2008		8,500		22,974		31,474		4,909,944		700,000		Yes			35.1		24,000
			2007		6,000		22,890		28,890		1,607,452									24,000
			Change		+2,500		+84		+2,584											—
William J. Doyle(6)		1989	2008		295,613		—		295,613		46,115,698		n/a		n/a			n/a		2,868,018
			2007		234,756		—		234,756		13,072,125									3,497,491
			Change		+60,857		n/a		+60,857											−629,473
John W. Estey		2003	2008		7,000		22,144		29,144		4,546,464		750,000		Yes			30.3		7,000
			2007		6,000		20,622		26,622		1,481,192									6,000
			Change		+1,000		+1,522		+2,522											+1,000
Wade Fetzer III		2002	2008		30,000		10,649		40,649		6,341,244		675,000		Yes			47.0		39,000
			2007		27,000		10,608		37,608		2,092,541									36,000
			Change		+3,000		+41		+3,041											+3,000
Charles S. Hoffman			2008		—		n/a		—				675,000		Yes			n/a		—
			2007		n/a		n/a		n/a		n/a				(to be fully met by			n/a		n/a
			Change		n/a		n/a		n/a		n/a				May 8, 2013	)				n/a
Dallas J. Howe		1991	2008		51,615		36,484		88,099		13,743,444		1,600,000		Yes			42.9		130,815
			2007		42,000		36,351		78,351		4,359,271									139,200
			Change		+9,615		+133		+9,748											−8,385
Alice D. Laberge		2003	2008		6,000		15,484		21,484		3,351,504		750,000		Yes			22.3		6,000
			2007		6,000		14,910		20,910		1,163,477									6,000
			Change		—		+574		+574											—
Keith G. Martell		2007	2008		—		852		852		132,912		700,000		Yes			0.9		—
			2007		—		—		—		—				(to be fully met by					n/a
			Change		—		+852		+852						May 3, 2012	)				—
Jeffrey M. McCaig		2001	2008		6,000		24,504		30,504		4,758,624		700,000		Yes			34.0		84,000
			2007		6,000		22,998		28,998		1,613,412									84,000
			Change		—		+1,506		+1,506											—
Mary Mogford		2001	2008		12,660		23,320		35,980		5,612,880		750,000		Yes			37.4		30,660
			2007		12,000		23,235		35,235		1,960,420									30,000
			Change		+660		+85		+745											+660
Paul J. Schoenhals		1992	2008		4,885		18,511		23,396		3,649,776		725,000		Yes			25.2		6,000
			2007		6,000		18,444		24,444		1,360,010									6,000
			Change		−1,115		+54		−1,048											—
E. Robert Stromberg		1991	2008		33,790		16,754		50,544		7,884,864		675,000		Yes			58.4		73,390
			2007		34,665		16,692		51,357		2,856,990									74,265
			Change		−875		+62		−813											−875
Elena Viyella de Paliza		2003	2008		9,000		14,720		23,720		3,700,320		675,000		Yes			27.4		9,000
			2007		7,500		14,664		22,164		1,233,293									7,500
			Change		+1,500		+56		+1,556											+1,500

(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 $55.63 on February 20, 2007 and $156.00 on February 20, 2008.
(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 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: Frederick J. Blesi 15,500 Shares; 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. No stock options have been granted to the Corporation’s non-employee directors since November 2002.

For 2007, 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 27, 2007 through the exercise of options granted by the Corporation, as follows: Frederick J. Blesi 18,000 Shares; William J. Doyle 2,137,536 Shares; Wade Fetzer III 9,000 Shares; Dallas J. Howe 97,200 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 60,000 shares held in the William J. Doyle 2007 Family Descendents Trust and 19,898 shares held in the William & Kathy Doyle Foundation.

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Appointment of Auditors and
Report of Audit Committee

	Page
Appointment of Auditors		19
Report of Audit Committee		21

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, 2007 and December 31, 2006, Deloitte & Touche LLP received the following fees:

	Year ended December 31,
	2007		2006
Audit Fees	$	2,263,000	$	2,361,000
Audit Related Fees		314,000		255,000
Tax Fees		33,000		57,000
All Other Fees		0		0

Audit Fees

Deloitte & Touche LLP billed the Corporation $2,263,000 and $2,361,000 for 2007 and 2006, respectively, for the following audit services (i) audit of the annual consolidated financial statements of the Corporation for the fiscal years ended December 31, 2007 and 2006; (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, 2007 and 2006; (iii) audits of individual statutory financial statements; and (iv) the provision of consent letters.

Audit-Related Fees

Deloitte & Touche LLP billed the Corporation $314,000 and $255,000 for 2007 and 2006, 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 $33,000 and $57,000 for 2007 and 2006, respectively, for the following services (i) tax compliance; (ii) tax planning; and (iii) tax advice, including minimizing tax exposure or liability.

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All Other Fees

No other fees were billed to the Corporation by Deloitte & Touche LLP for 2007 and 2006.

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.

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 2007 were approved in accordance with the pre-approval policy.

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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, 2007, 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), Multilateral Instrument 52-110 “Audit Committees” (“MI 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
Keith G. Martell (from appointment on May 3, 2007 to present)
Jeffrey J. McCaig
Mary Mogford
Jack G. Vicq (until his retirement on May 3, 2007)

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 MI 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, Chief Financial Officer and 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.

Mr. Blesi gained experience as the former Chairman and Chief Executive Officer of the Phosphate Chemicals Export Association, Inc.

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 a Certified Aboriginal Financial Manager and has 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 and has acted as a member of the audit committee for several publicly traded companies. Ms. Mogford has seventeen years of experience acting as a member of an 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. 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, 2007, the Audit Committee met 9 times.

In overseeing the audit process, the Audit Committee obtained from the independent auditors their letter dated February 15, 2008, 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

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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, including those described in Statement on Auditing Standards No. 61, as amended, “Communication with Audit Committees”. 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, 2007, 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 2007 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, 2007, 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 Corporation’s Statement of Core Values and Code of Conduct. Both the Audit Committee Charter and the 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 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.

Submitted on behalf of the Audit Committee: Alice D. Laberge, Frederick J. Blesi, Keith G. Martell, Jeffrey J. McCaig and Mary Mogford.

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Adoption of 2008
Performance Option Plan

On February 20, 2008, the Board adopted a new performance option plan (the “2008 Performance Option Plan”), subject to the approval of the 2008 Performance Option Plan by the Corporation’s shareholders at the Meeting. If approved, the 2008 Performance Option Plan will be deemed effective as of January 1, 2008 (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 2008 Performance Option Plan.

Options to purchase Shares may be granted under the terms of the 2008 Performance Option Plan only during 2008 and no options will be granted prior to the Meeting. Unless sooner terminated as provided therein, the 2008 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 2008 Performance Option Plan will be administered by the Compensation Committee or any other Board Committee designated by the Board. A copy of the 2008 Performance Option Plan is attached as Appendix C. This description of the 2008 Performance Option Plan is qualified, in its entirety, by the terms of the attached plan document.

If approved, the 2008 Performance Option Plan will result in up to 0.32% (as at February 20, 2008) of the outstanding share capital of the Corporation being available for issue pursuant to the exercise of options granted under the 2008 Performance Option Plan. The aggregate number of Shares in respect of which stock options may be granted to any one person pursuant to the 2008 Performance Option Plan and which remain outstanding may not at any time exceed 250,000 Shares, representing 0.08% (as at February 20, 2008) of the outstanding share capital of the Corporation.

Under the terms of the 2008 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 2008 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, 2010, subject to the Corporation’s achievement of the performance criteria described in the 2008 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 241 participants in the 2008 Performance Option Plan. Following shareholder approval of the 2008 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 2008 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 2008 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)	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 2008 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 2008 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 2008 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 2008 Performance Option Plan, permit non-employee directors to participate in the 2008 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 2008 Performance Option Plan; and provided further, for greater certainty, that, without the prior approval of the Corporation’s shareholders, stock options issued under the 2008 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 2008 Performance Option Plan to reflect such transaction. In the event of change of control (as defined in the 2008 Performance Option Plan), all unvested options then outstanding will become fully vested.

A participant in the 2008 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 2008 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

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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 2008 Performance Option Plan in Canada.

All of the options granted under the 2008 Performance Option Plan will be treated as non-qualified stock options for U.S. federal income tax purposes. A participant in the 2008 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 2008 Performance Option Plan will be made after shareholder approval is obtained and during the 2008 fiscal year.

In order for the 2008 Performance Option Plan to become effective, the resolution to approve the 2008 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 2008 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 five other stock option plans. 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, 2008, options to acquire 1,722,300 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 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, 2008, options to acquire 2,667,300 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. Apart from housekeeping and conforming amendments, 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, 2008, options to acquire 3,507,000 Shares had been granted and were outstanding under the 2005 Performance Option Plan. Grants under the 2005

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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. Apart from housekeeping and conforming amendments, 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, 2008, 5,809,884 options were outstanding under the Stock Option Plan — Officers and Employees and 300,500 options were outstanding under the Stock Option Plan — Directors. Apart from housekeeping and conforming amendments, 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, 2007 and February 20, 2008.

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, 2007
Equity compensation plans approved by shareholders	14,006,984 (1)	$28.47	0
Equity compensation plans not approved by shareholders	n/a	n/a	n/a
February 20, 2008
Equity compensation plans approved by shareholders	13,945,992(2)	$28.54	0
Equity compensation plans not approved by shareholders	n/a	n/a	n/a

(1)

Of this amount, 3,507,000 options were outstanding pursuant to the 2005 Performance Option Plan, 2,667,300 options were outstanding pursuant to the 2006 Performance Option Plan, 1,722,300 options were outstanding pursuant to the 2007 Performance Option Plan, 5,809,884 options were outstanding pursuant to the Stock Option Plan — Officers and Employees and 300,500 options were outstanding pursuant to the Stock Option Plan — Directors.

(2)

Of this amount, 3,507,000 options were outstanding pursuant to the 2005 Performance Option Plan, 2,667,300 options were outstanding pursuant to the 2006 Performance Option Plan, 1,722,300 options were outstanding pursuant to the 2007 Performance Option Plan, 5,748,892 options were outstanding pursuant to the Stock Option Plan — Officers and Employees and 300,500 options were outstanding pursuant to the Stock Option Plan — Directors.

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Corporate Governance

	Page
Statement of Corporate Governance Practices		27
Corporate Governance and Nominating Committee Report		28

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 “Statement of Core Values and Code of Conduct”. The complete text of the “PotashCorp Governance Principles”, the “Statement of 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. In 2007, the Corporation eliminated its Executive Committee. The recent activities of the Corporate Governance and Nominating Committee of the Board 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 Audit Committee Report”.

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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, 2007, the CG&N Committee met 5 times.

Mary Mogford (Chair)
Frederick J. Blesi
Wade Fetzer III
Dallas J. Howe

Mr. Stromberg served on the Corporate Governance and Nominating Committee during 2007. In connection with the year end review of director independence, Mr. Stromberg is no longer a member of this committee. See “Director Independence and Other Relationships” for additional detail.

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 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 in Appendix A.

2007 Governance Activities

In 2007, the CG&N Committee recommended that the Board formally eliminate the Executive Committee, which in practice has not been used in recent years. One of the principal justifications for the existence of the Executive Committee had been to have a standing committee of a small number of Board members who could easily and quickly meet and take binding action when urgent action was required and it was impractical or difficult to obtain a quorum of directors. Given the current reality of widespread access to instantaneous communication media which Board members rely upon to meet and exchange information, this justification has little force. It is not difficult to get all directors together on short notice to allow decision making by the full Board.

Notwithstanding the ability to convene the full board on short notice, there are from time to time certain Board matters which may require frequent meetings and sustained attention. On the rare occasions when the Board has had to deal with such matters, special committees of the Board comprised of Board members whose background, experience and personal characteristic made them best suited for such service dealt with such matters. Accordingly, given the demonstrated ability of the Board both to leverage modern communication and technology to quickly convene unscheduled meetings of the full Board and to appoint special committees with the requisite expertise to handle more protracted issues, the Board eliminated the Executive Committee.

The issue of “proxy access” for shareholders to the nomination process has been the subject of much public commentary and debate in the last year. As described below, by virtue of our governing corporate statute, “proxy access” has been and continues to be available to our shareholders.

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Disclosure Regarding Nominating Processes

In accordance with the provisions of section 137 of the Canada Business Corporations Act (the “Act” ), 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 Act for a description of the procedures to be followed. For additional information regarding shareholder proposals, see “2009 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 – 1^st 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 Act. 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

•  global agriculture

•  global and international commerce

•  transportation industry

•  e-commerce and technology

•  finance

•  investment banking

•  legal

•  accounting

•  mining industry

•  chemical industry

•  general business management

•  public policy

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 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.

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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 presiding director 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 2007, all such directors and nominees attended the annual meeting.

Submitted on behalf of the CG&N Committee: Mary Mogford, Frederick J. Blesi, Wade Fetzer III and Dallas J. Howe.

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Compensation

	Page
Report of the Compensation Committee and Compensation Committee Responsibilities and Procedures		31
Compensation Discussion and Analysis		33
Executive Compensation		48
Performance Graphs		57

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 four directors: John W. Estey (Chair), Wade Fetzer III, 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, 2007, 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 “Nominees for Election to the Board of Directors — Director Independence and Other Relationships”. 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 held 6 meetings in the last fiscal year.

Compensation Committee Responsibilities and Procedures

The Committee is charged with formulating and making recommendations to the Board in respect of compensation issues relating to our directors and senior officers. The Committee also makes recommendations regarding our stock option plans and administers the Short- and Medium-Term Incentive Plans, and our Performance Option Plans, each in accordance with its terms. The 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 Committee, in consultation with the CEO, considers and reports to the Board regarding employee or executive succession matters. 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 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;

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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;
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 2007, 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, 2007 and in this Management Proxy Circular.

By the Compensation Committee:

John W. Estey (Chair)
Wade Fetzer III
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 and 2007 can be found in the Summary Compensation Table and related compensation tables beginning on page 48.

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 2007, 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 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 generally link the amount of variable compensation to total shareholder return or metrics with a demonstrated relationship to total shareholder return. All of the outstanding options granted under our 2005 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, 2007.

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.

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. We also use Hewitt Associates’ proprietary Total Compensation Measurement data services to provide specific compensation data for selected executive and director positions.

We strongly support share ownership by our executives. Each of our executives is required to hold shares of our common stock 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.

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 generally link the amount of variable compensation to total shareholder return or metrics with a demonstrated relationship to total shareholder return.

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Compensation Principles

•  To emphasize performance-based compensation, we maintain total cash compensation levels (salary and annual short-term incentive targets) at the median (50th percentile) of the relevant group of comparable companies. 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 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. companies with similar industry characteristics and market capitalization, which we refer to herein as the “Comparator Group”, and (2) additional U.S.-based company executive compensation survey information, 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”.

•  For the purpose of total cash compensation comparisons, we calculate the median of the Comparative Compensation Information by applying a regression analysis based upon revenues to the salaries and annual short-term incentive targets for each position studied.

•  We provide the opportunity to earn total compensation above the median through medium-term and long-term incentive plans. We design these 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. We use the total shareholder return of the DJUSBMI as a benchmark for determining the relative performance of our company.

•  For purposes of total compensation, including salary, annual short-term incentives, medium-term incentives and long-term incentives, we calculate the median and upper quartile by using the range between competitive levels based upon a comparative revenues regression analysis and a comparative market capitalization regression analysis.

•  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.

The following charts set forth the relative weight of 2007 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, using regression analyses based on sales and market capitalization and (2) our Named Executive Officers and executive officers of the Comparator Group holding comparable positions, using a regression analysis based on sales.

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Our CEO’s Compensation

Our CEO’s Compensation	CEO Compensation of Comparator Group (regression analysis based on sales)
CEO Compensation of Comparator Group (regression analysis based on market capitalization)
Our NEO’s Compensation
Our NEO’s Compensation	Executive Officer Compensation of Comparator Group (regression analysis based on sales)(1)

⁽¹⁾  Information necessary to complete a regression analysis based on market capitalization is unavailable for executive officers of the Comparator Group, and therefore, that chart has been omitted. In addition, due to insufficient data regarding the compensation of Chief Operating Officers of the Comparator Group, the Executive Officer Compensation of Comparator Group chart incorporates Additional Survey data regarding the compensation of Chief Operating Officers.

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. 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.

Current			Performance
Compensation	Form	Eligibility	Period	Determination
Base salary	Cash	All salaried employees	Annual	• For executive officers, we set base salary targets at the median of the Comparative Compensation Information, adjusted to reflect individual performance and internal equity.
Short-term incentives	Cash	All executives and most salaried staff and union and non-union hourly employees	1 year	• 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.
Medium-term incentives	Performance Share Units	All executives and senior management (approximately 67 individuals)	3 years	• On 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.
Long-term incentives	Performance Options	All executives, senior management and other selected managers (approximately 241 individuals)	3 year vesting 10 year option term	• Options granted under our Performance Option Plans vest based on our cash flow return on investment and 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.

 

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Post-Retirement
and Termination			Measurement
Compensation	Form	Eligibility	Period	Determination
Pension Benefits
Canadian Pension Plan	Cash	All Canadian salaried staff and certain union and non-union hourly employees	Pensionable service period	• Benefits are based on the participant’s required contributions (up to 5.5% of earnings) and equivalent matching contributions by our company.
Canadian Supplemental Retirement Income Plan	Cash	Selected senior executives (23 individuals)	Pensionable service period to a maximum of 35 years	• 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.
U.S. Pension Plan	Cash	All U.S. salaried and non-union hourly employees	Pensionable service period to a maximum of 35 years	• 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.
U.S. Supplemental Plan	Cash	Eligible U.S. salaried and non-union hourly employees	Pensionable service period to a maximum of 35 years	• 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.

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Post-Retirement
and Termination			Measurement
Compensation	Form	Eligibility	Period	Determination
Severance Benefits
Change in control severance benefits	Cash, Insurance and Other Benefits	Selected senior executives (3 individuals)	Upon termination of employment	• 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.
General severance benefits	Cash	All salaried employees	Upon termination of employment	• 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.

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 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 have no non-qualified deferred compensation arrangements in place for management. 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. Our Compensation Committee generally establishes salary guidelines at levels that approximate the median (the 50th percentile) of the Comparative Compensation Information, adjusted through a regression analysis utilizing revenues. 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.

In 2007, 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 2006 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

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earnings per share and total shareholder return during the measurement period. The study concluded that during the three years ended December 31, 2006, the 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 conducted by the Hay Group found similar results for the compensation of our CEO. These results support the Compensation Committee’s compensation philosophy by demonstrating alignment between our Named Executive Officers’ compensation and our performance.

The peer group used by Watson Wyatt for the above study consisted of the following 18 companies: Agrium Inc., Air Products & Chemicals, Inc., Arch Coal, Inc., Ashland Inc., Barrick Gold Corporation, Cameco Corporation, Eastman Chemical Company, Ecolab Inc., Martin Marietta Materials, Inc., Monsanto Company, Newmont Mining Corporation, Nova Chemicals Corporation, Peabody Energy Corporation, PPG Industries, Inc., Praxair, Inc., Rohm and Haas Company, The Valspar Corporation and Vulcan Materials Company. Although many of the above companies are also included in our Comparator Group, which is set forth on page 44, the peer groups are not identical due to the reliance on publicly available data and the inclusion of non-U.S. companies in the Watson Wyatt study.

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 incentive 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.

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 adjust individual awards in accordance with individual performance and such other factors as the Committee deems appropriate. 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 use cash flow as a supplemental financial measure in our evaluation of liquidity and financial strength. Management believes that this measurement 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. We generally set cash flow return targets that are challenging for our Named Executive Officers 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.

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 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.

In 2007, the cash flow return target under our Short-Term Incentive Plan was 14.86% and our actual cash flow return was 21.85%, which resulted in an adjusted cash flow return ratio of 1.4573. In 2006, the adjusted cash flow return ratio was .8924, based on a cash flow return target of 16.10% and an actual cash flow return of 14.37%. (Due to rounding, dividing the actual cash flow returns by the cash flow return targets may not result in the exact adjusted cash flow return ratios set forth above.) For information regarding each Named Executive Officer’s 2006 and 2007 Short-Term Incentive Plan awards, see “Executive Compensation — Summary Compensation Table”. For a description of how adjusted cash flow return is calculated, see “— Summary Compensation Table — Non-Equity Incentive Plan Compensation”.

The purpose of the 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

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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.

Medium-Term Incentive Plan

Our Medium-Term Incentive Plan is 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 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, or TSR, over the three-year performance period beginning January 1, 2006 and ending December 31, 2008. TSR measures the capital appreciation in shares of our common stock, including dividends paid over the performance period, and thereby simulates the actual investment performance of the shares.

Under the Medium-Term Incentive Plan, we award 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 vest over a three-year performance period ending December 31, 2008. 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 group of peer companies.

The peer group of companies consists of the companies that are included in the DJUSBMI. 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, the participant is 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 resigns or whose employment is terminated for just cause forfeits all rights to any units granted under the plan.

We 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 may not exceed 300% of the market value of a share of our common stock as at the beginning of the performance cycle. Because the value of the units granted under the Medium-Term Incentive Plan are capped at 300% of the market value of a share, the Committee can more readily stress-test executive officer compensation and analyze the effect of significant upturns or downturns in company performance.

Depending on the achievement of performance objectives, 0% to 150% of the units granted under the Medium-Term Incentive Plan vest. Achievement of the target performance objectives entitles a participant to 100% of the units awarded under the plan. The target performance objective for the half of the units based on total TSR is a TSR of 30% over the performance period. The target performance objective for the other half of the units is a TSR that outperforms the DJUSBMI by 5% over the performance period. A maximum of 150% of the units vest if actual performance exceeds target performance. For a TSR of 50% or more, half of the units vest at 150%. For a TSR that outperforms the DJUSBMI by 10% or more, the other half of the units vest at 150%. No units vest if the minimum performance objectives are not achieved. The minimum performance objective for the units based on total TSR is a positive TSR. The minimum performance requirement for the remaining units is for TSR to match the performance of the DJUSBMI.

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.

— Performance Option Plans

On May 3, 2007, our shareholders approved the 2007 Performance Option Plan under which we could offer, after February 20, 2007 and before January 1, 2008, options for the issuance of up to 3,000,000 shares pursuant to the exercise of options to eligible officers and employees. As of February 20, 2008, options to acquire 1,722,300 shares were

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issued and outstanding under the 2007 Performance Option Plan. As of February 20, 2008, options to acquire an additional 2,667,300 shares were issued and outstanding under the 2006 Performance Option Plan. As discussed in detail below, options to acquire 3,507,000 shares have vested and are outstanding under the 2005 Performance Option Plan.

For 2008, we are requesting shareholder approval of an amount of 1,000,000 options to be available for grant under the provisions of the 2008 Performance Option Plan. We expect that this amount is sufficient for one annual grant to be made after the Meeting and before January 1, 2009.

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.

Using 10-year historical data, the Committee worked with Hewitt Associates 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 25th, 50th, and 75th 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.

Options to acquire 3,507,000 shares were issued and are outstanding under the 2005 Performance Option Plan. All outstanding options have vested based on an annual average CFROI-WACC level of 8.29 during the three-year performance period ended December 31, 2007. For a description of how adjusted CFROI-WACC is calculated, see “Grants of Plan-Based Awards — Option Awards”.

— Stock Option Plan — Officers and Employees

As at February 20, 2008, options for a total of 5,748,892 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

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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 in “— 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. 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, Mr. Brownlee and Mr. Moore, 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 and PCS Nitrogen maintained separate defined benefit pension plans (the “Nitrogen Pension Plan” and the “Phosphate Pension Plan”) for their respective eligible U.S. employees, including Mr. Dietz in the case of PCS Nitrogen and Mr. Regan, in the case of PCS Phosphate. 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. Regan, 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 and Mr. Regan 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.

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For financial statement reporting purposes, as calculated in accordance with generally accepted accounting principles in Canada (“Canadian GAAP”), 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 was approximately $23.1 million as of December 31, 2007.

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 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, Mr. Brownlee and Mr. Moore. 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 termination of the executive’s employment 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:

1.	a lump-sum payment of three times the executive’s current base salary and average bonus for the last three years;
2.	a lump-sum payment of the pro-rata target bonus for the year in which the termination occurs;
3.	immediate vesting and cash out of all outstanding Medium-Term Incentive Plan awards;
4.	a credit of three additional years of service under the Canadian Supplemental Plan;
5.	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
6.	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 if payable in respect of such benefits.

All outstanding non-exercisable options granted to the executive pursuant to the option plan 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

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

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evaluation of compensation arrangements associated with certain strategic opportunities. In 2007, we paid Watson Wyatt approximately $267,400 for compensation consulting services. 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 consulting services performed for us by Watson Wyatt must be approved in advance by the Chair of the Committee.

We use Hewitt Associates’ proprietary Total Compensation Measurement data services to provide specific compensation data for selected executive and director positions. Hewitt Associates has historically provided other human resources consulting services for us, including actuarial consulting, employee benefits design, finance consulting and recordkeeping services. In 2007, we paid Hewitt Associates approximately $46,100 for the Total Compensation Measurement data services and approximately $395,200 for actuarial and other services.

The Committee uses executive compensation analyses prepared on at least an annual basis by Watson Wyatt, Hewitt Associates and other independent compensation consultants. Such analyses currently consist of (1) a group of 21 publicly traded U.S. companies, or the Comparator Group, selected on the basis of a number of factors, including similar industry characteristics, amount of sales and market capitalization, and (2) additional U.S.-based company executive compensation survey information gathered by three compensation consulting services, or the Additional Surveys.

The 21 companies included in the Comparator Group in 2007 are:

Air Products and Chemicals, Inc.
Apache Corporation
Boise Cascade LLC
Eastman Chemical Company
Ecolab Inc.
Martin Marietta Materials, Inc.
MeadWestvaco Corporation
Monsanto Company
The Mosaic Company
Nalco Company
Packaging Corporation of America
Pactiv Corporation
PPG Industries, Inc.
Praxair, Inc.
Rayonier Inc.
Rohm and Haas Company
Smurfit-Stone Container Corporation
Sonoco Products Company
The Valspar Corporation
Vulcan Materials Company
W.W. Grainger, Inc.

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.

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The Guidelines are:

	Share Ownership
Title	Guideline
Chief Executive Officer	5 times base salary
Chief Financial Officer, Chief Operating Officer, Senior Vice Presidents and Division Presidents	3 times base salary
Designated Senior Vice Presidents and Vice Presidents	1 times base salary

As of February 20, 2008, 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		295,613(1)		$46,115,628		$5,460,000		42.2x
Wayne R. Brownlee		52,497		$  8,189,532		$1,483,200		16.6x
James F. Dietz		52,829		$  8,241,324		$1,458,600		17.0x
Garth W. Moore		27,869		$  4,347,564		$1,206,300		10.8x
Thomas J. Regan, Jr.		36,203		$  5,647,668		$1,188,900		14.3x

⁽¹⁾  Includes 60,000 shares held in the William J. Doyle 2007 Family Descendents Trust and 19,898 shares held in the William & Kathy Doyle Foundation.

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 2008, the Committee and the Board reviewed Mr. Doyle’s performance relative to his 2007 performance goals for the purpose of determining his 2008 base pay level and 2007 short-term incentive bonus award. At that time, a 2008 salary of $1,092,000 and a short-term incentive bonus award of $2,190,000 for 2007 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.

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In 2007, we improved in several key safety indices. The frequency of lost time injuries improved significantly, dropping 48% from 2006. Moreover, although the frequency of recordable injuries increased, the severity rate of injuries declined 4%.

2.  Meet or exceed the budget approved for 2007, including earnings per share (“EPS”) and cash flow per share (“CFPS”) targets.

We exceeded our 2007 budgeted targets for EPS and CFPS.

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.

We continued to drive our “Potash First” strategy by successfully increasing our investment in Sociedad Quimica y Minera de Chile S.A. to 32% and acquiring an additional approximately 194.3 million shares in Sinofert Holdings Limited, which acquisition closed in January 2008. 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 2007, our common stock outperformed the DJUSBMI with an annual total shareholder return of 201.6% compared to 30.35% for the DJUSBMI.

5.  Continue to implement the Board approved strategic plan to decommoditize our company with the focus on creating a better return on our phosphate business.

The profitability of solid and liquid phosphate fertilizers increased significantly in 2007. Due, in part, to a 231% increase in the gross margin per ton of phosphoric acid (P₂O₅), the split between the 2007 gross margins of fertilizer and non-fertilizer was 63% and 37%, respectively.

We continue to develop new specialty phosphate and phosphoric acid opportunities. This includes a new product which came on stream with the opening of the first of four Silicon Tetraflouride (STF) plants in Aurora. We expect that the other three STF plants will be commissioned in the first half of 2008.

6.  Grow the revenue base and bottom line for our company through strategic use of capital.

The following are expected to contribute significantly to future annual gross margin:

(1)	Potash capacity expansion and compaction projects completed at Allan (Cdn$210 million) and continued at Lanigan (Cdn$410 million);
(2)	Debottlenecking and expansion projects at Patience Lake (Cdn$110 million), Cory (Cdn$890 million), New Brunswick (Cdn$1.7 billion) and Rocanville (Cdn$1.8 billion) evaluated and commenced in 2007;
(3)	First STF plant completed in 2007 and executed a deal to construct an additional three STF plants;
(4)	Nitric acid expansion at Geismar commenced in 2007; and
(5)	Second warehouse completed in Brazil for total investment of Cdn$9.7 million.

7.  Show measurable success in leadership development and succession planning for our employees.

With 85% of senior positions filled by internal candidates during 2007, we exceeded our target of 75%. Senior management supported leadership skills training courses, succession planning strategy and key talent identification and development activities throughout the company, consistent with our ongoing commitment to develop talent internally.

8.  Lead management’s effort to make sure it does its part in the pursuit of the best possible corporate governance for our company.

Supporting the foundation of excellent corporate governance through transparency and accountability, in 2007, the CEO again engaged and met with our stakeholders, including customers, employees, analysts, the media, governmental leaders such as Saskatchewan’s Industry and Resources Minister and its new Premier, and other parties who are interested in our company. We also engaged our shareholders that expressed interest in corporate policies and practices, which, in 2007, tended to focus on executive compensation. Our commitment to excellence in

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corporate governance practices was recognized by external monitors, including The Globe & Mail, which ranked our company 8^th out of 270 Canadian companies in its 2007 corporate governance rankings.

9.  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.

We shipped all of our products in adherence to SGN or UI specifications, and we received no customer complaints regarding SGN or UI. We received 11 customer complaints regarding dusty product or high fines content, which complaints were attributable to shipments that accounted for only 0.085% of our total shipped tonnes of potash, nitrogen and phosphate.

10.  Provide leadership for our company with the investment community, within our industry and in the communities in which our people work and reside.

In 2007, we received recognition for our reporting and investor relations efforts. IR Magazine nominated us for several of its awards in Canada, including “Best Overall Investor Relations”, “Best Annual Report” and “Best Investor Relations by a CEO”. The Canadian Institute of Chartered Accountants, or CICA, awarded us with “Best Corporate Reporting” in the Mining category and awarded us with honorable mention for our electronic disclosure and our sustainability reporting.

In 2007, the CEO served on the boards of key industry groups, including chairman of The Fertilizer Institute, Vice-President, Sustainability of the International Fertilizer Industry Association, or IFA, and a member of the board of directors of the International Plant Nutrition Institute. The CEO also delivered the keynote address at the Canadian Fertilizer Industry’s Annual Conference and the International Feed Industry Federation, or IFIF, Global Feed & Food Safety Congress.

In 2007, surveys of community leaders were conducted in four communities in which we operate (Geismar, Trinidad, Allan and New Brunswick) regarding our community involvement, business practices and economic impact. All four of the locations obtained an overall average score of above 4.0 on a scale from 1 to 5.

11.  Find new ways to make it easier for our customers to do business with us.

Five important customer initiatives were introduced or continued in 2007:

•  Upgraded and expanded our North American and international transportation and distribution system to: (i) improve loading, unloading and delivery times; (ii) increase storage capacity and rail fleet; (iii) offer additional transportation mode alternatives; and (iv) bring our product closer to our customers;

•  Collaborated with customers in developing market placement and terminal strategies to optimize their supply chain and reduce rail cycle times and seasonality in their business;

•  Partnered with customers in our operational Best Practices workshops to discuss and share information to ensure product quality, reliability and service excellence;

•  Recertified all of our feed operations as American Feed Industry Association, or AFIA, Safe Feed/Safe Food facilities, demonstrating our pledge to food safety and enhancing consumer confidence in the products we provide; and

•  Expanded our electronic commerce initiatives and enhanced our report customization capabilities to make it simpler and quicker for our customers to do business with us.

Mr. Doyle’s award under our Short-Term Incentive Plan for 2007 as set forth in the “Summary Compensation Table” and salary for 2008 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 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 2007, for services rendered to us and our subsidiaries (the “Named Executive Officers” or “NEOs”).

												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		Compensation(5)		Total
Principal Position	Year		($)		($)	($)		($)		($)		($)		($)		($)
(a)	(b)		(c)		(d)	(e)		(f)		(g)		(h)		(i)		(j)
William J. Doyle President and Chief Executive Officer		2007 2006		1,040,000 1,000,000	— —		3,830,786 1,120,382		7,652,960 5,797,500		2,190,000 750,000		2,340,578(6) 94,917(6)		134,297 180,958		17,188,621 8,943,757
Wayne R. Brownlee Executive Vice President Treasurer and Chief Financial Officer		2007 2006		480,000 460,000	— —		1,132,709 331,281		2,018,887 1,913,173		578,000 300,000		406,802(7) 276,707(7)		44,114 58,556		4,660,512 3,339,717
James F. Dietz Executive Vice President and Chief Operating Officer		2007 2006		463,000 445,000	— —		1,095,729 320,466		2,049,900 1,932,500		621,000 270,000		62,363(8) 179,240(8)		40,133 41,397		4,332,125 3,188,603
Garth W. Moore President, PCS Potash		2007 2006		382,900 366,400	— —		802,169 234,609		1,049,821 918,323		400,000 171,000		395,746(9) —(9)		23,997 34,704		3,054,633 1,725,036
Thomas J. Regan, Jr. President, PCS Phosphate and PCS Nitrogen		2007 2006		374,396 355,045	— —		763,768 223,378		1,065,948 927,600		400,000 177,000		20,809(10) 388,434(10)		24,686 23,490		2,649,607 2,094,947

(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)

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:

	Quarter Ended			Quarter Ended			Quarter Ended			Quarter Ended			Quarter Ended			Quarter Ended			Quarter Ended			Quarter Ended
	March 31,			June 30,			September 30,			December 31,			March 31,			June 30,			September 30,			December 31,
	2006			2006			2006			2006			2007			2007			2007			2007
Risk-Free Interest Rate		4.816	%		5.122	%		4.614	%		4.808	%		4.574	%		4.858	%		3.984	%		3.177	%
Dividend Yield		1.24	%		1.18	%		1.15	%		1.12	%		1.09	%		1.02	%		0.97	%		0.90	%
Correlation Between our Common Share Price and DJUSBMI		0.52			0.56			0.58			0.48			0.49			0.50			0.52			0.68
Volatility of our Common Share Price		27.87	%		30.85	%		29.83	%		31.53	%		32.58	%		33.36	%		35.16	%		43.61	%
Volatility of DJUSBMI		16.68	%		17.79	%		17.73	%		17.75	%		17.90	%		17.22	%		18.85	%		22.60	%

(3)

Reports amounts calculated in accordance with FAS 123R for options granted pursuant to the 2007 Performance Option Plan and the 2006 Performance Option Plan, respectively. The amounts reported 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, 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 2007 and 2006 performance, which amounts were paid in 2008 and 2007, respectively. See “Compensation Discussion and Analysis — Short-Term Incentive Plan”.

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⁽⁵⁾  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.			Garth W.		Thomas J.
		Doyle		Brownlee		Dietz			Moore		Regan, Jr.
Company Contributions to Canadian	2007	$	8,590	$	8,568		—		$	8,614		—
Pension Plan	2006		8,195		8,218		—			8,233		—
Company Contributions to Savings	2007		31,200		14,400	$	20,039	(a)		11,487	$	17,489	(b)
Plan or 401(k) Plan	2006		60,000		27,600		19,807			21,984		17,251
Life Insurance Premiums Paid for the Benefit of NEO	2007 2006		10,122 10,601		3,690 4,240		7,354 7,459			3,744 4,006		7,197 6,239
Medical Insurance Premiums Paid on Behalf of NEO	2007 2006		17,014 14,040		— 6,743		— —			— —		— —
Tax Gross-ups for Taxable Benefits	2007 2006		11,663 19,614		6,192 —		— 2,365			152 481		— —
Perquisites(c)	2007 2006		55,708 68,508		11,264 11,755		12,740 11,766			— —		— —
Total	2007	$	134,297	$	44,114	$	40,133		$	23,997	$	24,686
	2006		180,958		58,556		41,397			34,704		23,490

(a)	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 2007, includes $13,438 in contributions to the 401(k) Plan on behalf of Mr. Regan and $4,051 that exceeds the 401(k) Plan statutory limit and is therefore immediately taxable and paid to Mr. Regan in cash. For 2006, includes $13,200 in contributions to the 401(k) Plan on behalf of Mr. Regan and $4,051 that exceeds the 401(k) Plan statutory limit and is therefore immediately taxable and paid to Mr. Regan in cash.
(c)	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, country club memberships and reimbursement for 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.

(6)	Reports the aggregate annual change of $2,340,578 and $94,917 in the actuarial present value of Mr. Doyle’s accumulated benefit under the Canadian Supplemental Plan during 2007 and 2006, respectively.
(7)	Reports the aggregate annual change of $406,802 and $276,707 in the actuarial present value of Mr. Brownlee’s accumulated benefit under the Canadian Supplemental Plan during 2007 and 2006, respectively.
(8)	Reports the aggregate annual change of a decline of $27,946 in the actuarial present value of Mr. Dietz’s accumulated benefit under the U.S. Pension Plan during 2007 and an increase of $90,309 in the actuarial present value of Mr. Dietz’s accumulated benefit under the U.S. Supplemental Plan during 2007, and reports the aggregate annual change of $98,885 in the actuarial present value of Mr. Dietz’s accumulated benefit under the U.S. Pension Plan during 2006 and $80,354 in the actuarial present value of Mr. Dietz’s accumulated benefit under the U.S. Supplemental Plan during 2006.
(9)	Reports the aggregate annual change of $395,746 in the actuarial present value of Mr. Moore’s accumulated benefit under the Canadian Supplemental Plan during 2007. The actuarial present value of Mr. Moore’s accumulated benefit under the Canadian Supplemental Plan declined by $42,931 in 2006.

⁽¹⁰⁾   Reports the aggregate annual change of a decline of $13,270 in the actuarial present value of Mr. Regan’s accumulated benefit under the U.S. Pension Plan during 2007 and an increase of $34,079 in the actuarial present value of Mr. Regan’s accumulated benefit under the U.S. Supplemental Plan during 2007. Reports the aggregate annual change of $203,512 in the actuarial present value of Mr. Regan’s accumulated benefit under the U.S. Pension Plan during 2006 and $184,922 in the actuarial present value of Mr. Regan’s accumulated benefit under the U.S. Supplemental Plan during 2006.

Salary and Bonus

As reported in the Summary Compensation Table above, the percentage of our Named Executive Officers’ total 2006 and 2007 compensation that is comprised of salary and bonus is between 5% and 25% 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. On 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, Mr. Moore received a grant of 16,920 performance share units and Mr. Regan received a grant of 16,110 performance share units. The performance share units vest and are paid at the end of the three-year performance cycle (December 31, 2008) in relation to a vesting schedule whereby one-half of the units are vested in accordance with corporate Total Shareholder Return (TSR) and one-half of the units are vested in accordance with corporate TSR relative to a selected competitive group’s TSR.

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We use the following vesting schedules to determine how many units each Named Executive Officer receives 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 is mathematically interpolated between the reference points. The value at payout is based on the number of vested units multiplied by the trailing 30-day average common share price.

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 and 2007 performance periods. The amount of each Named Executive Officer’s award is generally equal to the officer’s award percentage, as determined by our cash flow return in 2006 and 2007 compared to target cash flow return, multiplied by the officer’s 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, equals our 2006 or 2007 actual cash flow return, as defined in the plan, divided by the target cash flow return, as determined by the 2006 or 2007 corporate budget approved by our Board, as applicable. 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		Maximum Award
	When ACFR is	Award Percentage	Percentage (ACFR
Officers	Less than 1	When ACFR is Equal to or Greater 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	(100% 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.

Total Compensation

Total compensation awarded to our Named Executive Officers was 3.3% of net income in 2007 and 3.1% of net income in 2006. Total compensation awarded to our Named Executive Officers is equal to the sum of each Named Executive Officer’s 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, 2007 and December 31, 2006.

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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 2007 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	Value of
											Price of	Stock and
											Option	Option
	Grant		Threshold		Target	Maximum	Threshold		Target	Maximum	Awards(2)	Awards
Name	Date		($)		($)	($)	(#)		(#)	(#)	($/Sh)	($)
(a)	(b)		(c)		(d)	(e)	(f)		(g)	(h)	(k)	(l)
William J. Doyle
Short-Term Incentive Plan Performance Option Plan		5/3/2007		520,000	1,040,000	2,080,000		0	336,000	336,000	$62.73		7,652,960
Wayne R. Brownlee
Short-Term Incentive Plan Performance Option Plan		5/3/2007		168,000	336,000	672,000		0	90,000	90,000	Cdn$69.48		2,018,887
James F. Dietz
Short-Term Incentive Plan Performance Option Plan		5/3/2007		162,050	324,100	648,200		0	90,000	90,000	$62.73		2,049,900
Garth W. Moore
Short-Term Incentive Plan Performance Option Plan		5/3/2007		105,298	210,595	421,190		0	46,800	46,800	Cdn$69.48		1,049,821
Thomas J. Regan, Jr.
Short-Term Incentive Plan Performance Option Plan		5/3/2007		102,959	205,918	411,836		0	46,800	46,800	$62.73		1,065,948

(1)	The amounts in columns (c), (d) and (e) set forth the threshold, target and maximum values of the 2007 Short-Term Incentive Plan awards based on respective cash flow returns of 50%, 100% and 150% of target cash flow return for 2007. The actual amount of each Named Executive Officer’s 2007 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 2007 Performance Option Plan were granted with an exercise price equal to the closing market price per common share on the NYSE for Mr. Doyle, Mr. Dietz and Mr. Regan and on the TSX for Mr. Brownlee and Mr. Moore, in each case on the day prior to the grant date.

Option Awards

Certain amounts reported in column (f) of the Summary Compensation Table represent options granted during 2006 pursuant to our 2006 Performance Option Plan, and certain 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 2007 pursuant to our 2007 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 Mr. Moore and Mr. Regan 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 Mr. Moore and Mr. Regan received a grant of 46,800 performance options. The options have 10-year terms and vest based on performance incentives over the three-year performance periods ending December 31, 2008 and December 31, 2009.

In accordance with the Performance Option Plans, the performance incentives that will be used to determine vesting of the stock 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

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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 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 and 2005 Performance Option Plans, filed as Exhibits 10(dd) and 10(cc), respectively, 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.

TSR 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 stock options will depend on the market price of our Shares relative to the exercise price per Share of the stock option at the time of exercise.

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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, 2007 for the Named Executive Officers.

Option Awards

Stock Awards

Equity

Equity

Equity

Incentive Plan

Incentive

Incentive Plan

Awards:

Plan

Awards:

Market or

Awards:

Number of

Payout Value

Number of

Number of

Number of

Unearned

of 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

Unexercisable

Options(1)

Price

Date

Vested(2)

Vested(3)

(a)

(b)

(c)

(d)

(e)

(f)

(i)

(j)

William J. Doyle

300,000

$11.31

11/5/2008

420,000

$10.16

11/21/2010

420,000

$10.50

11/20/2011

420,000

—

$11.00

11/20/2012

121,203

$

9,450,198

337,536

$13.17

11/20/2013

675,000

$29.41

5/5/2015

450,000

$33.67

5/4/2016

336,000

$62.73

5/3/2017

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

35,838

$

2,794,289

195,000

Cdn$36.64

5/5/2015

150,000

Cdn$37.27

5/4/2016

90,000

Cdn$69.48

5/3/2017

James F. Dietz

50,000

$10.50

11/20/2011

210,000

$11.00

11/20/2012

168,756

—

$13.17

11/20/2013

34,668

$

2,703,064

195,000

$29.41

5/5/2015

150,000

$33.67

5/4/2016

90,000

$62.73

5/3/2017

Garth W. Moore

64,660

Cdn$17.17

11/20/2013

105,000

—

Cdn$36.64

5/5/2015

25,380

$

1,978,879

72,000

Cdn$37.27

5/4/2016

46,800

Cdn$69.48

5/3/2017

Thomas J. Regan, Jr.

105,000

$29.41

5/5/2015

—

72,000

$33.67

5/4/2016

24,165

$

1,884,145

46,800

$62.73

5/3/2017

(1)	The outstanding equity incentive plan awards reported in column (d) represent unearned options pursuant to our 2006 and 2007 Performance Option Plans. Options granted pursuant to the 2006 Performance Option Plan vest at the end of the performance period ending December 31, 2008, and options granted pursuant to the 2007 Performance Option Plan vest at the end of the performance period ending December 31, 2009. The reported number of shares underlying the options is based on achievement of the plans’ maximum performance levels.
(2)	The outstanding equity incentive plan awards reported in column (i) represent outstanding awards pursuant to our Medium-Term Incentive Plan, which vest at the end of the performance period ending December 31, 2008. The reported number of units is based on achievement of the plan’s maximum performance level.
(3)	Based on the average maximum allowable payout value of the Medium-Term Incentive Plan awards of $77.97 in accordance with the plan. The average closing price of our common shares on the NYSE for the last 30 trading days of 2007 was $124.87.

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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 2007.

	Option Awards				Stock Awards
	Number of
	Shares				Number of
	Acquired on		Value Realized		Shares Acquired		Value Realized
	Exercise		Upon Exercise		on Vesting		Upon Vesting
Name	(#)		($)		(#)		($)
(a)	(b)		(c)		(d)		(e)
William J. Doyle		240,000		15,153,800		—		—
Wayne R. Brownlee(1)		180,000		7,787,768		—		—
James F. Dietz		160,000		13,432,226		—		—
Garth W. Moore(1)		80,000		5,982,775		—		—
Thomas J. Regan, Jr.		—		—		—		—

⁽¹⁾  The value realized upon exercise was converted to U.S. dollars using the average Canadian exchange rate of 1.0740 for fiscal year 2007.

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		20.67		10,643,963		—
Wayne R. Brownlee	Canadian Supplemental Plan		30.67(2)		2,793,521		—
James F. Dietz	U.S. Pension Plan		14.5		349,930		—
	U.S. Supplemental Plan		10.83(3)		583,844
Garth W. Moore	Canadian Supplemental Plan		25.58		2,217,385		—
Thomas J. Regan, Jr.	U.S. Pension Plan		20.75		854,298		—
	U.S. Supplemental Plan		20.75		767,320

(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 19.1 years of service, from December 1988 to the present, with our company and our predecessors.
(3)	The difference in Mr. Dietz’s years of credited service under the U.S. Pension Plan and the U.S. Supplemental Plan relates to the plans’ differing treatment of Mr. Dietz’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, 2007. The total present value of accumulated benefits in our financial statements is calculated in accordance with Canadian GAAP. The assumptions for Mr. Doyle, Mr. Brownlee and Mr. Moore differ from the assumptions disclosed in Note 15 to our consolidated financial statements for the fiscal year ended December 31, 2007. The key assumptions used in calculating the present value of accumulated benefits for Mr. Doyle, Mr. Brownlee and Mr. Moore are as follows:

Interest Rate	5.50% per annum
Retirement Age	Age 62
Mortality Rates	1994 Unisex Pensioner Mortality Table

For additional information about the Canadian Supplemental Plan, the U.S. Pension Plan and the U.S. Supplemental Plan, see “Compensation Discussion and Analysis — Post-Retirement and Termination Compensation”.

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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 2007. The table does not quantify 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. In addition, the table does not include 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”.

	William J.		Wayne R.		James F.		Garth W.		Thomas J.
	Doyle		Brownlee		Dietz		Moore		Regan, Jr.
	($)		($)		($)		($)		($)
Involuntary Termination/Termination Without Cause Salary/Severance Medium-Term Incentive Plan Supplemental Plan(1)(2) Executive Health & Welfare Benefits		7,522,948 828,137 6,300,132 380,283 14,396		4,465,633 704,303 1,862,859 1,898,471 0		2,169,646 258,963 1,802,043 108,640 0		3,754,720 753,296 1,319,253 1,682,171 0		1,554,747 298,650 1,256,097 0 0
Termination Following Change in Control Salary/Severance Medium-Term Incentive Plan Stock Options (Accelerated) Supplemental Plan(1)(2) Executive Health & Welfare Benefits Tax Gross-up		188,302,725 7,116,000 9,450,198 154,245,030 380,283 54,398 17,056,816		46,071,597 2,670,000 2,794,289 38,708,837 1,898,471 0 0		48,361,096 258,963 1,802,043 46,191,450 108,640 0 0		25,478,987 1,914,700 1,978,879 19,903,237 1,682,171 0 0		25,324,941 298,650 1,256,097 23,770,194 0 0 0
Death or Disability Medium-Term Incentive Plan		6,300,132 6,300,132		1,862,859 1,862,859		1,802,043 1,802,043		1,319,253 1,319,253		1,256,097 1,256,097
Retirement Medium-Term Incentive Plan Stock Options (36 Month Continued Vesting) Supplemental Plan(1)(2)		160,925,445 6,300,132 154,245,030 380,283		42,470,167 1,862,859 38,708,837 1,898,471		48,102,133 1,802,043 46,191,450 108,640		22,904,661 1,319,253 19,903,237 1,682,171		25,026,291 1,256,097 23,770,194 0

(1)	Supplemental Plan refers to the Canadian Supplemental Plan for Mr. Doyle, Mr. Brownlee and Mr. Moore and to the U.S. Supplemental Plan for Mr. Dietz and Mr. Regan. 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, 2007, Mr. Regan was age 63 with 20 years of service and eligible to receive full benefits under the U.S. Supplemental Plan. As such, the present value of benefits set forth in the “Pension Benefits” table above is equal to the value of benefits Mr. Regan would have received if he had retired December 31, 2007.

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) a pro rata portion of the current performance period’s Medium-Term Incentive Plan award, (3) benefits under the Canadian or U.S. Supplemental Plan, as reduced in accordance with the plan’s early retirement provisions and (4) 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, Mr. Brownlee and Mr. Moore. 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) immediate vesting and payout of the current performance period’s Medium-Term Incentive Plan award, (3) 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 (4) 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.

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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), (2) a pro rata portion of the current performance period’s Medium-Term Incentive Plan award and (3) 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 Death or Disability

As quantified in the table above, upon death or disability, a Named Executive Officer is generally entitled to receive (1) a pro rata portion of the current performance period’s Medium-Term Incentive Plan award and (2) the right to exercise any vested performance options, including such options that may vest after retirement, for a period of one year.

Generally, death or disability do not result in incremental value under the Canadian Supplemental Plan or the U.S. Supplemental Plan. 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.

Payments Made Upon Retirement

As quantified in the table above, upon retirement, a Named Executive Officer is generally entitled to receive (1) a pro rata portion of the current performance period’s Medium-Term Incentive Plan award, (2) the right to exercise any vested performance options, including such options that may vest after retirement, for a period of three years and (3) 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 receive upon retirement at age 65 pursuant to the retirement plans in which each Named Executive Officer participates. The 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 in “— 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.		Wayne R.		James F.		Garth W.		Thomas J.
		Doyle		Brownlee		Dietz		Moore		Regan, Jr.
		($)		($)		($)		($)		($)
Canadian/U.S. Pension Plan	Annual Aggregate		1,440,100 16,750,632		746,738 8,685,732		189,060 1,458,640		427,607 4,473,738		180,050 1,057,642
Savings/401(k) Plan	Annual Aggregate		84,188 979,236		41,625 484,169		75,041 795,748		31,566 367,166		169,984 1,802,540
Total	Annual Aggregate		1,524,288 17,729,868		788,363 9,169,901		264,101 2,254,388		459,173 5,340,904		350,034 2,860,182

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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, 2002 to the return on the Standard & Poor’s 500 Index^®, the DJUSBMI and a self-selected peer group.

	Dec-02		Dec-03		Dec-04		Dec-05		Dec-06		Dec-07
PotashCorp-NYSE Listing	$	100	$	142	$	283	$	279	$	508	$	1,536
Self-Selected Peer Group	$	100	$	125	$	211	$	300	$	495	$	915
S&P 500®	$	100	$	129	$	143	$	150	$	173	$	183
DJUSBMI	$	100	$	136	$	153	$	161	$	189	$	252

* TSX Listing.

The self-selected peer group consists of:	Symbol
Agrium Inc.*	AGU
Mosaic Co (formerly IMC Global Inc) (through 4Q04)	IGL
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

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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, 2002 to the return on the S&P/TSX Composite Index.

	Dec-02		Dec-03		Dec-04		Dec-05		Dec-06		Dec-07
PotashCorp-TSX Listing	$	100	$	118	$	217	$	206	$	377	$	977
S&P/TSX Composite Index	$	100	$	127	$	145	$	180	$	211	$	232

^® Copyright^© 2008, Standard & Poor’s, a division of The McGraw Hill Companies, Inc. All rights reserved.

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Ownership of Shares

The following table sets forth information as of February 20, 2008, 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		295,613	(5)		2,868,149	(5)		0.94	%
Wayne R. Brownlee, Executive Vice President, Treasurer and Chief Financial Officer		52,497			752,157			0.17	%
James F. Dietz, Executive Vice President and Chief Operating Officer		52,829			676,585			0.17	%
Thomas J. Regan, Jr. President, PCS Phosphate and PCS Nitrogen		36,203			141,203			0.11	%
Garth W. Moore, President, PCS Potash		27,869			197,529			0.09	%
All directors and executive officers as a group, including the above-named individuals (25 persons)		770,843			6,605,215			2.44	%

(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, 2008 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 owned less than 1% of the Shares issued and outstanding as at February 20, 2008. The directors and executive officers of the Corporation as a group beneficially owned approximately 2.087% of the Shares issued and outstanding as at February 20, 2008.
(3)	Includes Shares purchasable within 60 days after February 20, 2008 through the exercise of options granted by the Corporation, as follows: Mr. Doyle 2,572,536 Shares; Mr. Brownlee 699,660 Shares; Mr. Dietz 623,756 Shares; Mr. Regan 105,000 Shares; Mr. Moore 169,660 Shares and directors and executive officers as a group, including the foregoing individuals, 5,834,372 Shares.
(4)	No Shares beneficially owned by any of the directors or Named Executive Officers are pledged as security.
(5)	Includes 60,000 shares held in the William J. Doyle 2007 Family Descendents Trust and 19,898 shares held in the William & Kathy Doyle Foundation.

Listed below are the names and other information concerning persons known to the Corporation (from records and reports filed with the SEC on Schedule 13D or 13G) who owned, as of February 20, 2008, more than 5% of the Corporation’s Shares.

Name and Address of	Amount and Nature of			Percent of
Beneficial Owner	Beneficial Ownership			Class(1)
Capital Group International, Inc. 11100 Santa Monica Blvd. Los Angeles, California 90025		22,664,420	(2)(3)(4)		7.18	%
Janus Capital Management LLC 151 Detroit Street. Denver, Colorado 80206		20,067,468	(5)(6)		6.36	%
FMR LLC (Fidelity) 82 Devonshire Street Boston, Massachusetts 02109		17,101,643	(7)(8)		5.42	%
PRIMECAP Management Company 225 S. Lake Ave., #400 Pasadena, California 91101		17,062,059	(9)(10)		5.41	%
Capital Guardian Trust Company 11100 Santa Monica Blvd. Los Angeles, California 90025		16,596,320	(4)(11)(12)		5.26	%

(1)	Represents percent of Shares outstanding as of February 20, 2008.
(2)	Such person has sole dispositive power as to all 22,664,420 Shares and sole voting power as to 18,912,540 Shares.
(3)	As set forth in a Schedule 13G dated February 12, 2008.
(4)	Capital Group International, Inc. may be deemed the beneficial owner of the Shares of its subsidiaries, including the 16,596,320 Shares beneficially owned by Capital Guardian Trust Company.
(5)	Such person has sole dispositive power as to all 20,607,468 Shares and sole voting power as to all 20,607,468 Shares.
(6)	As set forth in a Schedule 13G dated February 14, 2008.
(7)	Such person has sole dispositive power as to all 17,101,643 Shares and sole voting power as to 9,778,343 Shares.
(8)	As set forth in a Schedule 13G dated February 14, 2008.
(9)	Such person has sole dispositive power as to all 17,062,059 Shares and sole voting power as to 3,522,639 Shares.

(10)	As set forth in a Schedule 13G dated February 14, 2008.
(11)	Such person has sole dispositive power as to all 16,596,320 Shares and sole voting power as to 13,421,590 Shares.
(12)	As set forth in a Schedule 13G dated February 12, 2008.

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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 $100 million per claim and $100 million in the annual aggregate. The Corporation has entered into a one-year contract ending June 30, 2008. Premiums of $994,649 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 315,554,501 Shares of the Corporation outstanding as of February 20, 2008, each Share carrying the right to one vote. Each shareholder of record at the close of business on March 13, 2008 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 this Annual and Special Meeting. Such proposal and the Board’s response thereto are set forth in the attached Appendix D.

2009 Shareholder Proposals

Proposals of shareholders intended to be presented at the Corporation’s annual meeting of shareholders in 2009 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 22, 2008.

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, 2007. 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 also 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, 2008

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Appendices

	Page
Appendix A — Disclosure of Corporate Governance Practices		62
Appendix B — Resolution of Shareholders — 2008 Performance Option Plan		69
Appendix C — 2008 Performance Option Plan		70
Appendix D — Shareholder Proposal		76
Appendix E — Board of Directors Charter		79
Appendix F — Audit Committee Charter		82

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Appendix A
Disclosure of Corporate Governance Practices

The following table discloses the Corporation’s current corporate governance practices in accordance with the requirements of NI 58-101.

			PotashCorp
Disclosure Requirement under Form 58-101F1			Compliance	Comments & Discussion
1.	(a)	Disclose the identity of directors who are independent.	Yes	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.
	(b)	Disclose the identity of directors who are not independent, and describe the basis of that determination.	Yes	See disclosure under the “Director Independence and Other Relationships” section of this Management Proxy Circular.
	(c)	Disclose whether or not a majority of directors are independent. If a majority of directors are not independent, describe what the board of directors (the board) does to facilitate its exercise of independent judgment in carrying out its responsibilities.	Yes	Nine of twelve, or 75%, of the Corporation’s current directors are independent.
	(d)	If a director is presently a director of any other issuer that is a reporting issuer (or the equivalent) in a jurisdiction or a foreign jurisdiction, identify both the director and the other issuer.	Yes	Such other directorships have been disclosed in the “Nominees for Election to the Board of Directors” section of this Management Proxy Circular.
	(e)	Disclose whether or not the independent directors hold regularly scheduled meetings at which members of management are not in attendance. If the independent directors hold such meetings, disclose the number of meetings held during the preceding 12 months. If the independent directors do not hold such meetings, describe what the board does to facilitate open and candid discussion among its independent directors.	Yes	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 2007.
	(f)	Disclose whether or not the chair of the board is an independent director. If the board has a chair or lead director who is an independent director, disclose the identity of the independent chair or lead director, and describe his or her role and responsibilities. If the board has neither a chair that is independent nor a lead director that is independent, describe what the board does to provide leadership for its independent directors.	Yes	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.
	(g)	Disclose the attendance record of each director for all board meetings held since the beginning of the issuer’s most recently completed financial year.	Yes	Attendance records are fully disclosed in the “Attendance of Directors” section of this Management Proxy Circular. Pursuant to the “Potash Corp 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.
2.		Disclose the text of the board’s written mandate. If the board does not have a written mandate, describe how the board delineates its role and responsibilities.	Yes	The Board of Directors Charter is attached to this Management Proxy Circular as Appendix E.

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			PotashCorp
Disclosure Requirement under Form 58-101F1			Compliance	Comments & Discussion
3.	(a)	Disclose whether or not the board has developed written position descriptions for the chair and the chair of each board committee. If the board has not developed written position descriptions for the chair and/or the chair of each board committee, briefly describe how the board delineates the role and responsibilities of each such position.	Yes	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.
	(b)	Disclose whether or not the board and CEO have developed a written position description for the CEO. If the board and CEO have not developed such a position description, briefly describe how the board delineates the role and responsibilities of the CEO.	Yes	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.
4.	(a)	Briefly describe what measures the board takes to orient new directors regarding the role of the board, its committees and its directors, and the nature and operation of the issuer’s business.	Yes	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.
	(b)	Briefly describe what measures, if any, the board takes to provide continuing education for its directors. If the board does not provide continuing education, describe how the board ensures that its directors maintain the skill and knowledge necessary for them to meet their obligations as directors.	Yes	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 import or emerging significance; and (e)   at least annually, schedules a site visit in conjunction with a Board meeting.

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			PotashCorp
Disclosure Requirement under Form 58-101F1			Compliance	Comments & Discussion
5.	(a)	(i)   Disclose whether or not the board has adopted a written code for its directors, officers and employees. If the board has adopted a written code, disclose how a person or company may obtain a copy of the written code.	Yes	The Board has adopted the “PotashCorp Code of Conduct”. The complete text of the “PotashCorp 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.
		(ii)   Describe how the board monitors compliance with its code, or if the board does not monitor compliance, explain whether and how the board ensures compliance with its code.	Yes	The Audit Committee reviews the process for communicating the “PotashCorp 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.
		(iii)  If the board has adopted a written code, provide a cross-reference to any material change report filed since the beginning of the issuer’s most recently completed financial year that pertains to any conduct of a director or executive officer that constitutes a departure from the code.	Yes	The Corporation has not filed any material change reports since the beginning of the 2007 financial year that pertains to any conduct of a director or executive officer that constitutes a departure from the “PotashCorp Code of Conduct”. Pursuant to the “PotashCorp Governance Principles”, no waiver of the application of the “PotashCorp Code of Conduct” to directors or senior officers is permitted.
	(b)	Describe any steps the board takes to ensure directors exercise independent judgment in considering transactions and agreements in respect of which a director or executive officer has a material interest.	Yes	Pursuant to the “PotashCorp Governance Principles”, each director of the Corporation must possess and exhibit the highest degree of integrity, professionalism 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 Code of Conduct” and no waiver of the application of that Code to directors or senior officers is permitted.
	(c)	Describe any other steps the board takes to encourage and promote a culture of ethical business conduct.	Yes	The Corporation’s “Statement of Core Values and Code of Conduct” was redistributed to all employees in December 2006 and is continually reinforced with on-line training programs. At the end of 2007, all directors and employees were asked to sign a written confirmation of their compliance with the 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.

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			PotashCorp
Disclosure Requirement under Form 58-101F1			Compliance	Comments & Discussion
6.	(a)	Describe the process by which the board identifies new candidates for board nomination.	Yes	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.
	(b)	Disclose whether or not the board has a nominating committee composed entirely of independent directors. If the board does not have a nominating committee composed entirely of independent directors, describe what steps the board takes to encourage an objective nomination process.	Yes	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 “Report on Corporate Governance and Nominating Matters” sections of this Management Proxy Circular for additional information.
	(c)	If the board has a nominating committee, describe the responsibilities, powers and operation of the nominating committee.	Yes	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 “Report on Corporate Governance and Nominating Matters” section of this Management Proxy Circular for additional information.
7.	(a)	Describe the process by which the board determines the compensation for your company’s directors and officers.	Yes	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 response to 7(d) below for additional information.
	(b)	Disclose whether or not the board has a compensation committee composed entirely of independent directors. If the board does not have a compensation committee composed entirely of independent directors, describe what steps the board takes to ensure an objective process for determining such compensation.	Yes	The Corporation has a standing Compensation Committee. Each of the four 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.

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			PotashCorp
Disclosure Requirement under Form 58-101F1			Compliance	Comments & Discussion
	(c)	If the board has a compensation committee, describe the responsibilities, powers and operation of the compensation committee.	Yes	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.
	(d)	If a compensation consultant or advisor has, at any time since the beginning of the issuer’s most recently completed financial year, been retained to assist in determining compensation for any of the issuer’s directors and officers, disclose the identity of the consultant or advisor and briefly summarize the mandate for which they have been retained. If the consultant or advisor has been retained to perform any other work for the issuer, state that fact and briefly describe the nature of the work.	Yes	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 Committee. Additionally, Hewitt Associates has historically provided executive compensation and human resources consulting services for the Corporation, including actuarial consulting, employee benefits design, finance consulting and recordkeeping services. The Committee continues to use Hewitt Associates’ proprietary Total Compensation Measurement data services to provide specific compensation data for selected executive and director positions. This information has been and will continue to be supplemented with other compensation survey data available through Watson Wyatt.
8.		If the board has standing committees other than the audit, compensation and nominating committees, identify the committees and describe their function.	Yes	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.

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		PotashCorp
Disclosure Requirement under Form 58-101F1		Compliance	Comments & Discussion
9.	Disclose whether or not the board, its committees and individual directors are regularly assessed with respect to their effectiveness and contribution. If assessments are regularly conducted, describe the process used for the assessments. If assessments are not regularly conducted, describe how the board satisfies itself that it, its committees, and individual directors are performing effectively.	Yes	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 Chief Executive Officer, 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 of Directors 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 Chief Executive Officer 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 such action as appropriate.

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	PotashCorp
Disclosure Requirement under Form 58-101F1	Compliance	Comments & Discussion
		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. 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, as in the opinion of the Board Chair is desirable, the Chair of the CG&N Committee) formally meets with each director individually to engage in full and frank two-way 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 will employ a checklist, discuss both short-term and long-term goals, and establish action items to allow individual directors 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 will review progress and action taken. Each director, during such formal review, shall be prepared to discuss with the Board Chair how the directors, both individually and collectively, could operate more effectively. The Board Chair will discuss 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.

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Appendix B
Resolution of Shareholders — 2008 Performance Option Plan

WHEREAS the Board of Directors of Potash Corporation of Saskatchewan Inc. (the “Corporation”) has, approved a new performance option plan (the “2008 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 8, 2008;

NOW THEREFORE, BE IT RESOLVED that:

1.	the 2008 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
2008 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 2008 Annual and Special Meeting of shareholders, this Potash Corporation of Saskatchewan Inc. 2008 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, 2008 to be effective as of January 1, 2008 (the “Effective Date”), subject to shareholder approval at the Corporation’s 2008 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, 2008 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

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again be available for further stock options under this Plan; provided, however, that any stock option that is granted 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 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.

(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)	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.  CHANGE OF CONTROL

If a “change of control” of the Corporation 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. 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

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definition shall be applied), or the Committee decides to modify or amend the following definition through an amendment of this Plan:

(a)	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;
(b)	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;
(c)	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;
(d)	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
(e)	the Board approves and/or recommends that shareholders accept, approve or adopt any transaction that would constitute a change of control under clause (b), (c) or (d) above 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 (b), (c) or (d), as applicable.

15.  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.

16.  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”).

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17.  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 on Executive Compensation

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 the Carpenters’ Local 27 Pension Trust Fund (the “Fund”’), 2589 Calabogie Road, RR #1, Burnstown, Ontario K0J 1G0. The Proposal and the Fund’s supporting statement are set out verbatim below in italics.

Proposal

Be it Resolved: The shareholders of Potash Corporation of Saskatchewan Inc. (“Company”) herby request that the Board of Directors establish a policy regarding the Company’s supplemental executive retirement plan that provides the following: (1) an exclusion of all incentive pay from inclusion in the plan’s definition of covered compensation used to establish benefits, and (2) a prohibition on the granting of past service credits or accelerated service benefits to participating executives. This action should be implemented in a manner so as not to interfere with existing contractual rights of any supplemental plan participant.

Supporting Statement:

We believe that one of the most troubling aspects of the sharp rise in executive compensation is the excessive pension benefits provided to senior corporate executives through the use of supplemental executive retirement plans (“SERPs”). Our Company has established a supplemental pension benefit program for selected senior executives. This SERP provides senior executives retirement benefits far greater than those permitted under the Company’s tax-qualified pension plan. Our proposal seeks to limit excessive pension benefits by limiting the type of compensation used to calculate pension benefits under the SERP plan and also by prohibiting the grants of extra service credits.

According to the Company’s most recent proxy circular:

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.

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.

It is our position that the inclusion of an executive’s annual bonus along with his or her full salary in the pension calculation is overly generous and unjustifiable. The only type of compensation used in the SERP for establishing the level of additional pension benefits should be an executive’s annual salary. No variable incentive pay should be included in a senior executive’s pension calculation under the SERP. The inclusion of annual bonus or incentive payments in determining increased pension benefits can dramatically increase the pension benefit afforded senior executives and has the additional undesirable effect of converting one-time incentive compensation into guaranteed lifetime pension income.

The proposal’s limitation on the type of compensation that can be considered in determining senior executives’ retirement benefits to only the executive’s salary, as well as its prohibition on the granting of additional years of credited service, provides a necessary and reasonable restriction on the excessiveness of supplemental retirement benefits. We urge your support for this important executive compensation reform.

THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE AGAINST THE PROPOSAL FOR THE FOLLOWING REASONS:

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. The Board and the Compensation Committee believe that the purpose of our compensation policies is to attract, retain and inspire excellence in the performance of executive officers and other key employees. In order to meet these goals our compensation program must be one that is competitive within the market. Excluding incentive pay from

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inclusion in the calculation of the pension benefit under the supplemental retirement income plans, as the Proposal suggests, would place the Company at a significant competitive disadvantage in recruiting and retaining executives.

Under our U.S. qualified defined benefit plan, which covers our U.S. executives, staff and non-union hourly employees (or approximately 75% of our U.S. employees), pension benefits are calculated based on both base salary and short-term incentive awards. However, the benefits of certain of our employees under our U.S. qualified defined benefit pension plan are capped by limits imposed by the U.S. Internal Revenue Service (the “IRS”). Our U.S. supplemental pension plan is intended to provide such participants with the same aggregate benefits they would have received under our U.S. qualified defined benefit plan had there been no limitations on those benefits for tax purposes. In other words, executives who participate in our U.S. supplemental pension plan are treated effectively the same way with respect to their incentive compensation as our U.S. employees generally. We believe it is only fair to include both salary and short-term incentive awards in calculating supplemental pension benefits for employees whose participation in the qualified defined benefit plan is capped by IRS limits.

Our Canadian registered retirement plan, which is a defined contribution pension plan, covers all Canadian staff and certain union and non-union hourly employees. In Canada, contributions to such plans are capped by the Canada Revenue Agency (the “CRA”) pursuant to tax legislation. The Canadian supplemental retirement income plan is integrated with the Canadian registered retirement plan and includes an offset for benefits earned under the registered retirement plan.

Executive retirement benefits are an integral part of any sound executive compensation program and can be considered properly only in the context of the objectives and reasonableness of the entire program. Consistent with our “pay for performance” philosophy, we minimize our senior executives’ annual base salary and put a significant proportion of their annual compensation at risk through annual performance-based awards under our short-term incentive plan. By placing a significant amount of short-term compensation at risk, we reward executives for superior performance and ensure that our executives’ compensation is aligned with shareholder interests (see “Compensation Discussion and Analysis — Elements of Executive Compensation” for additional detail). Because we limit our executives’ annual base salary in favor of annual incentive compensation, it is only equitable that pensionable earnings be calculated based on an executive’s total short-term compensation, which includes both base salary and annual incentive awards. In addition, we have capped the maximum payout under the short-term incentive plan at two times target (±20% respecting individual performance). For the CEO, target is set at 100% of base salary, and lesser percentages for other plan participants. Despite our very good financial performance we have never reached the maximum payout threshold. Accordingly, we believe our executive compensation program, which is described under the caption “Compensation Discussion and Analysis,” is fair and reasonable and has contributed significantly to our superior performance and shareholder returns.

The Board and the Compensation Committee are confident that our practices are in line with market standards. In making decisions regarding our executives’ compensation, the Compensation Committee receives advice from independent compensation consultants who prepare comparisons of the compensation package of our executives with a peer group of companies. We have been advised that it is common practice for similarly situated companies to include annual performance-based awards in calculating executive retirement benefits.

In regard to the granting of past service credits or accelerated service benefits to participating executives, our pension plans, including our supplemental retirement income plans, do not provide for past service credits or accelerated service benefits. In exceptional circumstances, where employees have moved between subsidiary or joint venture entities, past service recognition has been provided. We feel that our company is therefore not an appropriate target for such a proposal.

You, as shareholders, have elected the Board and entrusted it with the responsibility of managing your Corporation. Through the Board’s Compensation Committee, composed entirely of independent and unrelated directors, your interests are protected. Our compensation policies have been designed, are administered and are focused on providing appropriate levels of compensation for our executive officers while motivating them to deliver sustained long-term value enhancement for us and our shareholders. We believe the proposal described above, if implemented, would significantly impair our ability to provide a market competitive compensation package necessary to attract and retain the most qualified executive officers and key employees, which is not in our and our shareholders best interests. The Board and the Compensation Committee (which each met 9 and 6 times, respectively in 2007) expend considerable time and effort in ensuring that shareholders’ interests are protected. We believe, as our record demonstrates, that we have earned your trust. Let us continue to administer our compensation policies in order to maximize our success.

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For the reasons described above, the Board believes that the Proposal is not in the best interests of the Corporation and our shareholders.

The Board strongly recommends that shareholders vote AGAINST the 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;

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•   Adopting a communications policy and reporting to shareholders on the performance of the business;

•   Approval and completion of routine legal requirements.

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.

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(c)	The Board has the responsibility for ensuring that the financial results are reported fairly, and in accordance with generally accepted accounting principles.
(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 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. 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 Canada Business Corporations Act 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 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 (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 report of the external auditors when required by Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act” ).

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 which duties may be discharged through the participation by the Chair of the Committee in the quarterly Sarbanes-Oxley Due Diligence Conference Call meeting.

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.

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6.4.  External Audit

(a)	Review the external auditors’ proposed audit scope and approach, (including coordination of audit effort with internal audit) and budget.
(b)	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 review, the Committee will:

(i)	At least annually, obtain and review a report by the external auditors describing (i) the external auditors’ internal quality control procedures; (ii) 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 (iii) (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 Audit Guideline 11 of the Canadian Institute of Chartered Accountants.
(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 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 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.

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(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.

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;

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(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;
(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.

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Potash Corporation
of Saskatchewan Inc. Proxy

For use at the Annual and Special Meeting

of Shareholders to be held on May 8, 2008.

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 8^th day of May, 2008 (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

[Mailing Label Placement]

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) W. J. Doyle			(07) K. G. Martell
	(02) J. W. Estey			(08) J. J. McCaig
	(03) W. Fetzer III			(09) M. Mogford
	(04) C. S. Hoffman			(10) P. J. Schoenhals
	(05) D. J. Howe			(11) E. R. Stromberg
	(06) A. D. Laberge			(12) E. Viyella de Paliza

		For	Withhold
2.	Voted FOR, or WITHHELD FROM VOTING, on the appointment of Deloitte & Touche LLP as auditors of the Corporation.
		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.
		For	Against
4.	Voted FOR or AGAINST the shareholder proposal (attached as Appendix D to the accompanying Management Proxy Circular).

Dated the ­ ­  day of ­ ­  2008.

Name of Shareholder Signature of Shareholder

EX-99.B

Exhibit 99(b)

              2007 Summary Annual Report

yesterday

today

tomorrow

past forward

The world is changing before our eyes.

Populations are growing. Incomes in developing nations are rising. Appetites are shifting. Cities are expanding. Farmland per capita is shrinking. Climate change is a growing concern.

With these changes come challenges – challenges to feed a growing population, to provide healthier food to developing nations, to produce more on less land, to offer more sustainable energy alternatives. Challenges that require foresight, hindsight and insight to solve.

As the world’s largest fertilizer company, PotashCorp plays an essential role in meeting those challenges. We find solutions by looking back and looking forward. Using ancient mineral deposits, we have built a company that helps feed the world today while eyeing future growth. Building on almost 20 years of planning, we’re investing now to be ready for coming opportunities. Learning from the past, we operate sustainably to preserve resources for future generations.

By using the past to prepare for the present and future, we are playing our part in a changing world...

yesterday, today and tomorrow.

Source: United Nations

Company Profile

Our Strategy

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, nitrogen and phosphate. Among these, potash – the primary focus of our business – delivers the highest-quality earnings. With large low-cost potash operations, plans to significantly expand capacity, and strategic global investments, we have an unmatched ability to meet the needs of North America and growing offshore markets.

Committed to seeking earnings growth and minimizing volatility, we employ a Potash First strategy, focusing our capital – internally and through investments – to build on our world-class potash assets and meet the rising global demand for this vital nutrient. By investing in potash capacity while producing to meet market demand, we create the opportunity for significant growth while limiting downside risk. We complement our potash operations with focused nitrogen and phosphate businesses that emphasize the production of high-margin products with stable and sustainable earnings potential.

essential nutrients   YESTERDAY, TODAY AND TOMORROW

Each time a crop is harvested, it takes some of the soil’s nutrients with it. Fertilizers replace those nutrients so the soil can continue to produce healthy crops.

For more than a century, the application of mineral fertilizer has been instrumental in improving agricultural production throughout the world. Today, fertilizers account for more than one-third of all crop yields.

With growing populations, improving diets and declining per capita arable land, sustainable increases in agricultural production will require maximizing crop yields. This can only be achieved with the proper use of fertilizers.

NUTRIENTS

Potash	K	Nitrogen	N	Phosphate	P
Source		Source		Source
Mined from deposits left behind by evaporated prehistoric seas		Synthesized from air using steam and natural gas		Mined from deposits containing ancient sea fossils
Uses and Benefits		Uses and Benefits		Uses and Benefits
Fertilizer:		Fertilizer:		Fertilizer:
Improves root strength and helps plants fight stress, disease and injury		Basic building block for proteins and enzymes in all living cells		Critical to photosynthesis and other key energy reactions in plants
Enhances taste, color and texture of crops and increases yields		Speeds the growth of plant roots, stalks and vines		Speeds crop maturity and reproduction and increases yields
Feed:		Feed:		Feed:
Aids animal growth and milk production		Essential to RNA, DNA and cell maturation		Necessary for skeletal development and repair of animal muscles
Industrial:		Industrial:		Industrial:
Used in computer and TV screens, soaps, de-icers, water softeners		Used in plastics, resins, adhesives		Used in soft drinks, food products, metal treatment

   L E T T E R  T O  S H A R E H O L D E R S 3     

WILLIAM J. DOYLE, PRESIDENT AND CEO

The successes your company enjoyed in 2007 can be traced back to our visits to China more than two decades ago. That is when the seeds of opportunity for our fertilizer business were planted and where the roots of PotashCorp’s long-term strategy took hold.

Particularly vivid are memories of the hospitality and ambitions of our hosts, as we were offered the finest food available in the country at that time. It was abundantly clear that few in China were then able to enjoy the quality of food we had come to expect in North America – a situation the country was eager to remedy. We knew this would be a foothold on which to build our fertilizer business and would have an impact on long-term issues of global food production and human development.

Today when we visit China, we see people enjoying beef, pork, poultry and fish that can rival food produced anywhere in the world. This reflects a fundamental shift that is taking hold, most notably among the growing populations in China, India and Southeast Asia. With strengthening economies in these regions, more people have higher incomes and their first opportunity to improve their standard of living – and, specifically, the quality of their diets.

These changing conditions are increasing the demand for crops used for food, animal feed, fiber and, more recently, fuel. With that demand comes a growing need for fertilizer ingredients – especially potash. This has spurred a surge of demand-driven growth for PotashCorp.

After years of patient and steady steps forward, we are now growing by significant leaps. In 2007, we achieved:

• earnings of more than $1.1 billion, a fourth consecutive annual record;

• record gross margin in each of our three nutrients; and

• a 201 percent increase in our share price.

More importantly, we are operating from a foundation that puts us on solid footing for an extended period of growth and success.

The desire for better food in developing countries is not a fad. People who have been introduced to more nutritious, protein-rich foods will not return to starch-based diets and the hundreds of millions of people still waiting to make this shift will not be denied.

As we recognized many years ago, this represents a significant continuing opportunity for your company – today and tomorrow – and we are well positioned to capitalize on it.

“MORE PEOPLE THROUGHOUT ASIA ARE EARNING

ENOUGH MONEY TO BUY BETTER FOOD – A POSITIVE

GLOBAL DEVELOPMENT THAT HAS TRANSLATED

INTO SUCCESS FOR YOUR COMPANY.”

            Source: FAO, British Sulphur, PotashCorp

4     L E T T E R  T O  S H A R E H O L D E R S

A PLATFORM FOR GROWTH

The best insight into our changing business environment is found in the markets of cities like Shanghai, Seoul, Mumbai and Jakarta – where people now expect better food – and in agricultural fields around the world.

Farmers are seeking to maximize the productivity of their land and they understand that the best way to do this is to improve the nutrient content in their soil. In India, you will see hundreds of farmers waiting in line for hours to purchase a single bag of fertilizer, with this scene being repeated all over the country.

Even though this use of fertilizer helped the world’s farmers grow record crops last year, food supply remains a pressing issue. Production of wheat and coarse grains in the 2007/2008 crop year is expected to fall short of consumption for the eighth time in nine years, straining already record-low inventories. Sustainable increases in food production must be achieved to feed the world’s rising population, now and over the long term.

Our life-giving products play an essential role in that productivity. In many regions, farmers have failed to adequately replenish the nutrients drawn from the soil by previous crops. That is one of the reasons corn yields in Asia are typically between one-quarter and one-half those achieved in North America.

While many countries have begun to increase their nutrient applications, they still have a long way to go. On a combined basis, farmers in China, India and Brazil need to more than double potash application rates to attain scientifically recommended levels. Growing economic strength, together with higher prices for crop commodities, is now providing motivation and money for farmers to invest in the necessary fertilizer products.

At PotashCorp, we are preparing to deliver on that need.

BRIDGING TODAY TO TOMORROW

Potash, the foundation of our company, is the ingredient with the greatest growth potential. While all three nutrients have been under-applied in many regions, this has been most pronounced in potash.

Farmers striving to correct that deficiency have pushed the world’s potash producers to their limits. As a result, supply is tight – with limited opportunity for our competitors to increase production at existing facilities.

Developing a greenfield mine takes five to seven years and presents many economic and logistical challenges. With no new significant mines announced, we have a pretty clear picture of global supply fundamentals for at least the next five years – and we like what we see. Potash supply is likely to remain tight, and much of the expected new capacity will be ours.

The Potash First strategy that has set our direction for many years has prepared us for these conditions. In a supply-driven market, we patiently and dutifully managed our production to minimize downside. Now we are in a position to demonstrate the power and potential of our potash capacity in a demand-driven market.

In 2007, we announced plans to invest $4.5 billion in expansion and debottlenecking projects at our potash operations. The increases in supply will come on stream incrementally over the next five years, allowing us to capture a significant share of growth in global demand. We expect this will lead to robust returns for your company for years to come.

In addition to our own Canadian operations, our potash-related investments in Jordan, Israel, Chile and China are increasingly valuable – not only for their financial contribution but for the additional insight we gain into emerging markets.

“IN AN ENVIRONMENT OF GROWING DEMAND AND TIGHT SUPPLY,

FARMERS NEED US TO PRODUCE MORE POTASH. WITH OUR

EXPERIENCE AND ASSETS, WE CAN DO THAT QUICKLY, AT LESS COST

THAN BUILDING A NEW MINE.”

5

THE POTENTIAL OF POTASHCORP

As pleased as we are with our performance in 2007, including a record $912 million in potash gross margin, we are far from reaching our full potential.

In 2007, tight supply/demand fundamentals led to significant potash price increases, with global spot markets nearly doubling. While we captured a portion of the benefit, rapidly rising ocean freight rates and a strengthening Canadian dollar had a noticeable impact on our performance. As a result, our growth was driven more by volumes than by margins for much of the year. By the third quarter, however, higher prices began to take hold and we expect the combination of greater margins and volumes to drive our business in 2008 and beyond.

In addition, volume increases reduce our per-tonne fixed production costs and mining taxes, further expanding our earnings. Our investments in offshore potash companies enhance our results even more, as these businesses benefit from the same market conditions and are expected to deliver increased earnings.

Our strength in potash is complemented by world-class assets and improving fundamentals in nitrogen and phosphate, which combined to contribute $969 million in gross margin in 2007. Rising demand for nitrogen tightened the market at the same time as higher ocean freight rates and European gas prices added pressure by diverting trade from the US market, increasing our nitrogen margins. We continued to generate significant nitrogen gross margin from our facility in Trinidad, with its lower-cost gas and easy access to the United States.

In phosphate, rising demand for fertilizers tightened markets while world prices for rock and sulfur inputs increased substantially, benefiting producers like PotashCorp with their own rock and lower sulfur costs. In addition to our strength in feed and industrial

phosphate products, we capitalized on improved conditions in fertilizers.

Even after a year of record gross margin in all three nutrients, we believe this is only the beginning. Increasing our gross margin performance will be our focus as we move forward.

DELIVERING ON STAKEHOLDER EXPECTATIONS

As we continue to build our business, we remain firmly grounded by the expectations of our stakeholders. We operate with a long-term view and know that our success is built on strong partnerships with customers, employees, investors, suppliers and the communities where we live and do business. We will continue to work closely with these groups to contribute to their success – and ultimately enhance our operations.

Our Board of Directors understands the importance of our stakeholders and continues to lead us to deliver exceptional performance for the people who have put their trust, effort and capital behind this company.

Your company is in an unrivaled position to capitalize on growth in demand for fertilizer ingredients, especially potash. Yesterday, we dreamed about and planned for ways to maximize the value of PotashCorp’s incredible resources. Today, we are able to measure the results.

We move forward into tomorrow with a tremendous sense of excitement and optimism about our ability to deliver even greater performance.

William J. Doyle, President and Chief Executive Officer February 20, 2008

KEEPING PACE WITH GROWING DEMAND

Over the next several years, world potash demand is expected to grow on average by more than 2 million tonnes annually. That is roughly equivalent to the production from a world-class greenfield mine coming on stream every year. With no major greenfield projects in development, producers will be challenged to keep pace.

In response to global demand, PotashCorp’s announced projects will raise annual operational capacity from 10.8 million tonnes in 2007 to 15.7 by the end of 2012.

These projects – at Patience Lake, Cory, New Brunswick and Rocanville, as well as a previously announced project at Lanigan – are timed to come on stream incrementally over the next five years.

As we have done for the past 20 years, we will use only as much of this new capacity as is needed to meet growing market demand and capture the greatest value for our shareholders.

6 F I N A N C I A L  H I G H L I G H T S

($ millions, except per-share data and percentages)
	2007		2006		2005		2004		2003			5-Year			10- Year
												CAGR1			CAGR
Financial Position
Current assets		1,811.3		1,310.2		1,110.8		1,243.6		733.9
Property, plant & equipment		3,887.4		3,525.8		3,262.8		3,098.9		3,108.1
Other long-term assets		4,017.9		1,381.0		984.3		784.3		725.3
Total assets		9,716.6		6,217.0		5,357.9		5,126.8		4,567.3
Current liabilities		1,001.9		1,103.5		1,096.1		703.7		557.8
Long-term debt		1,339.4		1,357.1		1,257.6		1,258.6		1,268.6
Other long-term liabilities		1,356.6		976.1		871.7		778.9		767.1
Shareholders’ equity		6,018.7		2,780.3		2,132.5		2,385.6		1,973.8
Total liabilities & shareholders’ equity		9,716.6		6,217.0		5,357.9		5,126.8		4,567.3
Financial Results
Sales		5,234.2		3,766.7		3,847.2		3,244.4		2,799.0			19	%		7	%
Gross margin – Potash		912.3		561.1		707.4		422.8		203.7			33	%		13	%
Gross margin – Nitrogen		536.1		315.6		318.7		242.8		193.2			62	%		15	%
Gross margin – Phosphate		432.8		125.3		98.9		15.8		(16.5	)		60	%		8	%
Total gross margin		1,881.2		1,002.0		1,125.0		681.4		380.4			44	%		12	%
Net income (loss)		1,103.6		631.8		542.9		298.6		(126.3	)		83	%		14	%
Net income (loss) per share — diluted 2		3.40		1.98		1.63		0.90		(0.40	)		82	%		14	%
Cash provided by operating activities		1,688.9		696.8		865.1		658.3		385.5			40	%		14	%
Additions to property, plant & equipment		607.2		508.6		382.7		220.5		150.7
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

Source: PotashCorp, at December 31

201%	142%	83%
Share Price Increase	Increase in Cash Provided	5-Year Net Income
year-over-year	by Operating Activities	CAGR
	year-over-year

Learn more in our online report:
	7

     RECORD GROSS MARGIN $1.9 BILLION

Record performance in all three nutrient segments produced overall gross margin 88 percent above 2006 and 67 percent more than our previous high in 2005.

POTASH

In potash, exceptionally tight market conditions prevailed for most of the year. Higher prices, improved per-tonne production costs and record sales volumes led to a 63 percent rise in gross margin over 2006, when offshore volumes were impacted by lengthy price negotiations with China and India. With rising food demand, farmers in developing nations worked to improve crop yields that have been stunted by the historical under-application of potash. Growing demand for this key nutrient, coupled with supply constraints, shrank inventories to historically low levels and drove up prices globally, although the benefit of offshore price increases was partially offset by higher ocean freight rates and locked-in contract pricing to China and India.

NITROGEN AND PHOSPHATE

Nitrogen gross margin was up 70 percent year over year, with the majority of total margin coming from our Trinidad operations. Strong fundamentals led to realized price increases in most nitrogen products.

In phosphate, strong demand for solid and liquid fertilizers and rising costs for inputs like rock and sulfur drove up global prices in all major product categories. Largely self-sufficient in rock supply and benefiting from lower-cost North American sulfur, PotashCorp more than offset higher input costs, resulting in improved gross margin.

8 O P E R A T I O N S   H I G H L I G H T S

Source: PotashCorp

MMT = million tonnes

preparing for
tomorrow, today

Anticipating the needs of tomorrow’s world, we took major steps in 2007 to prepare for increased potash demand in the years to come.

In keeping with our Potash First strategy, we completed and announced projects to strengthen our potash position and add long-term value to our company. These projects will build on our current operational capacity of 10.8 million tonnes, at a substantial saving of cost and time over equivalent greenfield capacity.

   “TODAY’S EXPANSIONS ARE THE PRODUCT OF

   YEARS OF PLANNING, WITH TOMORROW’S NEEDS

   ALWAYS IN MIND.”

   JIM DIETZ, EXECUTIVE VICE PRESIDENT AND CHIEF OPERATING OFFICER

Learn more in our online report:
	9

PROJECTS UNDERWAY IN 2007

2007		ALLAN	+0.4 MMT
	A debottlenecking and compaction expansion project was completed at Allan in 2007.
2008		LANIGAN	+1.5 MMT
	Lanigan’s $0.4 billion debottlenecking and compaction expansion project primarily entails refurbishing a mill that has been idle since the mid-1980s. New mill structures and equipment, along with upgraded ore hoisting and other underground equipment, will help raise operational capacity by 1.5 million tonnes, including 750,000 tonnes of additional compaction capability. Construction is scheduled to be completed in the second quarter of 2008.
2009		PATIENCE LAKE	+0.4 MMT
	The Patience Lake facility, a solution mine, will add 360,000 tonnes via 20 new injection wells and the pumping and piping systems required to serve them. The project will cost $0.1 billion, with production to come on stream by 2009.

10     O P E R A T I O N S   H I G H L I G H T S

                                 PROJECTS UNDERWAY IN 2007

2010	CORY	+1.2 MMT
The $0.9 billion project at Cory will add 1.2 million tonnes of operational capacity in 2010, including 750,000 tonnes of compaction capability. The expansion will enable Cory to produce red potash products in addition to the white product lines it currently offers. Storage, load-out and rail yard capabilities will be expanded to accommodate the new product mix and higher volumes.
2011	NEW BRUNSWICK	+1.2 MMT
At New Brunswick, $1.7 billion is being invested in a new 2-million-tonne mine and a 1.2-million-tonne enhancement to the existing mill. This expansion is strategically and logistically important, as it allows PotashCorp to capitalize on New Brunswick’s proximity to port and the growing Latin American market. This expansion is expected to be completed in 2011.

2012	ROCANVILLE	+2.0 MMT
A 2-million-tonne, $1.8 billion mine and mill expansion at Rocanville will enhance this low-cost, technologically advanced facility.
The expansion will leverage existing facilities and infrastructure to reduce construction costs by an estimated 25 percent and completion time by up to two years over equivalent greenfield capacity. An additional shaft will be sunk, providing two shafts with ore hoisting capabilities. Mining machines, underground services and power infrastructure will be added.
A new mill will be built adjacent to the existing mill. Storage, load-out and on-site rail capability will be modified to handle increased tonnes with minimal investment. Construction is scheduled to be complete at the end of 2012.

2013-15	POTENTIAL	+1.5 MMT
Other debottlenecking and expansion projects — with the potential to add up to 1.5 million tonnes of capacity at our existing Saskatchewan facilities — are currently under evaluation.

New compaction machines give our Allan mill the ability to produce more granular product.

	Learn more in our online report:
T A R G E T S   A N D   R E S U L T S		11

Our business goals are linked to the vision and strategy guiding the company. Each year we set targets to advance our goals and monitor our progress toward them. The following table highlights results from several key targets and explains their significance to our business. For a complete list of our goals, targets and results, see our online Annual Report, keyword KPD.

TARGET Exceed total shareholder return performance for our sector¹ and companies on the DJUSBM² for 2007.

RESULTS Achieved total shareholder return of 202 percent, exceeding the 141 percent generated by our sector and the 30 percent return of the DJUSBM.

COMMENTS

Total shareholder return measures the amount returned to investors through capital gains and dividends. Performance against our peers illustrates our ability to execute strategies that maximize shareholder value. Operating under similar market conditions, and subject to the same macro trends as our competitors, our company outperformed both our sector and the DJUSBM.

2007 Total Shareholder Return

TARGET Carry a higher multiple than the average of other fertilizer companies on both earnings and cash flow.

RESULTS Throughout 2007, our multiples were higher than the average of other fertilizer companies on both earnings and cash flow.

COMMENTS

Carrying a higher multiple than our peers indicates that investors believe in our ability to grow future earnings at a greater rate, while minimizing volatility. We believe this confidence stems from our long track record of building value, our strong market position and our strategies for capitalizing on our strengths and the opportunities that lie ahead. With an unrivaled opportunity to bring on significant potash volumes and realize greater per-tonne margins, we are well positioned for future profitability, building a solid argument for the continued premium valuation of our stock relative to other fertilizer companies.

TARGET Reduce recordable injury rate by 15 percent and lost-time injury rate by 40 percent.

RESULTS Recordable injury rate increased by 9 percent. Lost-time injury rate was reduced by 48 percent.

COMMENTS

Although we achieved record performance for our company-wide lost-time injury rate and for the recordable injury rate in both our nitrogen and phosphate divisions, diminished performance in potash kept us from reaching our overall recordable injury rate target. Our Senior Safety Leadership Team will continue to work closely with site managers to refine Site Safety Action Plans to reduce risk of injury.

TARGET Fill at least 75 percent of senior staff openings with internal candidates.

RESULTS 85 percent of senior staff openings were filled with internal candidates.

COMMENTS

Of 60 senior staff openings in 2007, 51 were filled by promoting or transferring internal candidates, while only nine required recruitment of external candidates. This high internal fill-rate reflects our commitment to developing our employees, broadening the knowledge base throughout the company and lowering recruitment costs.

¹ Sector Includes Mosaic, Agrium, Yara, ICL, SQM, K+S     ² Dow Jones US Basic Materials Index

1	THE WORLD NEEDS MORE FERTILIZER
	A combination of conditions is challenging farmers to maximize yields and meet the growing agricultural needs of a changing world:
	•  There are more mouths to feed. Population has more than doubled since 1950 and is expected to grow from 6.7 billion to 9.2 billion by 2050. •  Incomes and meat consumption are rising. As incomes rise in Asia and other developing regions, millions of people are switching from starch- to protein-based diets, driving the grain-intensive production of livestock. •  Biofuels are adding demand for crops. New demand for ethanol and other biofuels puts pressure on crops used for both food and fuel. •  Per capita arable land is decreasing. Urbanization and population growth are diminishing available farmland per person. •  Grain inventories are at record lows. Production of wheat and coarse grains is expected to fall short of consumption for the eighth time in nine years. Global inventories do not contain enough grain to feed the world for two months.	•  Global crop prices are rising. Low inventories and increasing demand are leading to higher crop prices, motivating farmers to maximize production. •  Yields are low in many regions. Historical under-application of fertilizer has led to chronic low-yield performance in countries like China, India and Brazil where farmers produce only a fraction of the yields of their US counterparts.                  Source: Fertecon, IPNI, PotashCorp

6    K E Y S  T O  U N D E R S T A N D I N G  O U R  B U S I N E S S

Source: Fertecon, PotashCorp *Since 2000

2		AMONG FERTILIZER NUTRIENTS, THE POTASH BUSINESS HAS ADVANTAGES
		The potash industry enjoys advantages in both structure and market conditions that make it the best business in the fertilizer universe:
	•	Good deposits are rare. Economically viable potash deposits are uncommon and geographically concentrated. Approximately 50 percent of the world’s potash resources are located in Canada, primarily in Saskatchewan.
	•	Barriers to entry are high. Greenfield development is costly (about $2.5 billion for a 2-million-tonne mine in Saskatchewan, excluding infrastructure) and has a long lead time (five to seven years before production begins).
	•	There are few global producers. Only 12 countries produce potash, while approximately 160 consume it.
	•	Government ownership is low. Less government ownership means decisions are primarily market-driven, rather than politically motivated.
	•	Demand growth is great. Historical under-application of fertilizers is most pronounced in potash. Farmers are working to remedy this deficiency, but they still have a long way to go.
	•	Supply is constrained. Even with all producer expansions considered, tight supply is anticipated for at least the next five years. PotashCorp, with nearly one-quarter of the world’s current capacity and numerous expansion projects underway, is positioned to capture a significant share of future market growth.
	•	Earnings quality is high. Among our nutrient segments, potash is the most stable and provides the highest gross margin per dollar of sales.

3	POTASH IS THE CORE OF OUR BUSINESS
	Anticipating today’s conditions – and tomorrow’s realities – PotashCorp has spent almost 20 years building the highest quality assets in the potash industry. We are the world’s largest producer, with five large low-cost mining and milling facilities in Saskatchewan and one in New Brunswick, plus a mining and processing
	agreement at a sixth Saskatchewan location.
	In addition, we have strategic investments in four offshore potash businesses:
		28 percent of Arab Potash Company Ltd. (APC), a producer in Jordan
		10 percent of Israel Chemicals Ltd. (ICL), a producer in Israel
		32 percent of Sociedad Quimica y Minera de Chile S.A. (SQM), a specialty producer in Chile
		20 percent of Sinofert Holdings Limited (Sinofert), the largest distributor of potash and other fertilizers in China

4 OUR STRATEGIES EMPHASIZE EARNINGS GROWTH AND QUALITY

To deliver superior value to stakeholders – both now and in the long term – we have developed strategies that build on our competitive strengths to encourage earnings growth with minimal volatility.
Growth through potash. With significant increases in volumes, higher prices and lower per-tonne fixed costs on the horizon, potash holds the greatest growth potential among our segments and is our first consideration in business decisions. We prioritize choices that enhance our world-leading potash position, which include building on our own capacity, investing in other companies and repurchasing stock.
Minimize volatility in all three nutrients. Our world-class nitrogen and phosphate businesses complement our Potash First strategy. In each nutrient, we focus our strategies on unique competitive advantages that maximize margins and minimize volatility.
•	Potash For almost two decades, we have matched supply to market demand to minimize inventory overhang.
•	Nitrogen Our lower-cost Trinidad natural gas contracts, indexed to US ammonia prices, provide stability and a cost advantage over most US producers.
•	Phosphate Our high-purity rock gives us the unique ability to vary our product mix – including production of less cyclical, high-margin industrial and feed products.

        Source: PotashCorp

5 WE ARE UNIQUELY PREPARED TO MEET GROWING POTASH DEMAND

	With unparalleled resources and plans for significant growth, we are well positioned to meet the needs of a diverse and growing potash market. In an industry marked by tight supply and high barriers to entry, PotashCorp is responding to rising demand by:
•	Maximizing existing capacity. By leveraging our expertise and utilizing our existing infrastructure, we are bringing on capacity in less time and at significantly less cost than equivalent greenfield development.
•	Broadening our global enterprise. By investing in international potash producers, we are benefiting from growth in all key world markets. APC in Jordan, for example, has logistical advantages in serving India’s rapidly growing market.

• Investing in the distribution chain. Through Canpotex, we are investing in transportation infrastructure – including railcars and port facilities – that enables us to get our product to growing offshore markets. Through our interest in Sinofert, we have a stake in the primary distributor to the world’s largest fertilizer market.

• Adding compaction capability. The ability to compact standard potash into granular product adds value and flexibility to our product mix. Demand for premium-priced granular product is increasing as farming technology advances in offshore countries.

Compaction expansions enable us to
make value-added granular (left) from
standard (right) and finer-grain product.

6	WE LIVE BY OUR CORE VALUES
	In pursuing our company vision, we operate by the highest possible business standards and take into account factors beyond financial performance when evaluating our success.
	By committing to and living by our core values, we:

• Create long-term value for our shareholders

• Build support and understanding among stakeholders

• Foster a culture of accountability for employees

• Improve satisfaction of our customers and partners

• Focus on our pursuit of no harm to people, no accidents and no damage to the environment

• Improve quality of life in our communities

 18

         P O T A S H C O R P   M A J O R   M A R K E T S

                       Source: FAO, British Sulphur, PotashCorp

key markets

The markets for our products continue to evolve, with emerging offshore economies creating significant opportunities for growth and North American markets providing greater stability. Understanding the conditions, trends and potential of our key markets is critical to anticipating and meeting the needs of our customers and building long-term value for our shareholders.

  CHINA

Major Crops

Rice, wheat, corn, soybeans, vegetables and fruit

Potash (2007E)
Production	3.1 mmt	Exports	0 mmt
Imports	9.4 mmt	Demand	12.5 mmt

Source: Fertecon, PotashCorp

China Today...and Tomorrow

With 1.3 billion people, China uses more fertilizer than any other country. Much of its western terrain is unusable for agriculture, so southeastern China’s farmers often double- and triple-crop to meet production needs for crops like rice, fruits and vegetables. Balanced fertilization, particularly after decades of under-application of potash, is now better understood and is seen as crucial to improving yields.

China’s future growth will have a heavy impact on agriculture. As incomes rise and urbanization spreads, people spend more on better-quality food-especially meat. China’s meat consumption has almost quadrupled in 20 years and is expected to continue to grow significantly. Pork and beef production is grain-intensive, furthering the need for fertilizer to maximize yields.

Learn more in our online report:
	19

  SOUTHEAST ASIA

Major Potash Consuming Countries

Malaysia, Indonesia, Thailand, Vietnam, Phillipines

Major Crops

Rice, corn, oil palm, rubber, coffee, sugar cane, cassava, vegetables and fruit

Potash (2007E)

Production	0 mmt	Exports	0 mmt
Imports	4.1 mmt	Demand	4.1 mmt

Source: Fertecon, PotashCorp

Southeast Asia Today...and Tomorrow

With strengthening economies, countries in Southeast Asia are working to maximize crop yields to meet growing food demand. Malaysia and Indonesia are prominent players in the biofuel industry, with the latter being the world’s largest producer of palm oil, which is very potash intensive. Indonesia plans to diversify into ethanol and in 2007 set aside 2.2 million hectares for potash-dependent sugar cane and cassava.

  INDIA

Major Crops

Rice, wheat, sorghum, pulse crops, sugar cane

Potash (2007E)

Production	0 mmt	Exports	0 mmt
Imports	4.5 mmt	Demand	4.5 mmt

Source: Fertecon, PotashCorp

India Today...and Tomorrow

As in China, India’s population (1.1 billion) and growing incomes are driving the need for more food and better diets. On average, more than half of Indian household expenditures are food-related. With 17 percent of the world’s population but only 11 percent of arable land, and yields typically ranging from 20 percent to 50 percent of those on equivalent US cropland, India’s need for fertilizer is clear.

Responding to a growing annual domestic grain deficit, India is developing strategies to improve agricultural production, including reversing its long-term under-application of potash and other fertilizer nutrients.

Source: Fertecon, IPNI, PotashCorp

20 P O T A S H C O R P   M A J O R   M A R K E T S

                        Source: USDA, AgraFNP, PotashCorp

  BRAZIL

Major Crops

Soybean, sugar cane, corn, wheat, rice, coffee

Potash (2007E)

Production	0.7 mmt	Exports	0 mmt
Imports	6.7 mmt	Demand	7.4 mmt

Source: Fertecon, PotashCorp

Brazil Today...and Tomorrow

In the past decade, Brazil has emerged as an agricultural powerhouse – a virtual supermarket to the world. The ready availability of land, water and labor to increase crop and meat production has driven up exports to the European Union and the United States, but soaring demand in China has fueled much of Brazil’s export growth. Benefiting from strengthening global crop prices, lower production costs and advanced farming techniques, it has become the world’s number one exporter of sugar, ethanol, coffee, orange juice, tobacco, beef and poultry. The agri-food sector accounts for nearly a third of the country’s GDP.

Future growth in Brazilian agriculture will rely on potash as soils in most key growing areas are potassium-deficient.

FUTURE MARKETS

RUSSIA: After years of depressed conditions following the collapse of the Soviet Union and subsequent attempts at reform, Russia’s economy is slowly gaining momentum. Rising crop prices are expected to stimulate growth in its agricultural sector.

AFRICA: In Africa, where political instability has limited the growth of a sustainable agricultural industry, there is potential for an enormous increase in crop production and fertilizer consumption. As governments recognize the benefits of investing in agriculture, advancements are expected to occur.

21

  NORTH AMERICA

Major Crops

Corn, wheat, soybeans, cotton

Potash – US (2007E)

Production	1.5 mmt	Exports	0.3 mmt
Imports	8.2 mmt	Demand	9.4 mmt

Potash – Canada (2007E)

Production	17.7 mmt	Exports	16.9 mmt
Imports	0 mmt	Demand	0.8 mmt

Source: Fertecon, PotashCorp

    Source: USDA, ProExporter

North America Today...Tomorrow

The US and Canada are major suppliers of food and fiber for the world, with the US accounting for 40 percent of the total global trade in wheat, corn, soybeans and cotton. Both countries are among the world’s most efficient agricultural producers – productivity in the US, for example, has improved by more than 1 percent per year since 1950, due largely to ongoing refinements in yield technology and increased understanding of the critical role of proper fertilization. Yields on North American farms far exceed those of India, China and Brazil, especially in corn, where US farms can produce as much as five times the output on the same amount of land.

The most significant and stable market, North America provides lower growth but a reliable base for fertilizer sales – a complement to rapidly growing offshore markets.

    Global Corn Yields

    Source: USDA

22 L I V I N G   B Y   O U R   V A L U E S

from values to vision

In pursuit of our vision, we rely on core values that reflect the history and ongoing development of our company — values that define, inform and guide the way we do business. These values remind us of our continuing responsibility as a global leader and the importance of tomorrow in the decisions we make today.

For more information on our core values, please visit our Online Annual Report, keyword Core Values.

OUR CORE VALUES

We Operate with Integrity

Throughout our company, our employees are held 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

Our goal is simple: no harm to people, no accidents and no damage to the environment. Our commitment to safety and environmental stewardship is embedded in our culture and impacts all aspects of our operations, from the evaluation of our CEO’s performance to our mine reclamation initiatives.

Environmental initiatives like our mine reclamation efforts at Aurora, North Carolina show our commitment to both the environment and our communities. PotashCorp restores more than 1½ acres of wetlands for every acre our operations disturb, often to a condition better than its pre-mined state.

Learn more in our online report:
	23

We Listen to All PotashCorp Stakeholders

By listening, we use what we learn to improve the company. We value our stakeholders’ opinions and are diligent in collecting feedback on our performance. Through surveys and meetings with customers, employees, neighbors, community leaders, policy makers and investors, we listen and cultivate relationships that keep us engaged with and responsive to the people upon whom our success relies.

We Seek Continuous Improvement

As an industry and community leader, we proactively look for ways to improve how we do business. By evaluating and refining our practices at every level of our organization through initiatives like our Best Practices meetings, we build value for our company, increase our efficiency and foster an atmosphere of responsive innovation.

We Share What We Learn

Education is at the core of our business. Internally, we ensure that all employees and contractors are informed, well-trained, engaged and committed to our vision and values. Externally, we teach safety to our communities and offer programs to explain how our products benefit the world.

We Are Accessible, Accountable and Transparent

Through disclosure vehicles like our annual triple-bottom-line sustainability report and website, we ensure our accountability by publicly setting goals and objectives for our economic, environmental and social performance. We are accessible to all stakeholders, helping them understand the company’s direction, values and progress.

     Source: PotashCorp

Our annual Sustainability Report is an opportunity for us to publicly review our past and future economic, social and environmental performance. Available in summary form in print and comprehensively online, it provides valuable information on matters global and local, keeps us transparent and accountable for our actions and illustrates our commitment to stakeholder communications and engagement.

	Learn more in our online report:
24	B O A R D   O F   D I R E C T O R S

      POTASHCORP BOARD OF DIRECTORS

1 Frederick J. Blesi ^A,D

Glenview, IL
Retired Chairman and CEO
of PhosChem

2 William J. Doyle

Winnetka, IL
President and CEO of PotashCorp

3 John W. Estey ^B,C

Glenview, IL
President and CEO of S&C Electric Co.

4 Wade Fetzer III ^A,B

Glencoe, IL
Director of Sinofert and Retired
Partner with Goldman Sachs

5 Dallas J. Howe (Chair) ^A

Calgary, AB
Owner and CEO of DSTC Ltd.

6 Alice D. Laberge ^C,D

Vancouver, BC
Corporate Director and former
President and CEO of Fincentric
Corporation

7 Jeffrey J. McCaig ^B,D

Calgary, AB
Chairman and CEO of
Trimac Group of Companies

8 Mary Mogford ^A,D

Newcastle, ON

Corporate Director and former
Ontario Deputy Minister of Finance
and Natural Resources

9 Paul J. Schoenhals ^B,C

Calgary, AB
Retired President and CEO of
Enform and former Chairman of
the PCS Crown corporation from
1987 to 1989

10 E. Robert Stromberg, QC ^C

Jackfish Lake, SK
Formerly associated with the law firm
Robertson Stromberg Pedersen

11 Keith G. Martell ^D

Saskatoon, SK
Executive Chairman of
First Nations Bank of Canada

12 Elena Viyella de Paliza ^C

Dominican Republic
President of Inter-Quimica, S.A.,
Monte Rio Power Corp and
Indescorp, S.A.

Committees:   ^A Corporate Governance and Nominating   ^B Compensation   ^C Safety, Health and Environment   ^D Audit

	Learn more in our online report:
SENIOR MANAGEMENT		25

CORPORATE OFFICERS AND KEY MANAGEMENT

1 William J. Doyle

President and
Chief Executive Officer

2 Wayne R. Brownlee

Executive Vice President
and Chief Financial Officer

3 James F. Dietz

Executive Vice President
and Chief Operating Officer

4 G. David Delaney

President
PCS Sales

5 Garth W. Moore

President
PCS Potash

6 Thomas J. Regan, Jr.

President
PCS Phosphate and PCS Nitrogen

7 Barbara Jane Irwin

Senior Vice President
Administration

8 Joseph A. Podwika

Senior Vice President
General Counsel and Secretary

9 Robert A. Jaspar

Senior Vice President
Information Technology

10 Stephen F. Dowdle

Senior Vice President
Fertilizer Sales, PCS Sales

11 Denis A. Sirois

Vice President
and Corporate Controller

12 Daphne J. Arnason

Vice President
Internal Audit

13 Karen G. Chasez

Vice President
Procurement

14 John R. Hunt

Vice President
Safety, Health and Environment

15 Denita C. Stann

Director
Investor Relations

26


        S H A R E H O L D E R   I N F O R M A T I O N

Annual Meeting

The Annual Shareholders Meeting will be held at

10:30 a.m. Central Standard Time May 8, 2008 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 13, 2008 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 2008 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, Director, Investor Relations

Canada: (800) 667-0403          US: (800) 667-3930

e-mail: ir@potashcorp.com

Visit us at www.potashcorp.com

Corporate Offices

Canada:

Suite 500, 122 - 1st Avenue South, Saskatoon SK S7K 7G3

Phone: (306) 933-8500

US:

Suite 400, 1101 Skokie Boulevard, Northbrook IL 60062

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 Exchange1						New York Stock Exchange
	High*		Low*		Volume		High*		Low*		Volume
2007
First Quarter		65.31		51.92		51,599,528		56.35		44.05		221,025,369
Second Quarter		86.21		61.02		51,480,129		80.85		52.82		220,781,704
Third Quarter		108.92		76.96		65,980,291		109.40		71.50		189,289,076
Fourth Quarter		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
First Quarter		37.96		30.50		63,024,657		33.08		26.05		165,652,500
Second Quarter		39.00		28.93		56,060,451		35.47		26.28		162,390,900
Third Quarter		39.49		30.67		42,424,140		35.49		27.34		123,589,800
Fourth Quarter		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
2005
First Quarter		37.97		29.70		54,892,338		30.67		24.30		96,036,000
Second Quarter		44.04		32.80		40,296,027		35.56		26.42		89,500,200
Third Quarter		46.00		36.08		43,354,176		38.38		30.95		73,579,800
Fourth Quarter		36.30		28.25		66,542,436		31.11		24.26		138,311,700
Year 2005		46.00		28.25		205,084,977		38.38		24.26		397,427,700

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

Source: Thomson Financial

Learn more in our online report:
	27

Common Share Transfer Agent

In Canada:
CIBC Mellon Trust Company
P.O. Box 7010
Adelaide Street Postal Station
Toronto, ON M5C 2W9
Phone: (416) 643-5500                (800) 387-0825
inquiries@cibcmellon.com            www.cibcmellon.com

In the United States:
Mellon Investor Services
P.O. Box 358016
Pittsburgh, PA 15252-8016
Phone: (201) 680-6578
e-mail: shrrelations@mellon.com            www.mellon.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
Suite 500, 122 - 1st Avenue South
Saskatoon, SK 57K 7G3

Ownership

On February 20, 2008, there were 1,772 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 2007 Annual Report on Form 10-K.

Yearly POT Stock Price Since Inception* – NYSE Composite

2007 Monthly POT Stock Price* – NYSE Composite

POT Share Ownership – Geographic Distribution

Forward-Looking Statements

This 2007 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. A number of 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 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, 2007 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, 2008.

* Where PotashCorp is listed as a source in conjunction with external sources, we have supplemented the external data with internal analysis.

Sources, Abbreviations, Terms and Measures
Abbreviated Company Names and Sources*
AgraFNP		AgraFNP Informa Ltd., Brazil
Agrium		Agrium Inc. (TSX and NYSE: AGU), Canada
APC		Arab Potash Company Ltd. (Amman: ARPT), Jordan
British Sulphur		British Sulphur Consultants, UK
Canpotex		Canpotex Limited, Canada
Doane		Doane Agricultural Services, USA
FAO		Food and Agriculture Organization of the United Nations
Fertecon		Fertecon Limited and Fertecon Research Centre Limited, UK
ICL		Israel Chemicals Ltd. (Tel Aviv: ICL), Israel
IPNI		International Plant Nutrition Institute, USA
K+S		K+S Group (Xetra: SDF), Germany
Mosaic		The Mosaic Company (NYSE: MOS), USA
NYSE		New York Stock Exchange, USA
ProExporter		The ProExporter Network, 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 Financial		Thomson Financial Inc., USA
TSX		Toronto Stock Exchange, Canada
USDA		US Department of Agriculture, USA
Yara		Yara International (Oslo: YAR), Norway
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
2007E		2007 Estimated
2008F		2008 Forecast
Canpotex		An export company owned by all Saskatchewan producers of potash (PotashCorp, Mosaic and Agrium)
Consumption vs Demand		Product applied vs product purchased
Greenfield		New operation built on undeveloped site
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 United States
Operational Capacity		Equipment in a state of readiness to produce. While operational capacity is increased at mechanical completion of a project, a period of ramp-up may be required to achieve full operating levels.
PotashCorp		Potash Corporation of Saskatchewan Inc. (PCS) and its direct or indirect subsidiaries, individually or in any combination, as applicable
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	KCl	potassium chloride, 60-63.2% (solid)

A LOOK AT TOMORROW

Strong world economic growth is expected to continue in 2008, with China and India leading the way. As people in Asia and other developing regions continue to consume more food and shift toward higher-protein diets, the pressure to improve crop yields will increase — and with it, fertilizer consumption.

Based on these factors, PotashCorp is forecasting potash sales volumes to grow by 7 percent in 2008. This increase, combined with rising prices and per-tonne efficiencies gained through additional volumes, is expected to drive potash gross margin to unprecedented levels - approximately 2½ times the 2007 record. Consolidated net income could double, rising to between $2.0 billion and $2.3 billion.