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POTASH CORPORATION OF SASKATCHEWAN INC. REPORT ON FORM 10-K FOR

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					POTASH CORPORATION OF SASKATCHEWAN INC.


          REPORT ON FORM 10-K


  FOR THE YEAR ENDED DECEMBER 31, 1997
             U.S. 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 Ñscal year ended December 31, 1997
                                           Commission Ñle number 1-10351



            Potash Corporation of Saskatchewan Inc.
                                     (Exact name of the registrant as speciÑed in its charter)


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


                                              122 Ó 1st Avenue South
                                     Saskatoon, Saskatchewan, Canada S7K 7G3
                                                   306-933-8500
                          (Address and telephone number of the registrant's principal executive oÇces)



                            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
  (Including rights under the Shareholder Rights Agreement)


     Indicate by check mark whether the registrant (1) has Ñled all reports required to be Ñled 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 Ñle such reports), and (2) has been subject to such Ñling requirements for
the past 90 days. Yes ≤ No n
     Indicate by check mark if disclosure of delinquent Ñlers 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 deÑnitive proxy or
information statements incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ≤
     At March 16, 1998, the registrant had 54,143,678 Common Shares (the ""Shares'') outstanding, and the
aggregate market value of the 54,104,732 Shares held by non-aÇliates of the registrant was approximately
$5,058,792,442.

                              DOCUMENTS INCORPORATED BY REFERENCE
     Portions of the registrant's 1997 Annual Report to shareholders (""Annual Report'') are incorporated by
reference into Part II.
     Portions of the registrant's Proxy Circular for its Annual and Special Meeting of Shareholders in 1998 are
incorporated by reference into Part III.
                                                   PART I

ITEMS 1 and 2. Business and Properties.
General
     Potash Corporation of Saskatchewan Inc. (""PCS'') and its direct and indirect subsidiaries (together with
PCS' predecessors, the ""Company'') is one of the world's largest integrated fertilizer and related industrial
and feed products companies. In 1997, the Company's potash production represented an estimated 16% of
global potash production. In 1997, the Company had 23% of global potash capacity and an estimated 52% of
global excess potash capacity, giving it more available potash capacity than any single company or country
other than Canada. The Company is the third largest producer of phosphates worldwide by capacity, currently
representing approximately 9% of world phosphates production and 7% of world phosphates capacity. The
Company is also the largest nitrogen producer in the Western Hemisphere.
     PCS is incorporated under the laws of Saskatchewan and is the successor to a corporation without share
capital established by the Province of Saskatchewan in 1975. Between 1976 and 1990, the Company acquired
substantial interests in the Saskatchewan potash industry. It purchased the Cory mine in 1976, the Rocanville
and Lanigan mines in 1977, and, by 1990, 100% of the Allan mine when the Company acquired all of the
outstanding shares of Saskterra Fertilizers Ltd. In addition, in 1978 the Company acquired reserves at
Esterhazy, which are mined by a third party.
     In November 1989, the Company was privatized by the Province of Saskatchewan through the sale of
12.86 million common shares (the ""Common Shares'') to the public at Cdn$18.00 per Common Share. While
the Province of Saskatchewan initially retained an ownership interest in the Company, this interest had been
reduced to zero by the end of 1993. At the time of privatization, limitations on ownership of Common Shares
were imposed in order to restrict the ability of non-residents of Canada to own and vote the Common Shares
and to restrict any one person or group of associated persons from holding more than 5% of the Common
Shares, regardless of residency or citizenship. In 1994, all restrictions on the holdings of the Common Shares
were eliminated.
    In October 1993, the Company acquired from Rio Algom Limited (""Rio'') its New Brunswick potash
and port facilities and its Patience Lake mine in Saskatchewan (the ""Rio Acquisition'').
      On April 10, 1995, the Company purchased all of the outstanding shares of Texasgulf Inc. (""Texasgulf'')
from Elf Aquitaine, Inc. (""Elf (USA)'') and Williams Acquisition Holding Company, Inc. (""Williams''), for
an aggregate purchase price of $833 million (including acquisition costs). On April 10,1995, the name
""Texasgulf Inc.'' was changed to PCS Phosphate Company, Inc. (""PCS Phosphate''). PCS Phosphate
manufactures and sells solid and liquid phosphate fertilizers, animal feed supplements, and puriÑed phosphoric
acid which is used in food products and industrial processes. Its facility in Aurora, North Carolina is the
largest vertically-integrated phosphate mine and processing plant in the world. Other assets of PCS Phosphate
include: animal feed plants in four states; two industrial phosphoric acid plants owned through a 50% interest
in a joint venture carrying on business as Albright & Wilson Company (""Albright''); a solution potash and salt
mine in Moab, Utah; an undivided 50% interest in an ammonia storage terminal in Savannah, Georgia; and
PCS Phosphate's product distribution infrastructure.
     On October 31, 1995, the Company purchased all of the outstanding shares of White Springs Agricultural
Chemicals, Inc. (""White Springs'') from Occidental Chemical Corporation (""OxyChem''), for an aggregate
purchase price of $291.5 million (including acquisition costs). White Springs' primary assets are a phosphate
mine and two chemical plant complexes in northern Florida, Swift Creek and Suwannee River, and a bulk
terminal facility in Jacksonville, Florida. Other assets of White Springs include an animal feed plant in
Davenport, Iowa and two more at the Suwannee River facility, and the remaining undivided 50% interest in
the ammonia storage terminal in Savannah, Georgia owned with PCS Phosphate.
     In November 1995 the Company, in an underwritten public oÅering, sold 2.3 million shares at $73 per
share, for gross proceeds of $167,900,000. The oÅering proceeds were used in connection with the Company's
purchase of the shares of White Springs.

                                                     I-1
     On March 6, 1997, the Company through its subsidiary PCS Nitrogen Inc. (""PCS Nitrogen'') acquired
all of the outstanding capital stock of Arcadian Corporation (""Arcadian'') in exchange for 8,029,092 of the
Company's Common Shares and $563,550,002 in cash. PCS Nitrogen produces nitrogen fertilizers and
nitrogen chemicals at facilities in Georgia, Iowa, Louisiana, Nebraska, North Carolina, Ohio and Tennessee in
the United States, and has large scale operations in Trinidad. Other assets of PCS Nitrogen include a 50%
interest in a joint venture that owns and operates an ammonia storage terminal near Houston, Texas and a 50%
joint venture interest in a carbon dioxide processing operation at PCS Nitrogen's plant in Augusta, Georgia.
      PCS has its head oÇce and executive oÇces at Suite 500, 122-1st Avenue South, Saskatoon,
Saskatchewan, Canada S7K 7G3. In this Form 10-K, the term ""Company'' means PCS, its predecessors and
its direct and indirect subsidiaries unless the context otherwise indicates.
     See Note 16 to the consolidated Ñnancial statements for information concerning the Company's domestic
and international results.
    Unless otherwise speciÑed, dollar amounts are stated in U.S. Dollars.
    The Company's operations are comprised primarily of potash, phosphate and nitrogen operations.

Potash Operations
    The Company's potash operations include the mining and production of potash, which is predominantly
used as fertilizer.

Properties
     The Company controls the right to mine 691,400 acres of land in Saskatchewan. Included in these
holdings are mineral rights to 488,100 acres contained in blocks around the six mines in which the Company
has an interest, of which acres approximately 35% are owned by the Company, approximately 50% are under
lease from the Province of Saskatchewan and approximately 15% are leased from other parties. The majority
of the leases are for 21-year terms, renewable at the Company's option. The Company's remaining 203,300
acres are located elsewhere in Saskatchewan.
     Potash is mined by the Company from two main potash bearing formations in Saskatchewan; the
Patience Lake member of the prairie evaporites in the north and the Esterhazy member of the prairie
evaporites in the south. 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 long-term mining and processing agreement (the ""Mining and Processing Agreement'')
eÅective through 2026, International Minerals & Chemical (Canada) Global Limited (""IMC'') mines and
processes PCS reserves at the Esterhazy division. PCS has the option to terminate this agreement every Ñve
years. It did not opt to give notice to terminate in December 1995. IMC has the option of abandoning the
mine at any time after 2011, thus terminating the Mining and Processing Agreement. For the year ending
June 30, 1998, the Company has notiÑed IMC that it requires total Ñnished potash products in the amount of
500,000 tons. For the year ending June 30, 1999, the Company has notiÑed IMC that it requires 700,000 tons
of Ñnished product. In each year the maximum the Company is permitted to take under the Mining and
Processing Agreement is 1,050,000 tons and the minimum required amount is 500,000 tons.
     Water inÖow at the Esterhazy mine has continued, to a greater or lesser degree, since December 1985.
Substantial pumping capacity has been installed and remedial eÅorts have been undertaken. The Company's
share of water inÖow costs for 1997 was $4.5 million. IMC has stated that it will continue conventional mining.
PCS has no indication from IMC that solution mining or substitute shafts will be pursued at this time.
     Potash is also produced by the Company at its New Brunswick mine from the Öank of an elongated salt
structure and at its solution mining and milling operation in Moab, Utah.
    In the Ñrst quarter of 1998, the Company acquired all of the outstanding shares of Potash Company of
Canada Limited (""Potacan''). Potacan's mine Öooded in 1997 and its primary asset is a potash mill facility

                                                     I-2
near Cassidy Lake, New Brunswick. The mill is currently being used to further process standard grade product
from certain of the Company's other mine sites into coarse and granular product.

Production
    In 1997, the Company's conventional potash operations mined 18.96 million tonnes of ore at an average
grade of 23.3% K2O. In 1997, the Company's potash produced consisted of 6.48 million tonnes of potash
(KCl) with an average grade of 60.95% K2O, representing approximately 38% of North American production.
     The Company's present annual potash production capacity is approximately 12.2 million tonnes KCl,
which includes maximum production under the Mining and Processing Agreement with IMC of approxi-
mately one million tonnes at Esterhazy. In December 1997, the Company's production capacity represented
approximately 52% of the North American total while its excess capacity was an estimated 91% of North
American excess production capacity. The Company allocates production among its mines on the basis of
various factors, including the grades of product which can be produced and cost eÇciency. The Patience Lake
mine, which was originally a conventional underground mine, now employs a solution mining method, while
the other Saskatchewan mines which the Company owns or in which it has an interest employ conventional
underground mining methods.
     The New Brunswick mine is a conventional cut and Ñll mine, while the Moab, Utah mine employs a
solution mining method. In addition to their potash production, these mines also produced 926,129 tonnes of
sodium chloride (salt) in 1997.
     As part of the Rio Acquisition, the Company granted a royalty interest to Rio based upon production and
revenue from the New Brunswick and Patience Lake potash mines and mills (the ""Royalty''). The terms of
the Royalty provide that if production meets speciÑed base production levels or the sales of potash are at prices
which meet speciÑed base sales prices, a royalty per tonne is to be paid, calculated on a formula basis.
Payments under the Royalty are limited to a term expiring October 7, 2003 and to a maximum aggregate
payment of Cdn$50 million. No payments have been made in respect of the Royalty to date.

Reserves
      The Company estimates that its conventional mines in Saskatchewan contained 4.95 billion tonnes of
recoverable ore at an average grade of 22.9% K2O as at December 31, 1997, and that such ore will yield 1.6
billion tonnes of Ñnished product (KCl) at an average grade of 60% K2O.
     The Company's ore reserve estimates for its conventional mining operations in Saskatchewan are based
on exploration drill hole data, seismic data and actual mining results during the past 25 years. The Company's
estimated recoverable ore and the estimated volumes of Ñnished product from such ore are as follows:
                                                                           Recoverable      Finished
              Mine                                                            Ore           Product
                                                                             (millions of tonnes)
              Allan ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ               1,285.2         413.9
              CoryÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ                1,075.6         359.1
              Esterhazy ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ                  80.8          25.7
              Lanigan ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ               1,858.7         599.8
              Rocanville ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ                648.1         206.4
                                                                             4,948.4       1,604.9

     The Company believes that, with production rates at full capacity and utilizing current technology, the
Rocanville mine has a reserve life in excess of 90 years, each of the Allan, Cory and Lanigan mines has a
reserve life in excess of 100 years, and that the Esterhazy mine has a reserve life of at least 20 years.
     Given the characteristics of the solution mining method employed at the Patience Lake mine, it is not
possible to estimate deÑnitively the productive capacity of or the recoverable ore from this operation.

                                                      I-3
However, based on information obtained upon the acquisition of the mine, current technology and the present
mining area for this operation, the Company believes that the mine has a reserve life of at least 40 years for the
existing mine workings. DiÅerent techniques will have to be utilized to mine reserves outside of the existing
mine workings.
     Based on geophysics, exploration drill hole data, deÑnition drilling underground and actual mining results,
the Company estimates proven reserves of 52.1 million tonnes of recoverable ore and 19.0 million tonnes of
estimated Ñnished product (KCl) at its New Brunswick mine. The Company believes that, based upon its
proven reserves, the New Brunswick mine has a reserve life of at least 25 years with production at full
capacity. The Company estimates that probable reserves at the New Brunswick mine consist of 200 million
tonnes of recoverable ore and 72 million tonnes of estimated Ñnished product (KCl). The Company believes
that, based upon its proven and probable reserves, the New Brunswick mine has a reserve life in excess of 100
years at full production capacity and utilizing current technology.
     The Moab solution operation has an estimated remaining life of 8 years, at diminishing capacity.

Phosphate Operations
    The Company mines phosphate ore and manufactures solid and liquid fertilizers, animal feed supple-
ments and puriÑed phosphoric acid which is used in food products and industrial processes.

Properties
     The Company conducts its phosphate operations primarily at two facilities, one a 35,000-acre facility near
Aurora, North Carolina (the ""Aurora Facility'') and the other a 96,000-acre facility near White Springs in
northern Florida (the ""White Springs Facility''). The Company believes the Aurora Facility to be the largest
integrated phosphate mine and phosphate processing complex at one site in the world. The Aurora Facility
includes a six million tonne per-year mining operation, four sulfuric acid plants, four phosphoric acid plants, a
liquid fertilizer (11-37-0) plant, a superphosphoric acid plant, two diammonium phosphate (""DAP'') plants
and a solid fertilizer plant capable of producing DAP, granular triple superphosphate (""GTSP'') or
monoammonium phosphate (""MAP''). The Company has also entered into the Albright joint venture which
produces high purity phosphoric acid at Aurora. The White Springs Facility is the Ñfth largest P2O5 producer,
by capacity, in the United States, with an annual capacity of 1.1 million tonnes. The White Springs Facility
includes a mine and two production facilities, Swift Creek and Suwannee River, with two sulfuric acid plants,
three phosphoric acid plants, two DAP plants, a superphosphoric acid plant, a dicalcium phosphate plant and a
deÖourinated phosphate rock plant located at the Suwannee River complex and two sulfuric acid plants and a
phosphoric acid plant located at the Swift Creek complex. The Company's other properties include animal
feed plants in Davenport, Iowa, Kinston, North Carolina, Marseilles, Illinois, Saltville, Virginia and Weeping
Water, Nebraska, and bulk terminal facilities at Jacksonville, Florida and Morehead City, North Carolina.
     At its Geismar facility, acquired as part of the Arcadian acquisition, the Company manufactures a variety
of phosphate products that are used for agricultural and industrial purposes.

Production
      The Company extracts 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 the Company's processing
facilities. The ore is then screened to remove coarse materials, washed to remove clay and Öoated to remove
sand to produce phosphate ""rock''. The annual production capacity of the Company's mines is currently 9.6
million tonnes of phosphate rock. During 1997, the Aurora Facility's total production of phosphate rock was
4.8 million tonnes and the White Springs Facility's total production of phosphate rock was 3.6 million tonnes.
The Company generally operates its phosphate mine and phosphate processing plants 24 hours a day, seven
days a week, using rotating shifts.
    Phosphate rock is the major input in the Company's phosphorus processing operations. In addition to
phosphate ore, the principal raw materials required by the Company are sulfur, sulfuric acid and ammonia.

                                                       I-4
The production of phosphoric acid requires substantial quantities of sulfur, which the Company purchases
from third parties. In December 1997, the Company entered into a ten-year supply contract with an oÅshore
supplier to supply a portion of the Company's sulfur requirements. The Company generally purchases
additional sulfuric acid from unaÇliated sellers. Sulfur and sulfuric acid have been in abundant supply in
recent years and remain so at the present time. In 1998, the Company may transport surplus production of
sulfuric acid at the White Springs Facility to the Aurora Facility as needed.
     The Company purchases all of its ammonia from or through PCS Nitrogen and PCS Sales (USA) Inc.,
wholly owned subsidiaries of the Company. The Company reacts phosphoric acid 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. Most of the ammonia that is currently purchased by PCS Nitrogen is
produced in the Republic of Russia (the ""Russian Ammonia'') and imported through a White Springs-
operated ammonia terminal located within the port of Savannah (Garden City, Georgia). The Company's
ammonia expenses at the Aurora Facility are slightly higher than those of many of its competitors because of
higher transportation costs incurred in transporting ammonia from Savannah to Aurora, North Carolina
by rail.
     Substantially all of the phosphate rock produced by the Company is used internally for the production of
phosphoric acid, superphosphoric acid (""SPA''), chemical fertilizers, puriÑed phosphoric acid and animal
feed products.
      A portion of the Company's phosphoric acid production, merchant grade phosphoric acid (""MGA''), is
sold in liquid form, mostly to foreign and domestic producers of solid fertilizers. The solid fertilizers produced
by the Company are DAP and, to a lesser extent, GTSP and MAP. Over one-half of the Company's DAP is
exported, with the balance sold domestically, mostly to large regional dealers that custom blend solid
fertilizers.
     The Company's liquid fertilizer products, 68% of which was sold domestically, consist principally of
low-magnesium SPA, which the Company markets under the name ""LoMag''. The Company believes that it
is the largest U.S. producer of SPA.
      The Company also processes phosphoric acid to produce animal feed supplements for the poultry and
livestock markets. The Albright joint venture produces puriÑed phosphoric acid for use in various food
products and industrial processes.
     In addition to nitrogen products, the Company produces phosphate products at the Geismar plant for
which supplies of phosphate rock and sulfur are necessary. PCS Nitrogen purchases phosphate rock from
Morocco pursuant to an agreement with a Moroccan government-owned company, the current term of which
expires on December 31, 2002, wherein prices are reset annually through negotiation. If no agreement on price
is reached, either party may terminate the agreement. Changes in the agreement could aÅect the stability of
the supply of the raw material and the proÑtability of PCS Nitrogen's phosphate products. Sulfur is purchased
pursuant to a contract that may be cancelled by either party upon 180 days notice prior to the end of
any month.

Reserves
     At December 31, 1997, the Company's Aurora phosphate mine had estimated proven and probable
reserves of approximately 393 million tonnes of phosphate rock, at an average grade of 30.7% P2O5. These
reserves would permit mining to continue at current rates for about 75 years. The Aurora phosphate mine has
an estimated annual capacity of 6.0 million tonnes of phosphate rock and its processing plants have the
capacity to produce 1.152 million P2O5 tonnes of phosphoric acid. On April 6, 1995, approximately 408 million
tonnes of phosphate reserves were transferred to a newly established company, the common stock of which
was transferred to Elf (USA) and Williams prior to the sale of PCS Phosphate to the Company. The
Company was granted a 20-year right of Ñrst refusal (from April 10, 1995) in the event that the newly
established company proposes to sell the reserves. In addition, the newly established company and Elf (USA)
and Williams agreed, for a period of ten years from April 10, 1995 not to compete, and for the Ñrst Ñve years

                                                       I-5
not to make certain preparations to compete, with the Company with respect to those reserves. See
Environmental Matters Ì Permits.
     The White Springs phosphate mine had estimated proven and probable reserves of approximately 57
million tonnes of phosphate rock, at an average grade of 30.7% P2O5. The Company estimates that an
additional 11 million tonnes of phosphate rock could be purchased at market rates from nearby owners.
Accordingly, the total reserves of 68 million tonnes of phosphate rock at White Springs would sustain a
19 year mine at a mining rate of 3.6 million tonnes per year. The White Springs mine has an estimated annual
capacity of 3.6 million tonnes of phosphate rock and the processing plants have the capacity to produce
annually 1.093 million P2O5 tonnes of phosphoric acid. See Environmental Matters Ì Permits.

Nitrogen Operations
    The Company's nitrogen operations include production of nitrogen fertilizers and nitrogen chemicals.
These products are used for both agricultural and industrial purposes.

Properties
    PCS Nitrogen manufactures nitrogen products at eight plants, of which seven are located in the
United States and one is located in Trinidad. The following table sets forth the plant locations and nitrogen
production capabilities:
Plant Locations                                                     Products Produced

Augusta, Georgia ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ         Ammonia, urea, nitric acid, ammonium nitrate and nitrogen
                                          solutions
Clinton, Iowa ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ         Ammonia, urea, nitric acid, ammonium nitrate and nitrogen
                                          solutions
Geismar, Louisiana ÏÏÏÏÏÏÏÏÏÏÏÏ         Ammonia, urea, nitric acid, ammonium nitrate, nitrogen solutions,
                                          phosphoric acid, super-phosphoric acid, phosphate solutions and
                                          sulfuric acid
LaPlatte, Nebraska ÏÏÏÏÏÏÏÏÏÏÏÏ         Ammonia, urea, nitric acid, ammonium nitrate and nitrogen
                                          solutions
Lima, Ohio ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ          Ammonia, urea, nitric acid, nitrogen solutions and ammonium
                                          nitrate
Memphis, Tennessee ÏÏÏÏÏÏÏÏÏÏÏ          Ammonia and urea
Wilmington, North Carolina ÏÏÏÏ         Nitric acid, nitrogen solutions and ammonium nitrate
Point Lisas, Trinidad ÏÏÏÏÏÏÏÏÏÏÏ       Ammonia and urea
     The plant at Wilmington, North Carolina is scheduled to cease production during the Ñrst half of 1998.

Production
     PCS Nitrogen produces ammonia at six of its seven domestic plants and in Trinidad. The ammonia is
used to produce a full line of upgraded nitrogen products, including urea, ammonium nitrate, nitric acid and
nitrogen solutions.

Service Agreements
     The Geismar plant is integrated with a larger chemical manufacturing complex owned by Allied-Signal,
Inc. (""Allied''). Under the Geismar Services Agreement, PCS Nitrogen and Allied provide certain support
services to each other, including the provision of utilities, the discharge of wastewater, security and emergency
services, and other essential services. PCS Nitrogen believes that most of the services that PCS Nitrogen
requires are available from other sources, if necessary. However, the termination of, or the need to replace,
certain of the services provided (such as steam, well water supply and dock services) could, in the aggregate,
involve potentially signiÑcant capital expenditures, increased operating costs and disruptions to the operations
of the Geismar plant.

                                                      I-6
     BP Chemicals Inc. (""BPC'') operates the Lima plant on PCS Nitrogen's behalf under an operating
agreement that can be terminated by either party with one year notice. PCS Nitrogen's payments to BPC
under the operating agreement generally are intended to approximate BPC's previous cost of operating the
Lima plant and are made through the reimbursement of expenses incurred by BPC in providing such operating
services. In addition, due to the mutual interdependence of the Lima plant and BPC's operations,
PCS Nitrogen and BPC have agreed to provide each other with certain manufacturing support services at cost
pursuant to a contract extending for as long as the plants continue to operate and either party is required to
provide support services thereunder.
     PCS Nitrogen uses contract labor personnel provided by Augusta Service Company, Inc., which is owned
50% by PCS Nitrogen and 50% by DSM Chemicals North America, Inc. (""DSM''), to provide purchasing,
stores and spare parts management, maintenance, repair and shipping services for the Augusta plant.

Raw Materials
      Natural gas is the primary raw material used for the production of ammonia and, as a result, virtually all
of PCS Nitrogen's other nitrogen products. The purchase and transportation of natural gas accounts for
approximately 40% of PCS Nitrogen's total domestic production cost. PCS Nitrogen's natural gas strategy is
to purchase approximately one-third of its natural gas in the spot market or on short-term contracts, one-third
of its natural gas pursuant to Ñxed-price physical contracts, reserves in the ground or forward contracts which
Ñx the price of future deliveries, and the remaining one-third of its natural gas in Trinidad using a pricing
formula related to the market price of ammonia. With the exception of the Trinidad facility, PCS Nitrogen
purchases nearly all its natural gas from producers or marketers at the point of delivery of the natural gas into
the pipeline system, then pays the pipeline company and, where applicable, the local distribution company to
transport the natural gas to PCS Nitrogen's facilities. Approximately 85% of PCS Nitrogen's domestic
consumption of natural gas is delivered pursuant to Ñrm transportation contracts which do not permit the
pipeline or local distribution company to interrupt service to, or divert natural gas from, the plant.


PCS Joint Venture
    The Company indirectly holds all outstanding interests in a limited partnership (the ""PCS Joint
Venture'') doing business in Florida as Florida Favorite Fertilizer and in Georgia and Alabama as Farmer's
Favorite Fertilizer. PCS Joint Venture manufactures, processes and distributes fertilizer and other agricultural
supplies from plants located in Florida, Alabama and Georgia.




                                                      I-7
Marketing
    The following table summarizes the Company's net sales revenue of potash, phosphate and nitrogen
products in the past three calendar years:
                                                                                1997           1996           1995
                                                                                       (thousands of dollars)
Potash
  Canada ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ              14,460              14,507      12,483
  United StatesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ            195,780             143,137     128,594
  Canpotex ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ             229,666             184,025     221,169
  Other ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ              64,261              61,526      53,686
Phosphates
  Canada ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ              24,268              17,672      23,461
  United StatesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ            632,616             564,074     247,127
  PhosChem ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ              261,502             275,644     128,320
  Other ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ              35,223              34,575      18,282
Nitrogen
  Canada ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ               2,879               Ì           Ì
  United StatesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ            795,158             108,708      22,958
  Other ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ              70,116               Ì           Ì
Florida Favorite Fertilizer ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ         57,156              58,004      55,261

    The following table summarizes the Company's net sales revenue from products, by category:
                                                                                1997           1996           1995
                                                                                       (thousands of dollars)
PotashÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ             504,167             403,196     421,002
Florida Favorite Fertilizer ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ         57,156              58,004      55,261
Phosphates
  Liquid FertilizersÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ          277,636             239,716     106,330
  Solid Fertilizers (DAP, MAP, GTSP) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ            362,625             379,326     151,152
  Animal Feed ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ             191,016             186,145      94,477
  Phosphate Rock, Industrial Products ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ         122,333              86,777      60,161
Nitrogen
  Ammonia ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ              376,972             108,708      22,958
  Urea ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ             209,825               Ì           Ì
  Nitrogen Solutions ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ           162,885               Ì           Ì
  Other ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ             118,470               Ì           Ì
     Fourth quarter gross margin for 1997 was $79.4 million for the potash operations, $48.6 million for the
phosphate operations and $8.6 million for the nitrogen operations. The Company has a diversiÑed customer
base, and apart from sales to Canpotex Limited (""Canpotex'') and Phosphate Chemicals Export Association,
Inc. (""PhosChem''), no one customer accounted for as much as 10% of the Company's sales in 1997.
     The following table summarizes average prices per tonne received by the Company on sales of potash in
the past Ñve calendar years expressed as a percentage of 1993 base prices:
                                                               1997      1996          1995         1994       1993

North America ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ               106        92             97         105        100
OÅshore ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ               128       128            121         110        100
     Potash from the Company's Saskatchewan mines produced for use outside North America is sold
exclusively to Canpotex. PCS Sales (Canada), Inc. executes oÅshore marketing and sales for the Company's

                                                    I-8
New Brunswick potash and executes marketing and sales for the Company's potash, phosphate and nitrogen
products in Canada. PCS Sales (USA), Inc. executes marketing and sales for the Company's potash,
phosphate and nitrogen products in the United States. PhosChem, an association formed under the Webb-
Pomerene Act (United States), is the principal vehicle through which the Company executes oÅshore
marketing and sales for its phosphate fertilizers.
     Ammonia, urea, ammonium nitrate and nitrogen solutions are sold as fertilizers to agricultural customers
and to industrial customers for various applications, while nitric acid is sold to industrial customers as an
intermediate chemical feedstock.
     In the recent past, fertilizer prices have been volatile. No assurance can therefore be given that the
average market prices for the Company's fertilizer products will continue at current levels.

North American Marketing
     In 1997, North American net sales revenue from potash products represented 9% of the Company's net
sales revenue, substantially all of which was attributable to potash customers in the United States. Typically,
North American potash sales of the Company are greatest in the second calendar quarter. The Company has
no material contractual obligations in connection with North American sales to sell potash in the future at a
speciÑed price.
     In 1997, North American net sales revenue from phosphate products represented 28% of the Company's
net sales revenue, substantially all of which was attributable to phosphate customers in the United States. Of
that amount, 56% represented the Company's sales of fertilizer products and 44% represented the Company's
sales of nonfertilizer and feed products. Typically, North American phosphate product sales are greatest in the
Ñrst and second calendar quarters. In 1997, the majority of PCS Phosphate's phosphate product sales were
made on the spot market, with the balance made under short-term contracts and a limited number of sales
made pursuant to multi-year contracts. The Company's contractual sales of phosphates are generally made
pursuant to annual sales contracts. The Company has no material contractual obligations in connection with
North American sales to sell phosphate in the future at a speciÑed price.
     In 1997, North American net sales revenue from nitrogen products represented 34% of the Company's
net sales revenue and PCS Nitrogen's industrial products accounted for approximately 33% of its nitrogen
revenue and 49% of its gross margin. Typically, North American nitrogen product sales are greatest in the
second calendar quarter. In 1997, the majority of PCS Nitrogen's nitrogen product sales were made on the
spot market, with the balance made under short-term contracts and a limited number of sales made pursuant
to multi-year contracts. The Company has no material contractual obligations in connection with North
American sales to sell nitrogen in the future at a speciÑed price.
     Ammonia purchased by PCS Nitrogen which is not used in the Company's operations is sold to third
party customers by PCS Sales (USA), Inc.
      The primary customers for fertilizer products are retailers, dealers, cooperatives, distributors and other
fertilizer producers. Such retailers, dealers and cooperatives have both distribution and application capabili-
ties. The primary customers for industrial products are chemical product manufacturers.
      At December 31, 1997, the Company's North American sales were handled by 74 employees in Chicago,
Illinois and various other locations in the United States, and 23 employees in Saskatoon, Saskatchewan.

OÅshore Marketing
     Potash produced by the Company in Saskatchewan for sale abroad is sold to Canpotex, which is owned in
equal shares by the three potash producers in the Province of Saskatchewan (including the Company).
Canpotex, which was incorporated in 1970 and commenced operations in 1972, acts as an export company and
as a uniÑed marketing force for all Saskatchewan potash production in the oÅshore marketplace. Each
shareholder of Canpotex has an equal voting interest as a shareholder and through its nominees on the board
of directors. The Company and the other shareholders of Canpotex have agreed that, as long as they are

                                                      I-9
members of Canpotex, and with respect to potash produced in Canada, they will not make oÅshore sales
independently. The Company's production from New Brunswick has been exempted from this requirement by
members of Canpotex. Any member may terminate its membership in Canpotex at speciÑed 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. The Company currently supplies 57.5% of
Canpotex's requirements. Canpotex sells potash to government agencies and private Ñrms pursuant to six-
month contracts at negotiated prices or by spot sales.
     The following table sets forth the percentage of sales by Canpotex for the past three calendar years in the
various geographical regions:
                                                                                      1997      1996       1995

Asia ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ                  72%        70%       78%
Latin America ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ                 14         14         8
Oceania ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ                   9         11        10
Europe ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ                   5          5         4
Other ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ                  Ì          Ì         Ì
Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ                100%       100%      100%

     For 1997, revenue from oÅshore sales of potash from the New Brunswick mine, through PCS Sales
(Canada), Inc., represented 2.8% of the net sales of the Company; sales to Canpotex represented 9.8% of the
net sales of the Company in 1997.
     Since 1975, PhosChem has been the principal vehicle for United States exports of phosphate fertilizers.
Since at least 1985, PCS Phosphate, IMC-Agrico Company (""IMC-Agrico''), a joint venture between IMC
Global Inc. and Freeport-McMoRan Resources Partners (or its predecessors) and, until the Company's
acquisition of White Springs, OxyChem, have been members. On October 1, 1997, Mississippi Phosphates
Corporation (""MissChem'') became a member. In addition, eÅective April 1, 1998, Mulberry Corporation
will become a member. The PhosChem members have agreed to export their fertilizer products exclusively
through PhosChem, except for exports to Canada or to any member state of the European Union or the
European Economic Area, sales of superphosphoric acid to the Former Soviet Union (the ""FSU'') and sales
to certain buyers aÇliated with members. Historically, PhosChem negotiated prices and other terms for the
export sale of fertilizer products. According to the terms of a PhosChem agreement eÅective January 1, 1995,
IMC-Agrico is responsible for the marketing of solid fertilizers (DAP, MAP and GTSP), and PCS
Phosphate, or its sales aÇliate (PCS Sales (USA), Inc.), is responsible for the marketing of liquid fertilizer
products (MGA) to export countries. Total P2O5 sales for 1997 were apportioned as follows: 71.0% to IMC-
Agrico, 2.1% to MissChem and 26.9% to PCS Phosphate. The PhosChem arrangement relies on the sales
forces of IMC-Agrico and PCS Sales (USA), Inc. for sales of solids and liquids, respectively. The PhosChem
agreement will be in eÅect through December 31, 1998, and subject to renewal thereafter. If the PhosChem
agreement is not renewed, the Company does not believe the disbanding of PhosChem would materially aÅect
the Company's sales of fertilizer, but there can be no assurance that, if PhosChem were to be disbanded, the
Company would be able to Ñnd alternative outlets for its products or sell its products at prices or on terms
similar to those expected to be obtained by PhosChem. The Company's estimated 1998 PhosChem allocation
is 28.09%.
    Revenue from sales to PhosChem accounted for approximately 11% of the Company's net sales in 1997.
All of the Company's phosphate sales to China and India were made through PhosChem. Most of the
Company's sales of phosphate products to China are made to the central purchasing authority of the Chinese
government. Sales in India were made to many independent buyers.




                                                     I-10
     The following table sets forth the percentage of sales of PhosChem for the past three calendar years in the
various geographical regions:
                                                                            1997       1996     1995(1)

         Asia ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ                88%       82%       75%
         Latin America ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ                8        17        13
         Europe ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ                Ì          1         3
         Mid East ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ                 1        Ì          2
         Africa ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ               Ì         Ì          2
         Other ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ                 3        Ì          4
         Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ             100%       100%      100%

(1) Percentages do not total 100% as a result of rounding.
     With respect to oÅshore sales of nitrogen, ammonia and urea sales predominate and originate primarily
from Trinidad, with other sales coming from purchased product locations. During the March-December 1997
period, 8% of nitrogen net sales revenue related to oÅshore sales.
      OÅshore sales are subject to those risks customarily encountered in foreign operations, including
(i) Öuctuations in foreign currency exchange rates, (ii) changes in currency and exchange controls, (iii) the
availability of foreign exchange, (iv) laws, policies and actions aÅecting foreign trade and (v) other economic,
political and regulatory policies of foreign governments.

Distribution and Transportation
    The Company has an extensive infrastructure and distribution system to transport and store its products.
The Company owns approximately 1,400 rail cars and leases approximately 3,800 additional rail cars.
     Transportation costs add signiÑcantly to the total amounts paid by purchasers of potash. Producers have a
deÑnite 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 oÅshore producers
(including the FSU, Germany, Israel and Jordan) to compete eÅectively in some of the Company's traditional
markets.
     Most of the Company's potash for North American customers is shipped by rail. Shipments are also
made from each of the Company's Saskatchewan mines to Thunder Bay, Ontario, for shipment by lake vessel
to the Company's warehouses and storage facilities in Canada and the United States.
    Potash from the New Brunswick mine is shipped primarily by ocean-going vessel from the Port of Saint
John, although truck and rail transport are also used for North American customers.
     In the case of the Company's sales to Canpotex, potash is transported by rail principally to Vancouver,
British Columbia, where port facilities exist for storage pending shipment overseas. The Company has an
equity interest in Canpotex Bulk Terminals Limited, which is a part owner of these port facilities. The
Company, through Canpotex, has an interest in the development of a port facility located in Portland, Oregon
which became operational during 1997.
     With respect to phosphates, the Company leases a shipping terminal in Morehead City, North Carolina,
which receives and stores raw materials for, as well as the products manufactured by, the Aurora facility. The
Company owns nine barges (four used for solid products, two for phosphoric acid, one for sulfuric acid and
two for sulfur) and three tug boats, which are used to transport materials between its Aurora facility and
Morehead City. Raw materials and products are also transported to and from the Aurora facility by rail. The
Company transports sulfur it purchases from Canada in large, dedicated unit trains. Both CSX Corporation
and Norfolk Southern Corporation serve the Aurora facility. The Company believes that its location and
diversiÑed transportation and terminalling capabilities put it in a comparable position to most of its Florida

                                                     I-11
competitors in purchasing sulfur. In December 1997, the Company entered into a ten-year supply contract
with an oÅshore supplier to supply a portion of the Company's sulfur requirements. The Company receives
ammonia for its phosphate operations at Aurora through its ammonia terminal in Savannah, Georgia; the
ammonia is shipped by rail from Savannah to the Aurora facility.
     Sulfur is delivered to the White Springs Facility by unit trains from Canada and by rail from multiple
domestic sources. The Company receives ammonia for its phosphate operations at White Springs through its
ammonia terminal in Savannah, Georgia; ammonia is shipped by rail from Savannah to the White Springs
Facility. The Norfolk Southern Corporation is the only railroad serving the White Springs Facility. Most of
the phosphoric acid and chemical fertilizers produced at the White Springs Facility are shipped to domestic
destinations by rail. The Company also ships some of its phosphoric acid, chemical fertilizers and animal feed
products, produced at the White Springs Facility, through the bulk terminal located in Jacksonville, Florida,
for oÅshore sales.
     The Company makes domestic deliveries of animal feed products (bulk and bagged) by rail or truck from
its manufacturing facilities and from several warehouses supplied from its manufacturing facilities.
     The Company distributes its nitrogen products by barge, railcar and truck to its customers and through its
strategically located storage terminals in high consumption areas. The Company leases or owns approximately
50 nitrogen terminal facilities with an aggregate storage capacity of approximately 600,000 tons of product.
The terminals provide oÅ-season storage and also serve local dealers during the peak seasonal demand period.
     The Company distributes products from the Trinidad plant to markets in Latin America and Europe in
addition to the United States. The Company's distribution operations in Trinidad employ two long-term
chartered ocean-going vessels and utilize spot charters as necessary for the transportation of ammonia. All
bulk urea production is shipped through third-party carriers.

Competition
     The markets for potash, both domestic and foreign, are highly competitive. Since potash is a commodity,
producers must compete based on price and service (e.g., delivery time and ability to supply all grades). Apart
from competitive pricing, the Company's principal method of competition is the quality of service it provides
to customers. Among other things, the Company provides quality service by maintaining warehouses and
leasing rail cars to enhance its delivery capability. The high cost of transporting potash limits competition in
various areas.
    The Company's potash competition includes two producers in Saskatchewan, two other signiÑcant
producers in North America and potash producers located outside North America in the FSU, Israel, Jordan,
Germany and France. Because of the high capital cost and lead time required to construct a new mine, the
Company's principal competition is expected to continue to come from the owners of existing mines.
     Most phosphate products, particularly solid fertilizers, are commodities, with little or no product
diÅerentiation, and thus trade on the basis of prices determined in highly competitive markets. The vast
majority of the United States phosphate rock not mined by the Company is produced in central Florida,
southeast of Tampa, and most of the United States phosphate processing capacity, other than at Aurora, is
located in Florida and along the coast of the Gulf of Mexico.
     The Company's principal advantage at Aurora in competing with other producers is that it operates
integrated phosphate mine and phosphate processing complexes while most of its competitors are required to
ship phosphate rock by rail or truck from their mines to their chemical processing plants, thus incurring
substantially higher transportation costs. In addition, ore at Aurora is of a more uniform grade and is found in
thicker seams than that in central and south Florida.
    As a result of its location in North Carolina and the relatively high cost of transportation, the Company's
U.S. phosphate sales from Aurora have a natural advantage in the Northeast, mid-Atlantic and eastern
Midwest regions, while White Springs and other Florida producers have a natural advantage in the South, and

                                                     I-12
Gulf coast producers have a natural advantage in areas of the Midwest accessible to barge traÇc up the
Mississippi River.
    The Company also competes with governmental enterprises and independent phosphate producers in
important exporting countries, including Morocco, Tunisia, Jordan and South Africa.
     Although there has been extensive consolidation and privatization worldwide, substantial competition
exists in the nitrogen industry. The Company competes domestically with a broad range of companies in the
production and sale of nitrogen products, including subsidiaries of larger chemical companies, farm coopera-
tives, integrated energy companies and independent fertilizer companies. Because fertilizer is a commodity,
competition takes place largely on the basis of price and delivery. The relative cost of, and availability of
transportation for, raw materials and Ñnished products to manufacturing facilities and markets are important
competitive factors.
     The Company also competes with foreign companies whose nitrogen products are imported into the
United States. Although diminishing in number, various foreign competitors receive subsidies from their
governments. Some countries also have natural gas supplies that are surplus to domestic demand. This surplus
natural gas may have a low alternative value and, when used as feedstock for the manufacture of ammonia and
urea, can result in low-cost production. These low-cost products are being imported into the U.S. and compete
with domestically manufactured nitrogen fertilizers, including the Company's. In addition, other importers
subsidized by their governments may import products into the U.S. for reasons not related to U.S. fertilizer
market conditions, such as a need to obtain U.S. dollars.
      The Company's nitrogen production capability is the largest in the Western Hemisphere. The Company's
domestic nitrogen plants serve agricultural markets with a diversiÑed crop base that spans a lengthy growing
season and chemical industrial manufacturers located throughout the U.S. Those plants are strategically
located in agricultural and industrial end-use markets in the Southeast, Midwest and Gulf Coast regions. The
Company believes that it is more economical to transport natural gas, the primary raw material in the
production of nitrogen fertilizers and chemicals, to plants situated in the product markets than to transport
such products over long distances. Several of the Company's domestic nitrogen plants are located closer to
their primary customers than are their competitors. The Company concentrates its nitrogen marketing eÅorts
on these nearby markets where lower transportation costs result in better margins. The Company believes that
the number and geographic diversity of its nitrogen plants provide competitive advantages in manufacturing,
distribution, marketing, customer service and other areas when compared to competitors controlling only a few
facilities. In addition, the industrial demand for nitrogen products is typically less volatile and follows diÅerent
demand cycles than agricultural demand for fertilizer. The Company believes that its industrial sales add
stability to its revenue and are a desirable complement to agricultural demand.

Employees
     At December 31, 1997, the Company actively employed 5,751 persons, of whom 2,028 were salaried and
3,723 were hourly paid. Of these employees, the Company's potash operations employed 1,550 people, the
phosphate operations employed 2,648 people, the nitrogen operations employed 1,258 and 113 people were
employed at PCS Joint Venture. The corporate oÇce had a staÅ of 85 and 97 people were employed in the
Company's sales group.
     The Company has entered into nine collective bargaining agreements with labor organizations represent-
ing employees. The collective bargaining agreements at the Allan, Cory and Patience Lake divisions expire on
April 30, 2000. The Lanigan agreement expired on January 31, 1998. The Company and the Rocanville
Potash Employees Association have a contract that expires on May 31, 1998. The agreement between IMC
and the union representing the employees at the Esterhazy mine expired on January 31, 1998. Negotiations
have commenced for new collective bargaining agreements for the Lanigan and Esterhazy mines. The
Company's New Brunswick and Aurora operations are non-union. The collective bargaining agreement with
the union representing employees at the White Springs plant expires on December 1, 2000. PCS Nitrogen has
three locations with collective bargaining agreements: Clinton, which contract expires July 31, 1999;
Memphis, which contract expires September 17, 2000; and LaPlatte, with a new contract that expires

                                                       I-13
January 31, 2003. In addition, the agreement between BPC and the union representing employees at the Lima
plant expires September 30, 2000. The Company believes its relations with its employees to be good.

Royalties and Certain Taxes
     Saskatchewan potash production is taxed at the provincial level under The Mineral Taxation Act, 1983
(Saskatchewan). This tax consists of a base payment and a proÑt tax. In addition to the Potash Production
Tax, rental fees, taxes and royalties are payable to the Province of Saskatchewan and municipalities by potash
producers in respect of potash reserves or production of potash in the Province of Saskatchewan. The
Company's tax, fees and royalty expenses were $68 million in 1997. On February 9, 1998, the government of
the Province of Saskatchewan announced a reduction of the top marginal rate of the proÑts portion of the tax
from 50% to 35%, eÅective January 1, 1998.
     The Company is subject to capital tax on its paid-up capital (as deÑned in The Corporation Capital Tax
Act of Saskatchewan). In addition, a resource corporation in the Province of Saskatchewan pays a corporate
capital tax surtax based on the value of Saskatchewan resource sales. This surtax is only payable to the extent
that it exceeds the regular capital tax. In 1997, the Company paid capital tax of $4.9 million and surtax of
$11.9 million.
    The Company pays royalties to the New Brunswick government on the basis of production from its New
Brunswick mine. In addition, the Company pays municipal taxes. The Company's expenses for such royalties
and municipal taxes were $4.8 million in 1997.
    The Company does not make royalty payments in connection with its phosphate and nitrogen operations.

Income Taxes
     PCS and certain subsidiaries are subject to federal and provincial income taxes in Canada. By virtue of
deductions with respect to non-capital losses carried forward, capital cost allowance, Canadian development
expense and earned depletion allowance, such taxes have not yet become payable. However, PCS is subject to
the Large Corporations Tax. In 1997, PCS began to book a deferred tax provision, at an eÅective tax rate of
35%, since the tax pools plus the non-capital losses carried forward are less than the book value of the assets.
Assuming the status quo, the Company is likely to begin paying some Canadian income tax before the end of
the decade.
     The subsidiaries of the Company which operate in the United States are subject to U.S. federal and state
income taxes. By virtue of certain income tax deductions available, these subsidiaries are not currently subject
to regular cash income taxes. However, they are subject to the Alternative Minimum Tax, which may be
carried forward indeÑnitely as a credit applied against future regular income tax liabilities. In addition, the
Company is subject to United States withholding tax on certain payments received from its U.S. subsidiaries.
The tax rate for 1997 was approximately 21% of income before taxes, of which 9 percentage points represented
deferred income taxes, and 12 percentage points represented cash taxes. The tax rate for 1996 was
approximately 24% of income before taxes, of which 14 percentage points represented deferred income taxes
and 10 percentage points represented cash taxes.
     The Company's nitrogen subsidiaries operating in Trinidad are subject to Trinidad taxes. The foreign tax
rate applicable to the Trinidad operations for 1997 was approximately 37% of income before taxes.

Research and Development
     The Company maintains research and development facilities located in Saskatoon, Saskatchewan,
employing approximately 30 persons who concentrate on improving eÇciency in mine operations and product
quality. Research continues on the use of three-dimensional seismic methods and other geophysical tools to
detect geological disturbances in ore seams. The Company is also proceeding with automation of mining
machines. Other research includes measures to maintain and enhance product quality in transit and at oÅsite
storage facilities. The Company supports research in agronomy through Potash & Phosphate Institute
programs.

                                                     I-14
     The Company continues to evaluate ways to more fully automate its phosphate production facilities,
including improvements to its sulfuric acid, phosphoric acid and puriÑed phosphoric acid plants. The
Company is also exploring ways of further debottlenecking its phosphate production facilities and selectively
adding capacity through technological enhancements.

     PCS Nitrogen is utilizing a newly designed balancing system for large, high speed, rotating equipment to
reduce downtime by improving motor stability and decreasing bearing wear by decreasing vibration and
lowering oil temperatures. Other technology enhancements being considered for improving plant reliability are
expanded applications of dry gas seals, better material selections in reforming and waste heat recovery systems
and improved automation.

Environmental Matters

     The Company's operations are subject to environmental controls in the form of required permits and
other applicable Canadian, U.S. and Trinidad and Tobago federal, provincial, state and local laws and
regulations. Such laws and regulations govern, among other matters, air emissions, waste water discharges,
land use and reclamation and solid and hazardous waste management. The Company believes that it is
currently in material compliance with applicable environmental laws and regulations and believes that it is
well positioned to meet anticipated requirements under these laws and regulations. Although signiÑcant
capital expenditures and operating costs have been incurred and will continue to be incurred on account of
these laws and regulations the Company does not believe, except as otherwise set out herein, that such
environmental laws and regulations have had, or will have, a material adverse eÅect on its business. However,
the Company cannot predict the impact of new or changed laws or regulations, including the recently-enacted
potash decommissioning regulations discussed below. The Company anticipates that its routine expenditures
related to environmental matters in 1998 will not diÅer materially from the previous year.

Environmental Expenditures
Reclamation and Restoration Costs

      Site restoration and reclamation costs have been accrued for various sites. At December 31, 1997, the
Company had accrued $32.0 million for the Aurora, North Carolina facility, $66.8 million for the White
Springs, Florida facility, $27.4 million for the Moab, Utah facility and $13.0 million for various sulfur
facilities. The idle sulfur facilities were part of the acquisition of Texasgulf and are undergoing dismantlement
and environmental restoration eÅorts. The current portion of restoration and reclamation accrued in 1997
totaled $3.7 million. These amounts represent the Company's current estimate of potential site restoration and
reclamation costs which were last assessed in November 1996. The expenditures are generally incurred over an
extended period of time.

    Annual environmental expenditures for reclamation and restoration during the year ended December 31,
1997 were $67.0 million. Of this amount, $51.5 million was charged to operations, $4.9 million was capitalized
and $10.6 million was charged against accrued reclamation costs.

Capping of By-product Gypsum Stacks

     In 1993, the State of Florida passed certain legislation requiring companies to reduce the potential
environmental hazards associated with accumulations of by-product gypsum (gypsum stacks). The rule
resulting from this legislation requires companies to ""cap'' the gypsum stacks in order to reduce seepage into
groundwater when such stacks reach their design capacity (no earlier than year 2010 for the Company) or
after March 25, 2001 if groundwater standards are not being met. At December 31, 1997, a balance of $35.4
million was included in accrued reclamation costs for this gypsum stack capping requirement. The obligations
of White Springs regarding the gypsum stacks are guaranteed by PCS.

    In North Carolina, on exhaustion of the mine's phosphate reserves, disposition of the remaining gypsum
must comply with the laws in place at that time.

                                                      I-15
Other Environmental Costs
     The Company's operating expenses, other than reclamation and restoration and gypsum stack capping,
relating to compliance with environmental laws and regulations governing ongoing operations were approxi-
mately $15.5 million for the year ended December 31, 1997.

Capital Expenditures
     Each year the Company undertakes capital projects to improve pollution control facilities. In 1997, a total
of approximately $10.5 million in capital expenditures was spent to meet the Company's environmental
control objectives. The Company expects that its capital requirements for environmental projects may increase
in the future due to increasingly stringent environmental regulations arising from current and future
requirements of law.
      PCS Phosphate's capital expenditures with respect to environmental matters have been primarily related
to air emission control, water management, land reclamation and solid waste disposal. In 1992, PCS
Phosphate completed construction of a $30 million water management system at its Aurora mine and plant
site that the Company believes will address signiÑcant water management issues with respect to both the mine
and plant operations for the foreseeable future. Under the Company's system of discharge minimization, PCS
Phosphate recycles water used in its slurries and cooling operations, adding new water as needed.
     With respect to air emissions, the Company anticipates that additional expenditures may be required to
meet increasingly stringent U.S. federal and state regulatory and permit requirements. These requirements
include existing and anticipated regulations under the U.S. federal Clean Air Act, particularly the 1990
amendments thereto, and under state law. In particular, both federal and state regulation of hazardous air
pollutants are expected to require additional pollution control equipment and increased operating expenditures
at some U.S. facilities. Further, the U.S. Environmental Protection Agency (""EPA'') has published new
National Ambient Air Quality Standards for both ozone and particulate matter which are more stringent than
existing standards. Such standards are being challenged in the U.S. District Court for the District of
Columbia. EPA has also proposed rules requiring the eastern most states to plan for the reduction of ozone
and nitrogen oxide transport across state lines.
     The federal operating permit program is also expected to require the addition of enhanced emissions
monitoring equipment at some facilities, as well as the imposition of permit fees based upon facility air
pollutant emissions. If the Company undertakes facility expansion at its White Springs, Geismar, Lima and/or
certain other plants, a federal Prevention of SigniÑcant Deterioration permit may be required. Such permits
would impose certain restrictions on air pollutant emissions from the expanded portions of such plants.

Regulatory Evaluation and Remediation
      In addition to environmental regulation of its present operations, the Company also may incur costs and
liabilities in connection with its and its predecessors' past and present waste disposal practices and ownership
and operation of real property and facilities, as well as its mining activities. The U.S. federal 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 property 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 apportioned according to various equitable and other factors. In the course of its present and
former operations, including those of divested businesses, PCS Phosphate, White Springs and PCS Nitrogen
have generated and the Company will generate wastes that could result in liability for the Company under
these laws.
      An EPA contractor conducted a screening site inspection in November 1989 of a portion of the Aurora
facility in order to determine whether further investigation or cleanup should be conducted. The contractor's
report identiÑed certain pesticide and other contamination of the soil and potential migration pathways for

                                                      I-16
contamination of surface water and, to a lesser degree, groundwater, and recommended that the site be
evaluated for cleanup. The Company is not aware of any further action by EPA or its contractor at this site
since the report of this inspection was issued in March 1991. Another EPA contractor conducted a screening
site inspection in May 1990 on a site that includes the Company's Marseilles, Illinois facility in order to
determine whether further investigation or cleanup of the site should be conducted. The contractor's report
identiÑed certain contamination of the soil and potential migration pathways for contamination of groundwater
and surface water, but did not make any recommendations for further action. Illinois Environmental
Protection Agency (""Illinois EPA'') visited the site in April 1995. During February 1996, the Company
received a CERCLA Site Inspection Report from Illinois EPA based on the April 1995 visitation. OÇcials of
the Company were also advised verbally, by the Illinois EPA, that the site, which included the Marseilles
facility, would be given a ""no further action'' status. However, the Company has received no written notice of
this status from either EPA or Illinois EPA. The Company does not know if any cleanup will ultimately be
required at these two sites, and consequently is unable to estimate the total costs of cleanup or its share of such
costs if a cleanup is ordered. During September 1995, an investigation of the Saltville, Virginia facility was
undertaken by EPA in connection with a review of the former operations of Olin Corporation conducted in
and around Saltville. During October 1996, the Company received a copy of a Health Consultation for the
Former Hydrazine Plant of Olin Corporation. The only item noted in the consultation report concerning the
former hydrazine plant was the presence of lead around a tank foundation. The Company plans to analyze the
soil at that tank location and to dispose of, in an appropriate manner, any soil having elevated levels of lead.
The Company has no information indicating that any cleanup required in connection with the Aurora,
Marseilles and Saltville sites will have a material adverse eÅect upon the Company's Ñnancial condition or
results of operation. Further, the Company believes that if it has any material liability for such costs, it would
have claims against third parties in connection with such liability. Any such claims would be based on
statutory and/or common law obligations of third parties, such as former owners, occupiers or disposers.
     PCS Phosphate was initially named as a party in two cleanup matters involving the Colorado School of
Mines Research Institute (""CSMRI'') in connection with hazardous substances allegedly generated at some
of the former operations of CSMRI. During May 1995, Elf (USA) advised EPA that Elf (USA) was
handling the matter on behalf of Texasgulf and another former Elf (USA) subsidiary, Texasgulf Metals and
Minerals Co. On January 28, 1997, EPA issued a notice that the required cleanup work at one of the sites had
been completed.
     PCS Joint Venture and its general partner, Potash Corporation of Saskatchewan (Florida) Inc. (""PCS
Florida''), a wholly-owned subsidiary of the Company, are subject to various environmental laws of the federal
and local governments in the United States, and from time to time investigations relating to the enforcement
of such laws. Currently, the Florida Department of Environmental Protection (""FDEP'') is conducting an
investigation into soil and ground water contamination of a PCS Joint Venture fertilizer plant located in
Lakeland, Florida and certain adjoining property. Assessment of the contamination of the plant site and of
certain adjoining property is continuing. No connection between the operations of PCS Joint Venture (or its
predecessor Florida Favorite Fertilizer, Inc.) and the contamination has been established. The magnitude of
any liability which PCS Joint Venture and PCS Florida may have regarding the Lakeland, Florida plant has
not yet been determined.
      In June 1994, the Georgia Department of Natural Resources, Environmental Protection Division, wrote
to PCS Joint Venture seeking certain environmental information regarding its Moultrie, Georgia location. In
October 1994, an additional request for information was received from the EPA pursuant to Section 104(e) of
CERCLA. Responses to both requests have been provided by PCS Joint Venture. Based on a preliminary
investigation, there appears to be lead-contaminated soil at the site. However, a complete assessment of the
site has not yet been completed, and the full nature and extent of the contamination cannot be quantiÑed at
this time. On September 30, 1997, the Georgia Department of Natural Resources, Environmental Protection
Division, requested that Farmers Favorite Fertilizer submit a Compliance Status Report by March 30, 1998.
Farmers Favorite Fertilizer has engaged outside consultants to assist in the preparation of such report.
   PCS Joint Venture is co-operating with regulatory authorities in their investigations of the Lakeland and
Moultrie sites. It is also attempting to determine the number and location of other parties who may be liable

                                                       I-17
for remediation of these sites. However, because site assessments are ongoing and because other parties may
be liable for some or all costs of remediation, the ultimate liability of PCS Joint Venture has not yet been
determined.
     In connection with certain recent modiÑcations and additions to the Geismar plant, consultants retained
by PCS Nitrogen incorrectly estimated emissions levels for nitrous oxide (""N0x'') associated with such
projects. As a result, preconstruction permit applications required for such projects under the federal Clean
Air Act were not Ñled by PCS Nitrogen. Pursuant to a consent order with the Louisiana Department of
Environmental Quality (""LDEQ''), such applications were Ñled and LDEQ has issued both of the required
preconstruction permits. Such permits do not require additional material N0x emissions controls.
     In February 1996, the North Carolina Department of Environment, Health and Natural Resources
notiÑed PCS Nitrogen that the Navassa, North Carolina terminal site had been included on the state's
Inactive Hazardous Waste Sites Priority List. Listed sites normally are subject to detailed assessment of the
environmental condition of concern and the feasible remediation options. PCS Nitrogen nonetheless currently
expects that the cost and liability, if any, associated with the Navassa terminal site will not have a material
adverse eÅect on the Company.
     In 1991, after extensive environmental assessments, PCS Nitrogen installed a remediation system at the
Memphis plant to address certain contaminants found in the groundwater. Although the system was installed
voluntarily and had been in operation for over a year, the Tennessee Department of Environment and
Conservation (""TDEC'') in 1993 proposed to include the Memphis plant on the state's list of Inactive
Hazardous Substance Sites. The Tennessee Solid Waste Disposal Control Board rejected a similar proposal
made by the TDEC in 1989. Listed sites normally are subject to detailed assessment of the environmental
condition of concern and the feasible remediation options, but that process may not be fully appropriate as to
the Memphis plant in view of PCS Nitrogen's existing remediation system. Nevertheless, in 1994, PCS
Nitrogen entered into a voluntary consent agreement and order with the TDEC providing for oversight and
possible modiÑcation by the TDEC of PCS Nitrogen's current remedial action, including authority for
requiring assessments of soils associated with PCS Nitrogen's wastewater treatment system. There can be no
assurance that the Memphis plant will not be listed in the future, but in the event that it is listed, PCS
Nitrogen expects that the compliance costs will not have a material adverse eÅect on the Company.
     In 1990, PCS Nitrogen implemented a voluntary program to assess groundwater quality at the Clinton
plant due to the presence of nitrates in the groundwater. PCS Nitrogen provided the results of its investigation
to the Iowa Department of Natural Resources (""IDNR''). Pursuant to negotiations with the IDNR, the
Company has conducted and will conduct further investigations and, if necessary, remediation. Further, the
Clinton plant site is immediately adjacent to the Chemplex Superfund site at which groundwater remediation
is currently being conducted. Certain volatile organic compounds associated with the Chemplex site have been
detected in small amounts in the groundwater at the Clinton plant. It is also possible that remediation
activities at the Chemplex site could result in increased levels of nitrates in groundwater at the Clinton plant.
Recently, IDNR oÇcials contacted PCS Nitrogen concerning elevated levels of nitrates in a receiving water
down gradient of the Clinton plant. PCS Nitrogen and such oÇcials are discussing further eÅorts to more
clearly identify potential sources at the Clinton plant and to stem nitrate level increases. Nonetheless, based on
currently available information, PCS Nitrogen expects that the cost of the further assessment and any
remediation of nitrates will not have a material adverse eÅect on the Company.
     The Lima plant discharges wastewater to the Ottawa River under a National Pollutant Discharge
Elimination System permit issued by the Ohio Environmental Protection Agency (""OEPA''). When the
permit was renewed in 1989, the OEPA initially proposed to impose substantial limitations on certain
substances present in the wastewater, based on concerns over the already impaired quality of the river water as
a result of industrial or municipal discharges. The OEPA later agreed in an administrative settlement to a Ñve-
year permit for the Lima plant with discharge conditions that were more acceptable to the Lima plant's prior




                                                      I-18
owner, BP Chemicals Inc. The permit expired in 1994, was administratively extended and renewed by the
OEPA in July 1996, for a shorter than customary term ending October 31, 1997. PCS Nitrogen has Ñled an
application for permit renewal and is entitled to operate under the current permit until such application is
processed and acted upon. While PCS Nitrogen does not expect that substantial additional discharge
restrictions will be imposed in conjunction with the next renewal, the OEPA may again seek to impose a
reduction in the permitted discharge levels. Such restrictions may require the installation of improved
treatment technology, the cost of which will depend on the limitations ultimately imposed.
     DSM, which conducts manufacturing operations immediately adjacent to the Augusta plant, is subject to
certain corrective action requirements under its Resource Conservation and Recovery Act (""RCRA'')
hazardous waste management permit. Pursuant to these requirements, the Georgia Department of Natural
Resources, Environmental Protection Division (""GEPD'') identiÑed a number of solid waste management
units on DSM's property, including several on property formerly leased from DSM by PCS Nitrogen, for
assessment and potential remediation. During 1996, PCS Nitrogen purchased the leased land and the GEPD
required PCS Nitrogen to enter into a corrective action consent order for the performance of the assessment
and remediation actions which would have been required of DSM with respect to the purchased land under its
RCRA permit. PCS Nitrogen has submitted a draft remediation investigation work plan to the GEPD
providing for the assessment of the solid waste management units identiÑed by the GEPD at the Augusta
plant. Because the draft work plan must be approved by the GEPD prior to implementation, PCS Nitrogen is
currently not able to accurately estimate the amount of costs that will be incurred. Based on currently
available information, however, PCS Nitrogen does not expect that such costs will have a material adverse
eÅect on the Company.
     The Parliament of Trinidad and Tobago is considering legislation providing for the increased regulation of
environmental matters. Due to the uncertain and emerging nature of this legislation and the regulations to be
issued thereunder, PCS Nitrogen is not currently able to accurately predict the impact that such legislation
and associated regulations may have on its operations in Trinidad. However, PCS Nitrogen does not currently
expect that such legislation or regulations will have a material adverse eÅect on the Company.

Permits
     A signiÑcant portion of the Company's phosphate reserves in Aurora, North Carolina is located in
wetlands and, under the U.S. federal Clean Water Act, a permit must be obtained from the U.S. Army Corps
of Engineers (the ""Corps'') before mining activity that will disturb the wetlands may occur. As part of the
permit process for PCS Phosphate, the Corps issued a draft Environmental Impact Statement in January 1994
in which Ñve alternative mine plans of PCS Phosphate were identiÑed and evaluated for their environmental
and other impacts. During May 1995, the Environmental Impact Statement was supplemented to add a sixth
alternative. All six alternatives would enable mining to continue for twenty years at a mining rate of 5.4 million
tonnes of phosphate rock per year. The cost of mining varies under each of the alternatives, given the
signiÑcance of the costs of transporting the phosphate ore from the mine to the plants and of transporting
gypsum and clay to reclamation areas. By letter dated November 21, 1996, PCS Phosphate requested that the
alternative which would disturb the least amount of wetlands be approved by the Corps and that a permit be
issued based on such alternative. In 1997, PCS Phosphate received its required authorizations from the State
of North Carolina and on August 14, 1997, the Corps issued a permit granting approval to mine certain areas
described in the Environmental Impact Statement through 2017. The permit contains a section on wetlands
mitigation approach and methods regarding wetland impacts associated with mining covered by the permit.
The Company has recently acquired additional land adjacent to its Aurora, North Carolina facilities for this
purpose. In order to demonstrate the feasibility of such activities, as of December 31, 1997, the Company had
created or restored 2,418 acres of wetlands.
     In addition to the wetlands permit from the Corps, the Company also needs additional authorizations
from agencies of the State of North Carolina to continue its mining activities in North Carolina. The
Company is required to have State mining permits that contain bonding and reclamation requirements. The
Company has a State mining permit for the areas presently being mined by the Company that is eÅective
through 2003, but this permit must be amended periodically to add additional acreage during this period. The

                                                      I-19
Company also holds another mining permit from the State for the area of the property that contains the
wetlands covered by the permit issued by the Corps. This State permit has been renewed until 2005.
     Gypsum is a byproduct of the production of phosphoric acid. Gypsum is normally placed in above-ground
storage areas called gypsum stacks. The gypsum stacks at the White Springs Facility will continue to be used
and when closed will be covered or capped to the extent required under applicable regulations. The Florida
Phosphogypsum Rule permits the use of existing gypsum stacks until they reach capacity, if groundwater
standards are met as of and after March 25, 2001. Although the Company's management believes that it will
be in compliance with such Rule and as such should be allowed to continue using its three gypsum stacks for
their useful lives of 40 to 50 years, it is not certain how long White Springs will be allowed to continue using its
gypsum stacks beyond the year 2001. A regulatory prohibition on use of existing stacks would result in a
closure/new stack construction cost in excess of $100 million.
     Lands mined by White Springs after July 1, 1975 and unmined lands used in the mining operations after
July 1, 1984 are subject to mandatory reclamation requirements of the State of Florida. Wetlands must be
reclaimed on an acre-for-acre basis under the rules of the State of Florida Department of Environmental
Protection (""FDEP'') unless otherwise provided in, or pursuant to, a Memorandum of Agreement, dated
February 1, 1995, between OxyChem and FDEP. The cost of reclamation of mandatory lands is borne solely
by White Springs. The current practice of White Springs is to return most upland areas to commercial pine
plantation, which is the predominant pre-operation land use. Reclaimed lands include uplands, wetlands
and lakes.
     In 1996, White Springs completed a series of federal, state, and local permitting actions eÅecting a major
change in the regulation of the mining operation and land reclamation. Pursuant to an agreement with FDEP,
White Springs will fund a land acquisition program for environmentally sensitive lands in the region near its
operations. This concept is referred to as ""oÅ-site mitigation''. Final approval of state plans to implement the
agreement was granted in 1996, as was a required modiÑcation of existing mining permits from Hamilton
County. White Springs made its Ñrst installment payment to the wetlands acquisition fund in April 1997. The
advisory team and the selection team were formed during 1997. White Springs is considering seeking a
modiÑcation to its existing permit to allow for the continuation of mining operations. In connection with such
proposed modiÑcation, White Springs oÇcials have met with aÅected regulatory, commenting and participat-
ing agencies, environmental organizations and other interested parties. Work on such modiÑcation is expected
to continue through 1998. FDEPs and Hamilton County's approvals are valid for the life of the operations, and
deÑne operating and reclamation standards for that term. Additional permit revisions incorporating this
change were secured from the Corps for federally-regulated wetlands mining. The revised Corps permit covers
operations through the year 2002. Further Corps permitting will be necessary to apply the oÅ-site mitigation
concept to remaining wetlands. Failure to achieve application of this concept to additional Corps wetlands
would result in higher reclamation costs if on-site wetlands were required. Failure to secure the required
permits under either on-site or oÅ-site mitigation would negatively aÅect reserves and costs.

Potash Decommissioning Regulations
     The environmental regulatory authorities in the Province of Saskatchewan have enacted regulations to
require decommissioning and reclamation plans and Ñnancial assurances with respect to decommissioning by
owners and operators of mines. Pursuant to the regulations, the Company Ñled a decommissioning plan for
each of the Company's Saskatchewan mines with the responsible Minister in the spring of 1997. These plans
contained a proposal for Ñnancial assurance to ensure completion of the plans and are subject to the approval
of the Minister. An approved Ñnancial assurance plan must be established by March 31, 1999, or one year
following approval of the decommissioning and reclamation plan, whichever is later. An initial response to the
proposed plans was received by the Company in February 1998 and discussions with the environmental
regulatory authorities are continuing. Because of the uncertainty surrounding the structure of the assurance
mechanism, the Company is unable to accurately estimate the Ñnancial implications to the Company.




                                                       I-20
Government Regulations
     In September 1987, legislation was adopted in Saskatchewan that authorized the government to control
production at potash mines located in the Province of Saskatchewan. The legislation, which has not taken
eÅect but which can be brought into eÅect by proclamation of the Cabinet of Saskatchewan, permits the
Cabinet, and the Potash Resources Board which would be created under such legislation, to prescribe rates of
potash production in Saskatchewan and to allocate production among individual mines. In determining rates
for individual mines, the Potash Resources Board would take into account a mine's productive capacity, the
rate of production from the mine, the present and future inventory and stockpile requirements for the mine,
the portion of demand for potash that has been fulÑlled by the primary production of potash from the mine
and any additional factors that may be prescribed by regulation. Increases in production capacity would be
subject to the approval of the government of Saskatchewan. The Company cannot predict at this time if or
when the legislation will be proclaimed or its eÅects on the results of the Company's operations.

Executive OÇcers of the Company
    The name, age, period of service and position held for each of the executive oÇcers of the Company as at
February 28, 1998 are as follows:
Name                                     Age    Served Since   Position Held

CHARLES E. CHILDERSÏÏÏÏÏÏÏ               65        1987        Chairman of the Board,
                                                               President and Chief Executive OÇcer
JOHN GUGULYN ÏÏÏÏÏÏÏÏÏÏÏÏÏ               62        1987        Senior Vice President, Administration
BARRY E. HUMPHREYSÏÏÏÏÏÏÏ                54        1976        Senior Vice President, Finance and Treasurer
JOHN L.M. HAMPTON ÏÏÏÏÏÏÏÏ               44        1988        Senior Vice President, General Counsel and
                                                               Secretary
WAYNE R. BROWNLEE ÏÏÏÏÏÏÏ                45        1988        Senior Vice President, Expansion and
                                                               Development
BETTY-ANN L. HEGGIE ÏÏÏÏÏÏÏ              44        1981        Senior Vice President, Corporate Relations
WILLIAM J. DOYLE ÏÏÏÏÏÏÏÏÏÏÏ             47        1987        President, PCS Sales
GARY E. CARLSON ÏÏÏÏÏÏÏÏÏÏÏ              44        1997        President, PCS Nitrogen
GARTH W. MOORE ÏÏÏÏÏÏÏÏÏÏÏ               49        1982        President, PCS Potash
PETER BRAUN ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ             58        1977        Vice President, Audit
DENIS A. SIROISÏÏÏÏÏÏÏÏÏÏÏÏÏÏ            42        1978        Vice President and Corporate Controller
THOMAS J. WRIGHT ÏÏÏÏÏÏÏÏÏÏ              65        1995        President, PCS Phosphate
    All of the oÇcers have had the principal occupation indicated for the previous Ñve years except as follows:
Mr. Doyle was President of Potash Corporation of Saskatchewan Sales Limited (""PCS Sales'') and located in
Chicago, Illinois prior to 1995 and was Executive Vice President, Potash and Sales, of the Company from
1995 until March 1997; Mr. Wright was President and Chief Operating OÇcer of Texasgulf from 1988 to
1993 and President and Chief Executive OÇcer from 1993 to April 1995. Prior to March 1997, Mr. Wright
was Executive Vice President, PCS Phosphate. On April 27, 1995, Mr. Hampton, Mr. Brownlee, and
Ms. Heggie were promoted from Vice President to Senior Vice President, and Mr. Braun was promoted from
Director, Internal Audit, to Vice President. Prior to March 1997, Mr. Moore was Senior Vice President,
Technical Services of the Company and prior to April 1995, he was Vice President, Technical Services.
Mr. Carlson was Vice President of American Cyanimid, International Agricultural Products Group from 1993
to June 1996 and was Senior Vice President, Marketing of Arcadian from June 1996 to March 1997.
Mr. Sirois was Controller of the Company prior to 1997.

ITEM 3.    Legal Proceedings.
Agreement Suspending Potash Dumping Investigation
    In March 1987, the U.S. International Trade Commission made a preliminary determination that there
was a reasonable indication that the U.S. potash producers had been injured by imports of Canadian potash,

                                                     I-21
assuming that Canadian potash had been ""dumped'' into the U.S. market at less than ""fair value''. On
August 26, 1987, the U.S. Department of Commerce (""Commerce'') determined on a preliminary basis that
Canadian potash was, or was likely to be, sold in the United States at less than ""fair value''.

     On January 8, 1988, Commerce signed a suspension agreement with all of the potash producers in
Canada, suspending the dumping investigation by Commerce. The agreement stipulates that each producer's
minimum price for potash sold in the United States is to be based upon a formula determined by Commerce
for each producer that is designed to limit any dumping by that producer in the future. Compliance with the
agreement is monitored by Commerce. The agreement can be terminated without termination of the
suspended investigation if Commerce determines that sales are made below the price determined under the
formula, producers having 15% or more of the total Canadian volume or value exported into the United States
withdraw from the agreement, or the conditions of the agreement are otherwise not being met, in which case
the suspended investigation could be resumed by Commerce.

Civil Antitrust Complaints

     In June, 1993, PCS and PCS Sales (Canada) Inc. (""PCS Sales (Canada)'') were served with a
complaint relating to a suit Ñled in the United States District Court for Minnesota against most North
American potash producers, including the Company. The complaint alleged a conspiracy among the
defendants to Ñx the price of potash purchased by the plaintiÅs as well as potash purchased by the members of
a class of certain purchasers proposed by the plaintiÅs. Similar complaints were Ñled in the United States
District Courts for the Northern District of Illinois and the Western District of Virginia. On motion of the
defendants, all of the complaints were transferred and consolidated for pre-trial purposes in the United States
District Court for Minnesota. Amended complaints were Ñled in March and April 1994. On January 12, 1995,
the Minnesota Federal Court granted the plaintiÅs' motion for class certiÑcation. The complaint sought treble
damages in an unspeciÑed amount and other relief. PCS and PCS Sales Ñled a motion for summary judgment
on December 22, 1995. On January 2, 1997, Judge Richard H. Kyle issued an order granting the defendants'
motions for summary judgment and dismissing the lawsuit. The plaintiÅs appealed that order to the United
States Court of Appeals for the Eighth Circuit, on January 31, 1997. Oral arguments were heard on
November 17, 1997.

     Additional complaints were Ñled in the California and Illinois State Courts on behalf of purported classes
of indirect purchasers of potash in those states. PCS moved to dismiss the California State Court lawsuit for
lack of personal jurisdiction and the court ruled that it does not have personal jurisdiction over PCS but that it
does have personal jurisdiction over PCS Sales. The case remains at an early stage; no merits discovery has
taken place. The parties have agreed to stay proceedings pending the outcome of the appeal to the United
States Court of Appeals for the Eighth Circuit. The Illinois State Court dismissed the Illinois State Court
complaint for failure to state a cause of action. The Illinois plaintiÅ appealed that dismissal and that dismissal
was aÇrmed by the Appellate Court of Illinois on November 27, 1996. On January 15, 1997 the appellate
court denied the plaintiÅ's request for rehearing. On February 17, 1997, the plaintiÅ petitioned the Supreme
Court of Illinois to review the Appellate Court's decision. The Illinois Supreme Court denied that petition on
April 2, 1997.

Lake Charles Plant

      In connection with a 1992 incident at PCS Nitrogen's Lake Charles plant, PCS Nitrogen's liability
insurers, in September 1996, negotiated preliminary settlements of substantially all of the civil litigation
arising from the incident. The settlements, which in the aggregate are within the policy limits of PCS
Nitrogen's liability insurance, have been Ñnalized and approved by the court as to fairness. There remain three
lawsuits on appeal to the United States Court of Appeals for the Fifth Circuit from the United States District
Court for the Western District of Louisiana against PCS Nitrogen arising from the incident, which lawsuits
were brought in July 1993 by former employees at the Lake Charles plant who allege that they were
wrongfully terminated following the incident. Management and legal counsel believe that these lawsuits are
without merit, and that there will be no material adverse eÅect on the Company upon their resolution.

                                                      I-22
Former Arcadian Executive Proceedings
     On May 7, 1997, J. Douglas Campbell, Alfred L. Williams, Peter H. Kesser, and David Alyea, former
oÇcers of Arcadian, Ñled lawsuits against PCS in the United States District Court for the Western District of
Tennessee. The complaints allege that PCS breached employment agreements between Arcadian and the
oÇcers and breached the related assumption agreement among PCS, PCS Nitrogen, and Arcadian. In
addition, Mr. Alyea's complaint names Charles Childers, John Gugulyn, and John Hampton as additional
defendants and alleges that the defendants interfered with and conspired to interfere with his employment
agreement, and did not accurately state their intentions in entering into the assumption agreement. The
complaints of Mr. Campbell, Mr. Williams, Mr. Kesser, and Mr. Alyea seek damages in excess of $22.2
million, $6.2 million, $3.7 million, and $4.2 million, respectively. In addition, on October 14, 1997, Charles
Lance, a former oÇcer of Arcadian Corporation, Ñled a lawsuit in the same court against PCS also alleging
breaches of his employment agreement and the related assumption agreement. Mr. Lance seeks damages in
an amount exceeding $3.0 million. Each complaint also seeks certain additional unspeciÑed damages. Trial
with respect to the original four plaintiÅs' claims has been set for August 17, 1998. Management of the
Company, having consulted with legal counsel, believes that the lawsuits will not have a material adverse
eÅect on the Company.
     On September 15, 1997, PCS and PCS Nitrogen Ñled an action in the Circuit Court of Tennessee for
Thirtieth Judicial District at Memphis against J. Douglas Campbell, Peter H. Kesser, Alfred F. Williams,
Charles W. Lance, Jr., and David L. Alyea, for declaratory relief and damages. PCS and PCS Nitrogen allege
that the defendants, all former executives of Arcadian,committed breaches of their Ñduciary duties in the
negotiation of, obtaining approval for, and execution of the Employment Agreements each of them had with
Arcadian. In addition, PCS has sought a declaratory judgment with respect to the unenforceability of the
Employment Agreements. On October 14, 1997, the defendants removed this action from the Circuit Court of
Tennessee to the United States District Court for the Western District of Tennessee. On October 21, 1997,
the Ñve defendants Ñled counterclaims: (i) under the Employee Retirement Income Security Act of 1974, as
amended, against PCS Nitrogen, (ii) alleging that PCS and PCS Nitrogen unlawfully interfered with their
attainment of beneÑts under their Employment Agreements, and (iii) incorporating by reference all claims
asserted in their individually Ñled complaints. The damages sought by the defendants in these counterclaims
appear substantially equivalent to the damages sought in their individually Ñled suits as plaintiÅs.

Port Authority Proceedings
      On March 13, 1996, PCS Nitrogen, two other nitrogen producers, and up to 30 unidentiÑed parties were
named as defendants in a lawsuit Ñled in the name of the Port Authority of New York and New Jersey (the
""Port Authority'') in New Jersey state court. The lawsuit was actually Ñled by attorneys hired by the Port
Authority's subrogated insurance carriers. The Port Authority's insurers are seeking to recover damages
allegedly incurred as a result of the explosion at the World Trade Center in New York City on February 26,
1993. The Port Authority's insurers allege in their complaint that the two other named defendants and one or
more unidentiÑed parties (as manufacturers of ammonium nitrate), PCS Nitrogen and one or more
unidentiÑed parties (as producers of urea), and one or more unidentiÑed makers of nitric acid are liable under
various tort theories for unspeciÑed property damages, business interruption losses, lost rent and other
damages allegedly incurred by the Port Authority as a result of the World Trade Center explosion. The lawsuit
was removed to federal court in New Jersey. On February 7, 1997, the defendants Ñled a motion to dismiss the
suit for failure to state a claim upon which relief could be granted. On December 19, 1997, that motion was
granted and the complaint was dismissed with prejudice. On January 15, 1998, the Port Authority appealed
the dismissal to the United States Court of Appeals for the Third Circuit. Although neither the Port Authority
nor its subrogated insurers have alleged or otherwise revealed the amount of damages sought from PCS
Nitrogen in the lawsuit, the Port Authority stated in an aÇdavit submitted to the court in support of its motion
to disqualify its insurers' counsel that as of April 9, 1996, the Port Authority had submitted to its insurers
claims relating to the explosion totaling approximately $340 million, of which the insurers had paid
approximately $160 million. PCS Nitrogen is unaware of any basis for liability and intends to continue to
vigorously defend the lawsuit.

                                                     I-23
DOJ Investigations
     In 1993, PCS Nitrogen learned that the Antitrust Division of the Department of Justice (the ""DOJ'')
had initiated a grand-jury investigation of pricing practices in the explosives industry. In response to a
subpoena issued in that investigation, PCS Nitrogen produced to the DOJ in 1994 and 1995 documents
concerning ammonium nitrate sold to explosives manufacturers. In late 1996 and early 1997, PCS Nitrogen
learned that the DOJ had begun contacting current and former PCS Nitrogen employees seeking information
concerning PCS Nitrogen's pricing of ammonium nitrate in 1992. PCS Nitrogen is cooperating fully with the
DOJ investigation and has been informed by the DOJ that, based on currently available information, neither
PCS Nitrogen nor any of its current or former directors, oÇcers or employees is a target of the investigation.
PCS Nitrogen believes that neither it nor its employees have violated the antitrust laws and that the DOJ's
investigations are unlikely to result in a material adverse eÅect on the Company.

ITEM 4.    Submission of Matters to a Vote of Security Holders.
    Not Applicable.




                                                    I-24
                                                 PART II

ITEM 5.     Market for Registrant's Common Equity and Related Stockholder Matters.
     The information under ""Common Share Prices and Volumes'' in the registrant's 1997 Annual Report is
incorporated herein by reference.

ITEM 6.     Selected Financial Data.
     The information under ""Selected Ten-Year Data'' in the registrant's 1997 Annual Report is incorporated
herein by reference.

ITEM 7.     Management's Discussion and Analysis of Financial Condition and Results of Operations.
    The information under ""Management's Discussion and Analysis of Financial Condition and Results of
Operations'' in the registrant's 1997 Annual Report is incorporated herein by reference.

ITEM 8.     Financial Statements and Supplementary Data.
     The Consolidated Financial Statements and notes thereto in the registrant's 1997 Annual Report are
incorporated herein by reference.

ITEM 9.     Changes In and Disagreements With Accountants on Accounting and Financial Disclosure.
    None.




                                                    II-1
                                                 PART III

ITEM 10.    Directors and Executive OÇcers of the Registrant.
     The information under ""Election of Directors'' in the Proxy Circular for the Annual and Special Meeting
of Shareholders in 1998 is incorporated herein by reference. Information concerning executive oÇcers is set
forth under ""Executive OÇcers of the Company'' in Part I.

ITEM 11.    Executive Compensation.
   The information under ""Executive Compensation'' in the Proxy Circular for the Annual and Special
Meeting of Shareholders in 1998 is incorporated herein by reference.

ITEM 12.    Security Ownership of Certain BeneÑcial Owners and Management.
     The information under ""Ownership of Shares by Directors and Executive OÇcers'' and ""Election of
Directors'' in the Proxy Circular for the Annual and Special Meeting of Shareholders in 1998 is incorporated
herein by reference.

ITEM 13.    Certain Relationships and Related Transactions.
    The information under ""Election of Directors'' and ""Executive Compensation'' in the Proxy Circular for
the Annual Meeting of Shareholders in 1998 is incorporated herein by reference.




                                                   III-1
                                                 PART IV

ITEM 14.      Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) List of Documents Filed as Part of this Report
1. Financial Statements in Annual Report
Auditors' Report ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ                    44
Consolidated Statements of Financial Position ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ                45
Consolidated Statements of Income and Retained EarningsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ                  46
Consolidated Statements of Cash Flow ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ                   47
Notes to the Consolidated Financial Statements ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ              48-61

2. Schedules

    All Schedules are omitted because the required information is inapplicable or it is presented in the
Consolidated Financial Statements or the notes thereto.

3. Exhibits
Exhibit
Number                                           Description of Document

2(a)      Agreement and Plan of Merger dated September 2, 1996, as amended, by and among the registrant,
          Arcadian Corporation and PCS Nitrogen, Inc., incorporated by reference to Exhibit 2(a) to
          Amendment Number 2 to the registrant's Form S-4 (File No. 333-17841).
3(i)      Restated Articles of Incorporation of the registrant dated October 31, 1989, as amended May 11,
          1995, incorporated by reference to Exhibit 3(i) to the registrant's report on Form 10-K for the year
          ended December 31, 1995 (the ""1995 Form 10-K'').
3(ii)     Bylaws of the registrant dated March 2, 1995, incorporated by reference to Exhibit 3(ii) to the 1995
          Form 10-K.
4(a)      Term Credit Agreement between The Bank of Nova Scotia and other Ñnancial institutions and the
          registrant dated October 4, 1996, incorporated by reference to Exhibit 4(b) to the registrant's
          Form S-4 (File No. 333-17841).
4(b)      First Amending Agreement between The Bank of Nova Scotia and other Ñnancial institutions and
          the registrant dated November 6, 1997.
4(c)      Second Amending Agreement between the Bank of Nova Scotia and other Ñnancial institutions and
          the registrant dated December 15, 1997.
4(d)      Indenture dated as of June 16, 1997, between the registrant and The Bank of Nova Scotia Trust
          Company of New York, incorporated by reference to Exhibit 4(a) the registrant's report on
          Form 8-K dated June 18, 1997.
The registrant hereby undertakes to Ñle with the Securities and Exchange Commission, upon request, copies
of any constituent instruments deÑning the rights of holders of long-term debt of the registrant or its
subsidiaries that have not been Ñled herewith because the amounts represented thereby are less than 10% of
the total assets of the registrant and its subsidiaries on a consolidated basis.
10(a)     Suspension Agreement concerning Potassium Chloride from Canada dated January 7, 1988, among
          U.S. Department of Commerce, the registrant, International Minerals and Chemical (Canada)
          Limited, Noranda, Inc. (Central Canada Potash Co.), Potash Company of America, a Division of
          Rio Algom Limited, S & P Canada, II (Kalium Chemicals), Cominco Ltd., Potash Company of
          Canada Limited, Agent for Denison-Potacan Potash Co. and Saskterra Fertilizers Ltd., incorporated
          by reference to Exhibit 10(a) to the registrant's registration statement on Form F-1 (File
          No. 33-31303) (the ""F-1 Registration Statement'').

                                                    IV-1
Exhibit
Number                                           Description of Document

10(b)     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., incorporated by reference to Exhibit 10(f) to the F-1 Registration
          Statement.
10(c)     Canpotex Limited Shareholders Seventh Memorandum of Agreement eÅective 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, incorporated by
          reference to Exhibit 10(g) to the F-1 Registration Statement.
10(d)     Producer Agreement dated April 21, 1978, between Canpotex Limited and PCS Sales, incorporated
          by reference to Exhibit 10(h) to the F-1 Registration Statement.
10(e)     Agreement of Limited Partnership of Arcadian Fertilizer, L.P. dated as of March 3, 1992 (form),
          and the related CertiÑcate of Limited Partnership of Arcadian Fertilizer, L.P., Ñled with the
          Secretary of State of the State of Delaware on March 3, 1992 (incorporated by reference to
          Exhibits 3.1 and 3.2 to Arcadian Partners L.P.'s Registration Statement on Form S-1 (File
          No. 33-45828)).
10(f)     Geismar Complex Services Agreement dated June 4, 1984, between Allied Corporation and
          Arcadian Corporation, incorporated by reference to Exhibit 10.4 to Arcadian Corporation's
          Registration Statement on Form S-1 (File No. 33-34357).
10(g)     Canpotex/PCS Amending Agreement, dated with eÅect October 1, 1992, incorporated by reference
          to Exhibit 10(f) to the 1995 Form 10-K.
10(h)     Canpotex PCA Collateral Withdrawing/PCS Amending Agreement, dated with eÅect October 7,
          1993, incorporated by reference to Exhibit 10(g) to the 1995 Form 10-K.
10(i)     Esterhazy Restated Mining and Processing Agreement dated January 31, 1978, between
          International Minerals and Chemical Corporation (Canada) Limited and the registrant's
          predecessor, incorporated by reference to Exhibit 10(e) to the F-1 Registration Statement.
10(j)     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, incorporated by reference to Exhibit 10(p) to the registrant's
          report on Form 10-K for the year ended December 31, 1990.
10(k)     Operating Agreement dated May 11, 1993, between BP Chemicals Inc. and Arcadian Ohio, L.P., as
          amended by the First Amendment to the Operating Agreement dated as of November 20, 1995,
          between BP Chemicals Inc. and Arcadian Ohio, L.P. (""First Amendment''), incorporated by
          reference to Exhibit 10.2 to Arcadian Partners L.P.'s current report on Form 8-K for the report event
          dated May 11, 1993, except for the First Amendment which is incorporated by reference to
          Arcadian Corporation's report on Form 10-K for the year ended December 31, 1995 and the Second
          Amendment, dated as of November 25, 1996, Ñled as Exhibit 10(k) to this Form 10-K.
10(l)     Manufacturing Support Agreement dated May 11, 1993, between BP Chemicals Inc. and Arcadian
          Ohio, L.P., incorporated by reference to Exhibit 10.3 to Arcadian Partners L.P.'s current report on
          Form 8-K for the report event dated May 11, 1993, except for the First Amendment dated as of
          November 25, 1996, Ñled as Exhibit 10(l) to this Form 10-K.
10(m)     Amended and Restated Agreement for Lease dated as of May 16, 1997, between Trinidad Ammonia
          Company, Limited Partnership, and PCS Nitrogen Fertilizer, L.P., incorporated by reference to
          Exhibit 10(n) to the registrant's report on Form 10-Q for the quarterly period ended June 30, 1997
          (the ""Second Quarter 1997 Form 10-Q'').
10(n)     Amended and Restated Lease Agreement dated as of May 16, 1997, between Trinidad Ammonia
          Company, Limited Partnership, and PCS Nitrogen Fertilizer, L.P., incorporated by reference to
          Exhibit 10(o) to the Second Quarter 1997 Form 10-Q.

                                                     IV-2
Exhibit
Number                                         Description of Document

10(o)  Amended and Restated Agreement for Lease dated as of May 16, 1997, between Nitrogen Leasing
       Company, Limited Partnership, and PCS Nitrogen Fertilizer, L.P., incorporated by reference to
       Exhibit 10(p) to the Second Quarter 1997 Form 10-Q.
10(p)  Amended and Restated Lease Agreement dated as of May 16, 1997, between Nitrogen Leasing
       Company, Limited Partnership, and PCS Nitrogen Fertilizer, L.P., incorporated by reference to
       Exhibit 10(q) to the Second Quarter 1997 Form 10-Q.
10(q)  Amended and Restated Purchase Option Agreement dated as of May 16, 1997, between Nitrogen
       Leasing Company, Limited Partnership, and PCS Nitrogen Fertilizer Operations, Inc., incorporated
       by reference to Exhibit 10(r) to the Second Quarter 1997 Form 10-Q.
10(r)  Amended and Restated Purchase Option Agreement dated as of May 16, 1997, between Trinidad
       Ammonia Company, Limited Partnership and PCS Nitrogen Fertilizer Operations, Inc.,
       incorporated by reference to Exhibit 10(s) to the Second Quarter 1997 Form 10-Q.
10(s)  Agreement dated January 1, 1997 between the registrant and Charles E. Childers.
10(t)  Potash Corporation of Saskatchewan Inc. Stock Option Plan Ì UnaÇliated Directors, incorporated
       by reference to Exhibit 4(a) to the registrant's Post-eÅective Amendment No. 1 to Form S-8 (File
       No. 333-19215) (the ""Form S-8'').
10(u)  Potash Corporation of Saskatchewan Inc. Stock Option Plan Ì OÇcers and Key Employees,
       incorporated by reference to Exhibit 4(b) to the Form S-8.
10(v)  Short-Term Incentive Plan of the registrant, as amended May 7, 1997, incorporated by reference to
       Exhibit 10(w) to the Second Quarter 1997 Form 10-Q.
10(w) Long-Term Incentive Plan of the registrant, as amended May 7, 1997, incorporated by reference to
       Exhibit 10(x) to the Second Quarter 1997 Form 10-Q.
10(x)  Resolution and Forms of Agreement for Supplemental Retirement Income Plan, for oÇcers and key
       employees of the registrant, incorporated by reference to Exhibit 10(o) to the 1995 Form 10-K.
10(y)  Forms of Agreement dated December 30, 1994, between the registrant and certain oÇcers of the
       registrant, concerning a change in control of the registrant, incorporated by reference to
       Exhibit 10(p) to the 1995 Form 10-K.
10(z)  Form of Agreement of IndemniÑcation dated August 8, 1995, between the registrant and certain
       oÇcers and directors of the registrant, incorporated by reference to Exhibit 10(q) to the 1995
       Form 10-K.
10(aa) Employment Agreement between Arcadian Corporation and Gary E. Carlson, dated as of
       September 5, 1996, incorporated by reference to Exhibit 10(cc) to the registrant's report on
       Form 10-Q for the period ended March 31, 1997.
10(bb) Deferred Compensation Plan, for certain oÇcers of PCS Phosphate Company, Inc., incorporated by
       reference to Exhibit 10(r) to the 1995 Form 10-K.
10(cc) Supplemental Retirement BeneÑts Plan, for eligible employees of PCS Phosphate Company, Inc.,
       incorporated by reference to Exhibit 10(s) to the 1995 Form 10-K.
10(dd) Second Amended and Restated Membership Agreement dated January 1, 1995, among Phosphate
       Chemicals Export Association, Inc. and members of such association, including Texasgulf Inc.,
       incorporated by reference to Exhibit 10(t) to the 1995 Form 10-K.
10(ee) International Agency Agreement dated January 1, 1995, between Phosphate Chemicals Export
       Association, Inc. and Texasgulf Inc. establishing Texasgulf Inc. as exclusive marketing agent for
       such association's wet phosphatic materials, incorporated by reference to Exhibit 10(u) to the 1995
       Form 10-K.




                                                  IV-3
Exhibit
Number                                          Description of Document

10(Å)  General Partnership Agreement forming Albright & Wilson Company, dated July 29, 1988 and
       amended January 31, 1995, between Texasgulf Inc. and Albright & Wilson Americas, Inc.,
       incorporated by reference to Exhibit 10(v) to the 1995 Form 10-K.
10(gg) Royalty Agreement dated October 7, 1993, by and between the registrant and Rio Algom Limited,
       incorporated by reference to Exhibit 10(x) to the 1995 Form 10-K.
10(hh) Amending Resolution and revised forms of agreement regarding Supplemental Retirement Income
       Plan of the registrant, incorporated by reference to Exhibit 10(x) to the registrant's report on
       Form 10-Q for the quarterly period ended June 30, 1996.
10(ii) Employment Agreement dated January 21, 1998, by and between PCS Phosphate Company, Inc.
       and Thomas J. Wright.
10(jj) Shareholder Rights Agreement as amended and restated on March 2, 1998, incorporated by
       reference to Schedule B to the registrant's proxy circular for the annual and special meeting of
       shareholders to be held on May 7, 1998.
11     Statement re Computation of Per Share Earnings.
13     1997 Annual Report.
21     Subsidiaries of the Registrant.
23     Consent of Deloitte & Touche.
27     Financial Data Schedule.

(b) No reports on Form 8-K were Ñled by the registrant during the last quarter of 1997.
Cautionary Statement
    This report contains forward looking statements. A number of factors could cause actual results to diÅer
materially from those in the forward looking statements, including, but not limited to, Öuctuation in supply
and demand in fertilizer markets, Öuctuation in supply and demand in sulfur and petrochemical markets,
changes in capital markets, changes in currency exchange rates, unexpected geological or environmental
conditions, imprecision in reserve estimates and changes in governmental policy.




                                                   IV-4
                                               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/ CHARLES E. CHILDERS
                                                    Charles E. Childers
                                                    Chief Executive OÇcer
                                                    March 27, 1998




     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/      CHARLES E. CILDERS                    Chairman of the Board, President and            March 27, 1998
          Charles E. Childers                  Chief Executive OÇcer


/s/     BARRY E. HUMPHREYS                     Sr. Vice President, Finance and                 March 27, 1998
         Barry E. Humphreys                    Treasurer (Principal Financial and
                                               Accounting OÇcer)


/s/     ISABEL B. ANDERSON                     Director                                        March 27, 1998
          Isabel B. Anderson


/s/      DOUGLAS J. BOURNE                     Director                                        March 27, 1998
          Douglas J. Bourne


/s/         DENIS J. COTE π                    Director                                        March 27, 1998
                        e
            Denis J. Cotπ


/s/       WILLIAM J. DOYLE                     Director                                        March 27, 1998
           William J. Doyle


/s/HON. WILLARD Z. ESTEY, Q.C.                 Director                                        March 27, 1998
    Hon. Willard Z. Estey, Q.C.


/s/        DALLAS J. HOWE                      Director                                        March 27, 1998
            Dallas J. Howe
                 Signature                                             Title                                Date



/s/       JAMES F. LARDNER                         Director                                           March 27, 1998
           James F. Lardner


/s/      DONALD E. PHILLIPS                        Director                                           March 27, 1998
          Donald E. Phillips


/s/       PAUL SCHOENHALS                          Director                                           March 27, 1998
           Paul Schoenhals


/s/       DARYL K. SEAMAN                          Director                                           March 27, 1998
           Daryl K. Seaman


/s/ E. ROBERT STROMBERG, Q.C.                      Director                                           March 27, 1998
     E. Robert Stromberg, Q.C.


/s/          JACK G. VICQ                          Director                                           March 27, 1998
              Jack G. Vicq


/s/      BARRIE A. WIGMORE                         Director                                           March 27, 1998
          Barrie A. Wigmore


/s/          PAUL S. WISE                          Director                                           March 27, 1998
              Paul S. Wise




Copies of Exhibits to the Form 10-K may be obtained upon request from the Corporate Secretary, Potash Corporation of
Saskatchewan Inc., Suite 500, 122 First Avenue South, Saskatoon, Saskatchewan S7K 7G3. The Company reserves the
right to recover its reasonable expenses in providing copies of the Exhibits, such expenses not to exceed $.25 per page.
                                 EXHIBIT INDEX
<Table>
<Caption>
EXHIBIT NO.                     DESCRIPTION OF DOCUMENT
-----------                     -----------------------
<S>           <C>
2(a)          Agreement and Plan of Merger dated September 2, 1996, as amended,
              by and among the registrant, Arcadian Corporation and PCS
              Nitrogen, Inc., incorporated by reference to Exhibit 2(a) to
              Amendment Number 2 to the registrant’s Form S-4 (File No.
              333-17841).
3(i)          Restated Articles of Incorporation of the registrant dated
              October 31, 1989, as amended May 11, 1995, incorporated by
              reference to Exhibit 3(i) to the registrant’s report on Form
              10-K for the year ended December 31, 1995 (the "1995 Form
              10-K").
3(ii)         Bylaws of the registrant dated March 2, 1995, incorporated
              by reference to Exhibit 3(ii) to the 1995 Form 10-K.
4(a)          Term Credit Agreement between The Bank of Nova Scotia and
              other financial institutions and the registrant dated
              October 4, 1996, incorporated by reference to Exhibit 4(b)
              to the registrant’s Form S-4 (File No. 333-17841).
4(b)          First Amending Agreement between The Bank of Nova Scotia and
              other financial institutions and the registrant dated
              November 6, 1997.
4(c)          Second Amending Agreement between The Bank of Nova Scotia
              and other financial institutions and the registrant dated
              December 15, 1997.
4(d)          Indenture dated as of June 16, 1997, between the registrant
              and The Bank of Nova Scotia Trust Company of New York,
              incorporated by reference to Exhibit 4(a) the registrant’s
              report on Form 8-K dated June 18, 1997.
10(a)         Suspension Agreement concerning Potassium Chloride from
              Canada dated January 7, 1988, among U.S. Department of
              Commerce, the registrant, International Minerals and
              Chemical (Canada) Limited, Noranda, Inc. (Central Canada
              Potash Co.), Potash Company of America, a Division of Rio
              Algom Limited, S & P Canada, II (Kalium Chemicals), Cominco
              Ltd., Potash Company of Canada Limited, Agent for
              Denison-Potacan Potash Co. and Saskterra Fertilizers Ltd.,
              incorporated by reference to Exhibit 10(a) to the
              registrant’s registration statement on Form F-1 (File No.
              33-31303) (the "F-1 Registration Statement").
10(b)         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., incorporated by
              reference to Exhibit 10(f) to the F-1 Registration
              Statement.
10(c)         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, incorporated by reference to Exhibit 10(g) to the
              F-1 Registration Statement.
10(d)         Producer Agreement dated April 21, 1978, between Canpotex
              Limited and PCS Sales, incorporated by reference to Exhibit
              10(h) to the F-1 Registration Statement.
10(e)         Agreement of Limited Partnership of Arcadian Fertilizer,
              L.P. dated as of March 3, 1992 (form), and the related
              Certificate of Limited Partnership of Arcadian Fertilizer,
              L.P., filed with the Secretary of State of the State of
              Delaware on March 3, 1992 (incorporated by reference to
              Exhibits 3.1 and 3.2 to Arcadian Partners L.P.’s
              Registration Statement on Form S-1 (File No. 33-45828)).
10(f)         Geismar Complex Services Agreement dated June 4, 1984,
              between Allied Corporation and Arcadian Corporation,
           incorporated by reference to Exhibit 10.4 to Arcadian
           Corporation’s Registration Statement on Form S-1 (File No.
           33-34357).
10(g)      Canpotex/PCS Amending Agreement, dated with effect October
           1, 1992, incorporated by reference to Exhibit 10(f) to the
           1995 Form 10-K.
</Table>
<Table>
<Caption>
EXHIBIT NO.                     DESCRIPTION OF DOCUMENT
-----------                     -----------------------
<S>           <C>
10(h)         Canpotex PCA Collateral Withdrawing/PCS Amending Agreement,
              dated with effect October 7, 1993, incorporated by reference
              to Exhibit 10(g) to the 1995 Form 10-K.
10(i)         Esterhazy Restated Mining and Processing Agreement dated
              January 31, 1978, between International Minerals and
              Chemical Corporation (Canada) Limited and the registrant’s
              predecessor, incorporated by reference to Exhibit 10(e) to
              the F-1 Registration Statement.
10(j)         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, incorporated by
              reference to Exhibit 10(p) to the registrant’s report on
              Form 10-K for the year ended December 31, 1990.
10(k)         Operating Agreement dated May 11, 1993, between BP Chemicals
              Inc. and Arcadian Ohio, L.P., as amended by the First
              Amendment to the Operating Agreement dated as of November
              20, 1995, between BP Chemicals Inc. and Arcadian Ohio, L.P.
              ("First Amendment"), incorporated by reference to Exhibit
              10.2 to Arcadian Partners L.P.’s current report on Form 8-K
              for the report event dated May 11, 1993, except for the
              First Amendment which is incorporated by reference to
              Arcadian Corporation’s report on Form 10-K for the year
              ended December 31, 1995 and the Second Amendment, dated as
              of November 25, 1996, filed as Exhibit 10(k) to this Form
              10-K.
10(l)         Manufacturing Support Agreement dated May 11, 1993, between
              BP Chemicals Inc. and Arcadian Ohio, L.P., incorporated by
              reference to Exhibit 10.3 to Arcadian Partners L.P.’s
              current report on Form 8-K for the report event dated May
              11, 1993, except for the First Amendment, dated as of
              November 25, 1996, filed as Exhibit 10(l) to this Form 10-K.
10(m)         Amended and Restated Agreement for Lease dated as of May 16,
              1997, between Trinidad Ammonia Company, Limited Partnership,
              and PCS Nitrogen Fertilizer, L.P., incorporated by reference
              to Exhibit 10(n) to the registrant’s report on Form 10-Q for
              the quarterly period ended June 30, 1997 (the "Second
              Quarter 1997 Form 10-Q").
10(n)         Amended and Restated Lease Agreement dated as of May 16,
              1997, between Trinidad Ammonia Company, Limited Partnership,
              and PCS Nitrogen Fertilizer, L.P., incorporated by reference
              to Exhibit 10(o) to the Second Quarter 1997 Form 10-Q.
10(o)         Amended and Restated Agreement for Lease dated as of May 16,
              1997, between Nitrogen Leasing Company, Limited Partnership,
              and PCS Nitrogen Fertilizer, L.P., incorporated by reference
              to Exhibit 10(p) to the Second Quarter 1997 Form 10-Q.
10(p)         Amended and Restated Lease Agreement dated as of May 16,
              1997, between Nitrogen Leasing Company, Limited Partnership,
              and PCS Nitrogen Fertilizer, L.P., incorporated by reference
              to Exhibit 10(q) to the Second Quarter 1997 Form 10-Q.
10(q)         Amended and Restated Purchase Option Agreement dated as of
              May 16, 1997, between Nitrogen Leasing Company, Limited
              Partnership, and PCS Nitrogen Fertilizer Operations, Inc.,
              incorporated by reference to Exhibit 10(r) to the Second
              Quarter 1997 Form 10-Q.
10(r)         Amended and Restated Purchase Option Agreement dated as of
              May 16, 1997, between Trinidad Ammonia Company, Limited
              Partnership and PCS Nitrogen Fertilizer Operations, Inc.,
              incorporated by reference to Exhibit 10(s) to the Second
              Quarter 1997 Form 10-Q.
10(s)         Agreement dated January 1, 1997 between the registrant and
              Charles E. Childers.
10(t)         Potash Corporation of Saskatchewan Inc. Stock Option
              Plan -- Unaffiliated Directors, incorporated by reference to
              Exhibit 4(a) to the registrant’s Post-effective Amendment
              No. 1 to Form S-8 (File No. 333-19215) (the "Form S-8").
10(u)      Potash Corporation of Saskatchewan Inc. Stock Option
           Plan -- Officers and Key Employees, incorporated by
           reference to Exhibit 4(b) to the Form S-8.
</Table>
<Table>
<Caption>
EXHIBIT NO.                     DESCRIPTION OF DOCUMENT
-----------                     -----------------------
<S>           <C>
10(v)         Short-Term Incentive Plan of the registrant, as amended May
              7, 1997, incorporated by reference to Exhibit 10(w) to the
              Second Quarter 1997 Form 10-Q.
10(w)         Long-Term Incentive Plan of the registrant, as amended May
              7, 1997, incorporated by reference to Exhibit 10(x) to the
              Second Quarter 1997 Form 10-Q.
10(x)         Resolution and Forms of Agreement for Supplemental
              Retirement Income Plan, for officers and key employees of
              the registrant, incorporated by reference to Exhibit 10(o)
              to the 1995 Form 10-K.
10(y)         Forms of Agreement dated December 30, 1994, between the
              registrant and certain officers of the registrant,
              concerning a change in control of the registrant,
              incorporated by reference to Exhibit 10(p) to the 1995 Form
              10-K.
10(z)         Form of Agreement of Indemnification dated August 8, 1995,
              between the registrant and certain officers and directors of
              the registrant, incorporated by reference to Exhibit 10(q)
              to the 1995 Form 10-K.
10(aa)        Employment Agreement between Arcadian Corporation and Gary
              E. Carlson, dated as of September 5, 1996, incorporated by
              reference to Exhibit 10(cc) to the registrant’s report on
              Form 10-Q for the period ended March 31, 1997.
10(bb)        Deferred Compensation Plan, for certain officers of PCS
              Phosphate Company, Inc., incorporated by reference to
              Exhibit 10(r) to the 1995 Form 10-K.
10(cc)        Supplemental Retirement Benefits Plan, for eligible
              employees of PCS Phosphate Company, Inc., incorporated by
              reference to Exhibit 10(s) to the 1995 Form 10-K.
10(dd)        Second Amended and Restated Membership Agreement dated
              January 1, 1995, among Phosphate Chemicals Export
              Association, Inc. and members of such association, including
              Texasgulf Inc., incorporated by reference to Exhibit 10(t)
              to the 1995 Form 10-K.
10(ee)        International Agency Agreement dated January 1, 1995,
              between Phosphate Chemicals Export Association, Inc. and
              Texasgulf Inc. establishing Texasgulf Inc. as exclusive
              marketing agent for such association’s wet phosphatic
              materials, incorporated by reference to Exhibit 10(u) to the
              1995 Form 10-K.
10(ff)        General Partnership Agreement forming Albright & Wilson
              Company, dated July 29, 1988 and amended January 31, 1995,
              between Texasgulf Inc. and Albright & Wilson Americas, Inc.,
              incorporated by reference to Exhibit 10(v) to the 1995 Form
              10-K.
10(gg)        Royalty Agreement dated October 7, 1993, by and between the
              registrant and Rio Algom Limited, incorporated by reference
              to Exhibit 10(x) to the 1995 Form 10-K.
10(hh)        Amending Resolution and revised forms of agreement regarding
              Supplemental Retirement Income Plan of the registrant,
              incorporated by reference to Exhibit 10(x) to the
              registrant’s report on Form 10-Q for the quarterly period
              ended June 30, 1996.
10(ii)        Employment Agreement dated January 21, 1998 by and between
              PCS Phosphate Company, Inc. and Thomas J. Wright.
</Table>
<Table>
<Caption>
EXHIBIT NO.                     DESCRIPTION OF DOCUMENT
-----------                     -----------------------
<S>           <C>
10(jj)        Shareholder Rights Agreement as amended and restated March
              2, 1998, incorporated by reference to Schedule B to the
              registrant’s proxy circular for the annual and special
              meeting of shareholders to be held on May 7, 1998.
11            Statement re Computation of Per Share Earnings.
13            1997 Annual Report.
21            Subsidiaries of the Registrant.
23            Consent of Deloitte & Touche
27            Financial Data Schedule.
</Table>
                                                                    EXHIBIT 4(b)
                        FIRST AMENDING AGREEMENT
        THIS AGREEMENT made as of the 6th day of November, 1997.
BETWEEN:
        THE BANK OF NOVA SCOTIA
        (herein, in its capacity as agent to the Lenders, called the "Agent")
        - and -
        THE BANK OF NOVA SCOTIA and those other financial
        institutions listed in Schedule A hereto and those
        financial institutions to whom the foregoing or their
        respective assigns may from time to time assign an
        undivided interest in the Credit Facility (as defined
        herein) and who agree to be bound by the terms hereof
        as a Lender
        (herein, in their capacities as lenders to the
        Borrower under the Credit Facility, collectively
        called the "Lenders" and individually called a
        "Lender")
        - and -
        POTASH CORPORATION OF SASKATCHEWAN INC., a corporation
        incorporated under the laws of the Province of
        Saskatchewan
        (herein called the "Borrower").
     WHEREAS the Borrower, the Lenders and the Agent entered into a credit
agreement made as of October 4, 1996 (the "Credit Agreement") and pursuant to
which the Lenders established a certain term credit facility in favour of the
Borrower;
     AND WHEREAS the Borrower, the Lenders and the Agent have agreed to effect
certain amendments to the Credit Agreement upon the terms set forth herein;
     NOW THEREFORE THIS AGREEMENT WITNESSES that, in consideration of the
mutual covenants and agreements and for other good and valuable consideration
(the receipt and sufficiency of which are hereby acknowledged), the parties
hereto hereby agree as follows:
                                   - 2 -



                                 ARTICLE I
                               DEFINED TERMS
1.1. CAPITALIZED TERMS. All capitalized terms which are used herein without
being specifically defined herein shall have the meaning ascribed thereto in the
Credit Agreement.

                                 ARTICLE II
                                 AMENDMENTS
2.1. GENERAL RULE. The Credit Agreement is hereby amended to the extent
necessary to give full effect to the provisions of this agreement.
2.2. DEFINITIONS.     Section 1.01 of the Credit Agreement is hereby amended as
follows:
      (i)    the definition of "APPLICABLE MARGIN" is deleted and replaced
             by the following:
              "APPLICABLE MARGIN" means, at any time, the applicable rate per
              annum set forth in the table below opposite the applicable S & P
              rating:

<Table>
<Caption>
     S & P’S CORPORATE CREDIT OR
        DEBT RATING OF BORROWER                       APPLICABLE MARGIN
<S>                                              <C>
A- or above                                      .250% per annum
BBB+                                             .275% per annum
BBB                                              .300% per annum
BBB-                                             .370% per annum
BB+                                              .550% per annum
BB or below                                      .750% per annum
-----------                                      ---------------
</Table>
      (ii)    the definition of "CONVERSION DATE" is deleted and replaced
              by the following:
              "CONVERSION DATE" means October 2, 1998, as extended pursuant to
              Section 1.13.;
      (iii) the following definition is hereby added following the
            definition of "ROLLOVER NOTICE":
                                   - 3 -


           "S & P" means Standard & Poor’s Corporation and any successor
           thereto; and
      (iv) the definition of "STANDBY FEE RATE" is deleted and replaced
           by the following:
            "STANDBY FEE RATE" means, at any time, the applicable rate per
            annum set forth in the table below opposite the applicable S & P
            rating:

<Table>
<Caption>
     S & P’S CORPORATE CREDIT OR
       DEBT RATING OF BORROWER                      STANDBY FEE RATE
<S>                                             <C>
A- or above                                     .060% per annum
BBB+                                            .070% per annum
BBB                                             .075% per annum
BBB-                                            .085% per annum
BB+                                             .125% per annum
BB or below                                     .175% per annum
-----------                                     ---------------
</Table>
2.3. ESTABLISHMENT OF CREDIT FACILITY. Section 2.01 of the Credit Agreement is
hereby amended by replacing "U.S. $1,450,000,000" in the last line thereof with
"U.S. $1,285,000,000".
2.4. ADJUSTMENT OF APPLICABLE MARGIN AND STANDBY FEE RATE. Section 7.06 of the
Credit Agreement is hereby deleted and replaced with the following:
      7.06. ADJUSTMENT OF APPLICABLE MARGIN AND STANDBY FEE RATE. The
      Applicable Margin and the Standby Fee Rate shall be adjusted on, and any
      such adjustment shall be effective as of, the Banking Day immediately
      following any announcement, change, or withdrawal of S & P’s corporate
      credit or debt rating of the Borrower which results in a different
      Applicable Margin or Standby Fee Rate being applicable.
2.5. INDIVIDUAL COMMITMENTS. Schedule A to the Credit Agreement is hereby
amended by changing the Individual Commitment of each of the Lenders with
respect to the Credit Facility to the following corresponding amounts:
                                 - 4 -




<Table>
<Caption>
LENDER                                      AMOUNT
------                                      ------
<S>                                         <C>
The Bank of Nova Scotia                     $190,000,000
Royal Bank of Canada                        $165,000,000
Bank of Montreal                            $100,000,000
Banque Nationale de Paris (Canada)          $135,000,000
The Toronto-Dominion Bank                   $ 50,000,000
Morgan Guaranty Trust Company of New York   $ 90,000,000
Societe Generale (Canada)                   $100,000,000
Union Bank of Switzerland (Canada)          $100,000,000
Bank of America Canada                      $ 60,000,000
Canadian Imperial Bank of Commerce          $ 75,000,000
Citibank Canada                             $ 60,000,000
Credit Suisse First Boston Canada           $ 40,000,000
Deutsche Bank Canada                        $ 60,000,000
The First National Bank of Chicago                   Nil
Fuji Bank Canada                            $ 40,000,000
Fuji Bank, Limited, Atlanta Agency          $ 20,000,000
</Table>
2.6. THE FIRST NATIONAL BANK OF CHICAGO. The parties hereto confirm that The
First National Bank of Chicago hereby ceases to be a Lender under the Credit
Agreement and has no further obligations under the Credit Agreement.
2.7. THE TORONTO-DOMINION BANK. The parties hereto confirm that The
Toronto-Dominion Bank hereby ceases to be a Co-Agent under the Credit Agreement.
2.8. TIMING OF EFFECTIVENESS OF PROVISIONS. Notwithstanding any other term
hereof, sections 2.05 to 2.08 hereunder take effect immediately prior to the
other provisions of this agreement. For greater certainty, the parties hereto
agree that The First National Bank of Chicago is a signatory to this agreement
solely for the purposes of giving effect to the provisions of sections 2.05,
2.06 and 2.08 hereunder.
                                  - 5 -


2.9. DELIVERIES PURSUANT TO CREDIT AGREEMENT. For the purposes of the Credit
Agreement, this agreement and any document or instrument referred to herein
shall be deemed to be delivered pursuant to the Credit Agreement and to be
referred to in the Credit Agreement.

                               ARTICLE III
                      REPRESENTATIONS AND WARRANTIES
3.1. REPRESENTATIONS AND WARRANTIES. To induce the Lenders and the Agent to
enter into this agreement, the Borrower hereby represents and warrants to the
Lenders and the Agent that the representations and warranties of the Borrower
which are contained in Sections 10.01(e) - (l) of the Credit Agreement, as the
same may be amended hereby, are true and correct, and further represents and
warrants, as at the date hereof, as follows:
      (a)   STATUS AND POWER. The Borrower is a corporation duly incorporated
            and organized and validly subsisting in good standing under the laws
            of the Province of Saskatchewan. The Borrower is duly qualified,
            registered or licensed in all jurisdictions where such qualification,
            registration or licensing is required. The Borrower has all
            requisite corporate capacity, power and authority to own, hold under
            licence or lease its properties and to carry on its business as now
            conducted. The Borrower has all requisite corporate capacity, power
            and authority to enter into and carry out the transactions
            contemplated by this agreement.
      (b)   AUTHORIZATION AND ENFORCEMENT. All necessary action, corporate or
            otherwise, has been taken to authorize the execution, delivery and
            performance by the Borrower of this agreement. The Borrower has duly
            executed and delivered this agreement. This agreement is a legal,
            valid and binding obligation of the Borrower enforceable against the
            Borrower by the Agent and the Lenders in accordance with its terms,
            subject to the qualifications of the nature contained in the opinion
            of the Borrower’s counsel delivered pursuant to Section 12.02(d)(vii)
            of the Credit Agreement.
      (c)   COMPLIANCE WITH OTHER INSTRUMENTS. The execution, delivery and
            performance by the Borrower of this agreement and the consummation of
            the transactions contemplated herein do not conflict with, result in
            any breach or violation of, or constitute a default under the terms,
            conditions or provisions of the charter or constating documents or
            by-laws of, or any unanimous shareholder agreement relating to, the
            Borrower or of any law, regulation, judgment, decree or order binding
            on or applicable to the Borrower or to which its property is subject
            or of any material agreement, lease, licence, permit or other
            instrument to which the Borrower is a party or is otherwise bound or
            by which the Borrower benefits or to which its property is
                                 - 6 -


           subject and do not require the consent or approval of any Official
           Body or any other party.

                               ARTICLE IV
                             MISCELLANEOUS
4.1. FUTURE REFERENCES. On and after the effective date of this agreement,
each reference in the Credit Agreement to "this Agreement", "hereunder",
"hereof", or words of like import referring to the Credit Agreement, and each
reference in any related document to the "Credit Agreement", "thereunder",
"thereof", or words of like import referring to the Credit Agreement, shall mean
and be a reference to the Credit Agreement as amended hereby, and each such
related document is hereby amended accordingly. The Credit Agreement, as amended
hereby, is and shall continue to be in full force and effect and is hereby in
all respects ratified and confirmed.
4.2. GOVERNING LAW. This agreement shall be governed by and construed in
accordance with the laws of the Province of Ontario.
4.3. ENUREMENT. This agreement shall enure to the benefit of and shall be
binding upon the parties hereto and their respective successors and permitted
assigns.
4.4. CONFLICT. If any provision of this agreement is inconsistent or conflicts
with any provision of the Credit Agreement, the relevant provision of this
agreement shall prevail and be paramount.
4.5. FURTHER ASSURANCES. The Borrower shall do, execute and deliver or shall
cause to be done, executed and delivered all such further acts, documents and
things as the Agent may reasonably request for the purpose of giving effect to
this agreement and to each and every provision hereof.
4.6. COUNTERPARTS. This agreement may be executed in one or more counterparts,
each of which shall be deemed to be an original and all of which taken together
shall be deemed to constitute one and the same instrument.
                                 - 7 -


IN WITNESS WHEREOF the parties hereto have executed this agreement.
                                         THE BANK OF NOVA SCOTIA,
                                         AS AGENT

                                         By: /s/
                                            ------------------------

                                         By: /s/
                                            ------------------------

                                         POTASH CORPORATION
                                         OF SASKATCHEWAN INC.

                                         By: /s/
                                            ------------------------

                                         By: /s/
                                            ------------------------

                                         THE BANK OF NOVA SCOTIA,
                                         AS LENDER

                                         By: /s/
                                            ------------------------

                                         By: /s/
                                            ------------------------
                                         ROYAL BANK OF CANADA

                                         By: /s/
                                            ------------------------

                                         By: /s/
                                            ------------------------
- 8 -


        BANK OF MONTREAL

        By: /s/
           ------------------------

        By: /s/
           ------------------------

        BANQUE NATIONAL DE PARIS (CANADA)

        By: /s/
           ------------------------

        By: /s/
           ------------------------

        THE TORONTO-DOMINION BANK


        By: /s/
           ------------------------

        By: /s/
           ------------------------

        MORGAN GUARANTY TRUST
        COMPANY OF NEW YORK

        By: /s/
           ------------------------

        By: /s/
           ------------------------
- 9 -


        SOCIETE GENERALE (CANADA)

        By: /s/
           ------------------------

        By: /s/
           ------------------------

        UNION BANK OF SWITZERLAND (CANADA)

        By: /s/
           ------------------------

        By: /s/
           ------------------------

        BANK OF AMERICA CANADA

        By: /s/
           ------------------------

        By: /s/
           ------------------------

        CANADIAN IMPERIAL BANK
        OF COMMERCE

        By: /s/
           ------------------------

        By: /s/
           ------------------------
- 10 -


         CITIBANK CANADA

         By: /s/
            ------------------------

         By: /s/
            ------------------------

         CREDIT SUISSE FIRST BOSTON CANADA

         By: /s/
            ------------------------

         By: /s/
            ------------------------

         DEUTSCHE BANK CANADA

         By: /s/
            ------------------------

         By: /s/
            ------------------------

         THE FIRST NATIONAL BANK OF CHICAGO

         By: /s/
            ------------------------

         By: /s/
            ------------------------
                                 - 11 -


                                          FUJI BANK CANADA

                                          By: /s/
                                             ------------------------

                                          By: /s/
                                             ------------------------

                                          FUJI BANK, LIMITED, ATLANTA AGENCY

                                          By: /s/
                                             ------------------------

                                          By: /s/
                                             ------------------------

     The undersigned, being a guarantor of the indebtedness, liabilities and
obligations of the Borrower to the Lenders, hereby consents to the foregoing
amendments to the Credit Agreement.
     DATED as of the 6th day of November, 1997.

                                          PCS NITROGEN, INC.

                                          By: /s/
                                             ------------------------


                                          By: /s/
                                             ------------------------
                                                                     EXHIBIT 4(c)

                       SECOND AMENDING AGREEMENT
            THIS AGREEMENT made as of the 15th day of December, 1997.
BETWEEN:
            THE BANK OF NOVA SCOTIA
            (herein, in its capacity as agent of the Lenders, called the
            "Agent")
            - and -
            THE BANK OF NOVA SCOTIA, ROYAL BANK OF CANADA, BANK OF MONTREAL,
            BANQUE NATIONALE DE PARIS (CANADA), THE TORONTO-DOMINION BANK,
            MORGAN GUARANTY TRUST COMPANY OF NEW YORK, SOCIETE GENERALE
            (CANADA), UNION BANK OF SWITZERLAND (CANADA), BANK OF AMERICA
            CANADA, CANADIAN IMPERIAL BANK OF COMMERCE, CITIBANK CANADA, CREDIT
            SUISSE FIRST BOSTON CANADA, DEUTSCHE BANK CANADA, FUJI BANK CANADA
            AND FUJI BANK, LIMITED, ATLANTA AGENCY
            (herein, in their capacities as lenders to the Borrower under the
            Credit Facility, collectively called the "Lenders" and individually
            called a "Lender")
            - and -
            POTASH CORPORATION OF SASKATCHEWAN INC., a corporation
            incorporated under the laws of the Province of
            Saskatchewan
            (herein called the "Borrower").
     WHEREAS the Borrower, the Lenders named therein and the Agent entered into
a credit agreement made as of October 4, 1996 as amended by agreement dated
November 6, 1997 (the "Credit Agreement") and pursuant to which the Lenders
established a certain term credit facility in favour of the Borrower;
     AND WHEREAS the Borrower, the Lenders and the Agent have agreed to effect
certain amendments to the Credit Agreement upon the terms set forth herein;
                                  - 2 -


     NOW THEREFORE THIS AGREEMENT WITNESSES that, in consideration of the mutual
covenants and agreements and for other good and valuable consideration (the
receipt and sufficiency of which are hereby acknowledged), the parties hereto
hereby agree as follows:

                                ARTICLE I
                              DEFINED TERMS
1.1. CAPITALIZED TERMS. All capitalized terms which are used herein without
being specifically defined herein shall have the meaning ascribed thereto in the
Credit Agreement.

                                ARTICLE II
                                AMENDMENTS
2.1. GENERAL RULE. The Credit Agreement is hereby amended to the extent
necessary to give full effect to the provisions of this agreement.
2.2. DEFINITIONS.    Section 1.01 of the Credit Agreement is hereby amended as
follows:
      (i)    the definition of "LOANS" is deleted and replaced by the following:
             "LOANS" means LIBOR Loans and Base Rate Canada Loans.
      (ii)   the definition of "PRIME RATE" is deleted; and
      (iii) the definition of "PRIME RATE LOAN" is deleted.
2.3. AMOUNT OF OUTSTANDING ACCOMMODATION. Section 1.10 of the Credit Agreement
is hereby amended by deleting clause (a) thereof.
2.4. TYPES OF ACCOMMODATIONS. Section 3.01 of the Credit Agreement is hereby
deleted and replaced with the following:
      3.01. TYPES OF ACCOMMODATIONS. Subject to the terms and conditions
      hereof, the Borrower may obtain and maintain Accommodation under the
      Credit Facility by way of one or more Base Rate Canada Loans and, subject
      to availability of LIBOR funding in the financial markets, LIBOR Loans.
                                  - 3 -


2.5. INABILITY TO FUND U.S. DOLLAR ADVANCES.    Section 3.04 of the Credit
Agreement is hereby deleted.
2.6. DRAWDOWN NOTICE. Section 4.01 of the Credit Agreement is hereby amended
by deleting clauses (b) and (c) thereof and replacing them with the following:
      (b)   whether such Accommodation is to be made available by way of
            LIBOR Loan or Base Rate Canada Loan;
      (c)   the principal amount of the Loan and, in the case of any
            LIBOR Loan, the Interest Period with respect thereto;
2.7. CONVERTING LOAN TO OTHER TYPE OF LOAN. Section 6.01 of the Credit
Agreement is hereby amended by deleting the phrase "or the Exchange Equivalent
of the principal amount, as the case may be" in the eighth and ninth lines
thereof.
2.8. INTEREST RATES. Section 7.01 of the Credit Agreement is hereby amended by
deleting clause (a) thereof.
2.9. CALCULATION AND PAYMENT OF INTEREST. Section 7.02 of the Credit Agreement
is hereby amended by deleting clause (a) thereof and by deleting the phrase
"Prime Rate Loans and" in subclause (i) of clause (c) thereof.
2.10. GENERAL INTEREST RULES. Section 7.03 of the Credit Agreement is hereby
amended by deleting clause (c) thereof and replacing it with the following:
      (c)   If the Borrower fails to pay any principal, interest, fee or
            other amount of any nature payable by it hereunder on the due date
            therefor, the Borrower shall pay to the Lenders to whom such amount
            is due interest on such overdue amount in the same currency as such
            overdue amount is payable (as well after as before judgment) at the
            rate per annum, calculated and compounded monthly, which is equal to
            the Alternate Base Rate Canada plus 1%.
2.11. PAYMENTS FREE AND CLEAR OF TAXES. Section 8.06 of the Credit Agreement
is hereby amended by deleting the phrase "any taxing authority in Canada" in the
fifth line of clause (a) thereof and replacing it with the phrase "any taxing
authority, whether domestic or foreign".
2.12. DEPARTING LENDERS. The Borrower shall be entitled, on or before December
31, 1997, to repay in full all outstanding credit which has been extended to the
Borrower by Societe Generale (Canada), Fuji Bank Canada and Fuji Bank, Limited,
Atlanta Agency (collectively, the "Departing Lenders"), together with all
accrued and unpaid interest and fees with respect thereto, without
                                  - 4 -

making any similar payments to any of the other Lenders.   Upon such repayments
to the Departing Lenders:
      (a)   Schedule A to the Credit Agreement shall be amended by
            changing the Individual Commitments of each of the Departing Lenders
            with respect to the Credit Facility to nil;
      (b)   each of the Departing Lenders shall thereby cease to be a
            Lender under the Credit Agreement and shall have no further
            obligations under the Credit Agreement.
If the funds required to make the aforesaid payments to the Departing Lenders
are to be obtained by drawdown by the Borrower under the Credit Agreement, such
drawdown shall be funded by the Lenders other than the Departing Lenders
(collectively, the "Remaining Lenders") and, for the purposes of such drawdown,
the Pro Rata Share of each of the Remaining Lenders shall be calculated as if
the aforesaid payments to the Departing Lenders had already been made and
paragraphs (a) and (b) above had taken effect.
2.13. ASSIGNMENTS TO NON-CANADIANS. No later than December 31, 1997 but
following the repayments to the Departing Lenders pursuant to Section 2.12
hereof, the Remaining Lenders shall, pursuant to a request from the Borrower,
either change their Lending Installation to a non-Canadian location or transfer
and assign all of their right, title and interest in, to and under the Credit
Agreement to an affiliate which is not resident in Canada. It is hereby agreed
that Section 8.04 of the Credit Agreement shall apply to any such change of
Lending Installation or transfer and assignment to the extent that any
outstanding LIBOR Loan must be prepaid or cancelled and rebooked. Upon the
completion of such changes of Lending Installations and transfers and
assignments, the definition of "Lending Installation" in Section 1.01 of the
Credit Agreement shall be amended to delete the word "Canada" therefrom.
2.14. DELIVERIES PURSUANT TO CREDIT AGREEMENT. For the purposes of the Credit
Agreement, this agreement and any document or instrument referred to herein
shall be deemed to be delivered pursuant to the Credit Agreement and to be
referred to in the Credit Agreement.

                               ARTICLE III
                      REPRESENTATIONS AND WARRANTIES
3.1. REPRESENTATIONS AND WARRANTIES. To induce the Lenders and the Agent to
enter into this agreement, the Borrower hereby represents and warrants to the
Lenders and the Agent that the representations and warranties of the Borrower
which are contained in Sections 10.01(e) to (l) of the Credit Agreement, as the
same may be amended hereby, are true and correct, and further represents and
warrants, as at the date hereof, as follows:
                                      - 5 -


      (a)   STATUS AND POWER. The Borrower is a corporation duly incorporated
            and organized and validly subsisting in good standing under the laws
            of the Province of Saskatchewan. The Borrower is duly qualified,
            registered or licensed in all jurisdictions where such qualification,
            registration or licensing is required. The Borrower has all
            requisite corporate capacity, power and authority to own, hold under
            licence or lease its properties and to carry on its business as now
            conducted. The Borrower has all requisite corporate capacity, power
            and authority to enter into and carry out the transactions
            contemplated by this agreement.
      (b)   AUTHORIZATION AND ENFORCEMENT. All necessary action, corporate or
            otherwise, has been taken to authorize the execution, delivery and
            performance by the Borrower of this agreement. The Borrower has duly
            executed and delivered this agreement. This agreement is a legal,
            valid and binding obligation of the Borrower enforceable against the
            Borrower by the Agent and the Lenders in accordance with its terms,
            subject to the qualifications of the nature contained in the opinion
            of the Borrower’s counsel delivered pursuant to Section 12.02(d)(vii)
            of the Credit Agreement.
      (c)   COMPLIANCE WITH OTHER INSTRUMENTS. The execution, delivery and
            performance by the Borrower of this agreement and the consummation of
            the transactions contemplated herein do not conflict with, result in
            any breach or violation of, or constitute a default under the terms,
            conditions or provisions of the charter or constating documents or
            by-laws of, or any unanimous shareholder agreement relating to, the
            Borrower or of any law, regulation, judgment, decree or order binding
            on or applicable to the Borrower or to which its property is subject
            or of any material agreement, lease, licence, permit or other
            instrument to which the Borrower is a party or is otherwise bound or
            by which the Borrower benefits or to which its property is subject
            and do not require the consent or approval of any Official Body or
            any other party.

                                ARTICLE IV
                              MISCELLANEOUS
4.1. FUTURE REFERENCES. On and after the effective date of this agreement,
each reference in the Credit Agreement to "this Agreement", "hereunder",
"hereof", or words of like import referring to the Credit Agreement, and each
reference in any related document to the "Credit Agreement", "thereunder",
"thereof", or words of like import referring to the Credit Agreement, shall mean
and be a reference to the Credit Agreement as amended hereby, and each such
related document is hereby amended accordingly. The Credit Agreement, as amended
hereby, is and shall continue to be in full force and effect and is hereby in
all respects ratified and confirmed.
                                 - 6 -


4.2. GOVERNING LAW. This agreement shall be governed by and construed in
accordance with the laws of the Province of Ontario.
4.3. ENUREMENT. This agreement shall enure to the benefit of and shall be
binding upon the parties hereto and their respective successors and permitted
assigns.
4.4. CONFLICT. If any provision of this agreement is inconsistent or conflicts
with any provision of the Credit Agreement, the relevant provision of this
agreement shall prevail and be paramount.
4.5. FURTHER ASSURANCES. The Borrower shall do, execute and deliver or shall
cause to be done, executed and delivered all such further acts, documents and
things as the Agent may reasonably request for the purpose of giving effect to
this agreement and to each and every provision hereof.
4.6. COUNTERPARTS. This agreement may be executed in one or more counterparts,
each of which shall be deemed to be an original and all of which taken together
shall be deemed to constitute one and the same instrument.

  IN WITNESS WHEREOF the parties hereto have executed this agreement.
                                         THE BANK OF NOVA SCOTIA,
                                         AS AGENT

                                         By: /s/
                                            ------------------------

                                         By: /s/
                                            ------------------------

                                         POTASH CORPORATION
                                         OF SASKATCHEWAN INC.

                                         By: /s/
                                            ------------------------

                                         By: /s/
                                            ------------------------
- 7 -


        THE BANK OF NOVA SCOTIA,
        AS LENDER

        By: /s/
           ------------------------

        By: /s/
           ------------------------

        ROYAL BANK OF CANADA

        By: /s/
           ------------------------

        By: /s/
           ------------------------
        BANK OF MONTREAL

        By: /s/
           ------------------------

        By: /s/
           ------------------------

        BANQUE NATIONAL DE PARIS (CANADA)

        By: /s/
           ------------------------

        By: /s/
           ------------------------
- 8 -


        THE TORONTO-DOMINION BANK


        By: /s/
           ------------------------

        By: /s/
           ------------------------

        MORGAN GUARANTY TRUST
        COMPANY OF NEW YORK

        By: /s/
           ------------------------

        By: /s/
           ------------------------

        SOCIETE GENERALE (CANADA)

        By: /s/
           ------------------------

        By: /s/
           ------------------------

        UNION BANK OF SWITZERLAND (CANADA)

        By: /s/
           ------------------------

        By: /s/
           ------------------------
- 9 -


        BANK OF AMERICA CANADA

        By: /s/
           ------------------------

        By: /s/
           ------------------------

        CANADIAN IMPERIAL BANK
        OF COMMERCE

        By: /s/
           ------------------------

        By: /s/
           ------------------------

        CITIBANK CANADA

        By: /s/
           ------------------------

        By: /s/
           ------------------------

        CREDIT SUISSE FIRST BOSTON CANADA

        By: /s/
           ------------------------

        By: /s/
           ------------------------
                                 - 10 -


                                          DEUTSCHE BANK CANADA

                                          By: /s/
                                             ------------------------

                                          By: /s/
                                             ------------------------

                                          FUJI BANK CANADA

                                          By: /s/
                                             ------------------------

                                          By: /s/
                                             ------------------------

                                          FUJI BANK, LIMITED, ATLANTA AGENCY

                                          By: /s/
                                             ------------------------

                                          By: /s/
                                             ------------------------

     The undersigned, being a guarantor of the indebtedness, liabilities and
obligations of the Borrower to the Lenders, hereby consents to the foregoing
amendments to the Credit Agreement.
     DATED as of the 15th day of December, 1997.

                                          PCS NITROGEN, INC.

                                          By: /s/
                                             ------------------------

                                          By: /s/
                                             ------------------------
                                                                   EXHIBIT 10(k)
                                SECOND AMENDMENT
                                       TO
                               OPERATING AGREEMENT

         THIS SECOND AMENDMENT TO THE OPERATING AGREEMENT ("Second
Amendment") is made and entered into as of November 25, 1996, by and between BP
Chemicals Inc., an Ohio corporation ("BP Chemicals"), and Arcadian Ohio, L.P., a
Delaware limited partnership ("Arcadian").
         WHEREAS, BP Chemicals and Arcadian are parties to that certain
Operating Agreement dated May 11, 1993, as amended by a First Amendment to the
Operating Agreement, dated as of November 20, 1995 (collectively the "1993
Operating Agreement"); and
         WHEREAS, Arcadian and The BOC Group, Inc., a Delaware corporation
("BOC"), are parties to that certain Asset Purchase Agreement, dated November
19, 1996 ("1996 Asset Purchase Agreement"), pursuant to which Arcadian is
selling or leasing to BOC, and BOC is purchasing or leasing from Arcadian, among
other assets and properties of Arcadian, certain liquid and solid carbon dioxide
facilities (collectively, the "CO(2) Plant") located at Arcadian’s nitrogen
plant in Lima, Ohio as that plant is defined in the 1993 Operating Agreement
("Nitrogen Plant"); and
         WHEREAS, Arcadian and BP Chemicals wish to amend the 1993 Operating
Agreement in light of the 1996 Asset Purchase Agreement;
         NOW THEREFORE, Arcadian and BP Chemicals hereby agree to amend the 1993
Operating Agreement as follows:
         1. From and after the date of this Second Amendment, subject to
Sections 2 and 3 hereof (including BP Chemicals’ obligation to provide interim
operating assistance through December 31, 1996), BP Chemicals shall cease its
operation of the CO(2) Plant as the agent and for the account of Arcadian,
pursuant to the terms of the 1993 Operating Agreement, and the CO(2) Plant shall
be removed from the definition of Nitrogen Plant in the 1993 Operating
Agreement; provided, however, that there shall be no reduction in the charges
for the Operating Activities performed by BP Chemicals pursuant to the 1993
Operating Agreement including, without limitation, the Management Fee, or other
compensation or reimbursable expenses payable to BP Chemicals pursuant to the
terms of the 1993 Operating Agreement, as a result of the application of the
provisions of this Section 1.
         2. Unless the 1993 Operating Agreement shall have been previously
terminated in accordance with its terms, from and after January 1, 2012 or the
date on which Arcadian shall notify BP Chemicals in writing to resume its
operation of the CO(2) Plant as the agent and for the account of Arcadian,
whichever of such dates shall be the first to occur, BP Chemicals shall
resume its operation of the CO(2) Plant as the agent and for the account of
Arcadian, pursuant to the terms of the 1993 Operating Agreement, and the CO(2)
Plant shall be added to the definition of Nitrogen Plant in the 1993 Operating
Agreement.
         3. From and after the date of this Second Amendment and until the date
on which the Operating Agreement shall terminate in accordance with its terms or
the date on which Arcadian shall notify BP in writing to resume its operation of
the CO(2) Plant as the agent and for the account of Arcadian, whichever of such
dates shall be the first to occur, BP Chemicals, acting as the agent and for the
account of Arcadian, shall provide (or cause to be provided) directly to BOC for
the CO(2) Plant the Operating Activities described in Exhibit "A" hereto
(collectively, the "CO(2) Plant Operating Activities"); provided, however that
BP Chemicals shall not be entitled to receive payment of any additional
compensation or reimbursable expenses from Arcadian or BOC in consideration of
or as a result of the application of the provisions of this Section 3. BP
Chemicals shall provide (and shall cause any Secondary Supplier to provide) the
CO(2) Plant Operating Activities in accordance with the Reasonable Operator
standard set forth in the 1993 Operating Agreement.
         4. The Operating Rules attached as Exhibit F to the 1993 Operating
Agreement are hereby deleted in their entirety and the Operating Rules attached
hereto as Exhibit "B" are hereby substituted therefor.
         5. BP Chemicals shall be deemed to be a third-party beneficiary of all
rights afforded to Arcadian under Appendix I to Exhibit "B" of the 1996
Manufacturing Support Agreement. In the event BP Chemicals shall provide clean
water discharge services for the account of BOC, BP Chemicals shall be deemed to
be a third-party beneficiary of all rights afforded to Arcadian under Appendix
III to Exhibit "B" of the 1996 Manufacturing Support Agreement.
         6. Except as expressly modified, amended and superseded by this Second
Amendment, the terms and provisions of the 1993 Operating Agreement shall
continue in full force and effect.
         IN WITNESS WHEREOF, the parties hereto have executed this Second
Amendment in duplicate by their duly authorized representatives as of the date
first above set forth above.
BP Chemicals Inc.                               Arcadian Ohio, L.P.
By:            /s/                              By:      Arcadian Corporation,
   ---------------------                                 General Partner
Title:             V.P.
       ------------------                                 By:     /s/
                                                             -------------------
                                                                  J.D. Campbell,
                                                                  President
             EXHIBIT "A" TO SECOND AMENDMENT TO OPERATING AGREEMENT

Ammonia
BP will timely provide (or arrange for the timely provision   of) all ammonia as
BOC may require for use as a refrigerant in the CO(2) Plant   at any time through
the existing closed-loop system located therein, subject to   the condition that
BOC will maintain such closed-loop system in good operating   repair.
Maintenance, Repair and Replacement of C-1 Compressor
BP will timely maintain, repair or replace (or arrange for the timely
maintenance, repair or replacement of), for the mutual benefit of Arcadian and
BOC, the C-1 Compressor and the instrumentation and other equipment associated
therewith that is located at the Nitrogen Plant for the purpose of delivering
high pressure carbon dioxide gas to Arcadian and BOC.
Demineralized Cooling Water
BP will timely provide (or arrange for the timely provision of), for BOC’s
account, all demineralized cooling water needed by BOC for use in the ammonia
unit purification system.
Maintenance and Repair of Roads
BP will timely maintain and repair (or arrange for the timely maintenance and
repair of) the roads currently and subsequently providing ingress to and egress
from the CO(2) Plant consistent with BP’s standard operating procedures.
Fire Water
BP will timely provide (or arrange for the timely provision of) all fire water
as BOC may require for use as such at the CO(2) Plant through BP’s existing fire
water piping and distribution system and as BP may then have available as a
Reasonable Operator; provided, however, that the commitment to furnish such fire
water shall not imply a representation that the amount of fire water delivered
in the event of any fire or other emergency will be of sufficient quantity to
respond adequately to any such fire or other emergency.
Inter-Company Complex Communications
BP will timely maintain, including repair and any necessary replacement of all
or any part thereof (or arrange for the timely maintenance including repair and
any necessary replacement of all or any part thereof, of), the existing Lima,
Ohio Complex inter-company communication system, including such portions of such
communication system that are found within the CO(2) Plant.
Disaster Plans
BP will timely furnish BOC a copy of the Disaster and Emergency Plan currently
in effect for the Lima, Ohio Complex and will facilitate (or arrange for the
facilitation of) the coordination of activities under such plan with and among
BP Chemicals, BP Oil, Arcadian and BOC.
Cooling Tower
BP Chemicals understands that Arcadian and BOC will enter into a separate
agreement relative to the expansion of the existing cooling tower (or cells
contained therein) or the construction of a new cooling tower at the Nitrogen
Plant for the cooling of carbon dioxide gas generated by Arcadian. Following any
such expansion or construction, BP will maintain, including repair and any
necessary replacement of all or any part thereof (or arrange for the
maintenance, including repair and any necessary replacement of all or any part
thereof, of), the same for the mutual account of Arcadian and BOC in accordance
with the terms thereof in order to facilitate the delivery of low pressure
carbon dioxide gas to BOC consistent with the terms of the CO(2) Gas Sale
Agreement between Arcadian and BOC.
Cooling Tower Water
BP will timely provide (or arrange for the timely provision of) all water needed
for the proper operation of the existing cooling tower (and any expansion to the
existing cooling tower or new cooling tower, as described above) located at the
Nitrogen Plant for BOC’s account consistent with BP’s standard operating
procedures.
Low Pressure CO(2) Gas Equipment.
BP will maintain, including repair and any necessary replacement of all or any
part thereof, (or arrange for the maintenance, including repair and any
necessary replacement of all or any part thereof, of), for the mutual benefit of
Arcadian and BOC, the Equipment and BOC Installed Equipment, as those terms are
defined in that certain Equipment Purchase and Installation Agreement, between
Arcadian and BOC, for the purpose of delivering Low Pressure CO(2) Gas to
Arcadian and BOC.
Interim Operating Assistance.
BP Chemicals will assist (or arrange for assistance to be provided to) BOC in
the operation of the CO(2) Plant on an interim basis through December 31, 1996.
Such assistance shall consist of providing (or arranging for the provision of )
the services of such number of persons as shall have been customarily employed
by BP Chemicals (or who shall have been customarily made available to BP
Chemicals under agreements with Jacobs Engineering or one or more other
third-party contractors) for use in the operation of the CO(2) Plant during the
three-month period immediately preceding the date of the Second Amendment, on
substantially similar shift schedules and on such other substantially similar
conditions as shall have applied during such period.
While such persons shall be responsible for rendering assistance to BOC in the
operation of the CO(2) Plant, BP Chemicals, as the agent of Arcadian, shall at
all times exercise the sole and exclusive right to control the ways, means and
manner by which any such person who is the employee of BP Chemicals shall render
such assistance (and Jacobs Engineering and any other third-party contractor
shall at all times exercise the sole and exclusive right to control the ways,
means and manner by which any such person who is the employee of Jacobs
Engineering or any such third party contractor shall render such assistance),
and no such persons shall be deemed to be the employee or agent of Arcadian or
BOC for any purpose.
Clean Water Discharge
If at any time Arcadian and BOC agree on terms and conditions, including
appropriate cost and capital allocations, pursuant to which BP will timely
provide (or arrange for the timely provision of) clean water discharge services
for the account of BOC, such services will be provided by BP in accordance with
the terms and subject to the conditions set forth in Appendix III to Exhibit "B"
to the 1996 Manufacturing Support Agreement.
Environmental Waste Water
BP will timely provide (or arrange for the timely provision of) chemical
separation services to BOC to treat all process water discharges and stormwater
runoff from the CO(2) Plant, to the extent required by applicable law, rule or
regulation, for the account of Arcadian or BOC, in accordance with the terms and
subject to the conditions set forth in Appendix I to Exhibit B to the 1996
Manufacturing Support Agreement.
Plant Process Air
BP will timely provide (or arrange for the timely provision of) all plant
process air as BOC may require for use in the CO(2) Plant at any time.
Instrument Air
BP will timely provide (or arrange for the timely provision of) all instrument
air as BOC may require for use in the CO(2) Plant at any time.
                                                                   EXHIBIT 10(l)
                                 FIRST AMENDMENT
                                       TO
                         MANUFACTURING SUPPORT AGREEMENT

         THIS FIRST AMENDMENT TO THE MANUFACTURING SUPPORT AGREEMENT ("First
Amendment") is made and entered into as of November 25, 1996, by and between BP
Chemicals Inc., an Ohio corporation ("BP Chemicals"), and Arcadian Ohio, L.P., a
Delaware limited partnership ("Arcadian").
         WHEREAS, BP Chemicals and Arcadian are parties to that certain
Manufacturing Support Agreement dated May 11, 1993 (the "1993 Manufacturing
Support Agreement"); and
         WHEREAS, Arcadian and The BOC Group, Inc., a Delaware corporation
("BOC"), are parties to that certain Asset Purchase Agreement dated November 19,
1996 ("1996 Asset Purchase Agreement"), pursuant to which Arcadian is selling or
leasing to BOC, and BOC is purchasing or leasing from Arcadian, among other
assets and properties of Arcadian, certain liquid and solid carbon dioxide
facilities (collectively, the "CO(2) Plant") located at Arcadian’s nitrogen
plant in Lima, Ohio, as that plant is defined in the 1993 Manufacturing Support
Agreement ("Nitrogen Plant"); and
         WHEREAS, Arcadian and BOC are parties to that certain Manufacturing
Support Agreement, dated November 20, 1996 (the "1996 Manufacturing Support
Agreement"), pursuant to which Arcadian has agreed to provide (or arrange for
the provision of) certain of the manufacturing support systems services, as set
forth in the 1993 Manufacturing Support Agreement, to BOC pursuant to the terms
of the 1996 Manufacturing Support Agreement, in order to assure the continued
operation of the CO(2) Plant on and after the date hereof; and
         WHEREAS, Arcadian and BP Chemicals wish to amend the 1993 Manufacturing
Support Agreement in light of the 1996 Asset Purchase Agreement and the 1996
Manufacturing Support Agreement;
         NOW, THEREFORE, Arcadian and BP Chemicals hereby agree to amend the
1993 Manufacturing Support Agreement as follows:
         1. Exhibit "A" to the 1993 Manufacturing Support Agreement is hereby
amended to specifically include in the manufacturing support systems services
used, consumed or employed in or in connection with the operation of the CO(2)
Plant or the related business of manufacturing and selling liquid and solid
carbon dioxide at the CO(2) Plant those support services set forth on Appendix
"I" to this First Amendment (collectively, the "CO(2) Plant Support Services").
(In any instance in which a manufacturing support system service is described in
Appendix "I" hereto in a manner different than the manner in which it was
described in Exhibit "A" to the 1993 Manufacturing Support Agreement, the
description of such service in said Exhibit "A" shall be
amended correspondingly to the extent necessary to cover the delivery of such
service to the CO(2) Plant only.)
         2. From and after the date of this First Amendment, subject to Section
3 hereof, BP Chemicals shall cease to provide to Arcadian the CO(2) Plant
Services; provided, however, that there shall be no reduction in the cost or
capital expenditure sharing by Arcadian and BP Chemicals or other compensation
or reimbursable expenses payable by Arcadian to BP Chemicals pursuant to the
terms of the 1993 Manufacturing Support Agreement as a result of the application
of the provisions of this Section 2.
         3. From and after the date of this Agreement and until December 31,
2011 or the date on which Arcadian shall notify BP Chemicals in writing to
resume providing the CO(2) Plant Support Services directly to Arcadian,
whichever of such dates shall be the first to occur, BP Chemicals, acting as the
agent and for the account of Arcadian, shall provide (or cause to be provided)
directly to BOC the CO(2) Plant Support Services; provided, however, that BP
Chemicals shall not be entitled to receive payment of any additional
compensation or reimbursable expenses from Arcadian or BOC in consideration of
or as a result of the application of the provisions of this Section 3, nor shall
there be any reduction in the cost or capital expenditure sharing by Arcadian
and BP Chemicals or other compensation or reimbursable expenses payable by
Arcadian to BP Chemicals pursuant to the terms of the 1993 Manufacturing Support
Agreement as a result of the application of this Section 3. BP Chemicals shall
provide (and shall cause any Secondary Provider to provide) the CO(2) Plant
Services to BOC in accordance with the Reasonable Operator standard set forth in
the 1993 Manufacturing Support Agreement.
         4. Included among the CO(2) Plant Support Services are sanitary sewage
disposal services. In providing such services, BP Chemicals shall be deemed to
be a third-party beneficiary of all rights afforded to Arcadian under Appendix
II to Exhibit "B" to the 1996 Manufacturing Support Agreement.
         5. Except as expressly modified, amended and superseded by this First
Amendment, the terms and provisions of the 1993 Manufacturing Support Agreement
shall continue in full force and effect.
         IN WITNESS WHEREOF, the parties hereto have executed this First
Amendment in duplicate by their duly authorized representatives as of the date
first above set forth above.
BP Chemicals, Inc.                          Arcadian Ohio, L.P.
By: /s/                                     By:   Arcadian Corporation,
   ----------------------------                   General Partner
Title:            V.P.
       -------------------------                  By:  /s/
                                                     -----------------------
                                                      J.D. Campbell
                                                      President
                           APPENDIX "I" TO FIRST AMENDMENT
                         TO MANUFACTURING SUPPORT AGREEMENT

Sanitary Sewage Disposal
BP will timely provide (or arrange for the timely provision of) all sanitary
sewage disposal services required by BOC for the account of Arcadian or BOC in
accordance with the terms and subject to the conditions set forth in Appendix II
to Exhibit "B" to the 1996 Manufacturing Support Agreement.
Steam
BP will timely provide (or arrange for the timely provision of) a continuously
available stream of 50 to 75 psi steam as BOC may require for use in the CO(2)
Plant.
City (Potable) Well Water
BP will timely provide (or arrange for the timely provision of) all city
(potable) and/or well water BOC may require for use in the CO(2) Plant at any
time.
BOC will install, on or before December 1, 1996, a meter to measure the quantity
of the city (potable) and/or well water furnished hereunder at BOC’s expense,
which expense is preliminarily estimated to be $5,000.
Electricity*
BP will timely provide (or arrange for the timely provision of) all electricity
as BOC may require for use in the CO(2) Plant and the security gate described in
the Manufacturing Plant Ground Sublease Agreement ("Sublease") between Arcadian
and BOC, in accordance with the terms and subject to the conditions set forth
therein. In providing such electricity, BP shall continue to use the same
electrical substation that is presently being utilized by BP to provide
electricity to the CO(2) Plant, provided that, after completion of the planned
expansion of the Nitrogen Plant, Arcadian may then direct BP to discontinue so
utilizing such substation for said purpose.
Existing Security Gate
BP will provide (or arrange for the provision of) the existing security gate and
security guards employed at such security gate for BOC’s non-exclusive use until
such date as BOC installs and equips a new security gate for BOC’s exclusive
use, which date shall be no later than April 7, 1997. (BP shall have no
responsibility for the new security gate or for any costs or expenses, capital
or otherwise, incurred by BOC in connection therewith.)
Rail Switching
BP will provide (or arrange for the timely provision of) all rail switching
support services as BOC may require for railcars serving the CO(2) Plant. The
switching services provided or arranged by BP shall be sufficient to allow rail
service to the CO(2) Plant, Monday through Saturday, from all railroad companies
serving the CO(2) Plant. BOC shall communicate to the BP Chemicals distribution
office at the BP Chemicals Plant the number and placement of railcars requiring
switching and the railroad companies to which such railcars should be delivered
each day.
                                                                     EXHIBIT 10(s)

THIS AGREEMENT made effective the 1st day of January, 1997.
BETWEEN:
                    POTASH CORPORATION OF SASKATCHEWAN INC.
                    (hereinafter referred to as "the Corporation")
                                                     OF THE FIRST PART
AND:
                    CHARLES E. CHILDERS
                    (hereinafter referred to as "Childers")
                                                     OF THE SECOND PART
WHEREAS, Potash Corporation of Saskatchewan ("PCS") and Childers entered into an
Employment Agreement ("the Employment Agreement") dated the 1st day of July,
1989;
AND WHEREAS, PCS and the Corporation entered into an Agreement for the Transfer
of Employees of Potash Corporation of Saskatchewan on the 31st day of October,
A.D. 1989;
AND WHEREAS, the Corporation has assumed the obligations of PCS with respect to
the Employment Agreement effective October 31, 1989;
AND WHEREAS, the Corporation and Childers have agreed to certain amendments to
the Employment Agreement and wish in this Agreement to restate the Employment
Agreement;
NOW THEREFORE, this Agreement WITNESSETH that in consideration of the mutual
covenants the parties hereto agree as follows:
1.         POSITION OF EMPLOYMENT
           The Corporation hereby continues the employment of Childers in
           positions of President and Chief Executive Officer, under the direction
           of its Board of Directors, and the position of Chairman of the Board of
           Directors and Childers hereby agrees to the extension of the foregoing
           employment.

2.         TERM OF AGREEMENT
           The term of this Agreement shall be to June 30, 2002. Childers shall be
           the Chairman of the Board of Directors and Chief Executive Officer of
           the Corporation to June 30, 1999. For the period July 1, 1999 to June
           30, 2002 Childers shall be the Chairman of the Board of Directors and,
           subject to the provisions of paragraph 16 hereof, serve as a special
           advisor to the Corporation. From and after July 1, 1999 Childers shall
           be deemed to have retired from active employment with the Corporation
           and shall be entitled to retirement benefits thereafter.
                                                                          Page 2
3.   SALARY AND COMPENSATION
     The Corporation agrees to pay Childers for all of the services rendered
     by him hereunder and Childers agrees to accept as compensation therefor
     the following (all of which amounts are expressed in United States
     dollars):
     a.         While Childers holds the position of Chairman and Chief
                Executive Officer a basic salary payable monthly, subject to
                all required and proper deductions, as follows:
                i.       for the period January 1, 1997 to December 31, 1997
                         the sum of one million, one hundred thousand
                         ($1,100,000) dollars;
                ii.      for the period January 1, 1998 to December 31, 1998
                         the sum of one million, two hundred thousand
                         ($1,200,000) dollars;
                iii.     for the period January 1, 1999 to June 30, 1999 the
                         sum of six hundred and fifty thousand ($650,000)
                         dollars.
     b.         In addition to the amounts payable to Childers under this
                Agreement or under any other benefit plan or program, while
                Childers holds the position of Chairman and Chief Executive
                Officer, an amount equal to any amount paid to Childers
                pursuant to the Corporation’s Short Term Incentive Plan.
     c.         After Childers ceases to hold the position   of Chief Executive
                Officer, he shall be paid the sum of three   hundred thousand
                ($300,000) dollars less any amount paid to   Childers for his
                role as Chairman and Director as an annual   retainer payable
                monthly subject to all required and proper   deductions.

4.   DUTIES OF EMPLOYEE
     It shall be Childers’ responsibility to faithfully and competently
     perform all of the services ordinarily required of a Chief Executive
     Officer of a major corporation such as that of the Corporation. It
     shall be Childers’ responsibility to direct all aspects of the
     operation of the Corporation. It shall be Childers’ responsibility as
     Chairman to preside at Board Meetings and carry out those functions as
     are authorized by the bylaws of the Corporation. Upon assuming the
     responsibility as a special advisor to the Corporation it shall be
     Childers’ responsibility to assist in customer and public relations,
     and act as a representative at industry association meetings and
     conventions including those of The Fertilizer Institute, International
     Fertilizer Association and the Potash and Phosphate Institute.

5.   EXPENSES
     The Corporation agrees to pay to Childers all reasonable expenses
     incurred by Childers in the performance of his duties. The Corporation
     recognizes the contribution of Norma Childers to the Corporation and
     agrees that expenses incurred by Norma Childers for travel and
     accommodation to any meeting relating to the Corporation shall be paid
     by the Corporation.
                                                                      Page 3

6.   INCOME TAX COMPENSATION
     The Corporation acknowledges that Childers may be subject to a higher
     rate of income taxation in Canada on income earned by Childers while
     resident in Canada than Childers would be liable to pay if he resided
     in the United States and earned an equivalent amount of income there.
     The Corporation further acknowledges that the parties intend that
     Childers’ after tax position pursuant to the terms of this Agreement
     based on the income earned by Childers shall be no different than if he
     resided in the United States and earned an equivalent amount of income
     in that country. Accordingly, the parties agree that a firm of
     Chartered Accountants, mutually agreed upon by the parties, shall, on
     an annual basis, complete the necessary calculations to determine the
     income tax payable by Childers in Canada and in the United States as if
     he had continued to reside in the State of Illinois. In the event that
     the first amount (i.e., federal and provincial tax payable in Canada)
     exceeds the second amount (i.e., projected federal and state tax
     payable in the United States) the Corporation shall pay Childers an
     amount, to be determined by such Chartered Accountants, such that
     Childers’ aggregate income on an after-tax basis would be equal to that
     which he would have earned had he been a resident of the State of
     Illinois during the entire taxable year.

7.   CORPORATION’S DISABILITY, RETIREMENT AND PENSION PLAN
     a)       Childers shall be entitled to participate in the benefits plan
              which are currently available to senior executives of the
              Corporation. Upon termination of employment the Corporation
              agrees to provide a comprehensive medical, vision, and dental
              insurance plan for Childers equivalent to the medical, vision,
              and dental plan currently in existence (a description of which
              plan is set forth in Schedule I attached hereto) which plan
              shall remain in effect for the lifetime of Childers. The
              commitment to provide medical, vision, and dental insurance
              shall survive this Agreement.
     b)       Both parties hereto acknowledge and agree that, effective July
              1, 1999 and not withstanding Childers continued provision of
              services to the Corporation in his role of Chairman of the
              Board and special advisor, Childers shall be deemed to have
              retired from employment with the Corporation.

8.   EXECUTIVE BONUS PROGRAM
     For so long as he serves as Chief Executive Officer, Childers shall be
     entitled to receive in addition to compensation provided for in this
     Agreement, additional compensation as is provided for in Schedule II
     attached hereto and forming part of this Agreement.

9.   CORPORATE AIRCRAFT
     The Corporation, in recognition of the importance to it of Childers’
     security, safety and efficient use of time, authorizes and expects
     Childers to use the principal corporate aircraft for all business and
     personal travel. The Corporation hereby agrees to indemnify Childers
     for any and all income taxes payable by him resulting from travel on
     such aircraft by him or members of his family who may accompany him.
     Furthermore, the Corporation hereby agrees to compensate Childers for
     any
                                                                       Page 4

      additional income taxes he may incur as a result of any indemnity
      payments for income taxes incurred from his use of such aircraft or for
      any compensating payments for additional taxes incurred on a
      compensating payment.

10.   DEATH OR DISABILITY OF EMPLOYEE
      If, prior to July 1, 1999, Childers becomes physically or mentally
      incapable of performing the services required of him and such
      incapacity is or may reasonably be expected to exist for more than four
      months, or Childers dies, then Childers or his estate shall be entitled
      to receive and be paid compensation up to and including June 30, 1999
      as if he had not been disabled or died, less any amounts of disability
      benefits that are available to Childers or his estate that have been
      provided by the Corporation.

11.   TERMINATION
      In the event that the Corporation shall terminate this Agreement for
      any reason or under circumstances other than for cause, the Corporation
      shall pay to Childers at the time of such termination all sums,
      including salaries, bonuses and income tax compensation, that would
      have been paid to Childers pursuant to this Agreement had this
      Agreement remained in full force and effect from the date of
      termination to the end of the term of this Agreement.

12.   VOLUNTARY RESIGNATION
      In the event that Childers shall voluntarily resign during the term of
      this Agreement or any renewal hereof, the Corporation shall pay to
      Childers at the time of such resignation the total of all salaries and
      bonuses earned by Childers to the date of such termination plus the
      income tax compensation with respect to those salaries and bonuses.

13.   TERMINATION FOR CAUSE
      The Corporation shall be entitled to terminate the services of Childers
      in the event of the infidelity of Childers to the Corporation. For the
      purposes of this provision, "infidelity" shall be defined as including
      any illegal act by Childers in relation to the property of the
      Corporation whereby Childers achieves a personal gain therefrom. In the
      event that the Corporation shall terminate the services of Childers
      pursuant to this provision, the Corporation shall pay to Childers at
      the time of such termination all salaries and bonuses earned by
      Childers to the date of such termination plus the income tax
      compensation with respect to those salaries and bonuses.
                                                                            Page 5

14.      BENEFITS PAYABLE UPON TERMINATION
         Upon termination of this Agreement for any reason including the expiry
         of the term, the Corporation agrees that it shall reimburse Childers
         for all reasonable moving expenses incurred by Childers. The
         Corporation agrees that Childers shall be entitled to participate in
         the Corporation’s "home purchase plan" that is available to senior
         employees that are transferred.

15.      MERGER, TAKE-OVER OR SALE OF THE CORPORATION
         The Corporation agrees that in the event the undertaking of the
         Corporation is sold, dissolved, merged or amalgamated, the Corporation
         shall ensure that Childers shall retain his positions of the successor
         Corporation or business and on the same terms and conditions as
         contained in this Agreement or, in the alternative, the Corporation
         shall compensate Childers in the same manner as provided for in
         paragraph 11 hereof.

16.      SUBSEQUENT AGREEMENTS
         The parties hereto acknowledge that, from and after July 1, 1999,
         Childers may enter into an agreement to act as special advisor to one
         or more of the Corporation’s direct or indirect subsidiaries. The
         parties hereto agree that, in the event such agreement is entered into,
         the respective obligations of Childers and the Corporation relating to
         Childers’ role as special advisor to the Corporation under this
         agreement shall be of no force and effect, including but not limited to
         the Corporation’s obligation to Childers under paragraph 3(c) hereof.

17.      SOLE AGREEMENT
         Upon the entering into this Agreement by both parties any previous
         contracts of employment between the parties are terminated and no
         longer have any force and effect.

IN WITNESS WHEREOF the Corporation has caused this Agreement to be duly executed
and made effective the day and year first above written.

                                  POTASH CORPORATION OF SASKATCHEWAN INC.
                                  By: /s/
                                     -----------------------------------
                                                                          Page 6

IN WITNESS WHEREOF CHARLES E. CHILDERS has executed this Agreement effective the
day and year first above written.

SIGNED, SEALED AND DELIVERED       )
                                   )
in the presence of:                )
                                   )
/s/                                )       /s/
--------------------------------   )       ---------------------------------
Witness                                     CHARLES E. CHILDERS
                            SCHEDULE I

Medical
-    No deductible
-    100% payment of medical expenses
-    Eligible expenses include private hospital, prescription drugs,
     paramedical treatment
-    Maximum -- unlimited

Visioncare
-    No deductible
-    100% payment of vision expenses
-    Eligible expenses include eyeglass and frame amounts and contact
     lens amounts. Eye examinations also included
-    Maximum -- unlimited

Dental
-    No deductible
-    100% of dental expenses
-    Dental expenses include diagnostic and preventive services, basic
     and major services, restorative treatment and orthodontic
     treatment
-    Unlimited maximum effective January 1, 1989
                                     SCHEDULE II

Childers shall be entitled to participate in executive bonus programs generally
available to senior executives of the Corporation subject to the following
special provisions:
a.         Short-term Incentive Compensation Plan (STIP)
           The provisions of the STIP shall apply to Childers except that
           Childers’ Award Percentage at:
           i.       Target ROE shall be 50%;
           ii.      Threshold ROE shall be 25%;
           iii.     Maximum ROE shall be 100%.

b.         Long-term Incentive Plan (LTIP)
           In addition to any Units granted to Childers prior to the date of this
           Agreement, and notwithstanding any provision of the LTIP to the
           contrary, the following grant of Units is made to Childers:
<TABLE>
<S>                                                <C>
           Grant Date:                             January 1, 1995
           Target Bonus:                           50% of Salary
           Number of Part I Units:                 10,300
           Number of Part II Units:                10,300
           Redemption Date Part I Units:           On or before December 31, 1997 on a date
                                                   determined by the Compensation Committee.
           Redemption Date Part II Units:          One third shall be redeemed on or before
                                                   December 31, 1995; December 31, 1996;
                                                   December 31, 1997, on a date to be
                                                   determined by the Compensation Committee.
</TABLE>
           Subject to the above, the provisions of the LTIP shall apply, with
           necessary changes in points of detail, to the foregoing grant of Units
           to Childers.
Nothing contained in this Schedule shall affect Childers right to participate in
any corporate benefit plan not referenced in this Schedule II.
                                                                  EXHIBIT 10(ii)
                              EMPLOYMENT AGREEMENT

EMPLOYMENT AGREEMENT, made and entered into as of the 21st day of January, 1998,
by and between PCS PHOSPHATE COMPANY, INC. (formerly Texasgulf Inc.), a Delaware
Corporation (the "Company"), and THOMAS J. WRIGHT ("Employee").

                              W I T N E S S E T H:
WHEREAS, the Company recognizes the Employee’s contribution to the growth and
success of the Company has been substantial and desires to assure the Company of
Employee’s continued employment, and
WHEREAS, Employee is desirous of continuing to serve the Company on the terms
herein provided;
NOW THEREFORE, in consideration of the promises hereinafter set forth, the
parties agree as follows:
1.       Employment. The Company agrees to continue to employ Employee, and
         Employee agrees to continue to serve the Company, subject to the terms
         and conditions set forth herein.
2.       Term. The employment of Employee by the Company as provided in Section
         1. hereof will be for a period commencing on the date hereof and ending
         on June 30, 1999, unless further extended or sooner terminated as
         herein provided.
3.       Position and Duties. During the term of this Agreement, Employee shall
         serve as President of the Company with general responsibility for all
         phosphate and feed operations. Employee agrees to devote all of his
         business time, skill, attention and best efforts during normal business
         hours to the business of the Company to the extent necessary to
         discharge the responsibilities assigned to him during the period of his
         employment hereunder, except for (i) service on other corporate, civic
         or charitable boards or committees not significantly interfering with
         his duties hereunder and (ii) usual, ordinary and customary periods of
         vacation.
4.       Compensation
         i.       Base Salary. Employee shall receive a base salary ("Base
                  Salary") at a monthly rate of $36,666.66 during the term of
                  this Agreement. The Base Salary shall be reviewed at least
                  once each year. Any increase in Base Salary or other
                  compensation shall in no way limit or reduce any other
                  obligation of the Company hereunder, and once established at
                  an increased rate, the Base Salary hereunder shall not
                  thereafter be reduced.
         ii.      Incentive Compensation: Bonuses. In addition to Base Salary,
                  Employee shall be entitled to participate in incentive plans
                  and stock option plans of Potash Corporation of Saskatchewan
                  Inc. ("PCS") for key employees of PCS and its subsidiaries in
                  effect from time to time.

                                        1
     iii.     Deferred Compensation. Employee will be protected for the full
              amount standing to his credit in his deferred compensation
              account as at February 29, 1996 and will be entitled to
              payments, upon retirement, in accordance with the Texasgulf
              deferred compensation program as it existed April 10, 1995.
              Employee’s compensation may not, after February 29, 1996, be
              deferred.
     iv.      Expenses. During the term of Employee’s employment hereunder,
              Employee shall be entitled to receive prompt reimbursement for
              all reasonable expenses incurred by Employee in accordance
              with the policies and procedures of the Company.
     v.       Benefit Plans. Employee shall be entitled to participate in or
              receive benefits under all of the Company’s benefit plans,
              policies, practices and arrangements in which Employee is
              presently eligible to participate, or plans and arrangements
              substituted therefor. Employee shall be entitled to
              participate in or receive benefits under any pension plan,
              profit-sharing plan, savings plan, life insurance, health and
              accident plan, short or long-term disability plan or
              arrangement or other benefit plan (collective, the "Benefit
              Plans") made available by the Company in the future to its
              executives or key management employees, subject to and on a
              basis consistent with the terms, conditions and overall
              administration of such Benefit Plans. The Company agrees to
              secure payment by it of all non-qualified deferred
              compensation benefits promised to Employee, including but not
              limited to (a) benefits under any deferred compensation
              agreements entered into between the Company and Employee and
              (b) benefits under the Company’s non-qualified excess benefits
              pension plan, in a manner consistent with general corporate
              practice to protect such benefits.
     vi.      Vacations. Employee shall be entitled to paid vacation in
              accordance with Company’s vacation policy as in effect from
              time to time. Employee shall be entitled to all paid holidays
              given by the Company to its employees.
     vii.     Perquisites. Employee shall be entitled to continue to receive
              fringe benefits and perquisites, including without limitation
              the use of an automobile and the payment by the Company of
              initiation fees and dues for country clubs, luncheon clubs, or
              similar facilities in accordance with the Company’s policy
              presently in effect.
5.   Termination
     i.       Death. This Agreement shall terminate automatically upon the
              death of Employee, subject to the provisions of subparagraphs
              6(i) and 6(v) hereof.
     ii.      Cause. The Company may terminate Employee’s employment for
              Cause. For the purpose of this Agreement, the Company shall
              have "Cause" to terminate Employee’s employment hereunder upon
              (A) the willful and continued failure by Employee to
              substantially perform his duties with the Company (other than
              any such failure resulting from Employee’s incapacity due to
              physical or mental illness), after a demand for substantial
              performance is delivered to Employee that specifically
              identifies the manner in which the Company believes that
              Employee has not

                                    2
       substantially performed his duties, or (B) the willful
       engaging by Employee in gross misconduct materially and
       demonstrably injurious to the Company. For the purpose of this
       paragraph, no act, or failure to act, on Employee’s part shall
       be considered "willful" unless done, or omitted to be done, by
       Employee in bad faith and without reasonable belief that
       Employee’s action or omission was in the best interest of the
       Company.
iii.   Good Reason. Employee may terminate his employment for Good
       Reason. For purposes of this Agreement, "Good Reason" shall
       mean:
       A.       without the express written consent of Employee, (x)
                the assignment to Employee of any duties materially
                inconsistent with Employee’s present position,
                duties, responsibilities and status with the Company,
                or (y) over Employee’s objection, a substantial
                reduction of Employee’s duties and responsibilities;
       B.       a reduction by the Company in Employee’s Base Salary;
       C.       the failure by the Company to continue in effect any
                Benefit Plan, unless a substitute plan or plans
                provide Employee with a substantially similar level
                of benefits;
       D.       any failure of the Company to obtain the assumption
                of the obligation to perform this Agreement by any
                successor as contemplated in paragraph 8. hereof; or
       E.       any purported termination of Employee’s employment
                that is not effected pursuant to a Notice of
                Termination satisfying the requirements of
                subparagraph (iv) below; and for the purpose of this
                Agreement, no such purported termination shall be
                effective.
iv.    Notice of Termination.
       Any termination by the Company for Cause or by Employee for
       Good Reason or otherwise shall be communicated by Notice of
       Termination to the other party hereto. "Notice of Termination"
       shall mean a written notice which shall indicate the specific
       termination provision in this Agreement relied upon and shall
       set forth in reasonable detail the facts and circumstances
       claimed to provide a basis for termination of Employee’s
       employment under the provision so indicated.
v.     Date of Termination. "Date of Termination" shall mean the date
       specified in the Notice of Termination; provided that if
       within thirty (30) days after any Notice of Termination is
       given, the party receiving such Notice of Termination notifies
       the other party that a dispute exists concerning the
       termination, the Date of Termination shall be the date finally
       determined to be the Date of Termination, either by mutual
       written agreement of the parties or by a binding and final
       arbitration award.

                             3
6.   Compensation Upon Termination or Death
     i.       If Employee’s employment is terminated by reason of Employee’s
              death, this Agreement shall terminate, and no further
              compensation shall be payable to Employee hereunder except as
              specifically provided herein; provided, however, that
              Employee’s estate, heirs and beneficiaries shall be entitled
              to receive the full amount of the Base Salary for the month in
              which death occurs, the amount payable under the Survivorship
              Plan and all other benefits available to them under the
              Company’s Benefit Plans.
     ii.      If Employee’s employment shall be terminated for Cause, or if
              Employee terminates his employment other than for Good Reason,
              the Company shall pay Employee his full Base Salary through
              the Date of Termination at the rate in effect at the time
              Notice of Termination is given, and the Company shall have no
              further obligations to Employee under this Agreement.
              Employee’s rights under Benefit Plans or other agreements
              shall be determined by the provisions contained therein.
     iii.     If the Company shall terminate Employee’s employment other
              than for Cause, or if Employee shall terminate his employment
              for Good Reason, then the Company shall pay to Employee as
              liquidated damages in a lump sum on the fifteenth day
              following the Date of Termination, the following amounts:
              A.       Employee’s full Base Salary through the Date of
                       Termination at the rate in effect at the time Notice
                       of Termination is given;
              B.       in lieu of any further salary payments to Employee
                       for periods subsequent to the Date of Termination, an
                       amount equal to the product of (a) Employee’s Base
                       Salary at the rate in effect as of the Date of
                       Termination, multiplied by the number of months,
                       including partial months, remaining in the term of
                       this Agreement;
              C.       all reasonable legal fees and other reasonable
                       expenses incurred by Employee as a result of such
                       termination.
     iv.      If the Company terminates Employee other than for Cause, or if
              Employee terminates his employment for Good Reason, the
              Company shall retain in full force and effect for the
              continued benefit of Employee and his eligible dependents and
              beneficiaries, until the last day of the term of this
              Agreement, the employee benefits under the Company’s Benefit
              Plans that they were eligible to receive immediately prior to
              the Date of Termination, subject to the terms and conditions
              of the Benefit Plans, provided that Employee’s continued
              participation or the participation of such eligible dependents
              or beneficiaries is possible under the general terms and
              provisions of such Benefit Plans. In the event that Employee’s
              participation or the participation of such eligible dependents
              or beneficiaries in any such Benefit Plan is barred, the
              Company shall arrange to provide Employee or such eligible
              dependents or beneficiaries for such period with benefits
              substantially similar to those which Employee and such
              eligible dependents or beneficiaries would be entitled to
              receive under such Benefit

                                    4
              Plans. At the end of the period of coverage, Employee shall
              have the option to have assigned to him at no cost and with no
              apportionment of prepaid premiums, any assignable insurance
              policy owned by the Company and relating specifically to
              Employee. The provisions of this subparagraph 6.(iv) shall be
              in addition to and not in limitation of the provisions of
              subparagraph 6.(v) below.
     v.       If the Employee shall be terminated by the Company other than
              for Cause, or if Employee terminates his employment for Good
              Reason, or if Employee shall die after such termination and
              during what would otherwise be the term of this Agreement,
              then, in addition to the other payment provided for in this
              paragraph 6., Employee and his eligible dependents and
              beneficiaries shall be entitled to receive from the Company
              benefits equivalent to the retirement and death benefits they
              would have been entitled to receive under the Company’s
              retirement and death benefit plans if Employee had been
              employed pursuant to this Agreement throughout the entire term
              of this Agreement, or to the date of his death, as the case
              may be.
     vi.      Employee shall not receive payments of Base Salary under this
              Agreement for any period during which Employee receives
              payments under the Company’s short or long-term disability
              plans.
     vii.     Employee shall not be required to mitigate the amount of any
              payment provided for in this paragraph 6. by seeking other
              employment or otherwise, nor shall the amount of any payment
              provided for in this paragraph 6. be reduced by any
              compensation earned by Employee as the result of employment by
              another employer after the Date of Termination, or otherwise.
     viii.    Employee’s rights under deferred compensation agreements shall
              be determined by the provisions contained herein.
7.   Confidential Information. During the course of his employment, Employee
     will have access to confidential records, data, formulae,
     specifications and secret inventions and processes owned and developed
     by the use in the course of the business of the Company and its
     subsidiaries and which will be disclosed to Employee in confidence.
     Employee agrees that he will not, during the term or after the
     conclusion of his employment by the Company, except as may be
     reasonably necessary or appropriate in connection with the performance
     by Employee of his duties as an executive of the Company or as may be
     authorized by the written consent of the Company, either directly or
     indirectly, use, publish or disclose, or authorized anyone else to use,
     publish or disclose, any proprietary knowledge or information
     concerning any such records, data, formulae, specifications, inventions
     or processes relating to the business of the Company and its
     subsidiaries.
8.   Successors: Binding Agreement.
     i.       The Company shall require any successor to all or
              substantially all of the business or assets of the Company
              (whether direct or indirect, by purchase, merger,
              consolidation or otherwise), by agreement in form and
              substance satisfactory to Employee, to expressly assume and
              agree to perform this Agreement in the same manner and to the

                                      5
               same extent that the Company would be required to perform if
               no such succession had taken place. As used in this Agreement,
               "Company" shall mean the Company as hereinbefore defined and
               any successor to its business or assets as aforesaid which
               executes and delivers the agreement provided for in this
               paragraph 8. or which otherwise becomes bound by all the terms
               and provisions of this Agreement by operation of law.
      ii.      This Agreement shall inure to the benefit of and be
               enforceable by Employee’s personal or legal representatives,
               executors, administrators, successors, heirs, distributees,
               devisees and legatees.
9.    Notice. For the purpose of this Agreement, notices and all other
      communications provided for in the Agreement shall be in writing and
      shall be deemed to have been duly given when delivered or mailed by
      certified mail, return receipt requested, postage prepaid, addressed as
      follows:
      If to the Employee:
               Mr. Thomas J. Wright
               3604 Ranlo Drive
               Raleigh, North Carolina   27612
      If to the Company:
               PCS Phosphate Company, Inc.
               c/o Potash Corporation of Saskatchewan Inc.
               500, 122 First Avenue South
               Saskatoon, Saskatchewan S7K 7G3
               Attention: Chief Executive Officer, PCS Inc.
      or to such other address as either party may have furnished to the
      other in writing in accordance herewith, except that notices of change
      of address shall be effective only upon receipt.
10.   Miscellaneous. No provision of this Agreement may be modified, waived
      or discharged unless such waiver, modification or discharge is agreed
      to in writing signed by Employee and an appropriate officer of the
      Company. No waiver by either party at any time of any breach by the
      other party of, or compliance with, any condition or provision of this
      Agreement to be performed by the other party shall be deemed a waiver
      of similar or dissimilar provisions or conditions at the same time or
      at any prior or subsequent time. The validity, interpretation,
      construction and performance of this Agreement shall be governed by the
      laws of the State of North Carolina.
11.   Validity. The invalidity or unenforceability of any provision of this
      Agreement shall not affect the validity or enforceability of any other
      provision of this Agreement.

                                     6
12.      Arbitration. Any dispute or controversy arising under or in connection
         with this Agreement shall be settled exclusively by arbitration in
         accordance with the rules of the American Arbitration Association then
         in effect. The decision of the arbitrator shall be final and binding on
         both parties. Judgment may be entered on the arbitrator’s award in any
         court having jurisdiction.
13.      Headings. The headings contained herein are for reference purposes only
         and shall not in any way affect the meaning or interpretation of any
         provision of this Agreement.
14.      Sole Agreement: Upon the entering into this Agreement by both parties
         any previous contracts of employment between the parties are terminated
         and no longer of any force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date and year first above written.
                                                PCS PHOSPHATE COMPANY, INC.

                                                By: /s/
                                                   -----------------------------

                                                By: /s/
                                                   -----------------------------


                                                THOMAS J. WRIGHT
                                                /s/
                                                --------------------------------



                                       7
                                                                                                       EXHIBIT 11
                              POTASH CORPORATION OF SASKATCHEWAN INC.
                                 COMPUTATION OF PER SHARE EARNINGS
                                  FOR THE YEARS ENDED DECEMBER 31
<TABLE>
<CAPTION>
(Figures and amounts expressed in thousands, except per share and per option amounts)

                                                                 1997           1996          1995            1994         1993
                                                                 ----           ----          ----            ----         ----

<S>                                                         <C>            <C>           <C>             <C>           <C>
A      Net income as reported, Canadian GAAP                $ 297,138      $ 209,036     $159,486        $ 91,219      $44,697
B      Items adjusting net income                             (11,382)         (7,216)     18,598          (4,539)       5,229
C      Net income, US GAAP (A + B)                          $ 285,756      $ 201,820     $178,084        $ 86,680      $49,926

D      Weighted average number of shares outstanding            52,275         45,537        43,352          42,872     39,793

E      Options outstanding to purchase equivalent shares         2,461          1,845         1,396           1,049          841

F      Average exercise price per option                    $    68.11     $    52.90    $    34.74      $    18.00    $ 16.90

G      Average market price per share                       $    82.60     $    70.33    $    52.44      $    29.81    $ 22.94

H      Period end market price per share                    $    83.00     $    85.00    $    70.88      $    34.00    $ 25.63

I      Rate of return available on option proceeds                   5%             5%            5%              5%           5%


Canadian GAAP
       Basic earnings per share (A/D)                       $     5.68     $     4.59    $     3.68      $     2.13    $    1.12

       Fully diluted earnings per share
J        Imputed earnings on option proceeds (E*F*I)        $    8,381     $    4,880    $    2,425      $      944    $     711

       Fully diluted earnings per share (A+J)/(D+E)         $     5.58     $     4.51    $     3.62      $     2.10    $    1.12


United States GAAP
       Basic earnings per share (C/D)                       $     5.47     $     4.43    $     4.11      $     2.02    $    1.25

       Fully diluted earnings per share
K        Net additional shares issuable (E-(E*F/G))                432            457           471             416          221

         Fully diluted earnings per share (C/(D+K))         $     5.42     $     4.39    $     4.06      $     2.00    $    1.25
</TABLE>
                                          EXHIBIT 13




Potash Corporation of Saskatchewan Inc.




               [PICTURE]




                  1997
                 ANNUAL
                 REPORT
Phosphate
Nitrogen
Potash
[PICTURE]
3 NUTRIENTS
ONE COMPANY
THREE VITAL NUTRIENTS, ONE VITAL ENTERPRISE
PROFILE
     In 1997, Potash Corporation of Saskatchewan Inc. (PCS) transformed itself
into the world’s largest fertilizer enterprise producing the three primary plant
nutrients used by farmers. The largest potash company in the world by capacity,
the second largest nitrogen company and the third largest phosphate producer,
PCS augments its global sales of quality fertilizer products with a wide variety
of valuable non-fertilizer products used in many modern industries.
     A prominent global potash supplier, PCS pulls product from eight mines in
Canada and the United States, and has large quantities of excess capacity on
which it can draw as world demand grows. At its three phosphate facilities in
the United States, it produces the most diversified line of products of any
world producer. It is the world’s largest manufacturer of phosphate feed
supplements for livestock and poultry. Its top-quality potash reserves are North
America’s largest, and its phosphate reserves will last more than 50 years
operating at full capacity. In nitrogen, PCS has a wealth of upgraded products.
It produces at seven facilities in the United States and has large-scale
operations in Trinidad supplied by favorable long-term gas contracts.
     Through PCS Sales, the Company sells all its products domestically and
handles some of its exports, as well as potash export sales for the largest New
Mexico producer. PCS is an important member of export agencies for potash and
phosphate and owns a full-range retail fertilizer company, Florida Favorite
Fertilizer.
     PCS has 53.9 million shares trading on the Toronto, Montreal and New York
stock exchanges under the symbol POT.

TABLE OF CONTENTS
<Table>
<S>                                                             <C>
Your Company                                                    front fold
Highlights                                                               1
Letter to Shareholders                                                   2
PCS Production                                                           6
Potash                                                                   7
Phosphate                                                               10
Nitrogen                                                                14
PCS Sales                                                               18
Stewardship                                                             26
Management’s Discussion and
Analysis of Financial Condition and Results of Operations               30
Selected Ten-Year Data                                                  43
Management’s Responsibility                                             44
Auditors’ Report                                                        44
Consolidated Financial Statements                                       45
Board of Directors                                                      62
Shareholder Information                                                 64
Glossary of Financial Terms                                      back fold
Management and Corporate Information                             back fold
Glossary of Operational Terms                                    back fold
</Table>
YOUR COMPANY’S STRATEGY FOR GROWTH

NATURE’S VITAL NUTRIENTS
     Your Company produces the major nutrients nitrogen, phosphorus and
potassium that are essential for growth. It draws potash, the source of
potassium, and phosphate, the source of phosphorus, from the earth where ancient
seas deposited them, and makes ammonia, the base for all nitrogen products, from
air using natural gas and steam. From these natural resources, your Company
produces the fertilizer nutrients that form the basis of its future.
STRIDING FORWARD FROM STRENGTH
     Since becoming a publicly-traded potash company in 1989, PCS has solidified
its position by identifying the business strengths that would enable it to
constantly increase value for its shareholders, and acting on them. Its excess
capacity and its operating strategy of matching potash production to demand to
maximize profitability were identified early as major strengths.
     While continuing to emphasize the important United States market and supply
it with high-quality potash, PCS recognized the growing export market as the
best prospect for use of its excess capacity, and for higher earnings. It
adopted an acquisition strategy that capitalized on its financial and industry
strengths, confirming it as a leading potash exporter and then building it into
an integrated international supplier of fertilizers, animal feed supplements and
products for industry.
GLOBAL POTASH LEADERSHIP
     In 1990, PCS acquired Saskterra, an offshore-oriented Saskatchewan company
outside of Canpotex, the export sales agency for Saskatchewan potash producers.
Then it arranged to handle offshore sales for New Mexico producers. In 1993, its
purchase of the potash assets of Potash Company of America, including a mine in
New Brunswick on Canada’s east coast, improved access to markets in Europe and
Latin America.
PHOSPHATE SYNERGIES ENHANCE DIVERSITY
     Solidly established in potash, in 1995 the Company entered the phosphate
industry by purchasing Texasgulf, North America’s premier phosphate producer. It
strengthened its position by acquiring White Springs Agricultural Chemicals in
Florida and blending the two acquisitions. With the benefit of synergies, PCS
followed its strategy to achieve the best margins by producing the products in
its diversified portfolio most in demand by the marketplace.
NITROGEN ADDS VALUE
     In 1997, PCS became the world’s largest fertilizer company producing all
three primary nutrients by acquiring Arcadian Corporation, the largest producer
of nitrogen products in the Western Hemisphere. This acquisition broadened the
range of fertilizer products available to its customers and greatly increased
the share of its business devoted to industry.
THE STORY CONTINUES . . .
     The most recent acquisition, Potash Company of Canada Limited (Potacan),
has a mill in New Brunswick ideally situated to give the Company more supply
options. The purchase, completed in the first quarter of 1998, further
strengthened the ability of PCS to meet the demands of its markets.

[GRAPH]
     PCS followed a growth strategy of building on its potash strength to
successfully expand into phosphate and nitrogen, increasing its earnings each
full year since it became publicly traded.
PCS PROPERTIES




[PICTURE]




COVER: Nitrogen, phosphorus and potassium, partners in producing healthy plants
and animals are also partners in PCS. Just as the three nutrients work together
to support plant growth, PCS works with farmers and dealers to help feed the
world.
                                   HIGHLIGHTS
                               FINANCIAL SUMMARY
                     (US$ millions except where specified)

<Table>
<Caption>
                                                           1997       1996
<S>                                                    <C>          <C>
Net Sales                                               2,325.9     1,403.9
Costs and Expenses                                      1,878.3     1,104.4
Operating Income                                           447.6      299.5
Net Income                                                 297.1      209.0
  Per Common Share (Actual Dollars)                         5.68        4.59
  Dividends Per Share (Actual Dollars CDN)                  1.44        1.44
Cash Flow from Operations                                  467.8      296.2
Long-Term Debt Obligations                              1,130.0       620.0
Shareholders’ Equity                                    2,227.9     1,405.5
Return on Shareholders’ Equity                             13.3%      14.9%
</Table>

All financial data are stated in US dollars.
[GRAPH]
Earnings per share grew at an average compounded rate of 50 percent per year
since 1993.
                            Potash Operating Summary
                          (in thousands of KCl tonnes)

<Table>
<Caption>
<S>                                                       <C>         <C>
Total Potash Production                                   6,483       5,782
North American Sales                                      3,017       2,589
Offshore Sales                                            3,623       3,023
  Sales to Third Parties                                  6,640       5,612
Sales to Florida Favorite Fertilizer                        129         121
Total Sales Tonnage                                       6,769       5,733
</Table>

[GRAPH]
PCS used its cash flow to pay down $300 million of debt in 1997.
                          Phosphate Operating Summary
                            (in thousands of tonnes)

<Table>
<S>                                                       <C>       <C>
Total Phosphoric Acid Production (P2O5 tonnes)            2,282     2,096
Sales (product tonnes)
  Rock                                                       29       191
  Solids                                                  1,924     1,880
  Liquids                                                 1,366     1,240
  Animal Feed                                               752       778
  Industrial                                                363       216
</Table>

Total P2O5 production and sales reflect the acquisition of the Geismar
operation on March 6, 1997.
[GRAPH]
Net sales were up by 66 percent in 1997, providing record gross margin.
                           Nitrogen Operating Summary
                            (in thousands of tonnes)

<Table>
<S>                                                       <C>        <C>
Total Nitrogen Production (N tonnes)                      2,349        -
Sales (product tonnes)
  Manufactured Product
    Ammonia                                               1,061        -
    Urea                                                  1,226        -
    Nitrogen Solutions                                    1,719        -
    Other                                                   894        -
  Purchased Product                                       1,138      535
</Table>

The nitrogen production and manufacturing data cover only a partial year, since
the properties were acquired on March 6, 1997.
[GRAPH]
Record potash sales and higher prices helped raise 1997 operating income.
[PICTURE]
C. E. Childers, Chairman, President and Chief Executive Officer
Dear Shareholders
The year 1997 was one of continued growth and transition for your Company. Our
net income and net income per share reached new highs, marking the seventh
consecutive year since we became publicly traded that we improved earnings. In
the past four years, we have posted year-over-year improvements in net income of
104 percent, 75 percent, 31 percent and 42 percent.
     On March 6, 1997, we acquired Arcadian Corporation, the largest nitrogen
producer in the Western Hemisphere, making us the world’s largest fertilizer
company producing all three primary nutrients. This continued growth and
evolution required a major reorganization, and operating subsidiaries were
established representing each nutrient.
     The phosphate subsidiary, headed by Tom Wright, is headquartered in
Raleigh, North Carolina and includes the phosphate mine and plant in North
Carolina, the phosphate mine and two plants in Florida, the retail business in
the southeast United States and seven feed phosphate plants strategically
located throughout the United States.
     The nitrogen subsidiary, headed by Gary Carlson, is headquartered in
Memphis, Tennessee. It includes seven plants located throughout the United
States and a large complex in Trinidad.
2
     Our potash subsidiary is headquartered in the corporate headquarters
building in Saskatoon, Saskatchewan, and is headed by Garth Moore. We own and
operate five mines and have production rights in the Esterhazy properties of
IMC, all located in Saskatchewan. We also own and operate potash mines in New
Brunswick and Utah.
     Although each subsidiary President is responsible for the profitability of
his operations, all PCS products are sold by our fourth subsidiary, PCS Sales.
Bill Doyle, its President, is located in Saskatoon, along with the
transportation and distribution group. PCS Sales personnel handling fertilizer,
feed and industrial sales are located, respectively, in Chicago, Illinois;
Raleigh, North Carolina; and Memphis, Tennessee.
     The merging of corporate cultures and procedures, as well as executives,
into our new organization was completed during the year and is working
efficiently.
     Our key corporate executives, Senior Vice Presidents John Gugulyn
(Administration), Barry Humphreys (Finance), John Hampton (Legal), Wayne
Brownlee (Business Development) and Betty-Ann Heggie (Corporate Relations),
along with Peter Braun (Vice President - Audit), have all held their current
responsibilities since privatization. They provide an experienced corporate team
who have grown with PCS during this past eight years as they led its growth. The
goal of PCS management has been and continues to be to provide increasing value
to our shareholders.
     Our excess potash production capacity, held in abeyance for increased
demand, proved to be a prime factor in our 1997 financial results. Strong
markets, both in North America and overseas, resulted in a record year for
potash. A 23-percent increase in domestic volumes over 1996 (exclusive of sales
to another producer) along with a 13-percent increase in price, coupled with a
20-percent increase in export sales volumes, provided a 25-percent increase in
net sales revenues and a 35-percent improvement in gross margin over 1996.
Provincial mining and other taxes of $70 million cut into profits, but we
nevertheless increased our operating income in potash by 26 percent over 1996.

[CHART]
The Company’s ability to easily bring on its excess capacity improved potash
gross margin as a percentage of sales.

[CHART]
The PCS nutrients worked together in 1997 for a near-record first quarter, an
outstanding second quarter reflecting an exceptional spring fertilizer season,
strong industrial sales in the third quarter, and record fourth-quarter potash
sales.
                                                                            3
     The phosphate business had results very similar to those of 1996.
Fertilizer earnings were down due to reduced netbacks in the DAP market. We
increased production of liquid products by 10 percent, as those prices were
better than in 1996, but this could not offset the lower prices for solid
phosphate fertilizers. Increased costs at our North Carolina operation due to
mining problems and downtime at one of the sulphuric acid plants were offset by
reduced costs at the Florida operation.
     The non-fertilizer phosphate business provided increased margins. Although
this represented only 33 percent of phosphate net sales, it provided 47 percent
of the gross margin. Increased prices in the feed business more than made up for
a 3-percent decrease in sales volumes.
     The most significant reason for improved financials for PCS in 1997 was the
addition of the nitrogen business. Net sales of $868 million provided $133
million in gross margin. Our second quarter results were very good but margins
were increasingly under pressure as the year went along. As in phosphate, our
non-fertilizer nitrogen business was an important part of this acquisition. With
34 percent of nitrogen net sales, it provided 51 percent of gross margin.
     In total, PCS had net sales of $2,326 million, an increase of 66 percent,
gross margin of $585 million (up 52 percent), operating income of $448 million
(up 49 percent), net income of $297 million (up 42 percent), and earnings per
share of $5.68 (up 24 percent). Fertilizer products made up 72 percent of net
sales and non-fertilizer products 28 percent. Gross margin was split 68
percent/32 percent fertilizer/non-fertilizer.
     The capital structure of PCS changed as the year progressed. We ended 1996
with a debt of $622 million and a debt to capital ratio of 30.7 percent. After
the Arcadian acquisition, our debt was $1,506 million and debt to capital ratio
was 42.7 percent. We ended 1997 with total debt of $1,235 million and a ratio of
35.7 percent. In June we sold our first bonds, a ten-year issue of $400 million
at a coupon rate of 7.125 percent. The issue was oversubscribed and considered
very successful. We maintain a BBB credit rating.

[CHART]
Flexibility in product selection and choice of markets benefited PCS sales
volumes and gross margin throughout 1997. Its balanced product portfolio will
enhance its position going forward.
4
     Cash flow continues to be a PCS trademark. Operating activities provided
$468 million cash in 1997. Without changes in working capital, the amount was
$503 million.
     Strong reserves and low-cost, efficient operations are other PCS strengths.
Several safety milestones were reached during the year, including the
prestigious John T. Ryan award for the safest mine in Canada being presented to
our Rocanville potash mine for the second straight year. Employees at Aurora,
White Springs and New Brunswick reached 2,000,000 hours without a lost-time
injury.
     However, the year was not without some disappointment. The anticipated
acquisition of the German potash company, Kali und Salz, the agreement for which
was announced in December of 1996, was denied by the German Minister of
Economics in July 1997. That acquisition, which had been worked on for more than
two years, would have provided continued growth for PCS . But even without Kali
und Salz, we have set an enviable record of growth. We are firmly established as
the world’s largest fertilizer company producing all three primary nutrients and
our production is balanced among the three nutrients. We have a strong
non-fertilizer segment, utilizing products made from our fertilizer resources.
     With a strong, experienced management team led by an equally strong,
experienced Board of Directors, we do not intend to rest on our accomplishments.
We have in excess of five million tonnes of low-cost Saskatchewan potash
production capacity which we intend to produce and sell as the market grows. We
have completed the purchase of Potacan, another potash producer in New
Brunswick. Although the mine is flooded, the assets include a 1.3-million tonne
mill and excellent storage, loading and shipping facilities. This asset provides
several options for increasing our potash business out of the east coast of
Canada.
     Although the nitrogen business is going through a period of low margins,
the new plant in Trinidad will provide low-cost ammonia with a gas contract tied
to ammonia prices, and further solidify our position in nitrogen. When the new
plant is operating, nearly 45 percent of our ammonia production will be tied to
such gas contracts. The high-cost operation at Wilmington, North Carolina will
cease production in 1998, with replacement production coming from more efficient
plants.
     Your management will continue to strive to improve the value of your PCS
ownership. Our managers will continue to look for synergies among our plants as
well as improvements in costs and efficiency at each operation. Our sales
subsidiary will continue to look for innovative marketing and new ways to
increase our margins. As always, we will search for accretive acquisitions.
Yours truly,

[SIG]
C. E. Childers
Chairman, President and Chief Executive Officer
March 3, 1998
                                                                            5
[PICTURE]

From modern plants in the Western Hemisphere, PCS produced and sold 17 million
tonnes of potash, phosphate and nitrogen to customers worldwide.
                                                                      PCS POTASH
                                   [PICTURE]

SUPPLIER TO THE WORLD
     Potassium, a vital nutrient for plants and animals, raises crop yields and
food value in plants, builds resistance to disease and environmental stresses,
and improves shipping, handling and storage qualities. Animals need potassium
for maintenance, growth and milk production. Potash is the major source of
potassium.
     PCS draws product from seven potash mines in Canada, six of which it owns
and operates, and one wholly-owned mine in the United States. It has 23 percent
of world capacity and an estimated 52 percent of excess capacity, so it can
increase production as markets grow and further reduce its costs per tonne. Its
reserves, which will last more than 100 years, will maintain it as a leader of
the world potash industry far into the future. It consistently makes more than
half its sales offshore, and is a primary supplier to developing nations, where
demand for potash continues to grow.
     In a world in which only seven countries have significant quantities of
potash and more than 150 countries use it, there is a large international trade.
About three-quarters of world production moves across borders. Canada is the
largest producer, followed by Germany and the Former Soviet Union countries of
Russia and Belarus. The United States, the leading consumer, imports 85 percent
of its potash. China, Brazil and India are the leading offshore consumers.
Developing nations, with little or no indigenous potash, account for
approximately 45 percent of world consumption.
     From deep underground, potash is brought to the surface for processing in
on-site mills. Important factors in varying production costs around the world
are thickness, consistency and continuity of the ore; its depth, geological
conditions and K2O grade; mill recovery achievable; operational capacity and
degree of automation. PCS pulls the majority of its product from mines in
Saskatchewan, where the flat beds put all mines in the lowest cost quartile on a
cash-cost basis.
     In the first quarter of 1998, PCS purchased Potash Company of Canada
Limited (Potacan), which has a mill and a flooded mine in New Brunswick. The
Company will use the mill initially to upgrade standard grade potash from
Saskatchewan to granular product for markets in Eastern Canada and the United
States. It will investigate additional future opportunities for the facility,
such as increasing ore production at its original New Brunswick mine to be
processed at the new mill.

[GRAPH]
Source: Fertecon, NRC, PCS

With world demand up by 14 percent in 1997 and the closure of two North
American potash mines, PCS increased production to 53 percent of capacity, up
from 47 percent in 1996.
                                                                            7
[PICTURE]
This electrostatic precipitator removes dust from the dryer exhaust at
Rocanville, helping the operation fulfil its responsibility to protect the
environment.

     PCS produces two dozen grades of potash fertilizer to suit different
markets. Agricultural product is guaranteed to have a minimum of 60 percent K2O
(95 percent KCl) when it leaves a mine site. Potash has industrial uses in
soaps, perfumes, TV and computer screens, and in the oil and gas industry. PCS
produces and markets a potassium-based water softening product, Softouch, and an
ice melt. Its New Brunswick and Utah mines produce sodium chloride (salt), used
for de-icing winter roads and manufactured into various products.
RECORD POTASH PRODUCTION
     With strong domestic and offshore demand and markets tightened by the
closure of two North American mines, PCS set a new production record in 1997. It
produced 6.483 million tonnes, 6.8 percent more than the record set in 1995 and
12 percent more than in 1996. This represented 16 percent of total world
production. Costs on a per-tonne basis were down due to higher production.
       New Brunswick and Moab produced 0.926 million tonnes of sodium chloride.
       Productivity records were set at Lanigan, Allan and New Brunswick.
     Numerous production records were broken in 1997, including daily, weekly
and monthly records for white product at Cory. Lanigan set a record for annual
production, for ore hoisted and milled and for the hourly feed rate through its
mill. New Brunswick set annual production records for potash and salt.
     One of the dredges at Patience Lake, a solution mine, was successfully
automated, raising productivity. Modified hoisting systems installed at
Rocanville and Allan improved reliability and maintenance costs. The new
computerized control system for the crystallizer circuit enhanced efficiency and
recovery at Allan. Cory’s miner automation project continued to progress, and
plant throughput and efficiency were increased. First phase modifications to the
crystallizer circuit at New Brunswick will result in significant annual fuel
savings, and installation of a crusher in the compaction circuit increased
granular production.
     PCS reserves at Esterhazy are mined by International Minerals and Chemical
(Canada) Global Limited under a long-term mining and processing agreement
effective through 2026. Every
1997 Production

<Table>
<Caption>

                            ANNUAL               1997                   1996            MINE SITE
                           CAPACITY           PRODUCTION             PRODUCTION         EMPLOYEES
<S>                 <C>                   <C>                    <C>                    <C>
                     (million tonnes KCl) (million tonnes KCl)   (million tonnes KCl)   (active)

Lanigan, SK                3.828                 1.600                  1.251               324
Rocanville,SK              2.295                 1.692                  1.502               312
Allan, SK                  1.885                 1.011                   .892               266
Cory, SK                   1.361                  .626                   .625               145
Patience Lake, SK          1.033                  .277                   .294                76
Esterhazy, SK1              .951                  .498                   .442                 2
New Brunswick, NB           .770                  .715                   .702               334
Moab, UT                    .080                  .064                   .074                51
Total                     12.203                 6.483                  5.782             1,510
</Table>
1 Production at Esterhazy is mined from PCS reserves by International Minerals
and Chemical (Canada) Global Limited under a long-term agreement.

8
five years, PCS has the option of terminating this agreement; the next
opportunity is June 30, 2001. Under the agreement, the Company can take between
0.45 million and 0.95 million tonnes of product per year from IMC, and it has
served notice that it will increase its allocation to 0.635 million tonnes,
effective July 1, 1998.
LEADING IN SAFETY
     New safety records were set throughout the potash divisions in 1997,
reflecting the emphasis PCS puts on this area.
     In 1997, for the second straight year, Rocanville received a national John
T. Ryan award; it was the safest mine in Canada in 1996 in the select mining
category. On February 4, 1998, the division reached seven years without a
lost-time injury. Lanigan received its fifth John T. Ryan award for notable
achievement in safe mining in 1996, and marked two years without a lost-time
accident on August 1. Allan reached three years on October 19. New Brunswick
recorded three years without a lost-time accident on June 8. It received awards
from the New Brunswick Mining Association for the lowest frequency and severity
of lost-time accidents of all mines in the province in 1996. Patience Lake
worked four years without a lost-time accident as of September 3, 1997, and Cory
two years on January 2, 1998. Moab completed three years without a lost-time
injury on February 7, 1998.
     PCS teams again excelled at the 1997 Saskatchewan mine rescue competition,
with Lanigan winning for the fourth time. Allan, the 1996 winner, was runner-up
among underground mines. Rocanville won the 17th annual PCS Fireman’s Rodeo;
Allan was runner-up. All PCS mines and fire departments in three nearby
communities competed in six rodeo events that demand a range of firefighting
skills.
TECHNOLOGY SUPPORTS PRODUCTION
     Several new potash products were developed to meet the needs of PCS
customers with specific requirements for size, shape, durability, purity or
nutrient composition.
     New process instrumentation for the control of potash mills was introduced,
including grade and brine saturation.
     Mineral separations technologies for improved recovery of potash were
demonstrated at operations, as well as isolation of waste streams for
environmental management.
                                   [PICTURE]
PCS leads the potash industry in mining automation, and Rocanville is the
trailblazer in this area.
                                  PCS PHOSPHATE [PICTURE]
A DIVERSITY OF QUALITY PRODUCTS
Underground phosphate deposits are the source of phosphorus, the energizer of
plant production, which is required for photosynthesis, energy transfer and
reproduction, and assists other yield-developing processes. Animals need
phosphorus for general nutrition and normal body growth, maintenance and
repair.
     About 60 countries produce phosphate products, and PCS is the world’s third
largest producer. It has 9 percent of world production and 7 percent of capacity
at its efficient facilities in North Carolina, northern Florida and Louisiana.
The most flexible of the major phosphate companies, PCS can switch its
production among fertilizers, animal feed supplements and products used in
industry, to maximize margins.
     The PCS complex at Aurora, North Carolina has traditionally been recognized
by outside experts as the lowest-cost producer of phosphoric acid, the feedstock
for its other phosphate products. Synergies and efficiencies at the complex at
White Springs, Florida, following its integration with Aurora, brought its costs
down so that the phosphoric acid from White Springs’ Swift Creek plant now
rivals Aurora’s in cost. Together the two facilities cement the PCS position as
the industry’s lowest-cost P2O5 producer.
     Phosphate production facilities are part of the Company’s nitrogen
operations at Geismar, Louisiana, producing superphosphoric acid and phosphate
solutions. Its superphosphoric acid production, combined with that of Aurora and
White Springs, confirmed PCS as the world’s leading supplier of this fertilizer
intermediary geared to the conservation tillage systems increasingly popular in
the United States.
     The PCS high-quality phosphate ore reserves will last more than 50 years
operating at full capacity. Multi-year permits allow the Company to draw on
those reserves in both North Carolina and Florida, giving it an advantage over
producers whose costs are expected to increase as they spend more on rock.
     Important factors in varying phosphate production costs around the world
include thickness, consistency and continuity of the ore, its depth, geological
conditions and concentration ratio (material removed to obtain a tonne of
phosphate rock). Aurora benefits from high P2O5 content in its ore, from high
tonnage of recovered rock per acre and from a lower concentration ratio. It does
not require clay pond impoundment areas because it blends its byproduct gypsum,
clays and sand into a unique neutralized soil which facilitates and accelerates
land reclamation. Both Aurora and White Springs are convenient to tidewater,
which benefits transportation costs.
     After sand and clay are separated from the phosphate ore, the resulting
phosphate rock is reacted with sulphuric acid to produce phosphoric

1997 PROFILE OF PCS PRODUCTS

                 POTASH              PHOSPHATE              NITROGEN
                 [GRAPH]              [GRAPH]               [GRAPH]

PCS has balanced production among its three nutrients, with a strong
non-fertilizer segment that utilizes products made from its fertilizer
resources.

10
acid (P2O5). From that acid, PCS produces phosphate fertilizers, both solid and
liquid, industrial phosphoric acid used in food and beverage products and
industrial applications, and feed supplements for livestock and poultry. It is
the world’s largest manufacturer of such phosphate feed supplements, producing
at seven plants strategically positioned throughout the United States so that
most customers are no more than 200 miles from their next shipment.
     DAP (diammonium phosphate, 46 percent P2O5) is the major solid fertilizer,
an important domestic and export product which is applied directly or in
fertilizer blends.
     The major liquid products, SPA (superphosphoric acid, 70 percent P2O5) and
MGA (merchant grade acid, 54 percent P2O5), are the feedstock for various liquid
and solid fertilizers, phosphate feed supplements and industrial quality acid.
     SPA and MGA are commonly mixed with other nutrients to produce liquid
fertilizers with varying concentrations of P2O5 for the domestic market. LoMag
SPA (70 percent P2O5) is aimed specifically at the growing minimum till market,
and PCS produces nearly half the US supply. Black SPA is sold in North America
to dealers seeking economical suspension liquid fertilizers.
     PCS now uses most of its black SPA in its feed plants to produce the animal
feed supplements Dical (dicalcium phosphate, 18.5 percent phosphorus) and
Monocal (monocalcium phosphate, 21 percent phosphorus). DFP or defluorinated
phosphate (tricalcium phosphate, 18 percent phosphorus) is produced by calcining
a mixture of phosphate rock, MGA and soda ash or caustic soda. Dical and Monocal
are used primarily for swine and cattle, DFP for poultry.
     In a joint venture at its Aurora plant, PCS produces industrial phosphoric
acid. This purified acid is used by soft drink companies to put the tang in soft
drinks, and by metal treating companies to put the shine on shower doors. It is
used in food products, institutional and industrial detergents, production of
activated carbon for emission controls and water treatment, and many more areas.
     World trade in phosphate products represents about one-third of   total
production; much phosphoric acid is converted into finished products   in the
country of origin and the products are mainly used there. The United   States is
by far the biggest phosphate exporter, providing about 70 percent of   world DAP
trade. Morocco and Tunisia are the largest MGA exporters, accounting   for about
60 percent of liquid trade.

[PICTURE]
The phosphate ore at Aurora lends itself well to production of high-quality
liquids in demand in domestic and offshore markets.
[PICTURE]
The size and quality of its phosphate ore reserves give PCS a competitive
advantage over other North American producers.

     More than 150 countries use phosphate fertilizers, and developing nations
account for approximately 65 percent of phosphate consumption. China is the
largest overall importer of phosphate products and by far the largest DAP
importer, followed typically by India and Pakistan. India is the major importer
of MGA, with Brazil a distant second.
FLEXIBLE PHOSPHATE PRODUCTION
     PCS phosphoric acid production in 1997 totalled 2.282 million P2O5 tonnes,
9 percent more than in 1996. Most of the increase is due to phosphate production
at the Geismar, Louisiana facility which was part of the Arcadian acquisition.
PCS Aurora produced phosphate rock at 80 percent of rated capacity and P2O5 at
101 percent. White Springs produced rock at 100 percent of capacity, and P2O5 at
88 percent. Rock is produced at White Springs’ Swift Creek mine and processed at
the Suwannee River and Swift Creek facilities. Geismar uses imported rock.
     White Springs productivity rose and its DAP costs per tonne were reduced by
6 percent. The Swift Creek plant operated according to its original

1997 Rock and Acid Production

<Table>
<Caption>
                                  PHOSPHATE ROCK                            PHOSPHORIC ACID
                        ANNUAL        1997          1996         ANNUAL          1997           1996     MINE SITE
                       CAPACITY    PRODUCTION    PRODUCTION     CAPACITY      PRODUCTION    PRODUCTION   EMPLOYEES
                                (million tonnes)                         (million P2O5 tonnes)           (active)
<S>                     <C>          <C>          <C>           <C>             <C>            <C>        <C>
Aurora, NC                6.0         4.806        4.331          1.152           1.168         1.164      1,168
White Springs, FL         3.6         3.585        3.143          1.093             .962         .932      1,114
Geismar, LA1                -              -           -            .202            .152             -        53
------------------------------------------------------------------------------------------------------------------
Total                     9.6         8.391        7.474          2.447           2.282         2.096      2,335
</Table>


1997 Phosphate Fertilizer Production
(All figures in million product tonnes)

<Table>
<Caption>
                                    AURORA                             WHITE SPRINGS                  GEISMAR1
                        ANNUAL       1997         1996       ANNUAL        1997       1996       ANNUAL      1997
                       CAPACITY   PRODUCTION   PRODUCTION   CAPACITY    PRODUCTION PRODUCTION   CAPACITY PRODUCTION
<S>                    <C>         <C>          <C>          <C>          <C>         <C>         <C>        <C>
Liquid fertilizers
    MGA2                1.835       1.753        1.750       1.908        1.474       1.448      .337        .252
    SPA                  .676        .348         .300       1.138         .788        .751      .196        .121
Solid fertilizers
    DAP                 1.247       1.215        1.117        .662         .724        .642         -           -
</Table>
1    Since acquisition on March 6, 1997.
2 A substantial portion is consumed internally in the production of downstream
products. The balance is exported to phosphate fertilizer producers and sold
domestically to dealers that custom-mix liquid fertilizer.
12
1997 Feed Phosphate Production

<Table>
<Caption>
                              ANNUAL            1997              1996
                             CAPACITY        PRODUCTION        PRODUCTION       EMPLOYEES
                         (million tonnes) (million tonnes) (million tonnes)     (active)
<S>                      <C>               <C>               <C>               <C>
Davenport, IA                   .280             .080              .103             27
Marseilles, IL                  .278             .187              .182             38
White Springs, FL (D/M)         .218             .108              .100             20
Weeping Water, NE               .209             .161              .158             42
Kinston, NC                     .141             .070              .071             29
White Springs, FL (DFP)         .100             .079              .083             41
Saltville, VA                   .078             .072              .076             48
-----------------------------------------------------------------------------------------
Total                          1.304             .757              .773            245
</Table>
design, as a single product producer of black SPA, and debottlenecking to meet
higher demand helped raise its output above 1996 levels. White Springs began
producing defluorinated phosphoric acid (58 percent P2O5). It set annual
records for rock, sulphuric acid, P2O5, black SPA and DAP, and monthly records
for rock, P2O5, black SPA and DAP.
     Aurora produced record annual volumes of phosphoric acid, 30 percent green
phosphoric acid, 11-37-0, DAP and purified acid. Monthly records were set for
sulphuric acid, P2O5, 30 percent green phosphoric acid, 11-37-0 and purified
acid. Revised mining techniques were utilized to recover ore in demanding
geological conditions.
     Production costs were affected negatively by Aurora’s rock conditions and
slightly higher costs for sulphur, but benefited from lower ammonia costs.
FEED PHOSPHATE PRODUCTION
     Dical and Monocal were   produced at Weeping Water, Kinston, Marseilles,
Davenport and White Springs   facilities; Saltville and White Springs produced
DFP. Marseilles and Weeping   Water set daily and annual production records,
Kinston and Davenport daily   records, and Saltville a quarterly record.
     Saltville installed a system that lets it use either caustic soda or soda
ash, depending on their prices. With White Springs personnel, it developed a
feed formulation system which significantly improved grade control and reduced
costs. Weeping Water’s new process control system was linked to the local area
network so it can monitor plant operations and control production from remote
locations. The White Springs DFP plant increased its capacity by adding new
blowers.
INDUSTRIAL ACID RECORD
     The purified acid plant at Aurora produced a record 0.139 million P2O5
tonnes for industrial use, and reduced its production costs. It operated at 103
percent of its rated capacity. Geismar produced 0.062 million P2O5 tonnes of
high-quality acid for its largest industrial contract.
SAFETY AT THE FOREFRONT
     Employees at White Springs completed 2 million hours without a lost-time
accident in May, and received the Chairman’s Award. The mining operation was
inspected by the federal Mine Safety and Health Administration twice during the
year and received no citations. White Springs continued

[PICTURE]
Since White Springs joined PCS , its Swift Creek facility has become one of the
most cost-effective in the phosphate industry.
to train an integrated Emergency Response Team for fire, chemical incidents,
medical treatment and confined space rescue.
     Aurora achieved 1 million hours without a lost-time accident in August
1997, and was presented with the President’s Award. It reached 2 million hours
on January 3, 1998. It initiated hazard recognition training and STOP safety
observation training for all employees.
     Both facilities received the new Thoroughbred Chemical Safety Award from
Norfolk Southern Corporation for shipping more than 1,000 carloads of hazardous
materials during calendar year 1996 without a shipper-caused incident.
     Davenport completed 18 years without a lost-time accident and Weeping Water
had its tenth quarterly Mine Safety and Health Administration inspection without
a citation. Marseilles’ new barge unloading system significantly reduced safety
hazards and operating costs; the plant completed three years without a lost-time
accident.
TECHNOLOGY SUPPORTS QUALITY
     Aurora modified its superacid process in 1997 to increase its output of
high-quality LoMag liquid fertilizer, and improved its scrubber systems for DAP
to increase ammonia recovery.
     The quality of DAP produced at White Springs now ranks with the best in the
industry. Building on 1996 improvements, a $3-million product cooler was
installed to ensure free-flowing, non-caking DAP. A unit-train concept with
trains of 60 or more cars instituted to supply black SPA to the Weeping Water
feed plant significantly improved utilization of the fleet of lined and
insulated SPA cars.

                                  PCS NITROGEN [PICTURE]
A WEALTH OF UPGRADED PRODUCTS
Nitrogen, part of every living cell, is the fundamental building block of all
plant proteins and improves yield size and quality. Animals need nitrogen for
proper nutrition and maturation, and it is part of the genetic blueprints RNA
and DNA. Plants obtain nitrogen from the atmosphere through lightning or from
bacteria found in nodules on the roots of legumes, but manufactured fertilizer
provides it more effectively. Today, nitrogen products are made from ammonia
synthesized from natural gas, steam and air.
     In 1997, PCS acquired the US nitrogen company, Arcadian Corporation of
Memphis, Tennessee. With seven strategically located plants in the United States
and a complex in Trinidad, it has a wealth of upgraded nitrogen products used as
fertilizer and in industry.
     Ammonia (NH3, 82 percent nitrogen) is the most concentrated form of
nitrogen fertilizer and the feedstock for all value-added nitrogen products.
Annual world ammonia capacity, spread among more than 75 countries, is
approximately 153 million tonnes. Because of this widespread production,
nitrogen is a very regional business, with less trade crossing borders than the
other primary nutrients. China, the United States, India and Russia are the
world’s largest producers; China, the US and India are the largest consumers of
nitrogen products. Asia consumes about 45 percent of all nitrogen used
worldwide. The United States is by far the largest importer of ammonia, with
Trinidad, Canada and Russia its primary suppliers.
     Adequate supplies of low-cost natural gas are key to the competitive
production of nitrogen products. This vital input can represent, on average,
30 percent to 50 percent of PCS Nitrogen’s operating budget. It has a purchasing
strategy by which one-third of its natural gas is fixed-priced, one-third is
market-priced and the remaining one-
14
third benefits from natural gas supplies in Trinidad indexed to
ammonia prices in the Caribbean.
     PCS is in a unique position. When the plant in Trinidad scheduled for
completion early in the second quarter of 1998 comes on line, nearly 45 percent
of PCS ammonia will be produced in Trinidad, where its margins are sheltered.
Much of the Trinidad ammonia production goes to Florida producers of DAP. Nearly
half the Company’s US nitrogen production goes to industrial customers as
ammonia or upgraded products. PCS can use over a third of the remaining ammonia
for its DAP production. The remainder of its nitrogen business is agricultural
and benefits from its strategic plant locations in the US Midwest and their
positive price differential with the Gulf.
     The most diversified nitrogen producer, PCS produces urea (46 percent
nitrogen), the world’s most popular manufactured fertilizer and the major
fertilizer source of nitrogen. It also produces the solid fertilizer ammonium
nitrate (34 percent nitrogen); nitric acid is a feedstock for its production.
Nitrogen solutions (28-32 percent nitrogen) are produced by combining the liquid
forms of urea and ammonium nitrate.
     The Company is a major supplier of industrial nitrogen products, which are
used by industry as raw materials for intermediates in the manufacture of many
products. On average, industrial customers take 80 percent of the urea and
ammonia produced and sold by PCS in the United States, 73 percent of the
ammonium nitrate and all the nitric acid.
     Nitrogen products are used in many familiar products, such as quality nylon
carpets, acrylic sweaters, plastics for home and car, refrigerants in
automobile air conditioners, automobile paint and tires, resins and adhesives
for the building trade, and pharmaceuticals. Urea is needed for the insulin
product humulin used by eight million diabetics around the world.
     PCS also produces micro prilled urea, a nitrogen-based supplement that
helps build protein in cattle.

[PICTURE]
The low-cost Augusta plant is recognized by outside experts as one of the most
efficient in the United States.
1997 Production*
(Million Tonnes)

<Table>
                                                                                         AMMONIUM            NITROGEN
                      AMMONIA1          NITRIC ACID1 2            UREA SOLIDS         NITRATE SOLIDS         SOLUTIONS
                ANNUAL                 ANNUAL                ANNUAL                ANNUAL                ANNUAL
               CAPACITY    PRODUCTION CAPACITY PRODUCTION CAPACITY PRODUCTION CAPACITY PRODUCTION CAPACITY PRODUCTION
<S>            <C>         <C>        <C>       <C>         <C>         <C>       <C>        <C>         <C>       <C>
Trinidad        1.192          .923       -           -      .586           .489      -            -       -             -
Augusta, GA      .622          .549    .474         .409     .274           .282   .397          .343    .581          .356
Lima, OH         .525          .388    .097         .075     .329           .192      -            -     .163          .128
Geismar, LA      .476          .404    .560         .441        -             -       -            -    1.028          .873
Memphis, TN      .357          .275       -           -      .399           .249      -            -       -             -
Clinton, IA      .238          .182    .126         .105        -             -    .079          .077    .163          .083
LaPlatte, NE     .182          .143    .178         .125        -             -       -            -     .436          .344
Wilmington, NC     -             -     .161         .087        -             -       -            -     .408          .082
----------------------------------------------------------------------------------------------------------------------------
Total           3.592        2.864    1.596       1.242     1.588         1.212    .476          .420   2.779         1.866
</Table>
*   Since acquisition on March 6, 1997.
1 A substantial portion of ammonia and nitric acid is upgraded to value-added
products.
2   HNO3 tonnes.

[PICTURE]

PCS Trinidad ships nitrogen products to the United States and offshore markets
through Point Lisas, on the Gulf of Paria.
NITROGEN PRODUCTION FOR AGRICULTURE AND INDUSTRY
     PCS produced 2.864 million tonnes of ammonia in the ten months after its
acquisition of Arcadian, 68 percent from its plants in the United States and 32
percent in Trinidad. That represented 12 percent of production in the Western
Hemisphere.
      Two major expansions that were under way at the time of acquisition are
continuing. A fourth ammonia plant (04) being added to the Trinidad operations
will raise ammonia capacity there to 1.836 million tonnes and total annual PCS
capacity to 4.236 million tonnes. In response to growing market demand, nitric
acid capacity is being expanded at Geismar. Expansions in ammonia and urea
production capacities at Lima planned before PCS acquired Arcadian were cut
back.
     In 1997, in response to the difficult market for nitrogen solutions, PCS
cut back solutions production at its Wilmington plant - the only nitrogen
facility which does not produce its own ammonia feedstock. The lower-cost
Augusta plant will take over the supply of nitric acid for the Company’s
contract with W.R. Grace.
     Augusta set annual production records in ammonia, nitric acid, urea,
ammonium nitrate and nitrogen solutions. Clinton set a record for annual
production of ammonium nitrate, Geismar for ammonia and nitric acid, LaPlatte
for nitrogen solutions and Memphis for ammonia. Memphis, LaPlatte, Lima and
Trinidad’s three ammonia units completed turnarounds. Trinidad’s 03 ammonia
plant increased production by 10 percent over
design levels after its turnaround, and Trinidad set an annual urea production
record.
     Increased production costs were partially due to the many plant turnarounds
in 1997. Costs of natural gas, a key ingredient in ammonia production, were up
10.6 percent in the United States, but down 15.6 percent in Trinidad.
     On December 31, 1997, PCS Nitrogen had 1,253 employees and 489 contract
workers, including those in Geismar’s phosphate operations.
EXPANDING INDUSTRIAL PRODUCTION
     Many of the Company’s nitrogen products have widespread industrial uses,
and it is responding to the growing demand for industrial nitrogen products by
expanding its production capabilities. It is building a new nitric acid plant at
Geismar to supply product to a customer that makes methyl diphenyl diisocyanate
(MDI), used in flexible cushioning foams and rigid urethane foams. AC
Industries, Inc., the PCS joint venture with Airgas Carbonics, Inc., expanded
its carbon dioxide liquefaction plant next to the Company’s Augusta facility in
1997, making it one of the largest liquid carbon dioxide plants in the world.
Augusta will supply the additional 645 tonnes per day of CO2.
     A plant making caprolactam for carpets and a calcium nitrite plant are also
located adjacent to Augusta. Other industrial plants are located near Geismar,
Lima and Memphis, using PCS products to make MDI, toluene diisocyanate,
acrylonitrile for hard plastics such as bumpers, and feedstock for plastics.
     PCS also produced 0.074 million tonnes of micro prilled urea at Memphis.
SAFETY A PRIORITY
     Safety systems at the nitrogen operations are designed for employee
leadership; they include Behavior Based Safety, with peer-on-peer safety
observations and feedback, and Root Cause investigations. Accumulative safety
records attest to their effectiveness: Geismar has worked more than 3.5 million
hours without a lost-time injury; Clinton exceeded 1.3 million hours without a
lost-time injury and received its fifth Iowa Safety Council Award for
Outstanding Achievement in Accident Prevention; LaPlatte received its fifth
Award of Honor from the Nebraska Safety Council, again with distinction;
Wilmington was presented with its third North Carolina Department of Safety
Award. Lima, an Occupational Safety and Health Administration VPP Star
recipient, exceeded 1 million hours without a lost-time injury; Augusta has gone
a year without a lost-time injury; Memphis achieved two years in December. Plant
employees in Trinidad reached 1 million hours without a lost-time injury on
January 31, 1998, and 3 million hours on the 04 ammonia plant construction
project were completed in February 1998 without an injury. Hurricane procedures
were included in new health, safety and environmental procedures at the Trinidad
facility.
     PCS Nitrogen received Norfolk Southern Corporation’s new Thoroughbred
Chemical Safety Award for shipping more than 1,000 carloads of hazardous
materials during a year without a shipper-caused incident.
     Employees are active in local Emergency Planning Commissions, state
Emergency Response Commissions and local Mutual Aid Organizations. They use the
unique ammonia safety training railcar they designed and built to train
community emergency response personnel and customers in the safe handling of
ammonia. Hazardous Materials response teams visit local schools and community
functions to teach about chemical safety; at Geismar alone, more than 1,000
students toured the team’s vehicle. Clinton led the way in organizing a farm
safety camp in which its employees taught and more than 500 local residents
participated.
MAJOR WESTERN HEMISPHERE AMONIA PRODUCERS
[GRAPH]
Source: Fertecon, BJA, PCS
When its new Trinidad plant is completed, nearly 45 percent of PCS ammonia will
be produced with gas contracts tied to the price of ammonia.

                                                                             17
[PICTURE]
Total world fertilizer consumption grew in 1997 and PCS increased its customer
base.
                              PCS SALES [PICTURE]
Total world fertilizer consumption grew in 1997 and PCS increased its customer
base.
GROWING GLOBAL SALES OF QUALITY PRODUCTS
PCS became a company producing and selling all three primary nutrients in 1997,
a year when total world fertilizer consumption grew. The Company responded to
increased world potash demand with the highest sales in its history. While
emphasizing higher-margin products in phosphate and nitrogen, it offered the
industry’s widest range of products to an expanding customer base. Providing
three nutrients instead of one in a convenient one-stop shopping system, PCS
increased its customer base to about 2,600 in 1997, six times more than when it
produced and sold only potash.
     World potash production totalled an estimated 41.7 million tonnes in 1997,
9 percent more than in 1996. World sales jumped to approximately 42.2 million
tonnes, up 14 percent after a slight decline in 1996. PCS provided 16 percent of
world sales and 28 percent of domestic sales.
     World production of phosphoric acid was up an estimated 2.3 percent.
Production of phosphate fertilizer products totalled about 34 million P2O5
tonnes, and world consumption grew by roughly 3 percent. One of every 19 tonnes
used around the world and one of every 5 tonnes applied to North American fields
came from PCS.
     Worldwide production of ammonia, the feedstock for all nitrogen products,
totalled about 129 million tonnes in 1997 and consumption grew by almost 3
percent.
RECORD POTASH SALES
     After beginning 1997 with one of the best spring seasons in its history,
PCS went on to sell a total of 6.769 million tonnes, topping its all-time sales
record set in 1995 by 13.6 percent. Third-quarter sales set a new company
record, and both domestic and offshore sales surpassed previous annual records.
     World potash sales jumped significantly. Supply was tightened in the second
half of the year by the flooding and closure of Potacan in New Brunswick and the
closure of Eddy in New Mexico. These closures took about 1.6 million tonnes of
annual capacity out of the market.
     North American demand was up and prices climbed throughout the year. Total
demand was an estimated 11.3 million tonnes KCl, 15 percent more than in 1996.

                        PCS SALES VOLUMES BY REGION 1997
[PICTURE]
PCS is firmly established as a reliable international supplier of the three
primary nutrients.


                                                                              19
     China and Brazil bought record volumes and India, with its increased
subsidies, was back in the market. In all, China bought 50 percent more potash
from all suppliers than it had in 1996, a total of 4.6 million tonnes. Brazil,
which achieved favorable prices for its cash crops of soybeans, coffee,
sugarcane and citrus fruits, bought record volumes of potash, nearly 3.5 million
tonnes from all sources. Its total KCl imports were up 16 percent. India is not
a large market for Canpotex but its buying patterns influence sales elsewhere.
The Malaysian market was strengthened by a joint venture there between Canpotex
and International Potash Company of the Former Soviet Union.
DOMESTIC
     PCS sold a record 3.146 million tonnes domestically, including
inter-company sales of 0.129 million tonnes to Florida Favorite Fertilizer. This
was 23 percent more than in 1996 (exclusive of sales to another producer in
1996). The United States market took more than 90 percent; the largest customers
were agricultural co-ops and big national firms.
     The Company made record sales in the first half, with demand in April
setting a record. The removal of Potacan from the market affected supply, and
the year ended with low producer inventories. PCS also achieved record sales in
the second half.
     Higher prices were achieved for September and November, which contributed
to higher realizations in the fourth quarter and for the year. Demand jumped in
the fall as customers bought before announced and expected price increases took
effect, anticipating strong spring demand in 1998 due to the increased acreage
expected to be planted.
OFFSHORE
     PCS sold 3.623 million tonnes of its potash offshore in 1997, 20 percent
above the 1996 total and 1.4 percent more than the previous record of 3.574
million tonnes set in 1995.
     Brazil was again the largest offshore market for PCS New Brunswick,
accounting for 75 percent of its total exports of 0.663 million tonnes.
     Canpotex set an all-time sales record of 5.19 million tonnes in 1997, 25
percent higher than the 4.15 million tonnes it sold in 1996. PCS provided 2.960
million tonnes in 1997. China bought one of every three tonnes sold by Canpotex,
a total of 1.78 million tonnes KCl. Other record markets were New Zealand, where
Canpotex is now the largest supplier, Thailand and Vietnam.
     Although spot prices for standard product were under pressure early in the
year, the offshore market gained strength in the second half. Higher prices were
achieved in Brazil and, in December, in a large sale by Canpotex to China.
INDUSTRIAL
     Six percent of total domestic and offshore sales were industrial. Often
these customers refine the potash further before using it or reselling it for
manufacture of other products. The US is a major industrial market for PCS , but
Japan, Korea and China are also important customers for industrial potash. Sales
of the Company’s water softening product Softouch jumped by 20 percent in 1997,
continuing its regular annual growth.

[PICTURE]

After corn, wheat is the crop that uses the most fertilizer in the United
States.
[PICTURE]
North American farmers are producing more grain per acre with the help of
proper fertilization and modern agricultural methods.

LIQUID PHOSPHATES LEAD THE WAY
     World phosphate trade was near an all-time high in 1997, with strong
exports of solid fertilizers and MGA. Sales of DAP by all world suppliers were
similar to 1996 levels. India, with its fertilizer subsidies, and China bought
more, but sales to Pakistan were down. It returned to the market early in 1998.
     Following its policy of emphasizing the phosphate products with the best
margins, PCS cut back in 1997 on offshore sales of MGA and upgraded its
phosphoric acid in North America where prices were better. During the year, it
sold a record 4.434 million tonnes of phosphate products, exceeding 1996
fertilizer sales, maintaining its leadership in sales of phosphate feed
supplements, and increasing sales of industrial products.
FERTILIZER PRODUCTS
     At 3.290 million tonnes, PCS sales of fertilizer products in 1997 were 5
percent above the 3.120 million tonnes sold in 1996, its first full year in the
phosphate business. The Company sold 1.924 million tonnes of solid fertilizers,
divided 58 percent-42 percent between offshore and domestic sales, and 1.366
million tonnes of liquid fertilizers, 32 percent offshore and 68 percent
domestically. Offshore sales are handled through PhosChem, a phosphate export
association which shipped 9 percent more DAP in 1997.
     SOLID FERTILIZERS: Total PCS sales of DAP were slightly up over 1996
levels, 1.924 million tonnes compared to 1.880 million tonnes. PCS sold 1.113
million tonnes offshore, more than half its production, compared to 1.062
million tonnes in 1996. It supplied about one quarter of the 4.36 million tonnes
shipped by PhosChem, which was fully committed in the fourth quarter. China, the
largest offshore buyer, bought more from PhosChem and India also bought
strongly. Those increases were balanced by lower exports to other countries,
primarily New Zealand, Vietnam, Thailand and Argentina. Pakistan did not
purchase from PhosChem but its buying patterns affect world trade.
     The Company sold 0.811 million tonnes of DAP domestically, similar to 1996
levels. DAP prices were below 1996 levels in both offshore and domestic markets.
     LIQUID FERTILIZERS: PCS sold 1.366 million tonnes of liquid fertilizers in
1997, compared to 1.240 million tonnes in 1996. LoMag was the major domestic
product and amber MGA the major export product. PCS supplied 88.5 percent of the
0.42 million solution tonnes of MGA shipped by PhosChem, about the same
percentage as in 1996.
     With tight phosphoric acid utilization worldwide, MGA prices were strong.
Prices for liquid fertilizers were higher than in 1996, and PCS realizations
from liquid fertilizer sales were up 5 percent.
                                                                              21
PHOSPHATE ROCK
     Sales of phosphate rock were sharply down in 1997 to 0.029 million tonnes,
just 15 percent of 1996 sales, as PCS followed its policy of retaining its rock
for its own production.
NON-FERTILIZER PRODUCTS
     The Company’s main non-fertilizer products are the phosphate feed
supplements Monocal, Dical and DFP for livestock and poultry, with industrial
phosphates as a specialized market area.
     FEED SUPPLEMENTS: PCS sold 0.752 million tonnes of feed products, down 3
percent from 1996. Sales were divided among Monocal (48 percent), Dical (30
percent) and DFP (20 percent). Feedgrade MAP made up the remainder.
     Domestic sales of Dical were down due to reduced demand throughout the
industry in the first half of the year. Monocal sales were up.
     Exports were a record, up 13 percent. Latin American countries provided the
main markets, with new sales to Asia. Monocal is the main export product.
     Total prices were up 6 percent over 1996 levels.
     INDUSTRIAL PRODUCTS: PCS produces phosphoric acid for industrial purposes
at Aurora and Geismar, and sold 0.363 million tonnes in 1997, 68 percent more
than in 1996. The Aurora production, in a joint venture with Albright & Wilson
Americas, consists of both food-grade acid, for cola beverages, preservatives
and other food products, and technical grade for industrial processes and
products. Geismar’s product is sold under contract to Rhodia, Inc. as a
feedstock for its food-grade acid purification plant located adjacent to the
Geismar plant. Prices and volumes provide relatively stable margins in this
business.
PHOSPHATE SALES DISTRIBUTION
[GRAPH]
Source: Fertecon, PCS
Its varied product line allows PCS to shift its feedstock to the products most
in demand by the market, to optimize margins.

[PICTURE]

PCS, the world’s largest producer of phosphate feed supplements for livestock
and poultry, sold to new markets in Brazil and Southeast Asia in 1997.
NITROGEN IS UNIQUELY POSITIONED
     As PCS anticipated when it expanded into nitrogen, its wide range of
industrial products provided a steady, profitable base to the nitrogen
fertilizer business. In spite of the fact that capacity utilization in nitrogen
was the highest of all three nutrients and consumption continued to grow, the
market struggled in 1997. Trade and prices were down, compared to 1996.
     China, usually a major purchaser of urea, was absent from the market for
much of 1997, resulting in depressed prices and profits for producers. This also
affected prices of other products. With urea prices down, producers upgraded
less ammonia into urea, increasing ammonia supplies and pulling prices down. The
situation spilled over into the market for nitrogen solutions, affecting prices.
Other influences on solutions prices were new US supply coming on stream,
competitive imports and weak fall demand.
     In spite of these market conditions, the nitrogen component of PCS has
integrated well and continues to provide the Company with increased earnings and
cash flow. Its average price per tonne for nitrogen products fell less than
overall industry prices because of the contribution of PCS industrial products.
The long-term outlook remains favorable. Nitrogen is the fertilizer considered
most essential by farmers and the fastest-growing of the three nutrients. And
China’s absence from the urea market had the beneficial effect of causing the
re-evaluation of planned expansions and new plants, many of which were delayed
or cancelled.
     In 1997, PCS sold 6.038 million tonnes of nitrogen products, both
manufactured and purchased. It purchased ammonia through a contract with a
company in the Republic of Russia that expired at the end of 1997. In 1998, PCS
is continuing to purchase ammonia from Former Soviet Union and other producers.

[PICTURE]
Corn uses approximately 40 percent of the nitrogen, phosphate and potash
applied in the United States.

FERTILIZER NUTRIENT CONSUMPTION

[CHART]
Source: FAO, IFA
The rising world population and its demand for more and better food will
encourage continued growth in fertilizer consumption as farmers strive to
increase production.
                                                                              23
FERTILIZER SALES
     Sales of all nitrogen fertilizer products, both manufactured by PCS and
purchased, totalled 4.229 million tonnes; 75 percent of product was manufactured
by PCS . More than 88 percent of sales were domestic, with urea the largest
export item.
     Nitrogen solutions represented the largest fertilizer sales volumes, a
total of 1.732 million tonnes, almost all manufactured. Like liquid phosphate
fertilizers, nitrogen solutions are well-suited to the new conservation tillage
methods and site specific fertilizer applications being used more and more by
North American farmers. Sales of ammonia as fertilizer totalled 1.659 million
tonnes, of which 0.668 million tonnes were manufactured and 0.991 million tonnes
purchased. Urea fertilizer sales totalled 0.701 million tonnes, with offshore
sales making up 49 percent. Sales of ammonium nitrate prills totalled 0.102
million tonnes, all domestic. Sales of other products totalled 0.035 million
tonnes.
INDUSTRIAL SALES
     Sales of nitrogen products for industrial use totalled 1.736 million
tonnes, almost entirely domestic. Ammonia, urea, ammonium nitrate and nitric
acid are all sold for industrial uses at relatively stable prices. While China’s
absence from the market affected fertilizer urea sales, demand for industrial
urea was very strong all year long.
     In 1997, PCS signed new long-term ammonia contracts with two major
industrial customers on the Texas Gulf coast. The Company also has long-term
contracts with several large customers which have plants adjacent to its
facilities.
INDUSTRIAL CONSUMPTION
[CHART]
Industrial customers took about 75 percent of the ammonia, urea and ammonium
nitrate produced and sold by PCS in the United States in 1997, and all the
nitric acid.

ANIMAL FEED SUPPLEMENTS
     PCS sold 0.073 million tonnes of nitrogen feed supplements in 1997. All
sales were domestic.
OUTLOOK FOR 1998 AND BEYOND
     The factors that affect fertilizer demand - rising world population and
demand for meat - continue to grow, painting a promising picture for world
fertilizer consumption. Large quantities of grain are necessary to feed the
poultry and livestock being raised to meet world demand for meat, which has
risen by more than 30 percent in the last decade. Much of that increase is
taking place in developing nations where higher incomes encourage greater meat
consumption and more varied diets. Furthermore, grain stocks must be replenished
to ensure global food security at the same time as annual food requirements must
be met.
     To meet the ever-increasing global food requirements from a finite land
base, crop yields must be improved through use of fertilizer and other modern
agricultural methods. This is expected to result in continued demand for the
three PCS nutrients, in 1998 and beyond. Rising meat consumption should bring
increased use of PCS feed supplements for livestock and poultry, and the strong
North American economy is expected to encourage sales of its industrial
products.
     Faced with new and more varied demands for food by their rising
populations, developing countries increasingly recognize the role of fertilizer
in helping to fulfil those demands. They are placing more emphasis on the need
to apply adequate amounts of fertilizer, and on better balance among the three
nutrients.
     China’s buying patterns are always important and influential. It is
importing fertilizer to help ensure adequate food supplies for its population,
recognizing that it is less expensive than importing food and more beneficial
locally. It has established potash as a key fertilizer to import, and is
expected to continue buying it and phosphate. When it considers its inventories
manageable, it should resume its urea imports, which would encourage nitrogen
markets. India’s purchases depend on its subsidy levels. Good prices for its
agriculture exports should support continued growth in fertilizer consumption in
Brazil.
     Increased trade usually increases prices for the products in demand. Trade
in potash rose an average of 3.5 percent per year over the last three
24
[PICTURE]
China increased its potash and phosphate purchases in 1997, supporting prices.

years. Phosphate trade rose an average of 2 percent per year in the same
period, and nitrogen trade an average of 2.5 percent.
     Healthy North American fertilizer consumption is expected to continue in
1998. More acres are likely to be planted, and the nutrients used by the 1997
crops must be replaced. This demand is expected to help support prices.
     Potash will get additional support. Closure of two mines in 1997 has put
stress on world production, so supply should remain tight. Its recent purchase
of Potacan should help PCS even more easily meet the needs of North American
customers.
     Uncertainty has been created by financial developments in Asia in late
1997, which bear continued attention. About one-fifth of the PCS gross margin
from its three nutrients came from sales to Asia in 1997. Continuing financial
pressures could temporarily dampen growth prospects for fertilizer. However,
many of the Asian countries under financial pressure import fertilizer to use on
crops they grow for export, so both imports and exports are in US dollars. This
creates a natural hedge.
     Outside events may cause temporary problems in the short term but are
unlikely to alter the longer-term promise for the fertilizer industry that is
provided by rising world population and demand for food. The trend line for
fertilizer consumption is seldom a smooth upward sweep, for economic and
political events within each nation and on the broader scene will have an
effect. Over the long term, however, the trend is positive.

CONSERVATION TILLAGE

[GRAPH]
Source: Conservation Technology Information Center
Environmentally-friendly systems such as reduced till and conservation till,
which are supplanting intensive till among US farmers, favor the liquid
nitrogen and phosphate fertilizers produced by PCS.



                                                                           25
[PICTURE]
Local schoolboys enjoy a swim near PCS New Brunswick.
                             PCS STEWARDSHIP [PICTURE]
THE GROWING PCS FAMILY
     The PCS workforce totalled 5,751 on December 31, 1997, including the
employees of PCS Nitrogen who were incorporated into the Company in March.
Almost two-thirds of PCS employees work in the United States, 28 percent in
Canada and 7 percent in Trinidad. The annual payroll is approximately $239
million.
     The Company presented 710 service awards in 1997, recognizing and rewarding
the long-term commitment of its employees. Scholarships were awarded to 35 sons
and daughters of employees for post-secondary study - 10 Chairman’s Awards and
25 Divisional Awards.
JOINING WITH ITS COMMUNITY
     PCS responds each year to requests to support a wide range of causes in the
communities in which it operates. Individual operations also support their local
communities with donations and employee participation in varied activities.
Through its long-standing Matching Gift Program, the Company matches employees’
personal donations to their favorite charities.
     PCS is in the third year of its CDN$5-million contribution to the
University of Saskatchewan First & Best Campaign, and the second year of its
five-year commitment to the North Carolina Museum of Natural Sciences in
Raleigh.
     Corporate office employees and those at Cory, Allan and Patience Lake
increased their contribution to the Saskatoon United Way by 10 percent in 1997,
matched by the Company. Employees received the Gold Award for participation and
the Company its sixth Gold Corporate Award. Employees at White Springs
contributed 118 percent of their goal to the United Way of Suwannee Valley.
Their contribution, matched by the Company, made up 36 percent of the agency’s
1997 goal. White Springs contributed to a number of environmental and
educational organizations in Florida.
      Aurora successfully completed its 21st annual Salvation Army campaign,
exceeding previous donations. Employees were leaders in a 24-hour walkathon to
raise money for cancer research, and two groups participated in the
Adopt-a-Highway program, cleaning stretches of the highway leading to the plant
site.
     Local schools receive help from several divisions. Aurora employees took
the Safelife program into local elementary schools. The Augusta nitrogen plant
has adopted two inner city schools; its help ranges from employees tutoring and
doing science demonstrations to funds for special projects and donations of used
computers and office equipment. Clinton partners with an elementary and a high
school; ten employees regularly help in many areas.
     The contributions made by White Springs to the schools in the three
counties around it were recognized by a second straight Commissioner’s Business
Recognition Award.
CORPORATE GOVERNANCE
     The responsibility for corporate governance rests with the Board of
Directors of PCS which has the duty to direct the management of the business and
affairs of the Company.
     PCS, having regard to the guidelines published by the Toronto and Montreal
stock exchanges, reports annually with respect to its corporate governance
practices. For a complete review of its governance practices, see the section
entitled "Corporate Governance" in the Company’s current proxy circular.
     The Board of Directors is made up of 15 members, 13 of whom are outside
directors. No significant shareholders are represented on the Board.
     There are four committees of the Board, each of which plays a significant
role in the discharge of Board duties and obligations. Each committee (audit,
compensation, environmental affairs and executive) is composed entirely of
outside directors, except the executive committee which is chaired by the Chief
Executive Officer. Each committee is empowered to retain outside advisors.
Individual directors may engage outside advisors at the Company’s expense upon
authorization of the executive committee.
                                                                              27
     The Company has adopted a corporate disclosure policy which calls for the
timely public dissemination of material information. Shareholder questions,
comments and concerns may be made to the Senior Vice President, Corporate
Relations, who is responsible for implementing the disclosure policy, to the
Corporate Secretary or to the Company’s transfer agent.
SAFEGUARDING THE ENVIRONMENT
     By helping to make existing farmland around the world as productive as
possible, fertilizer works to conserve forests, pastures, wetlands and other
non-agricultural lands. PCS shares in industry efforts to encourage farmers to
use the right amounts of fertilizer at the best time to supply nutrients to
plants at close to optimum levels. It also encourages balanced use of the three
nutrients, for nitrogen is used most efficiently when adequate amounts of
phosphate and potash are supplied.
     PCS takes seriously its responsibilities to fulfil the terms of the
environmental permits and other applicable federal, provincial, state and local
laws and regulations that govern air emissions, waste water discharges, land use
and solid and hazardous waste management at its operations in Canada, the United
States and Trinidad. Corporate environmental policy requires PCS to manage its
operations responsibly to safeguard the natural resources related to or affected
by its activities. The policy requires each production unit to work diligently
to minimize potential risks to the environment and to comply with environmental
legislation and regulations. The Company allots both capital and operating funds
to environmental measures, and the Board’s environmental affairs committee
reviews all environmental audit reports.
POTASH AND ITS ENVIRONMENT
     Their facilities for controlling pollution, managing wastes and maintaining
air quality are constantly improved by the PCS potash operations. Environmental
audits were completed at all divisions in 1997 by the Director, Environmental
Affairs for potash, to ensure compliance with regulations and corporate policy.
     Construction began in 1997 on an impervious cutoff wall to prevent
sub-surface seepage from Rocanville’s waste management area. This wall will be
the longest and deepest in Canada and second longest in North America when it is
completed in 1998. It incorporates design features developed through research
sponsored by the Saskatchewan potash industry.
     New Brunswick improved its refining process and loading procedures to
eliminate dust emissions concerns at Saint John during potash ship loading.
     PCS continued to participate in the environmental research program on
improved management of potash wastes and decommissioning of plants that is
jointly supported by members of the Saskatchewan Potash Producers Association.
Two projects were sponsored in 1997 and further studies are evaluating the
technology. PCS is also conducting in-house research aimed at developing
technology that will extend the life of waste management areas.
     As required, PCS Potash submitted to the Saskatchewan Department of
Environment and Resource Management a decommissioning and reclamation plan for
each of its Saskatchewan mines. An initial response has been received by the
Company and discussions are ongoing. Financial assurance for the plans must be
arranged by March 31, 1999 or within one year after approval of the plan,
whichever is later.


[PICTURE]

United States and North Carolina awards in 1997 applauded Aurora’s land
reclamation achievements.
PHOSPHATE AND ITS ENVIRONMENT
     Internal audits were conducted at all phosphate facilities in 1997, and a
small number of issues were identified and corrected.
     Environmental operating expenditures at Aurora and White Springs included
spending for their environmental departments and pollution control equipment.
Major capital items were improvements to pond water and spill prevention
systems.
     The total quantity of phosphorus and nitrogen compounds leaving the White
Springs site was reduced by 11 percent from 1996 levels, for a total reduction
of 72 percent since 1989-90.
     Environmental projects at the Company’s feed plants included the addition
of a fugitive dust collection system at Kinston, significantly improving the
work environment.
     LAND RECLAMATION: PCS is a phosphate industry leader in reclaiming the
lands it has mined.
     The reclamation work that transformed the Charles Tract clay ponds at
Aurora into a forested wildlife habitat was recognized with the National Mine
Reclamation Award in the Non-coal Category from the Interstate Mining Compact
Commission, and the North Carolina Mining Commission’s Statewide Reclamation
Award for best reclamation at a large mine in the state in 1996. The planting of
2,700 trees along the relocated portion of Bailey Creek and 231,000 trees at the
Parker Farm was completed in February, and the agricultural portion of the
Parker Farm was restored to wetlands.
     White Springs obtained the final approvals for its life-of-mine Conceptual
Reclamation Plan, a first-of-its-kind agreement with the state of Florida for
revised on-site reclamation standards in return for payments for off-site
purchase of environmentally sensitive lands. The first $1.5-million payment was
made to a fund administered by the Florida Department of Environmental
Protection under this plan.
NITROGEN AND ITS ENVIRONMENT
     In 1997, internal environmental audits were conducted at three of the
Company’s nitrogen facilities. No significant issues of non-compliance were
identified. All the Company’s nitrogen facilities in the US have applied for
permits for air emissions under Title V, the new federal regulation governing
emissions, and anticipate audits by the Environmental Protection Agency in 1998.
     Toxic release inventory (TRI) emissions at PCS Nitrogen plants are down 32
percent since 1992, including a 7-percent reduction in 1996. Lima achieved the
greatest improvement, cutting emissions by 23 percent, and they will be reduced
further when the expansion of its granular urea capacity is completed.
Reportable quantity releases from Geismar were reduced to zero, from 23 in 1996.
     The Augusta plant was named Air Quality Citizen of the Year by Georgia’s
Chamber of Commerce and Department of Natural Resources for its reduction in
nitric oxide discharge. It cut the frequency of reportable quantity releases and
permit excursions by 84 percent. After two years of planning, Augusta presented
its Risk Management Program for Augusta-Richmond County at a public meeting
which drew wide attention. Risk Management Programs are federally-mandated, but
Augusta exceeded the requirements by partnering with local regulators and
industrial groups to prepare a public presentation. The Company’s other US
nitrogen facilities plan similar presentations in 1998.
     TRI emissions were down 21 percent at the Trinidad facility due to
improvements and recycling in urea production, and process improvement of the
granulation stacks. Trinidad is adding a special environmental laboratory.
     Major capital improvements in the environmental area included installation
of secondary containment systems at LaPlatte and Clinton, an aerator system in
the effluent stream at Memphis, ammonia storage tank flare and compressor
system, urea mix tank scrubber, and scrubbers on the SPA trains at Geismar, and
oil skimmers in Trinidad.
PCS ENVIRONMENTAL EXPENDITURES
[CHART]
PCS operations are constantly improving their efforts to safeguard the
environment and natural resources related to their activities.
                                                                                29
[PICTURE]
White Springs reclaimed 775 acres in 1997, maintaining the existing trees and
vegetation to provide immediate habitat for wildlife and waterfowl, including
the rate whistling duck.
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
                            PCS ANALYSIS   [PICTURE]
     On March 6, 1997, the Company acquired Arcadian Corporation ("Arcadian")
through the merger of Arcadian into a wholly-owned subsidiary of PCS, PCS
Nitrogen, Inc. Under the terms of the merger, shareholders of Arcadian received
$12.25 in cash and 0.17713 of a common share of PCS for each outstanding share
of common stock of Arcadian. Each outstanding share of Arcadian preferred stock
was converted into 0.948 of a share of Arcadian common stock immediately prior
to the effective time of the merger. The Company utilized a $1.45 billion credit
facility to finance part of the acquisition. Immediately prior to closing,
Arcadian redeemed certain mortgage notes using funds obtained from existing cash
and short-term investments. Concurrent with the closing, the Company purchased
Arcadian senior notes through a tender offer and financed such offer from
existing cash and short-term investments and from borrowings under the credit
facility and a short-term bank loan.
1997 VERSUS 1996
     With the exception of purchased product, nitrogen data for 1997 is only for
the period subsequent to the acquisition of Arcadian. Phosphate data for 1997
includes phosphate produced after March 6, 1997 by the acquired Geismar
operation.
OVERVIEW
     Net sales revenue and net income for the year ended December 31, 1997
improved 66 percent and 42 percent, respectively, over 1996. Net income was
$297.1 million (1996 - $209.0 million) on net sales revenue of $2,325.9 million
(1996 - $1,403.9 million), or $5.68 per share (1996 - $4.59 per share). The
$922.0 million increase in net sales revenue is comprised of: potash $101.0
million; phosphate $61.6 million and nitrogen $759.4 million (the additional
nitrogen net sales revenue is primarily due to the acquisition of Arcadian).
Gross margin and operating income were $585.2 million and $447.6 million,
respectively, compared to a gross margin of $384.0 million and operating income
of $299.5 million for 1996 (increases of 52 percent and 49 percent,
respectively).
     For 1997, North American and offshore net sales revenue was $1,665.2
million (1996 - $847.8 million) and $660.7 million (1996 - $556.1 million),
respectively. North American net sales revenue represented 72 percent (1996 -
60 percent) of total net sales revenue, whereas offshore sales represented
28 percent of total net sales revenue
                                                                                31
(1996 - 40 percent). The change in the relative weighting of net sales revenue
is due to the fact that 92 percent of nitrogen net sales revenue is earned in
North America.
1997 GROSS MARGIN BY QUARTER
[CHART]
Quarterly gross margin shows the benefit of the PCS acquisition strategy and the
merits of producing three nutrients.
     Potash, phosphate and nitrogen net sales revenue for 1997 was $504.2
million (1996 - $403.2 million), $953.6 million (1996 - $892.0 million), and
$868.1 million (1996 - $108.7 million), respectively.
     Gross margin for 1997 increased $201.2 million or 52 percent over 1996.
Gross margin for potash products was $257.6 million (an increase of $67.0
million); gross margin for phosphate products was $194.4 million (an increase of
$3.1 million); and gross margin for nitrogen products was $133.2 million (an
increase of $131.1 million which is primarily due to the acquisition of
Arcadian).
     The increase in net income of $88.1 million when comparing 1997 with 1996
is attributable to a $67.0 million increase in potash gross margin and a $131.1
million gross margin contributed by nitrogen. This increase in gross margin was
offset by: $31.6 million of nitrogen selling and administrative expense
(including amortization of goodwill); a $30.1 million increase in provincial
mining and other taxes; a $34.7 million increase in interest expense relating to
the acquisition of the nitrogen operations; and a $25.4 million increase in the
provision for income taxes.
POTASH REVENUE
     Potash net sales revenue for 1997 was $504.2 million (1996 - $403.2
million), representing 22 percent of consolidated net sales revenue. The Company
sold 6.640 million tonnes of potash in 1997, compared to 5.612 million tonnes
sold in 1996, an increase of 1.028 million tonnes or 18 percent. Gross margin
for potash products was $257.6 million (1996 - $190.6 million) or 44 percent of
consolidated gross margin.
     North American and offshore potash sales volumes increased 16 percent and
20 percent, respectively, over 1996. Potash prices in the offshore market
decreased early in the year but had recovered to 1996 levels by the end of the
third quarter resulting in flat prices on a year-over-year basis. Price
increases of 14 percent were realized in the domestic market. Comparisons are
affected by sales to another producer during 1996.
     North American net sales revenue from potash operations represented 42
percent (1996 - 39 percent) of the potash net sales revenue of the Company. The
closure of Potacan’s mine due to flooding and the announced closure of another
competitor’s mine in New Mexico tightened supply which influenced successive
domestic price increases in September and November. The increase in North
American potash prices and an increase in North American sales volumes resulted
in a $52.6 million increase in North American potash net sales revenue over
1996. North American potash sales volumes for 1997 increased by 0.428 million
tonnes (1997 - 3.017 million tonnes; 1996 - 2.589 million tonnes). Of the 3.017
million tonnes for 1997, 2.813 million tonnes (1996 - 2.438 million tonnes) came
from Saskatchewan, 0.122 million tonnes (1996 - 0.079 million tonnes) from New
Brunswick and 0.082 million tonnes (1996 - 0.072 million tonnes) from Utah.

1997 POTASH NET SALES REVENUE BY MARKET
[GRAPH]
Potash sales offshore provide the highest prices, and that is where PCS sells
more of its product.
     Offshore net sales revenue from potash operations represented 58 percent
(1996 - 61 percent) of potash net sales revenue of the Company. Strong offshore
volumes contributed to higher prices during the year. In December, Canpotex
signed a new contract with China at higher prices. The increase in offshore
sales volumes resulted in a $48.4 million increase in offshore potash net sales
revenue. In the offshore market, the Company sold 3.623 million potash tonnes
during 1997 (1996 - 3.023 million tonnes), an increase of 20 percent. Of the
3.623 million tonnes, 2.960 million tonnes were sold through Canpotex and the
remaining 0.663 million tonnes were produced by PCS New Brunswick and sold and
delivered to offshore markets by PCS Sales.
PHOSPHATE REVENUE
     The acquired Geismar operation increased P2O5 production, liquid sales and
industrial sales.
32
     Phosphate net sales revenue for the year ended December 31, 1997 was $953.6
million, representing 41 percent of consolidated net sales revenue. The
distribution of this revenue was as follows: liquid phosphate fertilizer $277.6
million (29 percent); solid phosphate fertilizer $362.6 million (38 percent);
animal feed $191.0 million (20 percent); industrial products $121.0 million (13
percent) and phosphate rock $1.4 million. For 1996, net sales revenue was $892.0
million; liquid phosphate fertilizer $239.7 million (27 percent); solid
phosphate fertilizer $379.3 million (43 percent); animal feed $186.1 million (21
percent); industrial products $80.7 million (9 percent) and phosphate rock $6.2
million. Gross margin for phosphate was $194.4 million (1996 - $191.3 million)
or 33 percent of consolidated gross margin.
     For 1997, North American phosphate net sales revenue accounted for $656.9
million (1996 - $581.4 million) or 69 percent (1996 - 65 percent) of total
phosphate net sales revenue. In 1997, 56 percent (1996 - 57 percent) of the
Company’s North American phosphate net sales revenue was earned from phosphate
fertilizer products which represented 63 percent (1996 - 63 percent) of its
North American phosphate sales volumes. Offshore sales accounted for 31 percent
(1996 - 35 percent) of total phosphate net sales revenue for 1997 and 38 percent
(1996 - 42 percent) of volumes. In 1997, 92 percent (1996 - 92 percent) of the
Company’s offshore phosphate net sales revenue was earned from phosphate
fertilizer products, which represented 93 percent (1996 - 85 percent) of its
offshore phosphate sales volumes.
1997 PHOSPHATE NET SALES REVENUE BY PRODUCT
[GRAPH]
PCS sells its diversified phosphate product line to a wide variety of customers
for a wide variety of end uses.
     Net sales revenue from liquid and solid fertilizers was $640.2 million
(1996 - $619.0 million) with sales volumes of 3.290 million tonnes (1996 - 3.120
million tonnes). Solid phosphate fertilizer (substantially all DAP) accounted
for 38 percent (1996 - 43 percent) or $362.6 million (1996 - $379.3 million) of
the total phosphate net sales revenue. North American net sales revenue from
liquid and solid fertilizers was $367.5 million (1996 - $332.8 million) with
sales volumes of 1.745 million tonnes (1996 - 1.569 million tonnes). Compared to
1996, the Company received higher prices for most of its phosphate products
(with the exception of DAP and industrial products, the latter due to product
mix). Liquid fertilizer prices increased by 5 percent and sales volumes
increased by 10 percent, resulting in additional net sales revenue of $37.9
million. Solid phosphate fertilizer prices declined 7 percent as compared to
1996. However, this was partially offset by a volume increase of 2 percent,
resulting in a reduction of net sales revenue of $16.7 million.
     Net sales revenue from animal feed and industrial products during 1997 was
$312.0 million (1996 - $266.8 million) with sales volumes of 1.115 million
tonnes (1996 - 0.994 million tonnes). North American net sales revenue was 93
percent of total animal feed and industrial products in 1997 (1996 - 93
percent). Animal feed prices increased 6 percent and volumes decreased 3 percent
as compared to 1996. This resulted in additional net sales revenue of $4.9
million. Industrial product prices declined by 11 percent while sales volumes
increased by 68 percent (the changes are partially due to the acquisition of
Arcadian). The result was additional net sales revenue of $40.4 million. Gross
margin provided by feed and industrial products increased by 26 percent over
last year.
NITROGEN REVENUE
     Arcadian was acquired in March 1997. Nitrogen net sales revenue for the
year was $868.1 million. North American net sales revenue for the year accounted
for 92 percent of the total nitrogen net sales revenue. Net sales revenue
includes $201.6 million of purchased nitrogen products for resale. Manufactured
nitrogen net sales revenue for the ten months ended December 31, 1997 was $666.5
million. The distribution of this revenue was as follows: ammonia $183.8 million
(28 percent); urea $203.1 million (30 percent); nitrogen solutions $161.1
million (24 percent) and other nitrogen
                                                                              33
1997 MANUFACTURED NITROGEN NET SALES REVENUE BY PRODUCT
[GRAPH]
PCS became a three-nutrient fertilizer producer in March, and had revenue of
$667 million from manufactured nitrogen products in 1997 and $201 million from
sale of purchased product.

products $118.5 million (18 percent). Gross margin for nitrogen products was
$133.2 million or 23 percent of consolidated gross margin.
     From the date of acquisition, sales tonnes for manufactured nitrogen
products were as follows: ammonia 1.061 million tonnes; urea 1.226 million
tonnes; nitrogen solutions 1.719 million tonnes and other nitrogen products
0.894 million tonnes. Purchased nitrogen products sales tonnes for 1997 were
1.138 million tonnes.
     Limited imports of urea into China resulted in pricing pressures throughout
the world. Ammonia prices have declined since the acquisition, but results were
supported by the Company’s strategic plant locations in North America and its
favorable gas contracts in Trinidad.
COST OF GOODS SOLD
     For the year ended December 31, 1997, the Company produced 6.483 million
potassium chloride (KCl) tonnes, compared to 5.782 million tonnes in 1996, an
increase of 0.701 million tonnes (12 percent). The Company produced 2.282
million P2O5 tonnes of phosphoric acid from its phosphate operations, compared
to 2.096 million tonnes in 1996, an increase of 0.186 million tonnes (mainly due
to the acquisition of the Geismar operations). From the date of acquisition,
nitrogen production was 2.349 million nitrogen (N) tonnes.
     Potash unit cost of sales decreased marginally in 1997 compared to 1996,
due primarily to higher production volumes and fewer shutdown weeks.
Phosphate unit cost of sales in 1997 for feed products decreased by 2 percent
and industrial products decreased by 3 percent as compared to the same period
in the prior year. However, this was offset by an increase of 5 percent in the
unit cost of sales of liquid fertilizer. These increased costs were primarily
caused by increased rock costs as a result of excessive moisture in the
overburden at Aurora. The unit cost of sales of solid fertilizer remained
unchanged during 1997. The input cost of sulphur increased and ammonia
decreased as compared to 1996.
     PCS Nitrogen, through its natural gas hedging program and favorable gas
contracts in Trinidad, has kept its per unit natural gas cost relatively flat.
     Depreciation and amortization expense for 1997 was $170.0 million compared
to $90.1 million in 1996, an increase of $79.9 million or 89 percent. The
increase is largely attributable to $69.0 million additional depreciation and
amortization from the acquired nitrogen operations.
SELLING AND ADMINISTRATIVE
     Selling and administrative expenses for 1997 were $99.7 million as compared
to $60.1 million in 1996, an increase of $39.6 million. The increase is
attributable to the acquisition of Arcadian ($31.6 million including
amortization of goodwill of $12.2 million) and to general increases in supplies,
compensation and benefits.
PROVINCIAL MINING AND OTHER TAXES
     Saskatchewan’s Potash Production Tax is comprised of a base tax per tonne
of product sold and an additional tax based on mine-by-mine profits. The New
Brunswick division and the Saskatchewan divisions pay a provincial Crown
royalty, which is accounted for under cost of goods sold.
     For 1997, provincial mining and other taxes were $70.3 million as compared
to $40.2 million in 1996, an increase of $30.1 million. Potash production tax
was $53.5 million compared to $27.5 million in 1996, an increase of $26.0
million. The increased sales volumes in 1997 over 1996 have served, in part, to
increase the taxes. In addition, increased prices for potash and the resulting
increased profit per tonne, combined with the full utilization of certain
provincial resource tax deductions carried forward from prior years, has
resulted in most Saskatchewan mines reaching the top marginal profits tax rate
of 50 percent in 1997.
34
     Saskatchewan corporate capital tax was $16.8 million in 1997 compared to
$12.7 million in 1996, an increase of $4.1 million. Various other payments to
the province in the form of royalties and taxes totalled $14.8 million in 1997
and $12.1 million in 1996, and are reflected in cost of goods sold.
INTEREST EXPENSE
     For 1997, interest expense was $81.4 million as compared to $46.8 million
in 1996. The weighted average long-term debt outstanding in 1997 was $1.1
billion (1996 - $0.7 billion). The increase is due to the financing of the
Arcadian acquisition. The weighted average interest rate on the long-term debt
outstanding increased to 6.1 percent in 1997 from 5.8 percent in 1996. The
increase is primarily due to the higher interest rate on the ten-year notes
issued in June 1997.
INCOME TAXES
     Income taxes for the year were $69.1 million, compared to $43.7 million in
1996, an increase of $25.4 million. The increase reflects higher taxable
earnings relating to the Company’s phosphate operations and taxes relating to
the Company’s acquired nitrogen operations.
     PCS and certain subsidiaries are subject to federal and provincial income
taxes in Canada. By virtue of deductions with respect to non-capital losses
carried forward, capital cost allowance, Canadian development expense, and
earned depletion allowance, such taxes have not yet become payable. However, PCS
is subject to the Large Corporations Tax. In 1997, PCS began to book a deferred
tax provision at the effective rate of 35 percent since the tax pools plus the
non-capital losses carried forward are less than the book value of the assets.
Assuming the status quo, the Company is likely to begin paying some Canadian
income tax before the end of the decade.
     The Company’s subsidiaries which operate in the United States are subject
to US federal and state income taxes. By virtue of certain income tax deductions
available, these subsidiaries are not currently subject to regular cash income
taxes. However, they are subject to the Alternative Minimum Tax, which may be
carried forward indefinitely as a credit to be applied against future regular
income tax liabilities. In addition, the Company is subject to United States
withholding tax on certain payments received from its US subsidiaries. The tax
rate applicable to the US operations for 1997 was approximately 21 percent of
income before taxes, of which 9 percentage points represented deferred income
taxes and 12 percentage points represented cash taxes. This rate for 1996 was
approximately 24 percent of income before taxes, of which 14 percentage points
represented deferred income taxes and 10 percentage points represented cash
taxes.
     The Company’s nitrogen subsidiaries which operate in Trinidad are subject
to Trinidad taxes. The foreign tax rate applicable to the Trinidad operations
for 1997 is approximately 37 percent of income before taxes.

[PICTURE]
Cotton, grown in more than 75 countries including Australia, benefits from the
correct application of potash and is a growth market for this nutrient.
1996 VERSUS 1995
     Results for 1995 do not include (1) the results of White Springs prior to
October 31, 1995, the date of acquisition, and (2) the results of PCS Phosphate
(formerly Texasgulf Inc.) prior to April 10, 1995, the date of acquisition.
                                                                              35
OVERVIEW
     Net sales revenue and net income for 1996 improved 64 percent and 31
percent, respectively. Net income for 1996 was $209.0 million (1995 - $159.5
million) on net sales revenue of $1,403.9 million (1995 - $856.1 million), or
$4.59 per share (1995 - $3.68 per share). The $547.8 million increase in net
sales revenue is comprised of: potash $(17.8) million; phosphate $479.8 million
and ammonia $85.8 million. For 1996, gross margin and operating income were
$384.0 million and $299.5 million, respectively, compared to a gross margin of
$306.9 million and an operating income of $224.2 million for 1995 (increases of
25 percent and 34 percent, respectively).
     For 1996, North American and offshore net sales revenue was $847.8 million
(1995 - $438.1 million) and $556.1 million (1995 - $418.0 million),
respectively. North American net sales revenue represented 60 percent (1995 - 51
percent) of total net sales revenue, and offshore net sales revenue represented
40 percent of total net sales revenue (1995 - 49 percent).
     Potash, phosphate and ammonia net sales revenue for 1996 was $403.2 million
(1995 - $421.0 million), $892.0 million (1995 - $412.1 million), and $108.7
million (1995 - $23.0 million), respectively.
     Gross margin for 1996 increased $77.1 million or 25 percent over 1995.
Gross margin for potash was $190.6 million, a decrease of $27.0 million compared
to 1995. Gross margin for phosphate products and ammonia was $193.4 million
(1995 - $89.3 million). Domestic fertilizer sales were strong in both potash and
phosphate nutrients as customers purchased during the summer fill program in
anticipation of a good fall application period.
     The increase in net income of $49.5 million for 1996 is largely
attributable to an additional $565.6 million in net sales revenue from the
phosphate and ammonia acquisitions, and a 7 percent decrease in Saskatchewan
provincial mining and other taxes. This was offset by a decrease in potash net
sales revenue of $17.8 million, an increase in interest expense of $4.9 million
relating to a full year’s interest cost on debt financing of $878.8 million
incurred to purchase PCS Phosphate and White Springs, a $470.7 million increase
in cost of sales, a $20.7 million increase in income taxes, and an increase in
selling and administrative expenses of $6.5 million.
     Although the Company had increased earnings in 1996 compared to 1995,
market conditions in North America did not live up to expectations for the
fertilizer industry in general. A cold and wet spring put a damper on the
domestic market, resulting in a delayed seeding and harvest season. However,
sales rebounded in the summer and continued high through the fall, when farmers
purchased product to replace the nutrients depleted by higher yielding crops. In
the export market, large purchases at the end of 1995 and subsidy issues
resulted in lower sales volumes of potash and DAP to China and India during 1996
compared to 1995. Both countries carried large potash inventories over from
1995, affecting 1996 purchases. Shipments to Brazil, the third major potash
customer among developing nations, began 1996 slowly but it bought record
volumes after resolving some of its finance and economic issues.
POTASH REVENUE
     Potash net sales revenue for 1996 decreased by $17.8 million or 4 percent
as compared to 1995 (1996 - $403.2 million; 1995 - $421.0 million). The Company
sold 5.612 million tonnes of potash in 1996, compared to 5.848 million tonnes
sold in 1995, a decrease of 0.236 million tonnes or 4 percent. Potash prices
were up 1 percent (excluding sales to another producer).
     In 1996, North American and offshore potash sales volumes increased 14
percent and decreased 15 percent, respectively, compared to 1995. Part of this
increase (7 percent) was due to a full year of sales of production from Moab,
Utah, as well as sales to a competitor during its strike. Scheduled price
increases for the first quarter of 1996 were not attained and domestic customers
bought mainly during the summer prior to announced price increases. Exclusive of
sales to another producer, prices received from domestic customers were down 5
percent. Potash prices increased 6 percent in the offshore market. Offshore New
Brunswick price realizations in 1996 were flat in comparison to 1995.
     North American net sales revenue from potash operations represented 39
percent of the potash net sales revenue of the Company during 1996 (1995 - 35
percent). The increase in North American potash sales volumes and the decrease
in North American prices resulted in a $11.5 million increase in North American
potash net sales revenue over 1995. North American potash sales volumes for 1996
increased 0.316 million tonnes (1996 - 2.589 million tonnes; 1995 - 2.273
million tonnes) compared to 1995. Of the 2.589 million tonnes for 1996 (1995 -

36
2.273 million tonnes), 2.438 million tonnes (1995 - 2.137 million tonnes) came
from Saskatchewan, 0.079 million tonnes (1995 - 0.078 million tonnes) from New
Brunswick and 0.072 million tonnes (1995 - 0.058 million tonnes) from Utah.
Sales volumes to another producer were 0.133 million tonnes.
     In 1996, offshore net sales revenue from potash operations represented 61
percent of potash net sales revenue of the Company (1995 - 65 percent). The
decrease in offshore sales volumes and the 6 percent increase in overall
offshore selling price resulted in a $29.3 million decrease in offshore potash
net sales revenue compared to 1995. In the offshore market, the Company sold
3.023 million potash tonnes during 1996 (1995 - 3.574 million tonnes), a
decrease of 15 percent. The principal reason for the decrease was lower sales to
China through Canpotex. Of the 3.023 million tonnes, 2.400 million tonnes were
sold through Canpotex and the remaining 0.623 million tonnes were produced by
PCS New Brunswick and sold and delivered to offshore markets, such as Brazil, by
PCS Sales.
[PICTURE]
Coffee, one of Brazil’s major exports, requires ample application of
fertilizer.
PHOSPHATE REVENUE
     Phosphate net sales revenue for the year ended December 31, 1996 was $892.0
million. The distribution of this revenue was as follows: liquid phosphate
fertilizer $239.7 million (27 percent); solid phosphate fertilizer $379.3
million (43 percent); animal feed $186.1 million (21 percent); industrial
products $80.7 million (9 percent) and phosphate rock $6.2 million. For 1995 net
sales revenue was $412.1 million; liquid phosphate fertilizer $106.3 million (26
percent); solid phosphate fertilizer $151.2 million (37 percent); animal feed
$94.5 million (23 percent); industrial products $55.1 million (13 percent) and
phosphate rock $5.0 million. Gross margin for phosphate was $193.4 million (1995
- $89.4 million) or 50 percent of consolidated gross margin.
     For 1996, North American phosphate net sales revenue accounted for $581.4
million (65 percent) of total phosphate net sales revenue of $892.0 million. In
1996, 57 percent of the Company’s North American phosphate net sales revenue was
earned from phosphate fertilizer products which represented 63 percent of its
North American phosphate sales volumes. Offshore sales accounted for 35 percent
of total phosphate net sales revenue for 1996 and 42 percent of volumes. In
1996, 92 percent of the Company’s offshore phosphate net sales revenue was
earned from phosphate fertilizer products which represented 85 percent of its
offshore phosphate sales volumes.
     For 1996, net sales revenue from liquid and solid fertilizers was $619.0
million (1995 - $257.5 million) with sales volumes of 3.120 million tonnes (1995
- 1.399 million tonnes). Solid phosphate fertilizer (substantially all DAP)
accounted for 43 percent or $379.3 million of the total phosphate net sales
revenue. Offshore net sales revenue from DAP accounted for 56 percent of solid
fertilizer net sales revenue while North American net sales revenue from liquid
fertilizer accounted for 69 percent of liquid fertilizer net sales revenue. The
average net sales prices for liquid and solid fertilizer improved by 11 percent
and 5 percent, respectively. Export liquid and solid fertilizer sales prices
improved by 7 percent and 8 percent, respectively, compared to the same period a
year ago. North American liquid and solid fertilizer sales prices improved 5
percent and 2 percent, respectively, compared to 1995.

                                                                              37
     Net sales revenue from animal feed and industrial products during 1996 was
$266.8 million (1995 - $149.6 million) with sales volumes of 0.994 million
tonnes (1995 - 0.596 million tonnes). For 1996, feed sales tonnage was 0.778
million tonnes (1995 - 0.428 million tonnes) with 11 percent sold to offshore
markets such as South and Central America and Asia, while the remaining 0.216
million tonnes (1995 - 0.168 million tonnes) were industrial products sold to
North American customers. Feed product prices for 1996 improved by 8 percent
over 1995. North American industrial selling prices increased by 14 percent
compared to 1995.
AMMONIA REVENUE
     Ammonia sales for 1996 contributed $108.7 million (1995 - $23.0 million) to
net sales revenue with sales volumes of 0.535 million tonnes, (1995 - 0.115
million tonnes). Ammonia sales are comprised of the resale of purchased product.
COST OF GOODS SOLD
      For 1996, the Company produced 5.782 million potassium chloride (KCl)
tonnes, compared to 6.071 million tonnes in 1995, a decrease of 0.289 million
tonnes (5 percent) compared to 1995. It produced 2.096 million phosphoric acid
(P2O5) tonnes from its phosphate operations, compared to 1.008 million tonnes in
1995.
     Potash unit cost of sales increased by 7 percent compared to 1995 due in
part to a greater proportion of higher cost New Brunswick product in the mix and
a slight increase in the number of shutdown weeks (the number of mineweeks of
shutdown is at the discretion of management). Regarding phosphate, lower sulphur
and ammonia costs were offset by a full year of higher cost White Springs
products.
     Depreciation expense for 1996 was $90.1 million compared to $71.0 million
in 1995, an increase of $19.1 million or 27 percent. The increase is the result
of $22.8 million additional depreciation from the acquired phosphate operations.
Depreciation expense for the potash operations decreased by $3.6 million as a
result of reduced production.
SELLING AND ADMINISTRATIVE
     During 1996, selling and administrative expenses were $60.1 million
compared to $54.1 million in 1995. The $6.0 million increase is attributable to
the acquisitions of PCS Phosphate and White Springs and to general increases in
travel, supplies, compensation and benefits.
PROVINCIAL MINING AND OTHER TAXES
     Saskatchewan’s Potash Production Tax is comprised of a base tax per tonne
of product sold and an additional tax based on mine-by-mine profits. The New
Brunswick division and the Saskatchewan divisions pay a provincial Crown
royalty, which is accounted for under cost of goods sold.
     Increased profitability at certain of the mines increased the rate of taxes
paid to the Saskatchewan government but total taxes were reduced by lower prices
and potash sales volumes from Saskatchewan. For 1996, Saskatchewan provincial
mining and other taxes were $40.2 million compared to $43.4 million in 1995, a
decrease of 7 percent. Potash production tax for 1996 was $27.5 million compared
to $29.6 million in 1995, a decrease of 7 percent. Saskatchewan corporate
capital tax was $12.7 million in 1996 compared to $13.8 million in 1995, a
decrease of 7 percent. Various other payments to the province in the form of
royalties and taxes totalled $12.1 million in 1996 and $12.9 million in 1995 and
are reflected in cost of goods sold.
INTEREST EXPENSE
     For 1996, interest expense was $46.8 million compared to $41.8 million in
1995. The 1996 amount includes the interest incurred for the full year in
respect of the acquisitions made in 1995, while the 1995 amount includes
interest expense only after each of the respective acquisitions in April and
October.
INCOME TAXES
     Income taxes in 1996 were $43.7 million, compared to $22.9 million in 1995,
an increase of $20.8 million. The increase is largely attributable to US
withholding taxes, alternative minimum taxes and deferred income tax, relating
to the Company’s acquired phosphate operations which operated the full year
under PCS ownership.
     PCS and certain subsidiaries are subject to federal and provincial income
taxes in Canada. By virtue of deductions with respect to non-capital losses
carried forward, capital cost allowance, Canadian development expense, earned
depletion allowance, and resource allowance, such taxes have not yet been
payable by the Company. However, it is subject to the Large Corporations Tax. At
December 31, 1996, the Canadian tax pools plus the non-capital losses carried
forward exceed the book value of depreciable assets. PCS will begin to book a
deferred tax provision at the effective rate of 35 percent once the tax pools
plus the non-capital losses carried forward are less than the
38
book value of the assets. This rate assumes that primarily all Canadian
profits for income tax purposes are resource profits eligible for the resource
allowance and that an earned depletion claim of 25 percent on resource profits
is available to the Company.
     The Company’s subsidiaries which operate in the United States are subject
to US federal and state income taxes. By virtue of certain income tax deductions
available, these subsidiaries are not currently subject to regular cash income
taxes. However, they are subject to the Alternative Minimum Tax, which may be
carried forward indefinitely to be applied against regular income tax liability.
In addition, the Company is subject to United States withholding tax on certain
payments received from its US subsidiaries. For 1996, the tax rate was
approximately 24 percent, of which 14 percentage points represented deferred
income taxes, and 10 percentage points represented cash taxes.
Analysis of Financial Condition and Cash Flow
     Cash provided by operating activities for 1997 was $467.8 million (1996 -
$296.2 million). The increase in cash from operating activities of $171.6
million is primarily due to the contribution from the nitrogen operations.
     Cash used in investing activities was $1,215.4 million (1996 - $39.0
million). Of the $1,176.4 million difference, $1,048.3 million relates to the
acquisition of shares of Arcadian, $69.5 million relates to capital additions to
fixed assets at PCS Nitrogen, and $31.9 million relates to increased capital
spending in potash and phosphate operations.
     Cash provided by (used in) financing activities was $762.7 million (1996 -
$(304.0) million). The Company financed a portion of the Arcadian acquisition
and repayment of the Arcadian Senior Notes with additional long-term debt of
$810.0 million and short-term debt of $140.0 million. $300.0 million of the
long-term debt and a net $38.1 million of the short-term debt were repaid during
the period, as were $374.5 million of the Arcadian Senior Notes. The balance of
the Arcadian acquisition was financed through the issuance of 8,029,092 common
shares valued at $573.3 million. The Company paid dividends of $55.3 million
(1996 - $48.2 million).
RISKS ASSOCIATED WITH FINANCIAL INSTRUMENTS
     The Company’s nitrogen operations are significantly impacted by the price
of natural gas. The Company employs derivative commodity instruments related to
a portion of its natural gas requirements (primarily futures, swaps and options)
for the purpose of managing its exposure to commodity price risk in the purchase
of natural gas. Changes in the market value of these derivative instruments have
a high correlation to changes in the spot price of natural gas. Gains or losses
arising from settled hedging transactions are deferred as a component of
inventory until the product containing the hedged item is sold. Changes in the
market value of open hedging transactions are not recognized as they generally
relate to changes in the spot price of anticipated natural gas purchases. The
effect of the natural gas hedging program on cost of sales in 1997 was a
reduction of $1.8 million.
     A sensitivity analysis has been prepared to estimate the Company’s market
risk exposure arising from derivative commodity instruments. The fair value of
such instruments is calculated by valuing each position using quoted market
prices. 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, 1997, the Company’s derivative
commodity instruments market risk exposure was

THE FOLLOWING TABLE SUMMARIZES CERTAIN OF THE COMPANY’S FINANCIAL RATIOS AS
CALCULATED FROM THE CONSOLIDATED FINANCIAL STATEMENTS:

<TABLE>
                                         YEAR ENDED DECEMBER 31
                                         1997              1996        % CHANGE
<S>                                      <C>               <C>         <C>
Quick Ratio                               .79              1.23         (35.8)
Current Ratio                            1.62              2.48         (34.7)
Shareholders’ Equity to Total Assets      .50               .56         (10.7)
Return on Shareholders’ Equity            13%               15%         (13.3)
Book Value per Share                   $41.34            $30.83          34.1
Asset Turnover                            53%               56%          (5.4)
Return on Investment                    8.55%            10.25%         (16.6)
Long-term Debt to Equity                .51:1             .44:1          15.9
</Table>
                                                                              39
$22.5 million. Actual results may differ. Changes in the fair value of such
derivative instruments, with maturities in 1998 through 2002, will generally
relate to changes in the spot price of anticipated natural gas purchases.

     The Company also enters into forward foreign exchange contracts to manage
its exposure to exchange rate fluctuations relating to certain trade
liabilities. Gains or losses resulting from foreign exchange contracts are
recognized at the time that the contracts are entered into and are included in
other income.
ENVIRONMENTAL
     The Company is subject to various environmental laws and regulations
throughout the United States, Canada, and Trinidad. Expenditures relating to
compliance with these environmental laws are considered to be part of the normal
course of business. Future laws and regulations or changes to existing laws and
their impact cannot be predicted. Capital expenditures in the environmental area
in 1997 totalled $15.4 million (1996 - $8.9 million) while $66.9 million (1996 -
$63.0 million) was incurred as environmental operating expense. Expenditures in
1998 are expected to be of a similar magnitude for existing operations.
YEAR 2000
     The Company began addressing Year 2000 issues in the early 1990s by
converting to four-digit date codes. It continues to review its administration
systems and, based on investigations to date, considers them to be Year 2000
compliant with minor exceptions that will be compliant once routine upgrades are
completed. It is reviewing its operational systems and communicating with
relevant third parties to address Year 2000 matters. It is utilizing internal
resources to identify, reprogram and test its systems for Year 2000 compliance
and anticipates that these efforts will be completed by first quarter 1999.
Costs over the next two years are not expected to have a material effect on the
Company’s financial results.
OUTLOOK
     Certain statements in this annual report and this Management Discussion and
Analysis of Financial Condition and Results of Operations, including those in
this "Outlook" section relating to the period after December 31, 1997, are
forward-looking statements subject to uncertainties. A number of factors could
cause actual results to differ materially from those in the forward-looking
statements, including, but not limited to, fluctuation in supply and demand in
fertilizer markets, fluctuation in supply and demand in sulphur and
petrochemical markets, changes in capital markets, changes in currency exchange
rates, unexpected geological or environmental conditions, imprecision in reserve
estimates, and changes in government policy. The Company sells 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 shift from one period to another.
     The rising world population and the demand for more food and better diets,
with meat as a protein source, will continue to drive consumption of fertilizers
over the long term. Over the short term,


PCS DEBT TO CAPITAL RATIO
[GRAPH]
     Its phosphate and nitrogen acquisitions raised the Company’s debt to
capital ratio, but it has continued to pay down debt and has lowered its ratio
each quarter.
40
there should be increased fertilizer usage as world grain stocks are at
historical lows, and governments around the world are focusing on increasing
food production. While the consumption trend line is expected to continue
to climb over the long term, there will be, at times, fluctuations in demand.
     North American fertilizer demand is generally considered mature but is
expected to fluctuate from year to year, as a function of acres planted and
application rates per acre which are influenced by crop prices and weather. US
farmers are projected to commit more than 150 million acres to corn and soybeans
in 1998. These crops are among the largest users of fertilizers. With the need
to replenish depleted nutrient levels in the soil from record or near-record
harvests in 1997 and the larger acreages for corn and soybeans, it is expected
that demand for fertilizer will remain strong.
     The Company sells a significant amount of potash and phosphate in the
offshore markets. To date, the currency devaluation in Far Eastern countries has
not significantly affected these sales. These countries purchase fertilizer to
grow cash crops for export and to grow food for internal use and are making
fertilizer purchases a priority in spending plans. However, the persistence of
the currency devaluation could affect the growth trend.
     The Company also sells products in the non-fertilizer markets which are
affected by domestic economic growth. The optimistic outlook for domestic
economic growth should translate into increased demand for these upgraded
products.
     The effect of such anticipated increase in demand for fertilizer and
non-fertilizer products will be offset to the degree that additional capacity,
particularly for nitrogen products, comes on stream.
     Potash is expected to continue to perform well in both the domestic and
offshore markets. The Company successfully introduced two successive price
increases in the domestic market in the fall of 1997 and has announced a further
price increase for the first quarter of 1998. Supply has tightened as a
competitor in New Brunswick has shut down due to mine flooding and another mine
in New Mexico has closed due to dwindling ore reserves. The PCS acquisition of
Potacan will provide greater flexibility in product sourcing and mix. In the
offshore market, 1998 is off to a good start. Canpotex shipped strong volumes,
at higher prices, to China during the first quarter. A contract agreement at
higher prices was reached with Japan.
     PCS continues to operate its potash mines by matching production to sales
demand. Shutdowns at potash mines for inventory correction will influence potash
production costs on a quarter-over-quarter comparative basis.
[PICTURE]
     Freed from government restrictions, US farmers are planting more acres and
applying more fertilizer - an estimated 20 million tonnes in 1996-97.
     The near-term outlook for phosphate prices is expected to remain steady as
supply and demand are in reasonably good balance. Worldwide phosphoric acid
capacity utilization remains at historically high levels. The outlook for liquid
phosphate fertilizer is positive from both a demand and a price perspective. As
two-thirds of US DAP is exported, a strong offshore market is required to
establish upward pressure on prices. Prospective sales to China, India and
Pakistan look favorable. However, as in the past, India’s purchases will depend
on its subsidies. Mississippi Chemical has joined PhosChem, further
strengthening the association’s offshore sales position. In North America,
projected increased acreage is expected to support liquid and solid phosphate
fertilizer sales.
     In the phosphate feed industry, forecasts of increased hog and poultry
production in 1998 bode well for improved demand.
     Market prices for nitrogen fertilizer are expected to continue under
pressure as new capacity comes on stream. It will be difficult for the Company
to realize its 1997 ten month gross margin in nitrogen in the full year of 1998.
The urea market is influenced by China. Early in 1997, China stopped importing
urea which had a negative effect on prices. Chinese buyers remained
                                                                                41
inactive through early 1998. China postponed plans for the construction of two
urea plants. The UAN solutions market has been additionally affected by new
capacity. Prices continue to be disappointing. As a result, PCS Nitrogen has
cut nitrogen solutions production at its Wilmington plant. This plant is
scheduled to cease production in the first half of 1998. Overall, the Company
expects that its strategic plant locations (which generally result in higher
margins), stable sales to industrial customers, and favorable gas contracts
in Trinidad will continue to support nitrogen margins.
[GRAPH]
Source: USDA
China tripled its meat consumption between 1987 and 1997. In 10 years, its per
capita poultry and beef consumption increased sixfold while consumption of pork
doubled.
     The moderation of ammonia prices is expected to favorably affect phosphate
processing input costs on a year-over-year basis. PCS can use up to one-third of
the ammonia it produces and sells as ammonia at its own phosphate plants.
Modified mining methods at Aurora are expected to reduce rock costs.
     The Company manages its natural gas costs through a combination of fixed
price contracts, hedges and the Trinidad gas contracts. As the most flexible
producer, PCS will continue to allocate its nitrogen and phosphate feed stock to
production of the products with the best margins.
     Capital expenditures in 1998 are expected to be approximately the same as
those in 1997.
     Depreciation and amortization will be higher, in large part due to a full
year of nitrogen operations.
     On February 9, 1998, the government of the Province of Saskatchewan
announced a reduction of the top marginal rate of the profits portion of the
Potash Production Tax from 50 percent to 35 percent, effective January 1, 1998.
     The deferred income tax provision in 1998 will be higher as the Company has
fully utilized its additional Canadian tax deductions.
     The narrative included under this Management Discussion and Analysis has
been prepared with reference to the financial statements reported under
accounting principles generally accepted in Canada.


[PICTURE]


     Developing nations are coming to recognize that importing fertilizer to
improve yields of grains, fruits, vegetables and other crops often costs less
than importing food to feed their rising populations.
SELECTED TEN-YEAR DATA
(For the Years Ended December 31)

<Table>
<Caption>
                        1997(5)    1996 1995(4) 1994(1)     1993(3)    1992   1991   1990 1989(2)    1988
<S>                     <C>        <C>   <C>      <C>       <C>        <C>    <C>    <C>   <C>       <C>
FINANCIAL DATA
(US$ Millions)
Net Sales             2,325.9   1,403.9    856.1   363.1     212.2    214.1 206.8 189.9      221.6 251.3
Operating Income         447.6    299.5    224.2    98.5      56.9     50.6   39.1   34.6      68.4  84.8
Net Income               297.1    209.0    159.5    91.2      44.7     39.8   31.3   17.3      57.7  74.8
Net Income per Share
(Actual Dollars)          5.68     4.59      3.68   2.12      1.13     1.03   0.81   0.47      1.65   --
Dividends per Share
(Actual Dollars)          1.03     1.06      1.06   0.77      0.53     0.51   0.51   0.51      0.13   --
Cash Provided by
Operating Activities     467.8    296.2    233.5    150.7     49.8     57.4   53.8   66.1      72.4  97.7
Working Capital          281.7    278.8    136.1    103.3     37.0     70.9   47.4   25.7      16.4 115.3
Total Assets          4,427.6   2,494.4 2,581.8 1,027.8 1,036.4       915.0 898.8 914.8      915.5 959.0
Total Long-Term Debt
and Long-Term
Obligations Under
Capital Lease         1,130.0     620.0    714.5      2.0     20.1     48.9   54.4   62.6      67.8  72.3
Shareholders’ Equity 2,227.9    1,405.5 1,241.9     964.3    903.7    809.5 788.9 777.3      745.2 858.9
_________________________________________________________________________________________________________
OPERATING DATA
(Thousands)
EMPLOYEES AT YEAR-END
(Actual Numbers)         5,751    4,490    4,579    1,781    1,818    1,415 1,227 1,242      1,256 1,273
_________________________________________________________________________________________________________
POTASH PRODUCTION (KCl)
Tonnage                  6,483    5,782    6,071    5,298    3,902    3,850 4,030 3,464      4,257 5,089
_________________________________________________________________________________________________________
PHOSPHATE PRODUCTION
(P2O5) Tonnage           2,282    2,096    1,008      --        --      --     --     --        --    --
_________________________________________________________________________________________________________
NITROGEN PRODUCTION (N)
Tonnage                  2,349      --        --      --        --      --     --     --        --    --
_________________________________________________________________________________________________________
POTASH SALES - KCl
Tonnes                   6,640    5,612    5,848    5,569    3,795    3,737 3,909 3,725      4,018 4,728
_________________________________________________________________________________________________________
PHOSPHATE SALES -
Product Tonnes           4,434    4,305    2,206      --        --      --     --     --        --    --
_________________________________________________________________________________________________________
NITROGEN SALES -
Product Tonnes           6,038      535       115     --        --      --     --     --        --    --
_________________________________________________________________________________________________________
NET SALES
(US$ Millions)
POTASH                   504.2    403.2    421.0    363.1     212.2   214.1 206.8 189.9      221.6 251.3
PHOSPHATE                953.6    892.0    412.1      --         --     --     --     --        --    --
NITROGEN                 868.1    108.7      23.0     --         --     --     --     --        --    --
_________________________________________________________________________________________________________
TOTAL NET SALES       2,325.9   1,403.9    856.1    363.1     212.2   214.1 206.8 189.9      221.6 251.3
_________________________________________________________________________________________________________
</Table>
(1)    The financial statements of the Company for 1994 and prior years have been
       restated to US currency in accordance with accounting principles generally
       accepted in Canada using the Translation of Convenience Method. The
       Canadian dollar amounts have been converted to US currency at the exchange
       rate of US$1.00 = CDN$1.4028.
(2)    In November 1989, the Company was privatized. Subsequent results reflect
       the privatization and associated reorganization.
(3)    Data for 1993 and thereafter reflect the acquisition of Potash Company of
       America assets on October 7, 1993.
(4)    Data for 1995 and thereafter reflect the acquisition of Texasgulf Inc. on
       April 10, 1995 and the acquisition of White Springs Agricultural Chemicals,
       Inc. on October 31, 1995.
(5)    Data for 1997 reflect the acquisition of Arcadian Corporation on March 6,
       1997.
<Table>
<Caption>
                                 97 Q1    97 Q2    97 Q3    97 Q4    96 Q1     96 Q2    96 Q3    96 Q4
<S>                              <C>      <C>      <C>      <C>      <C>       <C>      <C>      <C>
QUARTERLY RESULTS (Thousands)
Potash Production - KCl Tonnes 1,653      1,687    1,297    1,846    1,699     1,512      755    1,816
Phosphate Production -
P2O5 Tonnes                        521      600      599      562      514       507      532      543
Nitrogen Production - N Tonnes     240      724      722      663     --        --       --       --
Net Sales ($)                  464,834  676,648 573,773 610,674 366,871      352,369 342,148 342,480
Operating Income ($)            90,513  154,714 108,851    93,562   87,122    74,366   66,418   71,586
Net Income ($)                  56,365   96,980   71,418   72,375   63,678    52,398   46,772   46,188
Net Income per Share
(Actual Dollars) ($)              1.18     1.81     1.33     1.35      1.40     1.15     1.03     1.01
______________________________________________________________________________________________________
</Table>
The consolidated financial statements of the Company have been prepared in
accordance with accounting principles generally accepted in Canada. These
principles differ in some respects from those applicable in the United States
(see Note 26 to the Company’s consolidated financial statements).
NOTES TO SELECTED TEN-YEAR DATA AND QUARTERLY RESULTS:
1.   There were no extraordinary items nor were there any discontinued
     operations in any of the accounting periods.
2.   Fully diluted net income per share did not differ materially from net
     income per share in any of the accounting periods.
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.

                                                                         43
MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL REPORTING
     The accompanying consolidated financial statements and related financial
information are the responsibility of PCS management and have been prepared in
accordance with generally accepted accounting principles and include amounts
based on best estimates and judgments. Financial information included elsewhere
in this report is consistent with the consolidated financial statements.
     To meet management’s responsibility for financial reporting and to obtain
reasonable assurance for the integrity and reliability of the financial reports,
the Company’s accounting and internal control systems are designed to safeguard
assets and to properly record transactions and events. Policies and procedures
are maintained to support the accounting and internal control systems.
     Our independent auditors, Deloitte & Touche, provide an objective,
independent audit of the consolidated financial statements. Their report for
1997 is included.
     The Board of Directors, through the audit committee composed exclusively of
outside directors, meets regularly with the independent auditors and
representatives of management, including the Company’s internal auditor - both
jointly and separately - to review significant accounting, reporting and
internal control matters. The audit committee also recommends to the Board the
external auditors to be proposed to the shareholders for appointment at the
annual meeting. Interim consolidated financial statements are reviewed by the
audit committee prior to release to shareholders.
     The consolidated financial statements are approved by the Board of
Directors on the recommendation of the audit committee.


[SIGNATURE]                       [SIGNATURE]
C. E. Childers                    B. E. Humphreys
Chairman, President and           Senior Vice President
Chief Executive Officer           Finance and Treasurer
February 12, 1998

AUDITORS’ REPORT
TO THE SHAREHOLDERS OF POTASH CORPORATION OF SASKATCHEWAN INC.
     We have audited the consolidated statements of financial position of Potash
Corporation of Saskatchewan Inc. as at December 31, 1997 and 1996 and the
consolidated statements of income and retained earnings and of cash flow for
each of the three years in the period ended December 31, 1997. These financial
statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance 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.
     In our opinion, these consolidated financial statements present fairly, in
all material respects, the financial position of the Company as at December 31,
1997 and 1996, and the results of its operations and the changes in its
financial position for each of the three years in the period ended December 31,
1997 in accordance with accounting principles generally accepted in Canada.



        Saskatoon, Saskatchewan               [SIGNATURE]
        February 12, 1998                     Chartered Accountants



44
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
AS AT DECEMBER 31


<Table>
<Caption>
                                                            (in thousands of US dollars)
                                                                  1997              1996
----------------------------------------------------------------------------------------
<S>                                                         <C>               <C>
ASSETS
Current Assets
  Cash and cash equivalents                                 $     8,756       $        -
  Accounts receivable (Note 4)                                  351,154           230,778
  Inventories (Note 5)                                          353,425           219,433
  Prepaid expenses                                               21,131            16,748
----------------------------------------------------------------------------------------
                                                                734,466           466,959
Property, plant and equipment (Note 6)                        2,995,625         1,978,692
Goodwill (Note 7)                                               574,296             1,686
Other assets (Note 8)                                           123,205            47,050
----------------------------------------------------------------------------------------
                                                            $4,427,592        $2,494,387
========================================================================================
LIABILITIES
Current Liabilities
  Bank indebtedness (Note 9)                                $       -         $     6,330
  Short-term debt (Note 9)                                      101,928                -
  Accounts payable and accrued charges (Note 10)                348,103           180,008
  Current portion of long-term debt (Note 11)                     2,400             1,520
  Current obligations under capital leases (Note 12)                340               300
----------------------------------------------------------------------------------------
                                                                452,771           188,158
Long-term debt (Note 11)                                      1,129,141           618,800
Obligations under capital leases (Note 12)                          823             1,163
Deferred income tax liability (Note 19)                         338,431            28,480
Accrued post-retirement/post-employment benefits
(Note 13)                                                       123,418            95,460
Accrued reclamation costs (Note 14)                             139,105           146,512
Other non-current liabilities and deferred credits               16,012            10,318
----------------------------------------------------------------------------------------
                                                              2,199,701         1,088,891
----------------------------------------------------------------------------------------
SHAREHOLDERS’ EQUITY
Share Capital (Note 15)                                      1,211,049           630,484
Unlimited authorization of common shares; issued
  and outstanding 53,896,186 and 45,581,864 shares
  in 1997 and 1996, respectively
Contributed Surplus                                            336,486           336,486
Retained Earnings                                              680,356           438,526
----------------------------------------------------------------------------------------
                                                             2,227,891         1,405,496
----------------------------------------------------------------------------------------
                                                            $4,427,592        $2,494,387
========================================================================================
</Table>

(See Notes to the Consolidated Financial Statements)

Approved by the Board,

                         [SIGNATURE]                   [SIGNATURE]
                          Director                      Director



                                                                              45
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
FOR THE YEARS ENDED DECEMBER 31


<Table>
<Caption>
                                                                              (in thousands of US dollars)
                                                             1997                1996                 1995
__________________________________________________________________________________________________________
<S>                                                   <C>                 <C>                     <C>
Net sales (Note 16)                                   $2,325,929          $1,403,868              $856,080
Cost of goods sold                                     1,740,758           1,019,894               549,185
__________________________________________________________________________________________________________
GROSS MARGIN                                              585,171             383,974              306,895
__________________________________________________________________________________________________________

Selling and administrative                                99,663              60,142               54,123
Provincial mining and other taxes (Note 17)               70,312              40,197               43,388
Other income                                             (32,444)            (15,857)             (14,865)
__________________________________________________________________________________________________________
                                                         137,531              84,482               82,646
__________________________________________________________________________________________________________
OPERATING INCOME                                         447,640             299,492              224,249
INTEREST EXPENSE (NOTE 18)                                81,439              46,761               41,817
__________________________________________________________________________________________________________
INCOME BEFORE INCOME TAXES                               366,201             252,731              182,432
INCOME TAXES (NOTE 19)                                    69,063              43,695               22,946
__________________________________________________________________________________________________________
NET INCOME                                               297,138             209,036              159,486
RETAINED EARNINGS, BEGINNING OF YEAR                     438,526             277,689              164,037
DIVIDENDS                                                (55,308)            (48,199)             (45,834)
__________________________________________________________________________________________________________
RETAINED EARNINGS, END OF YEAR                        $ 680,356           $ 438,526              $277,689
==========================================================================================================
NET INCOME PER SHARE (NOTE 20)                             $5.68               $4.59                $3.68
==========================================================================================================
DIVIDENDS PER SHARE                                        $1.03               $1.06                $1.06
==========================================================================================================
</Table>
(See Notes to the Consolidated Financial Statements)


46
CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE YEARS ENDED DECEMBER 31

<Table>
<Caption>
                                                                          (in thousands of US dollars)
                                                                       1997          1996          1995
_______________________________________________________________________________________________________
<S>                                                             <C>           <C>           <C>
OPERATING ACTIVITIES
Net income                                                      $   297,138   $ 209,036     $ 159,486
Items not affecting cash
  Depreciation and amortization                                     170,002        90,125        70,953
  (Gain) loss on disposal of fixed assets                            (4,739)        2,152           726
  Provision for deferred income tax                                  34,491        23,737         4,743
  Provision for post-retirement/
    post-employment benefits                                          6,166         5,890         2,052
_______________________________________________________________________________________________________
                                                                    503,058       330,940       237,960

CHANGES IN NON-CASH OPERATING WORKING CAPITAL
  Accounts receivable                                                23,470       (7,400)      (48,831)
  Inventories                                                        19,873        2,493         9,297
  Prepaid expenses                                                    3,736       (1,393)        4,299
  Accounts payable and accrued charges                              (68,623)     (19,214)       26,581
Accrued reclamation costs                                            (7,407)      (5,021)        5,214
Other non-current liabilities and deferred credits                   (6,286)      (4,219)       (1,037)
_______________________________________________________________________________________________________
CASH PROVIDED BY OPERATING ACTIVITIES                               467,821      296,186       233,483
_______________________________________________________________________________________________________

INVESTING ACTIVITIES
Additions to property, plant and equipment                         (160,337)     (58,939)      (39,596)
Acquisition of Texasgulf Inc.                                            -            -       (812,226)
Acquisition of White Springs Agricultural
  Chemicals, Inc.                                                        -            -       (291,540)
Acquisition of Arcadian Corporation (Note 3)                     (1,048,263)          -             -
Proceeds from disposal of fixed assets                               15,276       22,716           503
Additions to other assets                                           (22,091)      (2,819)      (10,298)
_______________________________________________________________________________________________________
CASH USED IN INVESTING ACTIVITIES                                (1,215,415)     (39,042)   (1,153,157)
_______________________________________________________________________________________________________
CASH (DEFICIENCY) BEFORE FINANCING ACTIVITIES                      (747,594)     257,144      (919,674)
_______________________________________________________________________________________________________

FINANCING ACTIVITIES
Proceeds from (repayment of) long-term obligations                  510,021     (258,556)      825,540
Proceeds from short-term debt                                       101,928           -             -
Repayment of Senior Notes                                          (374,526)          -             -
Dividends                                                           (55,308)     (48,199)      (45,834)
Issuance of shares                                                  580,565        2,784       163,889
_______________________________________________________________________________________________________
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES                     762,680     (303,971)      943,595
_______________________________________________________________________________________________________

INCREASE (DECREASE) IN CASH                                          15,086      (46,827)       23,921
(BANK INDEBTEDNESS) CASH AND CASH
  EQUIVALENTS, BEGINNING OF YEAR                                     (6,330)      40,497        16,576
_______________________________________________________________________________________________________
CASH AND CASH EQUIVALENTS (BANK INDEBTEDNESS),
 END OF YEAR                                                    $     8,756   $   (6,330) $     40,497
=======================================================================================================
Supplemental cash flow disclosure
  Interest paid                                                 $    85,926   $   42,901   $    38,836
  Income taxes paid                                             $    41,252   $   32,914   $     6,242
_______________________________________________________________________________________________________
</Table>
(See Notes to the Consolidated Financial Statements)
                                                                                                          47
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of US dollars)

1. DESCRIPTION OF BUSINESS
     Potash Corporation of Saskatchewan Inc. (PCS) and its operating
subsidiaries (the "Company" except to the extent the context otherwise requires)
form an integrated fertilizer and related industrial and feed products company.
The Company’s potash producing assets include five mines and mills and mining
rights to potash reserves at a sixth location all in the Province of
Saskatchewan, one mine and two mills located in the Province of New Brunswick
and one mine and mill in the State of Utah. The Company’s phosphate producing
assets include a vertically-integrated phosphate mine and processing plant
located in the State of North Carolina, phosphate feed plants in six states, two
industrial phosphoric acid plants owned in a joint venture carrying on business
as Albright & Wilson Company, a mine and processing plant complexes in the State
of Florida and a processing plant complex in the State of Louisiana. The
Company’s nitrogen producing assets include seven domestic plants located in the
states of Georgia, Iowa, Louisiana, Nebraska, Ohio, North Carolina and Tennessee
and large scale operations in Trinidad. The Company owns or leases in excess of
130 terminal and warehouse facilities strategically located in Canada and the
United States, and services customers with a fleet of approximately 5,200
railcars.
     The Company sells potash from its Saskatchewan mines for use outside North
America exclusively to Canpotex Limited ("Canpotex"). Canpotex, a potash export,
sales and marketing company owned in equal shares by the three potash producers
in the Province of Saskatchewan (including the Company), resells potash to
offshore customers. PCS Sales (Canada) Inc. and PCS Sales (USA), Inc.,
wholly-owned subsidiaries of PCS, execute marketing and sales for the Company’s
potash, phosphate and nitrogen products in North America. PCS Sales (Canada)
Inc. executes offshore marketing and sales for the Company’s New Brunswick
potash. PCS Sales (USA), Inc. executes offshore marketing and sales for the
Company’s nitrogen products. Phosphate Chemicals Export Association, Inc.
("PhosChem"), a 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 accounting
principles generally accepted in Canada ("Canadian GAAP"). These policies are
consistent with accounting principles generally accepted in the United States in
all material respects except as outlined in Note 26. The preparation of
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 financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates. The following policies are considered to be significant:
PRINCIPLES OF CONSOLIDATION
     The consolidated financial statements include the accounts of PCS and its
operating subsidiaries:
- PCS Sales (Canada) Inc.
     - PCS Sales (Iowa), Inc.
     - PCS Sales (Indiana), Inc.
     - Potash Corporation of Saskatchewan (Florida) Inc.
     (PCS Florida)
- PCS Sales (USA), Inc.
- Potash Corporation of Saskatchewan Transport Limited
     (PCS Transport)
- PCS Phosphate Company, Inc. (PCS Phosphate)
     - Albright & Wilson Company (proportionately consolidated)
     - White Springs Agricultural Chemicals, Inc. (White Springs)
     - PCS Nitrogen, Inc. (PCS Nitrogen)
     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 product, raw materials and work in process are
valued at the lower of cost and net realizable value. Cost for substantially all
finished product, raw materials and work in process inventories is determined
using the first in, first out (FIFO) 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 cost
and market.
PREPAID EXPENSES
     Prepaid expenses include prepaid freight which relates to product inventory
stored at warehouse and terminal facilities which is invoiced to customers at
the time of sale of the inventory.
PROPERTY, PLANT AND EQUIPMENT
     Property, plant and equipment (which includes mine development costs) are
carried at cost, except for mineral properties, which are carried at the lower
of cost or fair value. Costs of additions, betterments and renewals are
capitalized. The Company periodically reviews property, plant and equipment for
indicators of potential impairment. Impairment would be measured by comparing
book value against the estimated undiscounted future cash flows and any such
impairment loss would be included in the statement of income.
     Maintenance and repair expenditures which do not improve or extend
productive life are expensed as incurred.
DEPRECIATION AND AMORTIZATION
     Depreciation and amortization are provided for on a basis and at rates
calculated to amortize the cost of the fixed assets over their estimated useful
lives. Depreciation and amortization rates for all mine assets (including mine
development costs) and potash mills are determined using the units of production
method based on estimates of proven and probable reserves. Other asset classes
are depreciated or amortized on a straight-line basis as follows: land
improvements 5 to 30 years, buildings and improvements 6 to 30 years and
machinery and equipment 5 to 25 years.
GOODWILL
     Goodwill represents the excess of the purchase price and related costs over
the value assigned to the net tangible assets of businesses acquired.
Substantially all of the goodwill relates to the acquisition of Arcadian
Corporation (see Note 3). Goodwill is being amortized on a straight-line basis
over a period of forty years. The Company assesses the recoverability of this
intangible asset based on estimated undiscounted future cash flows.
OTHER ASSETS
     Issue costs of long-term obligations are capitalized to deferred charges
and are amortized to interest expense over the term of the related liability.


48
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of US Dollars)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
     Preproduction costs are capitalized to deferred charges and represent costs
incurred prior to obtaining commercial production at new milling facilities, net
of revenue earned, and are amortized on a straight-line basis over ten 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 three to five years.
     Land held for sale is stated at the lower of cost or net realizable value.
     Investments in which the company exercises significant influence (but does
not control) are accounted for using the equity method. Other investments are
stated at cost.
     Rotational plant maintenance costs, which consist primarily of planned
major maintenance projects (also known as "turnarounds"), are capitalized when
incurred and are amortized over the anticipated periods until the next scheduled
rotational plant maintenance which ranges from two to four years.
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. At the time a
capital lease is entered into, an asset is recorded together with the related
long-term obligation. Equipment acquired under capital leases is being
depreciated on the same basis as other fixed assets. 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
charged to expense as incurred.
POST-EMPLOYMENT AND POST-RETIREMENT BENEFITS
     Accrual of the costs of the Company’s defined benefit pension plans are
recorded monthly and adjusted annually based on actuaries’ reports. Pension
expense includes the net of management’s best estimate of the cost of benefits
provided, interest cost of projected benefits, return on pension plan assets and
amortization of experience gains or losses and plan amendments. Adjustments
arising from plan amendments, experience gains or losses and changes in
assumptions are amortized on a straight-line basis over the expected average
remaining service life of the employee group covered by the plan. Pension fund
assets are valued at market values.
     Accrual of the costs of providing certain post-retirement benefits,
including medical and life insurance coverage, during the active service period
of the employee is recorded monthly and adjusted annually as actuaries’ reports
become available.
     Accrual during periods of active employment, for the expected cost of
certain benefits payable to former or inactive employees, is also recorded
monthly and adjusted annually. These benefits include long-term disability
income payments and related medical and insurance costs.
ENVIRONMENTAL COSTS
     Environmental expenditures that relate to current operations are expensed
or capitalized as appropriate. Expenditures that relate to existing conditions
caused by past operations and that do not contribute to current or future
revenue generation are expensed. Reserves for estimated costs are recorded when
environmental remedial efforts are likely and the costs can be reasonably
estimated. In determining the reserves, 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.
FOREIGN EXCHANGE TRANSACTIONS
     PCS and its operating subsidiaries have the US dollar as their functional
currency.
     Canadian dollar operating transactions are translated to United States
dollars at the average exchange rate of the previous month. Trinidadian dollar
operating transactions are translated to United States dollars at the average
exchange rate for the period. 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.
     Foreign exchange gains or losses are included in other income.
FINANCIAL INSTRUMENTS
     The Company enters into forward exchange contracts and natural gas futures,
swaps and option agreements to manage its exposure to exchange rate and
commodity price fluctuations. These activities have been designated as hedging
activities by the Company.
     Gains or losses on foreign currency exchange contracts are recognized at
the time that the contracts are entered into and are included in other income.
     Gains or losses resulting from changes in the fair value of natural gas
hedging transactions which have not yet been settled are not recognized as they
generally relate to changes in the spot price of anticipated natural gas
purchases. Gains or losses arising from settled hedging transactions are
deferred as a component of inventory until the product containing the hedged
item is sold, at which time both the natural gas purchase cost and the related
hedging deferral are recorded as cost of sales.
     The Company regularly evaluates its unrecognized or deferred gains and
losses on these derivatives from a net realizable value of inventory perspective
and establishes appropriate reserves, if necessary.
REVENUE RECOGNITION
     Sales revenue is recognized when the product is shipped or a service is
performed. Revenue is recorded based on the F.O.B. mine, plant, warehouse or
terminal price. Transportation costs are recovered from the customer through
sales pricing.
3. ACQUISITION OF ARCADIAN CORPORATION
     On March 6, 1997, the Company acquired all of the outstanding shares of
Arcadian Corporation for cash of $563,550 and the issuance of 8,029,092 common
shares valued at $573,278. The cash consideration was financed by debt. Arcadian
Corporation, based in Memphis, Tennessee, was a producer of nitrogen, nitrogen
products and certain phosphate products. The acquisition was completed through
the merger of Arcadian Corporation into a wholly-owned subsidiary of PCS, PCS
Nitrogen.
     The acquisition has been accounted for by the purchase method of accounting
and, accordingly, the results of operations of PCS Nitrogen have been included
in the consolidated financial statements from March 7, 1997. The excess of the
purchase price over the fair value of the net identifiable assets acquired of
$584,848 has been recorded as goodwill and is being amortized on a straight-line
basis over 40 years. Liabilities assumed and included in the acquisition cost
include an accrual for integration costs (including relocation, outplacement and
termination costs) in the amount of $50,928.
                                                                               49
3. ACQUISITION OF ARCADIAN CORPORATION (CONTINUED)
Net assets acquired were:

<Table>
<Caption>
<S>                                                   <C>
Working capital                                       $1,167,703
Fixed assets and other assets                          1,067,828
Goodwill                                                  584,848
________________________________________________________________
                                                       1,820,379
Long-term debt and other long-term liabilities            683,551
________________________________________________________________
Net assets acquired                                    1,136,828
Less: Cash acquired                                        88,565
________________________________________________________________
Net acquisition cost                                  $1,048,263
================================================================
</Table>
     The following unaudited pro forma financial information presents the
combined results of operations of the Company and PCS Nitrogen as if the
acquisition had occurred at the beginning of the years presented, after giving
effect to certain adjustments including amortization of goodwill, additional
depreciation expense, increased interest expense on debt related to the
acquisition, decreased interest expense and interest income due to debt retired
in connection with the acquisition, and related income tax effects.
     The unaudited pro forma financial information is for informational purposes
only and is not necessarily indicative of the future results of operations of
the combined company or the results of operations that would have actually
occurred had the acquisition been in effect for the years presented.
<Table>
<Caption>
                                                 1997             1996
_____________________________________________________________________
                                              (unaudited proforma)
<S>                                         <C>            <C>
Net sales                                  $2,487,985      $2,607,328
Operating income                              477,769          580,672
Net income                                    312,432          353,687
Net income per share                             5.82             6.60
</Table>
4. ACCOUNTS RECEIVABLE
<Table>
<Caption>
                                                   1997            1996
______________________________________________________________________
<S>                                         <C>             <C>
Trade accounts - Canpotex                   $1,143,097      $1,134,550
               - Other                          283,485         178,712
Non-trade accounts                               31,429          21,673
______________________________________________________________________
                                                358,011         234,935
Less allowance for doubtful accounts              6,857           4,157
______________________________________________________________________
                                            $1,351,154      $1,230,778
======================================================================
</Table>
5. INVENTORIES

<Table>
<Caption>
                                                   1997           1996
______________________________________________________________________
<S>                                         <C>               <C>
Finished product                            $1,162,181        $193,717
Materials and supplies                          107,518         73,912
Raw materials                                    59,689         29,917
Work in process                                  24,037         21,887
______________________________________________________________________
                                            $ 353,425         $219,433
======================================================================
</Table>
6. PROPERTY, PLANT AND EQUIPMENT
<Table>
<Caption>
                                                        1997
_________________________________________________________________________________
                                                     ACCUMULATED
                                                  DEPRECIATION AND       NET BOOK
                                     COST           AMORTIZATION          VALUE
_________________________________________________________________________________
<S>                               <C>                  <C>             <C>
Land and improvements               $196,004            $20,697          $175,307
Buildings and improvements            421,617           102,494            319,123
Machinery and equipment            2,914,119            501,228         2,412,891
Mine development costs                125,908            37,604             88,304
_________________________________________________________________________________
                                  $3,657,648           $662,023        $2,995,625
=================================================================================
</Table>
<Table>
<Caption>
                                                        1996
_________________________________________________________________________________
                                                     Accumulated
                                                  Depreciation and       Net Book
                                      Cost          Amortization           Value
_________________________________________________________________________________
<S>                               <C>                 <C>              <C>
Land and improvements               $204,081            $17,662          $186,419
Buildings and improvements            424,368             92,156           332,212
Machinery and equipment            1,753,017            383,987         1,369,030
Mine development costs                125,908             34,877            91,031
_________________________________________________________________________________
                                  $2,507,374           $528,682        $1,978,692
=================================================================================
</Table>
7. GOODWILL
<Table>
<Caption>
                                                1997            1996
____________________________________________________________________
<S>                                         <C>               <C>
Cost                                        $586,987          $2,139
Accumulated amortization                      12,691              453
____________________________________________________________________
                                            $574,296          $1,686
====================================================================
</Table>
8. OTHER ASSETS
<Table>
<Caption>
                                                 1997             1996
_____________________________________________________________________
<S>                                         <C>               <C>
Deferred charges - net of
  accumulated amortization                   $32,080          $22,451
Prepaid pension costs                         13,143            9,407
Land held for sale                              9,435           9,446
Investments                                   28,041            4,254
Rotational plant maintenance costs -
  net of accumulated amortization             36,137                -
Other                                           4,369           1,492
_____________________________________________________________________
                                            $123,205          $47,050
=====================================================================
</Table>
9. BANK INDEBTEDNESS AND SHORT-TERM DEBT
     Bank indebtedness consists of cheques issued in excess of funds on deposit.
     Short-term debt was $101,928 at December 31, 1997 (1996 - $0). The Company
has remaining available lines of credit for short-term financing in the amount
of $205,000 at December 31, 1997 (1996 - $95,000). The lines of credit are
unsecured.
10. ACCOUNTS PAYABLE AND ACCRUED CHARGES
<Table>
<Caption>
                                              1997             1996
_____________________________________________________________________
<S>                                         <C>              <C>
Trade accounts                              $264,679         $151,723
Accrued interest                                3,927            6,853
Accrued payroll                               17,561             9,015
Accrued integration                           44,534                -
Income taxes                                    3,778              395
Dividends                                     13,624           12,022
_____________________________________________________________________
                                            $348,103         $180,008
=====================================================================
</Table>
50
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of US dollars)

11. LONG-TERM DEBT
<Table>
<Caption>
                                                                                              1997            1996
-------------------------------------------------------------------------------------------------------------------
<S>                                                                                     <C>               <C>
SYNDICATED FACILITIES LED BY THE BANK OF NOVA SCOTIA                                    $ 685,000         $ 575,000

     The Credit Facility provides for aggregate unsecured advances of $1.125
     billion at an interest rate of LIBOR plus a maximum of 0.75% (actual at
     December 31, 1997 was 0.30%) or Base Rate Canada Loans payable throughout
     the term of the Credit Facility. The Facility is renewable every 364 days
     with the consent of the lenders. No principal payments are required during
     the revolving period. If the Credit Facility is not renewed it converts to
     a five-year term facility repayable in twenty quarterly instalments each
     equal to 1% of the principal outstanding on the conversion date and a final
     payment of the remaining principal amount due on the fifth anniversary of
     the conversion date. The average interest rate on this obligation was 5.96%
     in 1997 (1996 - 5.88%).

INDUSTRIAL REVENUE AND POLLUTION CONTROL OBLIGATIONS                                       45,641          45,320

     Adjustable Rate Industrial Revenue and Pollution Control Obligations with
     varying interest rates and with maturity dates ranging from 1998 to 2012.
     No sinking fund requirements prior to maturity. The Adjustable Rate
     Industrial Revenue and Pollution Control Obligations bear interest at rates
     ranging from 3.75% to 4.30%. The average interest rate on these obligations
     was 3.92% in 1997 (1996 - 3.98%). These loans are secured by bank letters
     of credit, most of which are guaranteed by the Company.

NOTES PAYABLE                                                                             400,000               -

     7.125% notes payable June 15, 2007. No sinking fund requirements prior to
     maturity. These notes were issued under a shelf registration covering up to
     $1,000,000 of debt securities. The notes are unsecured.


SENIOR NOTES                                                                                  900               -

     The Senior Notes are redeemable beginning May 1, 1998.
------------------------------------------------------------------------------------------------------------------
                                                                                         1,131,541         620,320
Less current maturities                                                                      2,400           1,520
------------------------------------------------------------------------------------------------------------------
                                                                                        $1,129,141        $618,800
==================================================================================================================
</Table>
       The fair values of all long-term obligations are approximated by their face
       values.
     Assuming that the Credit Facility will continue to be renewed, long-term
debt at December 31, 1997 will mature as follows:

<Table>
                            <S>                         <C>
                            1998                        $     2,400
                            1999                              1,200
                            2000                              7,000
                            2001                                  -
                            2002                                222
                            Subsequent years              1,120,719
                            --------------------------------------
                                                        $1,131,541
                            ======================================
</Table>
12. COMMITMENTS
LEASE COMMITMENTS
      The Company has long-term lease agreements for buildings, port facilities,
certain ammonia plants in Trinidad, equipment, ocean-going transportation
vessels and rail cars (excluding mineral leases), the latest of which expires in
2017.
     The Company has lease agreements with unaffiliated entities with respect to
two ammonia plants constructed in Trinidad. The minimum annual lease payments
under these agreements are approximately $23,000. The initial terms of the
leases (five years and seven years) are renewable for additional five year terms
subject to certain conditions. If the leases are not renewed or are otherwise
terminated, the Company may be required to make residual termination payments of
approximately 85% of the estimated $374,000 costs of construction. The Company
has an option to purchase the plants during the terms of the leases for prices
approximating their fair market values at the date of exercise.
     Future minimum lease payments under these capital and operating leases will
be approximately as follows:
<Table>
<Caption>
<S>                                               <C>             <C>
                                                    Operating       Capital
--------------------------------------------------------------------------
1998                                              $    75,760     $     468
1999                                                   73,688           468
2000                                                   69,636           467
2001                                                   55,599             -
2002                                                   49,503             -
Subsequent years                                      156,070             -
--------------------------------------------------------------------------
                                                                      1,403
Less amount representing interest                                       240
--------------------------------------------------------------------------
Present value of minimum capital lease payments                       1,163




Current portion                                                        340
--------------------------------------------------------------------------
Long-term portion                                                 $    823
==========================================================================
</Table>

     Rental expense for operating leases for the years ended December 31, 1997,
1996 and 1995 was $65,252, $29,350 and $11,437, respectively.
OTHER COMMITMENTS
     The Company has entered into raw material purchase commitments based upon
market rates at the time of delivery through 2007 in the amount of approximately
$150,898.
     The Company has entered into an agreement for the construction of a ship to
be delivered in 1999 for ocean-going transportation of raw materials and
finished products in the amount of $37,000. Progress payments of $22,200 are
required in 1998.



                                                                              51
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of US dollars)

12. COMMITMENTS (CONTINUED)
     On December 23, 1997, the Company signed a letter of intent to purchase all
of the outstanding shares of Potash Company of Canada Limited for cash of
CDN$18.8 million (subject to adjustment).
     BP Chemicals Inc. ("BPC") operates the Lima plant on behalf of the Company
pursuant to a contract providing for the reimbursement of expenses incurred by
BPC in providing such operating services.
     The Company’s Trinidad operations have entered into long-term natural gas
contracts with a gas company in Trinidad. The contracts provide for prices which
vary with ammonia market prices, escalating floor prices and minimum purchase
quantities.
13. POST-RETIREMENT/POST-EMPLOYMENT BENEFITS AND PENSION PLANS
CANADA
     Substantially all employees of the Company are participants in either a
defined contribution or a defined benefit pension plan. The Company’s
obligations under the defined contribution plans are limited to making regular
payments to the plan to match contributions made by the employees for current
services (to a maximum of 5.5% of salary). Based on the latest actuarial
valuations of the defined benefit pension plans conducted at December 31, 1994,
and extrapolated to December 31, 1997, accrued pension benefits were $9,607 and
the market values of the assets of the plans were $9,368.
     The Company has established a supplemental retirement income plan for
senior management which is unfunded and 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 contributory and 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. Generally,
contributions to the US plans are made to meet minimum funding requirements of
the Employee Retirement Income Security Act of 1974 (ERISA).
     The components of net pension expense for the Company’s US pension plans,
computed actuarially, were as follows:

<Table>
<Caption>
                                                        1997      1996        1995
---------------------------------------------------------------------------------
<S>                                               <C>         <C>        <C>
Service cost for benefits earned
  during the year                                  $ 9,446    $ 7,337    $ 2,584
Interest cost on projected
  benefit obligations                                 18,844    15,351       9,021
Return on plan assets                               (23,624)   (35,551)   (26,048)
Net amortization and deferral                             31    16,875     16,044
---------------------------------------------------------------------------------
Net pension expense                                $ 4,697    $ 4,012    $ 1,601
=================================================================================
</Table>
     Assets of both US funded plans consist mainly of corporate equity, US
government and corporate debt securities and units of participation in a
collective short-term investment fund.
     The funding status of the Company’s US pension plans and amounts recognized
in the Consolidated Statements of Financial Position was as follows:
<Table>
<Caption>
                                                                                1997         1996
-------------------------------------------------------------------------------------------------
<S>                                                                         <C>          <C>
Plans’ assets at fair value                                                 $316,125     $238,531
-------------------------------------------------------------------------------------------------
Actuarial present value of projected benefit obligations:
  Vested benefits                                                            223,255      169,513
  Non-vested benefits                                                         16,101       11,294
-------------------------------------------------------------------------------------------------
Accumulated benefit obligations                                              239,356      180,807
Excess projected benefit obligations
  over accumulated benefit obligations                                        57,662       40,327
-------------------------------------------------------------------------------------------------
Total projected benefit obligations                                          297,018      221,134
-------------------------------------------------------------------------------------------------
Plans’ assets exceeding projected
  benefit obligations                                                         19,107       17,397
Items not yet recognized in earnings:
  Additional minimum liability                                                  (311)          -
  Unrecognized net gain                                                      (24,855)     (10,722)
  Unrecognized prior service cost                                              3,245          432
-------------------------------------------------------------------------------------------------
Net (accrual) prepaid pension cost                                            (2,814)       7,107
White Springs accrued liability                                                   -         2,300
(Accrual) prepaid pension cost                                             $ (2,814)     $ 9,407
=================================================================================================
</Table>

     Significant actuarial assumptions for the Company’s US funded plans were as
follows:
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of US dollars)


<Table>
<Caption>
                                                                       1997       1996        1995
--------------------------------------------------------------------------------------------------
<S>                                                                   <C>        <C>         <C>
Discount rate                                                         7.50%      7.50%       7.25%
Long-term rate of return
  on assets                                                           9.00%      9.00%       9.00%
Rate of increase in
  compensation levels                                                 5.00%      5.00%       5.00%
</Table>

TRINIDAD
     The Company has contributory defined benefit pension plans that cover a
substantial majority of its employees. Benefits are based primarily on future
service, with past service counting for purposes of vesting and eligibility for
benefits.
     The components of net pension expense for the Company’s Trinidad pension
plans, computed actuarially, were as follows:
<Table>
<Caption>
                                                                                        1997
-------------------------------------------------------------------------------------------
<S>                                                                                 <C>
Service cost for benefits earned during the year                                    $    381
Interest cost on projected benefit obligations                                           722
Return on plan assets                                                                 (1,610)
-------------------------------------------------------------------------------------------
Net pension expense                                                                 $ (507)
===========================================================================================
</Table>
     The plans’ assets consist mainly of local government and other bonds, local
mortgage and mortgage-backed securities, fixed income deposits and cash.
     The funding status of the plans and amounts recognized in the Consolidated
Statements of Financial Position was as follows:

<Table>
<Caption>
                                                                                        1997
-------------------------------------------------------------------------------------------
<S>                                                                                <C>
Plans’ assets at fair value                                                         $20,839
-------------------------------------------------------------------------------------------
Actuarial present value of projected benefit obligations:
 Vested benefits                                                                       5,376
 Non-vested benefits                                                                       6
-------------------------------------------------------------------------------------------
Accumulated benefit obligations                                                        5,382
Excess projected benefit obligations over accumulated
 benefit obligations                                                                   4,547
-------------------------------------------------------------------------------------------
Total projected benefit obligations                                                    9,929
-------------------------------------------------------------------------------------------
Plans’ assets exceeding projected benefit obligations                                10,910
Item not yet recognized in earnings:
 Unrecognized net gain                                                               (1,361)
-------------------------------------------------------------------------------------------
Net prepaid pension cost                                                               9,549
Valuation allowance                                                                  (3,944)
-------------------------------------------------------------------------------------------
Prepaid pension cost                                                                $ 5,605
===========================================================================================
</Table>
52
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of US dollars)
13. POST-RETIREMENT/POST-EMPLOYMENT BENEFITS AND PENSION PLANS (CONTINUED)
       Significant actuarial assumptions for the plans were as follows:

<Table>
<S>                                                                  <C>
Discount rate                                                        8.50%
Long-term rate of return on assets                                   9.50%
Rate of increase in compensation levels                              7.00%
</Table>
OTHER POST-RETIREMENT PLANS
     The Company provides certain health care and life insurance benefits for
retired employees. These plans are either contributory or non-contributory and
contain certain cost-sharing features such as deductibles and coinsurance. These
plans are unfunded and benefits are subject to change.
     Although the Company prepares its financial statements under Canadian GAAP,
it has continued to apply the treatment prescribed by SFAS No. 106 under US GAAP
"Employers’ Accounting for Postretirement Benefits Other Than Pensions." This
statement requires the accrual of the cost of providing other post-retirement
benefits, including medical and life insurance coverage, during the active
service period of the employee.
       The components of this expense were as follows:
<Table>
<Caption>
                                                          1997          1996           1995
-------------------------------------------------------------------------------------------
<S>                                                  <C>              <C>            <C>
Service cost                                          $ 2,701         $2,233         $1,017
Interest cost                                            7,816         6,710          3,999
Net amortization and deferral                               -             (11)           373
-------------------------------------------------------------------------------------------
Net cost                                              $10,517         $8,932         $5,389
===========================================================================================
</Table>
     The significant assumptions used in determining post-retirement benefit
cost were as follows:
<Table>
<S>                                                    <C>            <C>            <C>
Discount rate                                           7.50%          7.50%          7.25%
Health care trend rate                                 10.80%*        11.60%         12.50%
</Table>
* Decreasing gradually to 6.00% in 2003 and thereafter.
     If the health care cost trend rate was increased by 1.0 percent, the
accumulated post-retirement benefit obligation and the aggregate of service and
interest cost would have increased as follows:

<Table>
<Caption>
                                                         1997           1996           1995
-------------------------------------------------------------------------------------------
<S>                                                    <C>             <C>           <C>
Accumulated post-retirement
  benefit obligation                                   $4,722           $843         $2,650
Aggregate of service and
  interest cost                                            490             77            337
</Table>
     The Company has applied Canadian GAAP to prepare its financial statements
but continues to apply SFAS No. 112 under US GAAP "Employers’ Accounting for
Postemployment Benefits." This statement requires the Company to accrue, during
periods of active employment, the expected cost of certain benefits payable to
former or inactive employees. These benefits include long-term disability income
payments and related medical and insurance costs.
     The effect of these costs on income before income taxes was $887, $486 and
$332 for 1997, 1996 and 1995, respectively. As at December 31, 1997, the Company
has a recorded liability for these costs of $1,873 (1996 - $2,138).
     The components of the Company’s post-retirement/post-employment benefits
liability are as follows:
<Table>
<Caption>
                                                                        1997            1996
-------------------------------------------------------------------------------------------
<S>                                                                 <C>             <C>
Retirees                                                            $ 45,483        $39,681
Active:
  Fully eligible                                                      27,496         20,052
  Not fully eligible                                                  54,226         36,778
-------------------------------------------------------------------------------------------
Total                                                                127,205         96,511
Unrecognized net (loss) gain                                          (2,130)           341
-------------------------------------------------------------------------------------------
                                                                     125,075         96,852
Less current portion of SFAS 106                                      (3,530)        (3,530)
Add SFAS 112 liability                                                 1,873          2,138
-------------------------------------------------------------------------------------------
Accrued post-retirement/post-
  employment benefits liability                                     $123,418        $95,460
===========================================================================================
</Table>
       All of the Company’s US employees may participate in defined contribution
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of US dollars)

savings plans. These plans are subject to US federal tax limitations and provide
for voluntary employee salary reduction contributions of up to 15 percent of
salary and Company matching contributions of up to 5 percent of salary. The
Company’s matching contributions were $3,647 and $3,565 for 1997 and 1996,
respectively.
14. ENVIRONMENTAL COSTS
RECLAMATION AND RESTORATION COSTS
     Site restoration and reclamation costs have been accrued for various sites.
At December 31, 1997, the Company has accrued $31,953 (1996 - $35,856) for the
Aurora, North Carolina facility, $66,810 (1996 - $66,669) for the White Springs,
Florida facility, $27,377 (1996 - $27,377) for the Moab, Utah facility and
$12,965 (1996 - $16,610) for various sulphur facilities. The idle sulphur
facilities were part of the acquisition of Texasgulf Inc. and are undergoing
dismantlement and environmental restoration efforts. The current portion of
restoration and reclamation accrued in 1997 totalled $3,675 (1996 - $4,511).
These amounts represent the Company’s current estimate of potential site
restoration and reclamation costs which were last assessed in November 1996.
These expenditures are generally incurred over an extended period of time.
     Annual environmental expenditures for reclamation and restoration during
the years ended December 31, 1997, 1996 and 1995 were $66,972, $69,905 and
$32,971, respectively. Of the 1997 amount, $51,421 (1996 - $53,507; 1995 -
$28,296) was charged to operations, $4,948 (1996 - $6,787) was capitalized and
$10,603 (1996 - $9,611) was charged against accrued reclamation costs.
     Certain reclamation obligations are currently secured by a surety bond of
approximately $13,000.
CAPPING OF BYPRODUCT GYPSUM STACKS
     In 1993, the State of Florida passed certain legislation requiring
companies to reduce the potential environmental hazards associated with
accumulations of byproduct gypsum (gypsum stacks). The legislation requires
companies to "cap" the gypsum stacks in order to reduce seepage into the
groundwater. The procedures are not required until the gypsum stacks are no
longer in use, which management currently estimates to be no earlier than the
year 2010. At December 31, 1997, a balance of $35,350 (1996 - $34,285) was
included in accrued reclamation costs for this gypsum stack capping requirement.
The obligation of White Springs regarding the gypsum stacks is guaranteed by
PCS.
     In North Carolina, on expiry of the mine’s phosphate reserves, capping of
the remaining gypsum stack must comply with the laws in place at that time.

                                                                                               53
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of US dollars)
14. ENVIRONMENTAL COSTS (CONTINUED)
OTHER ENVIRONMENTAL COSTS
Other than reclamation and restoration and gypsum stack capping costs discussed
above, no significant costs relating to existing conditions caused by past
operations were incurred by the Company during 1997. At December 31, 1997,
environmental reserves recorded by the Company, other than those related to
reclamation and restoration and gypsum stack capping, as discussed above, were
approximately $2,000.
The Company’s estimated operating expenses, other than reclamation and
restoration and gypsum stack capping, relating to compliance with environmental
laws and regulations governing ongoing operations were approximately $15,520
for the year ended December 31, 1997 (1996 - $9,533; 1995 - $8,598). In
addition, capital expenditures for environmental compliance were approximately
$10,464 for the year ended December 31, 1997 (1996 - $2,123).
15. 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 first
preferred shares may be issued in one or more series with rights and conditions
to be determined by the Board of Directors.
<Table>
<Caption>
ISSUED:
                                                           1997            1996            1995
                                                 CONSIDERATION   CONSIDERATION   CONSIDERATION
----------------------------------------------------------------------------------------------
<S>                                                <C>                <C>           <C>
Issued, beginning of year                          $    630,484       $627,700      $ 463,811
Shares issued under option                                5,826           2,634           2,516
Shares issued in public offering                             -               -          161,184
Shares issued to purchase Arcadian Corporation          573,278              -               -
Shares issued for dividend reinvestment plan              1,461             150             189
----------------------------------------------------------------------------------------------
Issued, end of year                                  $1,211,049       $630,484      $ 627,700
==============================================================================================

ISSUED:

                                                           1997           1996            1995
                                                      NUMBER OF      NUMBER OF       NUMBER OF
                                                  COMMON SHARES COMMON SHARES    COMMON SHARES
----------------------------------------------------------------------------------------------
Issued, beginning of year                            45,581,864     45,439,667      42,988,238
Shares issued under option                              267,350        140,050         147,650
Shares issued in public offering                             -              -        2,300,000
Shares issued to purchase Arcadian Corporation        8,029,092             -               -
Shares issued for dividend reinvestment plan             17,880          2,147           3,779
----------------------------------------------------------------------------------------------
Issued, end of year                                  53,896,186     45,581,864      45,439,667
==============================================================================================
</Table>

STOCK OPTIONS
At December 31, 1997, there were stock options outstanding in respect of
2,461,125 common shares granted to certain employees of the Company and the
directors of PCS with an exercise price from CDN$14.00 to CDN$121.50 for
options held by optionees resident in Canada, and US$12.00 to US$86.75 for
optionees resident in the United States. As at December 31, 1997, 1,280,875
shares were subject to exercisable options.
The foregoing options have expiry dates ranging from November 30, 1999 to
November 5, 2007.
STOCK-BASED COMPENSATION DISCLOSURE
The Company continues with its policy of not recording any compensation expense
for the stock options as 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.
SHAREHOLDER RIGHTS PLAN
The Board of Directors of the Company adopted a shareholder rights plan (the
Plan) on November 10, 1994. The Plan was amended by the Board of Directors on
March 28, 1995 and May 4, 1995 and approved by the shareholders on May 11,
1995. Under the Plan, the Board of Directors declared a dividend distribution
of one right for each common share to holders of record. The rights are not
currently exercisable and only become exercisable upon the occurrence of
certain events as specified in the Plan. The Plan expires following the
Company’s annual meeting in 1998 unless otherwise renewed or extended.



54
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of US Dollars)
16. GEOGRAPHIC SEGMENTS
     Financial information by geographic area is summarized in the accompanying
table.
<Table>
<Caption>

                                                     CANADA      UNITED STATES        TRINIDAD      CONSOLIDATED
________________________________________________________________________________________________________________
<S>                                                <C>             <C>                <C>             <C>
1997
NET SALES TO CUSTOMERS OUTSIDE THE ENTERPRISE
  Canada                                           $ 14,460         $    27,147     $     -           $    41,607
  United States                                     188,416           1,435,138           -             1,623,554
  PhosChem                                             -                261,502           -               261,502
  Canpotex                                          229,666               -               -               229,666
  Other                                              64,261             102,548           2,791           169,600
________________________________________________________________________________________________________________
                                                   $496,803         $1,826,335      $     2,791       $2,325,929
================================================================================================================

SALES BETWEEN GEOGRAPHIC AREAS                     $ -              $    -            $143,452        $    -
================================================================================================================
SEGMENT OPERATING EARNINGS                         $163,620         $ 257,528         $ 26,492        $ 447,640
================================================================================================================
ASSETS                                             $977,601         $3,019,841        $430,150        $4,427,592
================================================================================================================

1996
NET SALES TO CUSTOMERS OUTSIDE THE ENTERPRISE
  Canada                                           $ 14,507         $   28,225      $    -            $   42,732
  United States                                     136,981            668,385           -               805,366
  PhosChem                                            -                275,644           -               275,644
  Canpotex                                          184,025              -               -               184,025
  Other                                              61,526             34,575           -                96,101
________________________________________________________________________________________________________________
                                                   $397,039         $1,006,829      $    -            $1,403,868
================================================================================================================

SEGMENT OPERATING EARNINGS                         $113,317         $ 186,175       $    -            $ 299,492
================================================================================================================
ASSETS                                             $840,176         $1,654,211      $    -            $2,494,387
================================================================================================================

1995
NET SALES TO CUSTOMERS OUTSIDE THE ENTERPRISE
  Canada                                           $ 12,483         $   23,461      $    -            $   35,944
  United States                                     128,594            270,085           -               398,679
  PhosChem                                            -                128,320           -               128,320
  Canpotex                                          221,169              -               -               221,169
  Other                                              53,686             18,282           -                71,968
________________________________________________________________________________________________________________
                                                   $415,932         $ 440,148       $    -            $ 856,080
================================================================================================================

SEGMENT OPERATING EARNINGS                         $138,939         $   85,310      $    -            $ 224,249
================================================================================================================
ASSETS                                             $935,075         $1,646,742      $    -            $2,581,817
================================================================================================================
</Table>

     Transfer prices for sales between affiliates approximate prices charged to
unaffiliated customers.
17. PROVINCIAL MINING AND OTHER TAXES
       Provincial mining taxes and other taxes consist of:
<Table>
<Caption>
                                                         1997           1996            1995
____________________________________________________________________________________________
<S>                                                <C>              <C>           <C>
Potash Production Tax                              $ 53,453         $27,462        $ 29,589
Saskatchewan corporate capital taxes                   16,859        12,735           13,799
____________________________________________________________________________________________
                                                   $ 70,312         $40,197        $ 43,388
============================================================================================
</Table>
18. INTEREST EXPENSE
<Table>
                                                         1997           1996            1995
____________________________________________________________________________________________
<S>                                                <C>              <C>             <C>
Interest on
  Short-term debt                                  $    2,351       $     56        $    190
  Long-term debt                                       78,921         46,391          41,177
  Obligations under capital leases                        167            314             450
____________________________________________________________________________________________
                                                   $ 81,439         $46,761         $ 41,817
============================================================================================

</Table>
55
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of US dollars)

19. 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 statutory income tax rates to income before income
taxes as follows:
<Table>
<Caption>
                                                                                       1997       1996        1995
----------------------------------------------------------------------------------------------------------------
<S>                                                                               <C>        <C>        <C>
Income before income taxes
Canada                                                                            $ 67,606    $ 81,067   $102,540
United States                                                                      272,520     171,664      79,892
Trinidad                                                                            26,075           -           -
----------------------------------------------------------------------------------------------------------------
Income before income taxes                                                        $366,201    $252,731   $182,432
================================================================================================================
Federal and Provincial Statutory tax rates                                            46.12%     46.12%      46.08%
================================================================================================================
Tax at statutory rates                                                            $168,892    $116,560   $ 84,065
Adjusted for the effect of:
  Net non-deductible provincial taxes and royalties and resource allowances         (7,025)    (22,879)   (22,262)
  Additional tax deductions                                                        (73,631)    (44,255)   (35,252)
  Difference between Canadian rate and rates applicable to
    subsidiaries in other countries                                                (24,662)    (10,359)     (4,502)
 Other                                                                                5,489      4,628         897
----------------------------------------------------------------------------------------------------------------
Income tax expense                                                                $ 69,063    $ 43,695   $ 22,946
================================================================================================================
</Table>
The principal timing differences and their tax effect are as follows:
<Table>
<Caption>
                                                                                      1997       1996       1995
----------------------------------------------------------------------------------------------------------------
<S>                                                                               <C>        <C>        <C>
Depreciation and amortization                                                     $574,673   $241,429   $201,744
Accrued reclamation costs                                                          (49,577)   (56,660)   (60,612)
Accrued post-retirement/post-employment benefits                                   (49,551)   (38,132)   (35,828)
Loss carryforwards                                                                 (75,309)   (93,900)   (94,400)
Other                                                                              (45,230)   (17,702)       394
Alternative minimum tax carryforward                                               (16,575)    (6,555)    (6,555)
----------------------------------------------------------------------------------------------------------------
Deferred income tax liability                                                     $338,431   $ 28,480   $ 4,743
================================================================================================================

Details of income tax expense are as follows:
Canada - Current                                                                  $ 1,024    $ 3,097    $ 3,236
       - Deferred                                                                    2,146          -          -
United States - Federal - Current                                                   31,888     16,861     14,967
                        - Deferred                                                  25,063     20,651      3,356
United States - State - Deferred                                                      (716)     3,086      1,387
Trinidad - Current                                                                  13,564          -          -
         - Deferred                                                                 (3,906)         -          -
----------------------------------------------------------------------------------------------------------------
Income tax expense                                                                $ 69,063   $ 43,695   $ 22,946
================================================================================================================
</Table>
     At December 31, 1997, the Company has income tax losses carried forward of
approximately $198,602 which will begin to expire in 1998. The benefit relating
to these loss carryforwards has been recognized by reducing deferred income tax
liabilities. In addition, the Company has alternative minimum tax credits of
approximately $16,575 which carry forward indefinitely.
     The Company has reorganized certain of its financings within the corporate
group which, among other things, resulted in certain tax benefits. These
benefits could be questioned by the relevant tax authorities. However,
management believes the ultimate resolution of the issues will not have a
material effect on the Company.
20. NET INCOME PER SHARE (EARNINGS PER SHARE)
     Net income per share is calculated on the weighted average number of shares
issued and outstanding during the twelve months ended December 31, 1997 of
52,275,000 (1996 - 45,537,000; 1995 - 43,352,000). Fully diluted net income per
share did not differ materially from net income per share in any of the
accounting periods.
21. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
     The Company uses financial instruments, including forward exchange
contracts, futures, swaps and option agreements to hedge foreign exchange and
commodity price risk. The Company does not hold or issue financial instruments
for trading purposes.
     At December 31, 1997, the Company had commitments in the form of foreign
exchange contracts to sell US$46,000 (1996 - US$8,000). The fair value of these
contracts approximated the cost amount at December 31, 1997.
     The Company’s exposure to interest rate risk is limited to its long-term
debt. The effective interest rate on the long-term debt approximates the stated
rate because there are no significant premiums or discounts.
56
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of US dollars)
21. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED)
     In addition to physical spot and term purchases, the Company at times
employs futures, swaps and option agreements to establish the cost on a portion
of its natural gas requirements. These instruments are intended to hedge the
future cost of the committed and anticipated natural gas purchases for its
United States nitrogen 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 which are utilized to reduce cash margin requirements to maintain the
derivatives. Cash margin requirements which have been advanced as at December
31, 1997 totalled $11,158 and are included in inventory.
     As at December 31, 1997, the Company had derivatives qualifying for
deferral in the form of futures and swaps. The futures represented a notional
amount of 17.4 million MMBtus with maturities in 1998 through 2000. The swaps
represented a notional amount of 83.3 million MMBtus with maturities in 1998
through 2002. As at December 31, 1997, net gains arising from settled hedging
transactions which are included as a component of finished goods inventory were
not material.
     The Company is exposed to credit related losses in the event of
non-performance by counterparties to derivative financial instruments. The
Company 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 the Company’s sales are in North America and are
primarily for use in the agricultural industry. Credit risk relating to these
sales is managed through an effective credit management program.
Internationally, the Company’s products are sold primarily through two export
associations whose accounts receivable are either insured or secured by letters
of credit.
     The carrying amount of the Company’s cash and cash equivalents, accounts
receivable and accounts payable and accrued charges approximate fair values
because of short-term maturities. The carrying amount of the Company’s long-term
debt approximates estimated fair value because the stated interest rates
approximate the market rate.
22. CONTINGENCIES
     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 Canpotex for such losses or liabilities
in proportion to their productive capacity. There were no such operating losses
or other liabilities in 1997.
     In common with other companies in the industry, the Company is unable to
acquire insurance for underground assets.
     In June 1993, the Company was served with a complaint relating to a suit
filed in the United States District Court for Minnesota against most North
American potash producers, including the Company. The complaint alleged a
conspiracy among the defendants to fix the price of potash purchased by the
plaintiffs as well as potash purchased by the members of a class of certain
purchasers proposed by the plaintiffs. The complaint sought treble damages in an
unspecified amount and other relief. The Company filed a motion for summary
judgment on December 22, 1995. On January 2, 1997, Judge Richard H. Kyle issued
an order granting the defendants’ motions for summary judgement and dismissing
the lawsuit. The plaintiffs appealed that order to the United States Court of
Appeals for the Eighth Circuit on January 31, 1997. Oral arguments were heard on
November 17, 1997.
     Additional complaints were filed in the California and Illinois State
Courts on behalf of purported classes of indirect purchasers of potash in those
states. The parties in the California lawsuit have agreed to stay proceedings
pending the outcome of the appeal to the United States Court of Appeals for the
Eighth Circuit. The Illinois State Court complaint has been dismissed for
failure to state a cause of action.
     On May 7, 1997, J. Douglas Campbell, Alfred L. Williams, Peter H. Kesser
and David L. Alyea, former officers of Arcadian Corporation, filed lawsuits
against PCS in the United States District Court for the Western District of
Tennessee. The complaints allege that PCS breached employment agreements between
Arcadian and the officers and breached the related assumption agreement among
PCS, PCS Nitrogen and Arcadian. The complaints of Mr. Campbell, Mr. Williams,
Mr. Kesser and Mr. Alyea seek damages in excess of $22.2 million, $6.2 million,
$3.7 million and $4.2 million, respectively. In addition, on October 14, 1997,
Charles Lance, a former officer of Arcadian Corporation, filed a lawsuit in the
same court against PCS also alleging breaches of his employment agreement and
the related assumption agreement. Mr. Lance seeks damages in an amount exceeding
$3.0 million. Each complaint also seeks certain additional unspecified damages.
Trial with respect to the original four plaintiffs’ claims has been set for
August 17, 1998. Management of the Company, having consulted with legal counsel,
believes that the lawsuits will not have a material adverse effect on the
Company.
     On March 13, 1996, PCS Nitrogen, two other nitrogen producers and up to
thirty unidentified parties were named as defendants in a lawsuit filed in the
name of the Port Authority of New York and New Jersey (the "Port Authority") in
New Jersey State Court. The lawsuit was actually filed by the attorneys hired by
the Port Authority’s subrogated insurance carriers. The Port Authority’s
insurers are seeking to recover damages allegedly incurred as a result of the
explosion at the World Trade Center in New York City on February 26, 1993. On
February 7, 1997, the defendants filed a motion to dismiss the suit for failure
to state a claim upon which relief could be granted. On December 19, 1997, that
motion was granted and the complaint was dismissed with prejudice. On January
15, 1998, the Port Authority appealed the dismissal to the United States Court
of Appeals for the Third Circuit. Although neither the Port Authority nor its
subrogated insurers have alleged or otherwise revealed the amount of damages
sought from PCS Nitrogen in the lawsuit, the Port Authority stated in an
affidavit submitted to the court in support of its motion to disqualify its
insurers’ counsel that as of April 9, 1996, the Port Authority had submitted to
its insurers claims relating to the explosion totaling approximately $340
million, of which the insurers had paid approximately $160 million. PCS Nitrogen
is unaware of any basis for liability and intends to continue to vigorously
defend the lawsuit.
     Various other claims and lawsuits are pending against the Company. While it
is not possible to determine the ultimate outcome of such actions at this time,
it is management’s opinion that the ultimate resolution of such items, including
those pertaining to environmental matters, will not have a material effect on
the Company.
23. RELATED PARTY TRANSACTIONS
     The Company has a one-third interest in Canpotex which markets potash
offshore. Sales to Canpotex are at prevailing market prices. Sales for the year
ended December 31, 1997 were $229,666 (1996 - $184,025; 1995 - $221,169).
     Account balances resulting from the Canpotex transactions are included in
the Consolidated Statements of Financial Position and settled on normal trade
terms.


                                                                            57
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of US dollars)

24. QUARTERLY RESULTS (UNAUDITED)
     The following quarterly information in management’s opinion includes all
adjustments (consisting solely of normal recurring adjustments) necessary for
fair presentation.
<Table>
<Caption>
                                              First        Second         Third        Fourth
                                            Quarter       Quarter       Quarter       Quarter
____________________________________________________________________________________________
<S>                                       <C>           <C>           <C>           <C>
1997
Net sales                                 $464,834      $676,648      $573,773      $610,674
============================================================================================
Gross Margin                              $115,027      $184,152      $149,466      $136,526
============================================================================================
Operating Income                          $ 90,513      $154,714      $108,851      $ 93,562
============================================================================================
Net Income                                $ 56,365      $ 96,980      $ 71,418      $ 72,375
============================================================================================
Net Income per Share                      $    1.18     $    1.81     $    1.33     $    1.35
============================================================================================
1996
Net sales                                 $366,871      $352,369      $342,148      $342,480
============================================================================================
Gross Margin                              $107,404      $ 90,313      $ 89,884      $ 96,373
============================================================================================
Operating Income                          $ 87,122      $ 74,366      $ 66,418      $ 71,586
============================================================================================
Net Income                                $ 63,678      $ 52,398      $ 46,772      $ 46,188
============================================================================================
Net Income per Share                      $    1.40     $    1.15     $    1.03     $    1.01
============================================================================================
</Table>
     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.
25. COMPARATIVE FIGURES
     Certain of the prior years’ figures have been reclassified to conform with
the current year’s presentation.
26. UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
     A description of the accounting principles which differ significantly in
certain respects from generally accepted accounting principles in the United
States (US GAAP) follows:
     Deferred income taxes: Deferred tax assets have been recognized only to the
extent of reducing deferred tax liabilities. US GAAP would require that deferred
tax assets be recorded when their realization is more likely than not.
     Foreign currency translation adjustment: The foreign currency translation
adjustment results from the restatement of prior periods so that all periods
presented are in the same reporting currency. US GAAP requires that the
comparative Consolidated Statements of Income and the Consolidated Statements of
Cash Flow be translated using weighted average exchange rates for the applicable
periods. In contrast, the Consolidated Statements of Financial Position are
translated using the exchange rates at the end of the applicable periods. The
difference in these exchange rates is what gives rise to the foreign currency
translation adjustment.
     Net sales: Sales are recorded net of freight costs (less related revenues)
and transportation and distribution expenses. US GAAP would require that net
freight costs be included in cost of sales and transportation and distribution
expenses be reported as an operating expense.
     Non-cash financing and investing activities: Non-cash financing and
investing activities are included in the statement of cash flow. US GAAP
requires that non-cash financing and investing activities be disclosed
supplementally rather than being included in the statement of cash flow.
     In 1995, the Financial Accounting Standards Board issued Statement No. 123
"Accounting for Stock-Based Compensation." The Company has decided to continue
to apply APB Opinion 25 ("APB 25") for measurement of compensation of employees.
     THE APPLICATION OF US GAAP, AS DESCRIBED ABOVE, WOULD HAVE HAD THE
FOLLOWING APPROXIMATE EFFECTS ON NET INCOME, NET INCOME PER SHARE, TOTAL ASSETS
AND SHAREHOLDERS’ EQUITY:

<Table>
<Caption>
                                                                                            1997              1996             1995
_________________________________________________________________________________________________________________________________
<S>                                                                                  <C>                <C>              <C>
Net income as reported in the consolidated statements of income
  and retained earnings                                                              $ 297,138        $ 209,036        $ 159,486
Item (decreasing) increasing reported net income
 Deferred income taxes                                                                   (11,382)           (7,216)          18,598
_________________________________________________________________________________________________________________________________
Approximate net income - US GAAP                                                     $ 285,756        $ 201,820        $ 178,084
=================================================================================================================================
Approximate net income per share - US GAAP                                           $      5.47      $       4.43     $       4.11
=================================================================================================================================

Total assets as reported in the consolidated statements of financial position        $4,427,592       $2,494,387       $2,581,817
Item increasing reported total assets
 Deferred income tax asset                                                                   -            15,727           18,598
_________________________________________________________________________________________________________________________________
Approximate total assets - US GAAP                                                   $4,427,592       $2,510,114       $2,600,415
=================================================================================================================================

Shareholders’ equity as reported in the consolidated statements of
 financial position                                                                  $2,227,891       $1,405,496       $1,241,875
Item increasing reported shareholders’ equity
 Deferred income taxes                                                                       -            11,382           18,598
_________________________________________________________________________________________________________________________________
Approximate shareholders’ equity - US GAAP                                           $2,227,891       $1,416,878       $1,260,473
=================================================================================================================================
</Table>



58
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of US dollars)

SUPPLEMENTAL US GAAP DISCLOSURE
       New Accounting Pronouncements
     In December 1997, the Company adopted the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 128, Earnings per Share. This
Statement establishes standards for the computation of basic and diluted
earnings per share and requires that the treasury stock method be utilized in
the computation of diluted earnings per share. Adoption of this statement did
not have a material impact on basic or diluted earnings per share.
     The Company has also adopted the provisions of SFAS No. 129, Disclosure of
Information about Capital Structure.
     In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
Reporting Comprehensive Income, and SFAS No. 131, Disclosures about Segments of
an Enterprise and Related Information, both of which will be effective for the
Company’s 1998 fiscal year. Adoption of these standards will not have a material
impact on the Company’s financial statements.
DEFERRED INCOME TAXES
     The tax effects of temporary differences that give rise to significant
portions of the net deferred income tax liability are:
<Table>
<Caption>
                                                            1997            1996
_______________________________________________________________________________
<S>                                                    <C>             <C>
Deferred income tax assets:
  Loss and credit carry forwards                       $ 91,884      $ 100,455
  Post-retirement/post-employment benefits                49,551         38,132
  Accrued reclamation costs                               49,577         56,660
  Other                                                   63,858         33,429
_______________________________________________________________________________
Total deferred income tax assets                         254,870        228,676
_______________________________________________________________________________
Deferred income tax liabilities:
  Basis difference in fixed assets                       574,673        241,429
  Other                                                   18,628           4,345
_______________________________________________________________________________
Total deferred income tax liabilities                    593,301        245,774
_______________________________________________________________________________
Net deferred income tax liability                      $338,431      $   17,098
===============================================================================
Consisting of:
  Current deferred income tax asset                    $      -      $ (15,727)
  Long-term deferred income tax liability                338,431         32,825
_______________________________________________________________________________
                                                       $338,431      $   17,098
===============================================================================
</Table>
STOCK COMPENSATION PLANS
     The Company has two stock-based compensation plans which are described
below. The Company applies APB Opinion 25 and related interpretations in
accounting for its plans. No compensation cost has been recognized under APB 25
as the exercise price of the options at the grant date is equal to the market
value of the shares at the grant date. Had compensation cost for the Company’s
plans been determined based on the fair value at the grant dates for awards
under the plans consistent with the method of FASB Statement No. 123, the
Company’s net income and net income per share for the year ending December 31,
1997 would have been reduced to the pro forma amounts indicated below:

<Table>
                                                   1997                           1996
______________________________________________________________________________________________
<S>                                   <C>               <C>          <C>               <C>
                                      AS REPORTED       PRO FORMA    AS REPORTED       PRO FORMA
______________________________________________________________________________________________
Net income                                $285,756       $271,497        $201,820       $191,936
Net income per share                      $   5.47       $   5.19        $   4.43       $   4.21
</Table>

     The fair value of each option grant is estimated on the date of grant using
the Modified Black-Scholes option-pricing model with the following weighted
average assumptions:
<Table>
<Caption>
                                              1997           1996            1995
________________________________________________________________________________
<S>                                       <C>            <C>             <C>
Expected dividend                           $1.03          $1.06           $1.06
Expected volatility              26%        32%        37%
Risk-free interest rate        5.80%      6.90%      6.80%
Expected life of option     10 years   10 years   10 years
Expected forfeitures             26%        25%        25%
</Table>
     The Company has two option plans. Under the Officer and Key Employee Plan,
the Company may, after January 24, 1995, issue up to 3,842,000 common shares
pursuant to the exercise of options. Under the Directors Plan, the Company may,
after January 24, 1995, issue up to 456,000 common shares pursuant to the
exercise of options. Under both plans, the exercise price of each option equals
the closing market price of the Company’s shares on the trading day prior to the
grant and an option’s maximum term is ten years. All options granted to date
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 of the options vesting the
following year.

                                                                            59
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of US dollars)
26. UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (CONTINUED)
     A summary of the status of the plans as of December 31, 1997, 1996 and 1995
and changes during the years ending on those dates is presented below:
NUMBER OF SHARES SUBJECT TO OPTION
<Table>
                                                       1997              1996             1995
_____________________________________________________________________________________________
<S>                                              <C>               <C>              <C>
Outstanding, beginning of year                   1,845,475         1,395,525        1,048,675
Granted                                            889,750           592,000          494,500
Exercised                                         (267,350)         (140,050)        (147,650)
Cancelled                                            (6,750)           (2,000)          -
_____________________________________________________________________________________________
Outstanding, end of year                         2,461,125         1,845,475        1,395,525
=============================================================================================
</Table>
WEIGHTED AVERAGE EXERCISE PRICE
<Table>
<Caption>
                                                      1997              1996             1995
_____________________________________________________________________________________________
<S>                                              <C>               <C>              <C>
Outstanding, beginning of year                   $   52.90         $   34.74        $   23.19
Granted                                              86.11             71.00            74.52
Exercised                                            23.12             20.95            18.24
Cancelled                                            78.44             74.75              -
Outstanding, end of year                             68.11             52.90            34.74
</Table>

     The weighted-average grant-date fair value of options granted during the
year was $23,712 (1996 - $14,206; 1995 - $14,416). The following table
summarizes information about stock options outstanding at December 31, 1997:

<Table>
<Caption>
                                                   OPTIONS              OPTIONS
                                               OUTSTANDING         EXERCISABLE
______________________________________________________________________________________________________________
RANGE OF EXERCISE                 NUMBER WEIGHTED AVERAGE     WEIGHTED AVERAGE                WEIGHTED AVERAGE
PRICES                       OUTSTANDING    REMAINING LIFE      EXERCISE PRICE      NUMBER      EXERCISE PRICE
______________________________________________________________________________________________________________
<S>                          <C>           <C>                   <C>               <C>             <C>
$12.00 to $18.38                  45,625         4 years             $16.29         45,625          $16.29
$20.00 to $25.38                 222,350         6 years              22.04        222,350           22.04
$32.25                           232,850         7 years              32.25        232,850           32.25
$70.38 to $74.75               1,075,050         9 years              72.59        780,050           73.19
$81.75 to $86.75                 885,250        10 years              86.34            -               -
</Table>

     The following supplemental schedules present the Consolidated Financial
Position, Income and Cash Flow in accordance with US GAAP as adjusted for the
GAAP differences described in this note.
SUPPLEMENTAL SCHEDULE OF CONSOLIDATED FINANCIAL POSITION
<Table>
<Caption>

As at December 31
(in thousands of US dollars)
                                                                         1997                1996
______________________________________________________________________________________________
 <S>                                                             <C>                 <C>
ASSETS
Current Assets
  Cash and cash equivalents                                      $     8,756         $     -
  Accounts receivable                                                351,154             230,778
  Inventories                                                        353,425             219,433
  Prepaid expenses                                                    21,131              16,748
  Deferred income tax asset                                              -                15,727
______________________________________________________________________________________________
                                                                     734,466             482,686
Property, plant and equipment                                      2,995,625           1,978,692
Goodwill                                                             574,296               1,686
Other assets                                                         123,205              47,050
______________________________________________________________________________________________
                                                                 $4,427,592          $2,510,114
==============================================================================================
LIABILITIES
Current Liabilities
  Bank indebtedness                                              $     -           $       6,330
  Short-term debt                                                    101,928               -
  Accounts payable and accrued charges                               348,103             180,008
  Current portion of long-term debt                                   2,400              1,520
  Current obligations under capital leases                              340                300
______________________________________________________________________________________________
                                                                    452,771            188,158
Long-term debt                                                    1,129,141            618,800
Obligations under capital leases                                        823              1,163
Deferred income tax liability                                       338,431             32,825
Accrued post-retirement/post-employment benefits                    123,418             95,460
Accrued reclamation costs                                           139,105            146,512
Other non-current liabilities and deferred credits                   16,012             10,318
______________________________________________________________________________________________
                                                                  2,199,701          1,093,236
______________________________________________________________________________________________
SHAREHOLDERS’ EQUITY
Share Capital                                                     1,211,049            630,484
Contributed Surplus                                                 336,486            336,486
Retained Earnings                                                   701,285            470,837
Foreign Currency Translation Adjustment                             (20,929)           (20,929)
______________________________________________________________________________________________
                                                                  2,227,891          1,416,878
______________________________________________________________________________________________
                                                                 $4,427,592         $2,510,114
==============================================================================================
</Table>
60
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of US dollars)
26. UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (CONTINUED)
SUPPLEMENTAL SCHEDULE OF CONSOLIDATED INCOME AND RETAINED EARNINGS
<Table>
<Caption>

For the Years Ended December 31
(in thousands of US dollars)                                             1997             1996             1995
__________________________________________________________________________________________________________________
<S>                                                                  <C>              <C>              <C>
__________________________________________________________________________________________________________________
Net sales                                                            $2,610,346       $1,552,885       $ 910,988
Cost of goods sold                                                     1,963,565        1,119,758          549,185
__________________________________________________________________________________________________________________
GROSS MARGIN                                                             646,781          433,127          361,803
__________________________________________________________________________________________________________________
Selling, distribution and administrative                                 161,273          109,295          109,031
Provincial mining and other taxes                                         70,312           40,197           43,388
Other income                                                             (32,444)         (15,857)         (14,865)
__________________________________________________________________________________________________________________
                                                                         199,141          133,635          137,554
__________________________________________________________________________________________________________________
OPERATING INCOME                                                         447,640          299,492          224,249
INTEREST EXPENSE                                                          81,439           46,761           41,817
__________________________________________________________________________________________________________________
INCOME BEFORE INCOME TAXES                                               366,201          252,731          182,432
INCOME TAXES                                                              80,445           50,911            4,348
__________________________________________________________________________________________________________________
NET INCOME                                                               285,756          201,820          178,084
RETAINED EARNINGS, BEGINNING OF YEAR                                     470,837          317,216          184,966
DIVIDENDS                                                                (55,308)         (48,199)         (45,834)
__________________________________________________________________________________________________________________
RETAINED EARNINGS, END OF YEAR                                       $ 701,285        $ 470,837        $ 317,216
==================================================================================================================
NET INCOME PER SHARE -- BASIC                                        $      5.47      $      4.43      $      4.11
==================================================================================================================
NET INCOME PER SHARE -- FULLY DILUTED                                $      5.42      $      4.39      $      4.06
==================================================================================================================
DIVIDENDS PER SHARE                                                  $      1.03      $      1.06      $      1.06
==================================================================================================================
</Table>
SUPPLEMENTAL SCHEDULE OF CONSOLIDATED CASH FLOW
<Table>
<Caption>

For the Years Ended December 31
(in thousands of US dollars)                                               1997             1996             1995
__________________________________________________________________________________________________________________
<S>                                                                  <C>              <C>              <C>
OPERATING ACTIVITIES
Net Income                                                           $ 285,756        $ 201,820        $ 178,084
Items not affecting cash
  Depreciation and amortization                                          170,002           90,125           70,953
  (Gain) loss on disposal of fixed assets                                 (4,739)           2,152               726
  Provision for deferred income tax                                       45,873           30,953          (13,855)
  Provision for post-retirement/post-employment benefits                   6,166            5,890            2,052
CHANGES IN NON-CASH OPERATING WORKING CAPITAL
  Accounts receivable                                                     23,470           (7,400)         (48,831)
  Inventories                                                             19,873            2,493            9,297
  Prepaid expenses                                                         3,736           (1,393)           4,299
  Accounts payable and accrued charges                                   (68,623)         (19,214)          26,581
Accrued reclamation costs                                                 (7,407)          (5,021)           5,214
Other non-current liabilities and deferred credits                        (6,286)          (4,219)          (1,037)
__________________________________________________________________________________________________________________
CASH PROVIDED BY OPERATING ACTIVITIES                                    467,821          296,186          233,483
__________________________________________________________________________________________________________________
INVESTING ACTIVITIES
Additions to property, plant and equipment                             (160,337)          (58,939)         (39,596)
Acquisition of Texasgulf Inc.                                              --               --           (812,226)
Acquisition of White Springs Agricultural Chemicals, Inc.                  --               --           (291,540)
Acquisition of Arcadian Corporation                                    (474,985)
Proceeds from disposal of fixed assets                                    15,276           22,716               503
Additions to other assets                                                (22,091)          (2,819)         (10,298)
__________________________________________________________________________________________________________________
CASH USED IN INVESTING ACTIVITIES                                      (642,137)          (39,042)     (1,153,157)
__________________________________________________________________________________________________________________
FINANCING ACTIVITIES
Proceeds from long-term obligations                                   1,210,000             --           1,040,000
Repayment of long-term obligations                                     (699,979)        (258,556)        (214,460)
Proceeds from short-term debt                                            210,000            --               --
Repayment of short-term debt                                           (108,072)            --               --
Repayment of Senior Notes                                              (374,526)            --               --
Dividends                                                                (55,308)         (48,199)         (45,834)
Issuance of shares                                                         7,287            2,784          163,889
__________________________________________________________________________________________________________________
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES                          189,402        (303,971)          943,595
__________________________________________________________________________________________________________________
INCREASE (DECREASE) IN CASH                                               15,086          (46,827)          23,921
(BANK INDEBTEDNESS) CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR          (6,330)          40,497           16,576
__________________________________________________________________________________________________________________
CASH AND CASH EQUIVALENTS (BANK INDEBTEDNESS), END OF YEAR             $ 8,756        $    (6,330)     $    40,497
==================================================================================================================
</Table>
SUPPLEMENTAL CASH FLOW INFORMATION
     On March 6, 1997, the Company acquired all of the outstanding shares of
Arcadian. The consideration paid included 8,029,092 common shares of the Company
valued at $573,278.
                                                                             61
BOARD OF DIRECTORS
ISABEL B. ANDERSON [PICTURE]
     Ms. Anderson, President and Chief Executive Officer of A&L Information
Brokers, a Calgary-based information brokerage company, joined the PCS Board in
1989 and is on the executive committee. A longtime Professor of Economics at the
University of Saskatchewan and specialist in international economics and
Canadian public policy, she was a Commissioner in 1986 for Saskatchewan’s public
hearings on the Canada-United States trade negotiations. She has served on the
Canadian delegation to the United Nations Conference on Science and Technology
in Vienna, Austria, and on the Canadian NGO delegation to the United Nations
Conference on Trade and Development in Nairobi, Kenya. She works extensively on
the implications of public policy for the growth and development of the Western
Canadian economy, particularly in Saskatchewan.
DOUGLAS J. BOURNE [PICTURE]
     Mr. Bourne, of Houston, Texas, is a director, former Chairman and retired
CEO of Battle Mountain Gold Company and, before that, Group Vice President and
director of Pennzoil Company, and Chairman and CEO of Duval Corporation, its
mining subsidiary. A past Chairman of the Potash & Phosphate Institute and the
Sulphur Institute, and a director of The Fertilizer Institute and the American
Mining Congress, he was elected to the PCS Board in 1990 and heads the
environmental affairs committee.
CHARLES E. CHILDERS [PICTURE]
     Mr. Childers, President and CEO of Potash Corporation of Saskatchewan Inc.
and its predecessor company since 1987, joined the Board in 1989 and became
Chairman in 1990. He is Chairman of the executive committee. He is past
President of the International Fertilizer Industry Association and past Chairman
of the Potash & Phosphate Institute, Canpotex Limited, the Saskatchewan Potash
Producers Association and The Fertilizer Institute. He is active in the
Fertilizer Industry Advisory Committee to the Food and Agriculture Organization,
and sits on the board of directors of Battle Mountain Gold Company and KAP
Resources Ltd.
DENIS J. COTE [PICTURE]
     Mr. Cote retired Chairman and CEO of the UMA Group Ltd., was President,
Chief Executive Officer and member of the board of Reclamation Management Ltd.
in Vancouver, British Columbia in 1993. He has served on the PCS Board since
1989, sits on the executive committee and heads the compensation committee.
Former Chairman and director of Joss Energy Ltd., he is a director of the
successor company, Startech Energy Inc. He is a founder and Chairman of Inter
West Energy Corporation, which merged with New Cache Resources in 1997, and a
member of the board of the Vancouver Port Corporation. From 1975 to 1981, he
served on the board of governors of the University of Calgary.
WILLIAM J. DOYLE [PICTURE]
     Mr. Doyle, President of PCS Sales, has served on the PCS Board since 1989.
He became President of PCS Sales in 1987 and prior to that was International
Vice President of International Minerals and Chemical Corporation. He is past
Chairman of Canpotex Limited and continues to serve on its board, as well as the
boards of the Potash & Phosphate Institute, PhosChem and Fersan S.A. in the
Dominican Republic. He chairs the International Fertilizer Industry
Association’s Potash Committee.
THE HONOURABLE WILLARD Z. ESTEY, Q.C. [PICTURE]
     Mr. Estey, of Toronto, Ontario, is a former Chief Justice of Ontario and
Justice of the Supreme Court of Canada. He was appointed Queen’s Counsel in
1960. A PCS director since 1990, he sits on the audit committee. He is a
director of Canwest Global Communications Corporation, CamVec Corporation, ACC
Corp. and Fundy Cable Ltd. He is Chairman of the Ballard Foundation, the
Canadian Law Scholarship Foundation and the Ontario Press Council.
DALLAS J. HOWE [PICTURE]
     Mr. Howe, President and CEO of Advanced DataSystems Ltd. and BDM
Information Systems Group of Companies, served on the PCS Board from 1982 to
1989 and was reappointed in 1991. He sits on the audit committee. He has been
President, CEO and founder of an extensive group of high technology information
and data systems companies over twenty years, and is a director of the Saskatoon
Regional Economic Development Authority and Saskatoon City Hospital Foundation.
JAMES F. LARDNER [PICTURE]
     Mr. Lardner, of Davenport, Iowa, is a retired Vice President of Deere &
Company who was responsible for agricultural tractor design and North American
tractor operations. He joined the PCS Board in 1989 and serves on the executive
committee. He is a director of the Sears Manufacturing Company and a former
director of the Trane Company and American Standard Inc. Elected to the National
Academy of Engineering in 1985, he often serves on bodies which advise United
States government agencies and departments on science, technology and
engineering policy. He is a consultant on manufacturing strategy and management,
and manufacturing and information technology.
DONALD E. PHILLIPS [PICTURE]
     Mr. Phillips, of Brandon, Mississippi, former President and CEO of
Pitman-Moore Inc., joined the PCS Board in 1991 and serves on the compensation
committee. A director of Great Lakes REIT Inc., Oak Brook, Illinois, he is
Chairman of the board of directors of Synbiotics Inc., San Diego, California. He
is President of Holmes Community College Development Foundation, Goodman,
Mississippi, a regent of Bethel College and Seminary in St. Paul, Minnesota, a
trustee of Mississippi College, Clinton, Mississippi, and former Chairman of the
board of Lake Forest Graduate School of Business, Lake Forest, Illinois.



62
BOARD OF DIRECTORS
PAUL J. SCHOENHALS [PICTURE]
     Mr. Schoenhals, President of Petroleum Industry Training Service in
Calgary, Alberta, was Chairman of Potash Corporation of Saskatchewan from 1987
to 1989. He rejoined the Board in 1992, and sits on the environmental affairs
committee. A former Member of the Legislative Assembly and Cabinet Minister in
Saskatchewan, he is on the boards of Upton Resources Inc., Brandon Energy Ltd.
and Petroleum Industry Training Service. He has been a director of Precambrian
Shield Resources and Sabre West Oil & Gas and on the national advisory board for
Marsh & McLennan. He sits on the national advisory committee for Bayer Care
Canada.
DARYL K. SEAMAN [PICTURE]
     Mr. Seaman, Chairman and President of Dox Investments Inc. in Calgary,
Alberta, joined the PCS Board of Directors in 1989 and is a member of the
compensation committee. Former Chairman and CEO of Bow Valley Industries Ltd.,
he is a director of Encal Energy Ltd., Renaissance Energy Ltd., Far West Mining
Ltd., Abacan Resource Corporation, Basic Industries Corporation, Canadian
Chemical Reclaiming Ltd. and Bow Valley Energy Ltd. He is co-owner and director
of the Calgary Flames Hockey Club.
E. ROBERT STROMBERG, Q.C. [PICTURE]
     Mr. Stromberg, Partner in Saskatchewan law firm Robertson Stromberg, was
elected to the PCS Board in 1991 and serves on the executive committee. Admitted
to the Saskatchewan Bar in 1969 and appointed Queen’s Counsel in 1984, he is a
member of the Law Society of Saskatchewan and the Saskatoon Bar Association. He
serves on the advisory board for the Centre for International Business Studies,
is Chairman of the Saskatoon Airport Authority, a director of the Canadian
Airports Council and past President of the Saskatchewan Place board.
JACK G. VICQ [PICTURE]
     Mr. Vicq, Professor of Accounting and Associate Dean of the College of
Commerce, University of Saskatchewan, is responsible for the Centre for
International Business Studies, established to help Saskatchewan businesses
explore export markets and to improve co-operation between the academic and
business communities in developing export opportunities. A member of the PCS
Board since 1989, he heads the audit committee. He sits on committees of the
Saskatchewan and Canadian Institutes of Chartered Accountants and has worked for
the Saskatchewan and Canadian governments in areas of policy, finance and
taxation.
BARRIE A. WIGMORE [PICTURE]
     Mr. Wigmore, a Limited Partner with New York investment banking firm
Goldman Sachs Group, L.P., headed its efforts in such regulated industries as
electric and gas utilities, pipelines and telecommunications. He joined the PCS
Board in 1989 and sits on the compensation committee. He writes on financial
history and current financial markets and is Chairman of the American Friends of
Worcester College (Oxford University), trustee of the Progressive Policy
Institute and a director of National Service Industries Inc.
PAUL S. WISE [PICTURE]
     Mr. Wise, of Carefree, Arizona, a past President and CEO of the Alliance of
American Insurers and a member of the PCS Board since 1989, currently sits on
the environmental affairs committee. He is also on the boards of United Funds,
Waddell & Reed Funds and TMK/United Funds, and has been on the boards of the
College of Insurance, the Institute of Civil Justice at the Rand Corporation,
the Insurance Hall of Fame, and the National Safety Council and Senior Net. He
was President of the Property Loss Research Bureau and a director of the
Insurance Institute for Highway Safety.
COMMITTEES
EXECUTIVE COMMITTEE:
     The executive committee is composed of five directors. Between meetings of
the Board it has, with certain exceptions, all the powers vested in the Board.
In addition, the executive committee nominates candidates for directorship of
the Corporation. It also has responsibility for corporate governance issues.
AUDIT COMMITTEE:
     The audit committee is composed of three directors, none of whom may be an
officer or employee of the Corporation or any of its affiliates. The committee
meets with the Corporation’s financial management personnel, internal auditor
and external auditor at least once each quarter to review the Corporation’s
financial reporting practices and procedures and authorize the release of
unaudited quarterly financial statements, and reviews the Corporation’s annual
financial statements prior to their submission to the Board for approval. The
committee also recommends to the Board the external auditors to be proposed to
the shareholders for appointment at the annual meeting.
COMPENSATION COMMITTEE:
     The compensation committee is composed of four non-employee directors. This
committee formulates and makes recommendations to the Board in respect of
compensation issues relating to directors and senior management of the
Corporation and in respect of corporate salary and benefits policy. It reviews
and approves, on an annual basis, the Corporation’s salary administration
program. It is responsible for the annual report on executive compensation. The
committee, in consultation with the Chief Executive Officer, considers and
BOARD OF DIRECTORS

reports to the Board regarding corporate succession matters.
ENVIRONMENTAL AFFAIRS COMMITTEE:
     The environmental affairs committee is composed of three directors. The
committee works to ensure that the Corporation’s commitment to the protection of
the environment is fulfilled. It routinely receives environmental audit reports
for review and discussion with senior management and monitors environmental
issues in other areas of corporate activity such as off-site transportation,
distribution and storage of product. The committee reviews and discusses with
management potential changes to regulatory requirements and to corporate
environmental policy.

                                                                             63
SHAREHOLDER INFORMATION
ANNUAL MEETING
     The Annual Meeting of the shareholders of the Company will be held at 10:30
a.m. Central Standard Time May 7, 1998 in the Commonwealth Ballroom, Ramada
Hotel, First Avenue and 22nd Street East, Saskatoon, Saskatchewan.
     Holders of common shares as of March 19, 1998 are entitled to vote at the
meeting and are encouraged to participate. Shareholders who cannot attend are
urged to complete and mail their proxies promptly to ensure their common shares
will be voted.
DIVIDENDS
     Dividend amounts paid to shareholders resident in the United States were
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 before the payment date.
     Future cash dividends will be paid out of, and conditioned upon, the
Corporation’s available earnings. Shareholders who wish to have their dividends
deposited directly in their bank accounts should contact the transfer agent and
registrar, CIBC Mellon Trust.
DIVIDEND REINVESTMENT POLICY
     A dividend reinvestment plan established in 1993 allows registered
shareholders to have dividends reinvested to newly-issued common shares of the
Corporation at prevailing market rates.
INFORMATION FOR SHAREHOLDERS OUTSIDE CANADA
     Dividends paid to residents in countries with which Canada has bilateral
tax treaties, which is the majority of countries, are generally subject to the
15-percent Canadian non-resident withholding tax. There is no Canadian tax on
gains from the sale of shares or debt instruments owned by non-residents not
carrying on business in Canada. No level of government in Canada levies estate
taxes or succession duties.
INVESTOR INQUIRIES
     Shareholders with inquiries can contact Betty-Ann Heggie, Senior Vice
President, Corporate Relations by toll-free lines.

<Table>
<S>                                <C>
Within Canada:                     (800)667-0403
Within the US:                     (800)667-3930
</Table>
Website: www.potashcorp.com
INTERIM REPORTS, NEWS RELEASES AND FORM 10-K
     Those who would like to receive quarterly reports but are not registered
shareholders should contact the Company’s Corporate Relations department. News
releases are also available via fax.
     Copies of the Company’s most recent Form 10-K, as filed with the Securities
and Exchange Commission, are available upon request.
DUPLICATE MAILINGS
     Multiple copies of the annual and quarterly reports may be received by
shareholders who own shares in more than one account or several shareholders
living at the same address. To eliminate multiple mailings, call CIBC Mellon
Trust, the Company’s transfer agent and registrar, toll-free at (800) 387-0825.
SHARES LISTED (POT)
The Toronto Stock Exchange
The Montreal Exchange
New York Stock Exchange
OWNERSHIP
     On March 3, 1998, there were 3,058 holders of record of the Company’s
common shares.
AUDITORS
Deloitte & Touche
Saskatoon, Saskatchewan
LEGAL COUNSEL
Robertson Stromberg
Saskatoon, Saskatchewan
Stikeman, Elliott
Toronto, Ontario
Arent Fox Kintner Plotkin & Kahn, PLLC
Washington, DC
BANK
The Bank of Nova Scotia
Saskatoon, Saskatchewan
TAX ADVISORS
Hergott Duval Stack & Partners
Saskatoon, Saskatchewan
Goodman Phillips & Vineberg
Montreal, Quebec
New York, New York
COMMON SHARE TRANSFER AGENT
In Canada:
CIBC Mellon Trust Company
1080 - 2002 Victoria Avenue
Regina, Saskatchewan S4P 0R7
Phone: (306) 751-7550
     Inquiries about shareholdings, share transfer requirements, address changes
or lost certificates should be directed to CIBC Mellon Trust’s AnswerLine at
(800) 387-0825 or to the Corporate Secretary, PCS, Suite 500, 122 First Avenue
South, Saskatoon, Saskatchewan S7K 7G3.
In the United States:
ChaseMellon
Shareholder Services, L.L.C.
85 Challenger Road
Overpeck Center
Ridgefield Park, New Jersey 07660
Phone: (800) 526-0801
Website: www.chasemellon.com
[GRAPH] 1997 PCS SHARE PRICE - NYSE
[GRAPH] 1990 - 1997 PCS SHARE PRICE - NYSE

64
COMMON SHARE PRICES AND VOLUMES
     The following table sets forth the high and low prices, as well as the
volumes, of the Company’s common shares as traded on The Toronto Stock Exchange,
The Montreal Exchange and the New York Stock Exchange (composite transactions)
on a quarterly basis, as reported in The Globe and Mail and The Wall Street
Journal, for the periods indicated. Potash Corporation of Saskatchewan Inc. is a
TSE 100 company.

<Table>
<Caption>
                     The Toronto Stock Exchange1            The Montreal Exchange1          New York Stock Exchange
                   High         Low         Volume        High          Low     Volume     High       Low         Volume
<S>              <C>          <C>       <C>             <C>         <C>       <C>         <C>       <C>       <C>
1997
First Quarter     122.700      98.650       3,212,708    122.100     99.000     210,444    89.875    71.500    15,706,400
Second Quarter    117.000      99.850       2,986,406    116.800    100.300     230,607    85.000    71.000    13,678,900
Third Quarter     111.500      98.500       3,854,717    111.100     99.000     624,684    81.125    71.688    16,679,900
Fourth Quarter    122.200     108.750       8,222,508    121.900    108.950     371,250    87.500    78.000    13,866,600
Year 1997         122.700      98.500      18,276,339    122.100     99.000   1,436,985    89.875    71.000    59,931,800

1996
First Quarter     110.875      82.000       1,747,948    110.875     82.250     185,062    80.500    60.000    26,538,200
Second Quarter     97.000      83.000       1,893,727     97.700     83.000     115,952    71.875    60.250    17,187,800
Third Quarter     108.500      88.000       1,018,661    108.250     88.700     138,003    79.500    64.125    14,057,200
Fourth Quarter    117.950      91.750       3,983,487    117.850     92.950     616,267    86.875    68.250    17,897,800
Year 1996         117.950      82.000       8,643,823    117.850     82.250   1,055,284    86.875    60.000    75,681,000

1995
First Quarter      66.000      45.625       4,970,457     65.750     45.500     306,490    47.125    32.375    20,297,500
Second Quarter     76.750      60.500       2,593,136     76.500     60.750     248,742    55.875    43.500    17,041,400
Third Quarter      93.000      73.500       1,916,335     93.000     74.750     659,437    68.500    53.875    16,258,200
Fourth Quarter    107.000      79.000       4,809,481    106.125     79.000     180,231    79.000    59.500    20,969,000
Year 1995         107.000      45.625      14,289,409    106.125     45.500   1,394,900    79.000    32.375    74,566,100
</Table>
1 Trading prices are in CDN$
EXCHANGE RATE OF THE CANADIAN DOLLAR
     In this report, unless otherwise specified, all dollar amounts are
expressed in US dollars (US$). The Government of Canada permits a floating
exchange rate to determine the value of the Canadian dollar (C$) against the US
dollar. The exchange rate at the end of each of the five most recent years ended
December 31, and the average, the high and the low exchange rates for each of
such five years, were as follows (such rates, which are expressed in US dollars,
being the noon buying rates in Canada for cable transfers in Canadian dollars by
the Bank of Canada):

<Table>
<Caption>
                                         YEARS ENDED DECEMBER 31
                                    1997    1996   1995   1994    1993
                                   -----   ----- ----- ----- -----
<S>                                <C>     <C>    <C>    <C>     <C>
At end of period                   .6997   .7301 .7325 .7129 .7553
Average for period(1)              .7198   .7330 .7307 .7301 .7730
High for period                    .7495   .7527 .7534 .7644 .8050
Low for period                     .6945   .7212 .7009 .7098 .7435
</Table>
(1) Based on the average of the exchange rates on the last business day of each
month during the period.
The noon buying rate in New York City for cable transfers in Canadian dollars
as certified by the Bank of Canada on March 3, 1998 was US$1.00 = C$1.4184
(equivalent to C$1.00 = US$0.7050).

                                        GLOSSARY OF FINANCIAL TERMS
ASSET TURNOVER = SALES / TOTAL ASSETS measures the efficiency of using assets
to produce sales.
CURRENT RATIO = CURRENT ASSETS / CURRENT LIABILITIES measures the ability to
pay short-term debt obligations.
LONG-TERM DEBT TO EQUITY = LONG-TERM DEBT / SHAREHOLDERS’ EQUITY measures the
proportion of creditor to shareholder financing.
NET INCOME PER SHARE = EARNINGS AVAILABLE TO COMMON SHARES / WEIGHTED AVERAGE
NUMBER OF COMMON SHARES OUTSTANDING measures the normalized earnings generated
for each common share.
QUICK RATIO = CASH + CASH EQUIVALENTS + NET RECEIVABLES / CURRENT LIABILITIES
measures the ability to meet immediate demands of creditors.
RETURN ON INVESTMENT = NET INCOME PLUS INTEREST EXPENSE / TOTAL ASSETS measures
the profitability or earning power of all assets employed.
RETURN ON SHAREHOLDERS’ EQUITY = NET INCOME / SHAREHOLDERS’ EQUITY measures the
adequacy of return on the owners’ investment.
SHAREHOLDERS’ EQUITY TO TOTAL ASSETS = SHAREHOLDERS’ EQUITY / TOTAL ASSETS
measures the proportion of assets to shareholder financing.
FREE CASH FLOW is the cash, exclusive of the change in working capital, which
is provided by operations less disbursements for sustaining capital,
capitalized turnarounds and dividends.
CUMULATIVE RETURN to shareholders is calculated by using the difference between
the beginning and ending share prices on the NYSE for the period indicated,
plus dividends received.


[SYMBOL]
It is the policy of PCS to manage its operations responsibly in order to
safeguard those natural resources related to or affected by its activities. In
keeping with this policy, the Annual Report uses paper containing at least 10%
post-consumer recycled fiber and is recyclable.
CORPORATE OFFICERS AND KEY MANAGEMENT
POTASH CORPORATION OF SASKATCHEWAN INC.
CHARLES E. CHILDERS
Chairman, President and
Chief Executive Officer

WAYNE R. BROWNLEE               BARRY E. HUMPHREYS
Senior Vice President           Senior Vice President
Expansion and Development       Finance and Treasurer
JOHN GUGULYN                    PETER BRAUN
Senior Vice President           Vice President
Administration                  Audit
JOHN L. M. HAMPTON              DENIS A. SIROIS
Senior Vice President           Vice President and
General Counsel and Secretary   Corporate Controller
BETTY-ANN L. HEGGIE
Senior Vice President
Corporate Relations

PCS SALES                       PCS PHOSPHATE
WILLIAM J. DOYLE                THOMAS J. WRIGHT
President                       President
RICHARD J. LACROIX              THOMAS J. REGAN, JR.
Executive Vice President        Executive Vice President
P. RODNEY WILSON                WILLIAM T. COOPER, JR.
Executive Vice President        Vice President
                                Production - Aurora
PCS POTASH
                                VERNON J. LLOYD
GARTH W. MOORE                  Vice President
President                       Production - White Springs
JAMES J. BUBNICK                PCS NITROGEN
Executive Vice President
                                GARY E. CARLSON
                                President
                                JAMES F. DIETZ
                                Executive Vice President



CORPORATE DATA
POTASH CORPORATION OF SASKATCHEWAN INC.                PCS POTASH - ESTERHAZY
Suite 500                                              P.O. Box 1060
122 - 1st Avenue South                                 Esterhazy, SK S0A 0X0
Saskatoon, SK S7K 7G3                                  Phone: (306) 745-6601
Phone: (306) 933-8500                                  Fax: (306) 745-2100
Fax: (306) 652-2699
PCS SALES                                              PCS POTASH - LANIGAN
Suite 440                                              P.O. Box 3100
5750 Old Orchard Road                                  Lanigan, SK S0K 2M0
Skokie, IL 60077                                       Phone: (306) 365-2030
Phone: (800) 241-6908                                  Fax: (306) 365-2526
(847) 583-4400
Fax: (847) 966-1293
PCS PHOSPHATE                                          PCS POTASH - MOAB
P.O. Box 30321                                         P.O. Box 1208
3101 Glenwood Avenue                                   Moab, UT 84532-1208
Raleigh, NC 27622-0321                                 Phone: (435) 259-7171
Phone: (919) 881-2700                                  Fax: (435) 259-7100
Fax: (919) 881-2847
PCS NITROGEN                                           PCS POTASH - NEW BRUNSWICK
3175 Lenox Park Boulevard                              P.O. Box 5039
Suite 400                                              Sussex, NB E4E 5L2
Memphis, TN 38115-4256                                 Phone: (506) 432-8400
Phone: (901) 758-5200           Fax: (506) 433-6617
Fax: (901) 758-5201
FLORIDA FAVORITE FERTILIZER     PCS POTASH - PATIENCE LAKE
P.O. Box 8000                   P.O. Box 509
Lakeland, FL 33802              Saskatoon, SK S7K 3L6
Phone: (941) 688-2442           Phone: (306) 374-4800
Fax: (941) 682-6652             Fax: (306) 955-0424
PCS PHOSPHATE - AURORA          PCS POTASH - ROCANVILLE
P.O. Box 48                     P.O. Box 460
Hickory Point Road              Rocanville, SK S0A 3L0
Aurora, NC 27806                Phone: (306) 645-2870
Phone: (919) 322-4111           Fax: (306) 645-2733
Fax: (919) 322-5686
PCS PHOSPHATE - WHITE SPRINGS   PCS NITROGEN - AUGUSTA
P.O. Box 300                    P.O. Box 1483
White Springs, FL 32096         Augusta, GA 30903
Phone: (904) 397-8101           Phone: (706) 849-6100
Fax: (904) 397-1026             Fax: (706) 849-6111
DAVENPORT FEED PLANT            PCS NITROGEN - CLINTON
Highway 22 West                 P.O. Box 2966
P.O. Box 500                    Clinton, IA 52733-2966
Buffalo, IA 52728               Phone: (319) 243-5800
Phone: (319) 381-1130           Fax: (319) 243-7528
Fax: (319) 381-4990
KINSTON FEED PLANT              PCS NITROGEN - GEISMAR
3102, Highway 11 North          P.O. Box 307
P.O. Box 1005                   Geismar, LA 70734
Kinston, NC 28503               Phone: (504) 621-1500
Phone: (919) 522-4077           Fax: (504) 621-1504
Fax: (919) 522-4996
MARSEILLES FEED PLANT           PCS NITROGEN - LAPLATTE
US Route 6 East                 CS 7354
P.O. Box 88                     Bellevue, NE 68005
Marseilles, IL 61341            Phone: (402) 291-0090
Phone: (815) 795-5111           Fax: (402) 293-6262
Fax: (815) 795-5117
SALTVILLE FEED PLANT            PCS NITROGEN - LIMA
Government Plant Road           P.O. Box 628
P.O. Box 1069                   Lima, OH 45802-0628
Saltville, VA 24370             Phone: (419) 226-1200
Phone: (540) 496-4741           Fax: (419) 226-1500
Fax: (540) 496-5116
WEEPING WATER FEED PLANT        PCS NITROGEN - MEMPHIS
East Garfield Street            5790 Old Millington Road
P.O. Box 171                    Millington, TN 38053-8306
Weeping Water, NE 68463         Phone: (901) 354-3300
Phone: (402) 267-2365           Fax: (901) 354-3338
Fax: (402) 267-7235
PCS POTASH - ALLAN              PCS NITROGEN - WILMINGTON
Allan, SK S0K 0C0               P.O. Box 630
Phone: (306) 257-3312           Wilmington, NC 28402
Fax: (306) 257-4240             Phone: (910) 343-3100
                                Fax: (910) 343-6601
PCS POTASH - CORY               PCS NITROGEN - TRINIDAD
P.O. Box 1320                   Goodrich Bay Road
Saskatoon, SK S7K 3N9           Point Lisas, Couva
Phone: (306) 382-0525           Trinidad, West Indies
Fax: (306) 384-9132             Phone: (868) 636-2205
                                Fax: (868) 636-8297
                         GLOSSARY OF OPERATIONAL TERMS

GENERAL

DOMESTIC AND EXPORT MARKETS The domestic or North American market includes
Canada and the United States while the export or offshore market is the rest of
the world.
MIXED FERTILIZERS contain more than one nutrient. A 6-23-30 fertilizer contains
6 percent nitrogen [N], 23 percent phosphate [P2O5] and 30 percent potash [K2O]
by weight. The nutrient breakdown is always stated in the same order, and is
referred to in the industry as NPK.
LIQUID FERTILIZERS come in two types: solution, in which essentially all the
plant nutrients are dissolved in solution; and suspension, a saturated solution
in which some plant nutrients are suspended (by gelling clay).
METRIC TONNE is equal to 2,204.6 pounds or 1,000 kilograms. Most offshore sales
are made in metric tonnes and US dollars, F.O.B. Vancouver, BC for potash,
F.O.B. Morehead City, NC for phosphate and F.O.B. Trinidad for nitrogen.
SHORT TON is equal to 2,000 pounds. The measurement is rarely used in Canada,
following metrication, but is used in the United States. The Corporation’s US
price lists are in US dollars per short ton.
PRODUCT TONNE is a standard measure of the weights of all types of potash,
phosphate and nitrogen products.
NUTRIENT TONNE is a measure of the nutrient weight of potassium, phosphate and
nitrogen fertilizers; and consists of K2O tonnes, P2O5 tonnes and N tonnes.

POTASH
POTASSIUM (K) is the seventh most common element in the earth’s crust. It is
usually found combined with chlorine in the chemical compound potassium
chloride.
POTASH is a term typically used to denote materials containing potassium,
particularly potassium fertilizer. Most potash fertilizer is muriate of potash
[KCl], potassium chloride. Potassium combines with other minerals in specialty
fertilizers such as potassium sulphate [K2SO4], potassium magnesium sulphate
[K2Mg2(SO4)3] or potassium nitrate [KNO3].
POTASH ORE consists typically of KCl, NaCl and other minerals. The KCl, which
becomes the product stream, is separated from the NaCl and other minerals,
which become the tailings stream. Processing 100 tonnes of ore typically
produces 28 to 38 tonnes of product.
K2O is potassium oxide, a term used in the fertilizer industry to define
potassium content. To convert 100 percent pure KCl tonnes to K2O tonnes,
multiply by 0.6317. To convert typical product tonnes to K2O tonnes, multiply
product tonnes by 0.61.
K2O tonne is a term used to provide a common measure of the potassium content
of fertilizers having different chemical analyses. PCS product is generally
guaranteed to contain no less than 60 percent K2O.
CANPOTEX LIMITED is an export company owned by all Saskatchewan potash
producers. Sales through Canpotex are generally allocated pro rata to each
producer on the basis of productive capacity. PCS provides 57.5 percent of
Canpotex product.

PHOSPHATE
PHOSPHORUS (P) is widely distributed in nature in combination with other
elements. It is most commonly found in phosphate ore, the only economical
source of phosphorus for production of phosphate fertilizers and phosphate
chemicals.
BPL, (bone phosphate of lime), is a standard reference for the phosphate
content of phosphate ore and phosphate rock.
P2O5 is phosphorus pentoxide, a term used to express phosphorus content of ore
or products. To convert P to P2O5, multiply by 2.29.
P2O5 tonne is a term used to provide a common measure of the phosphorus content
of fertilizers having different chemical analyses.
PHOSPHATE ROCK, the main source of phosphate fertilizers, is a form of calcium
phosphate, and also contains materials such as fluorine, magnesium and iron.
The phosphate rock is generally dissolved in a mixture of phosphoric and
sulphuric acid to produce a product stream containing phosphoric acid, and a
by-product stream containing primarily gypsum. The phosphoric acid product
stream is further processed to produce a wide range of phosphate fertilizers
and industrial products.
MGA, merchant grade phosphoric acid, is available in amber or green form, and
has NPK composition 0-54-0. It is primarily used to produce DAP.
DAP, diammonium phosphate, is the most commonly produced and widely traded
phosphate product. Its NPK composition is 18-46-0. It is produced by reacting
ammonia with phosphoric acid.
MAP, monoammonium phosphate, is a solid fertilizer with NPK composition
13-52-0. It is produced by reacting ammonia with phosphoric acid.
GTSP, granular triple superphosphate, is a solid fertilizer with NPK
composition 0-46-0. It is produced by reacting phosphate rock with phosphoric
acid.
SUPERPHOSPHORIC ACID, with NPK composition 0-70-0, is used to manufacture
liquid fertilizers and animal feed supplements. PCS LoMag is superphosphoric
acid, which is produced by evaporating MGA to remove water, and filtering to
remove impurities such as magnesium.
ANIMAL AND POULTRY FEED SUPPLEMENTS are an important use of phosphate. They are
solid and granular and have different compositions. These products are sold on
the basis of their phosphorus content.
PHOSCHEM is an association formed under the Webb-Pomerene Act for US exports of
phosphate fertilizer. PCS Sales is responsible for export sales of liquid
fertilizer products for all PhosChem members.

NITROGEN
NITROGEN (N) is a gas which makes up four-fifths of the atmosphere. It is an
essential nutrient for plant growth, and is present in chlorophyll and protein.
Some plants can obtain nitrogen from the atmosphere, but most obtain it from
soil solutions. It must be applied to the soil annually because its nutritional
value is consumed during each growing season.
N TONNE is a term used to provide a common measure of the nitrogen content of
fertilizers having differing chemical analyses.
AMMONIA is produced primarily from natural gas and atmospheric nitrogen as the
first step in the production of nitrogen fertilizers. It can also be directly
applied to soils. Anhydrous ammonia [NH3] is a gas with NPK composition 82-0-0.
Ammonia is condensed by pressure and cooling, and stored and transported in
this liquid form.
AQUA AMMONIA [NH4OH], ammonium hydroxide, is formed by blending anhydrous
ammonia in water. Commercial grades usually contain 20-25 percent nitrogen.
NITRIC ACID [HNO3], produced in varying strengths by reacting ammonia with
atmospheric oxygen, is used in the production of ammonium nitrate and as an
intermediate for industrial purposes.
AMMONIUM NITRATE [NH4NO3], with NPK composition 34-0-0, is water soluble and
used as a solid fertilizer, as a liquid in nitrogen solutions and in industrial
applications. It is produced by reacting ammonia with nitric acid. Half its
nitrogen is in the ammonium form, half in the nitrate form.
NITROGEN SOLUTIONS (UAN solutions) are produced by blending ammonium nitrate
solution with urea solution. They vary in nitrogen content (28-32 percent), and
are non-pressure solutions which are used principally for direct application on
soils and for manufacturing starter fertilizers.
UREA [CO(NH2)2], NPK composition 46-0-0, is the world’s most commonly produced
and widely traded nitrogen product. It is manufactured by reacting ammonia with
carbon dioxide under high pressure. It is used as fertilizer and as a feedstock
for industrial purposes.
UAN EXPORT ASSOCIATION was formed under the Webb-Pomerene Act for exporting UAN
solutions.
[GRAPH]

PCS market capitalization has grown each year, and was $4.473 billion at the
end of 1997.
[LOGO]
POTASH CORPORATION OF SASKATCHEWAN INC.
Suite 500, 122 - 1st Avenue South Saskatoon Saskatchewan Canada S7K 7G3

Printed in Canada
                                                                                               EXHIBIT 21
                                        SUBSIDIARIES OF
                            POTASH CORPORATION OF SASKATCHEWAN INC.
<Table>
<Caption>
                                                               JURISDICTION OF INCORPORATION
NAME OF ENTITY                                                          OR FORMATION
--------------                                                 -----------------------------
<S>                                                            <C>
Potash Corporation of Saskatchewan Transport Limited........   Saskatchewan
Canpotex Bulk Terminals Limited.............................   Canada
PCS Sales (Canada) Inc......................................   Saskatchewan
Potash Corporation of Saskatchewan (Florida) Inc............   Florida
PCS Sales (Iowa), Inc.......................................   Iowa
PCS Joint Venture, LP.......................................   Florida
PCS Sales (Indiana), Inc....................................   Indiana
609430 Saskatchewan Limited.................................   Saskatchewan
Potash Holding Company, Inc.................................   Delaware
PCS Sales (USA), Inc........................................   Delaware
PCS Finance LLC.............................................   Delaware
Phosphate Holding Company, Inc..............................   Delaware
White Springs Agricultural Chemicals, Inc...................   Delaware
White Springs Phosphate, Inc................................   Delaware
PCS Phosphate Company, Inc..................................   Delaware
Cardinal Creek Corporation..................................   Colorado
Moab Salt, Inc..............................................   Delaware
Texagulf Aircraft Inc.......................................   Delaware
Lone Star Salt Water Company................................   Texas
Mideast Distributors, Inc...................................   Delaware
Tg Corporation..............................................   Delaware
Albright & Wilson Company...................................   Virginia
PCS Nitrogen, Inc...........................................   Delaware
PCS Luxembourg Finance (S.a.r.1.)...........................   Luxembourg
Sarmento Limited............................................   Ireland
PCS Nitrogen Payroll Corporation............................   Delaware
PCS Nitrogen Amm Term Corp II...............................   Delaware
PCS Nitrogen Amm Term Corp I................................   Texas
Houston Ammonia Terminal, L.P...............................   Delaware
AA Sulfuric Corp............................................   Louisiana
PCS Nitrogen Trinidad Fertilizer Corporation................   Delaware
PCS Nitrogen Fertilizer Limited.............................   Trinidad
PCS Nitrogen Holding Company................................   Delaware
PCS Nitrogen Limited........................................   Trinidad
Augusta Service Company Inc.................................   Delaware
PCS L.P. Inc................................................   Delaware
PCS Nitrogen Fertilizer Operations, Inc.....................   Delaware
PCS Nitrogen Ohio, L.P......................................   Delaware
PCS Nitrogen Fertilizer, L.P................................   Delaware
PCS Nitrogen LCD Corporation................................   Delaware
AC Industries...............................................   Delaware
PCS Nitrogen Trinidad Corporation...........................   Delaware
</Table>
<Table>
<Caption>
                                                               JURISDICTION OF INCORPORATION
NAME OF ENTITY                                                          OR FORMATION
--------------                                                 -----------------------------
<S>                                                            <C>
PCS Nitrogen Cayman Limited.................................   Cayman
PCS Nitrogen Trinidad Limited...............................   Trinidad
PCS Nitrogen Trinidad Finance Ltd...........................   United Kingdom
Nutriciones Integradeas Agricoles...........................   Mexico
ARWE........................................................   Mexico
</Table>
                           [DELOITTE & TOUCHE LETTERHEAD]

Exhibit 23

                    CONSENT OF INDEPENDENT CHARTERED ACCOUNTANTS

POTASH CORPORATION OF SASKATCHEWAN INC.
We hereby consent to the incorporation of our report dated February 12, 1998
into this Annual Report on Form 10-K for the year ended December 31, 1997 and
into the following Registration Statements:
     -    Registration Statement No. 33-37855 on Form S-8
     -    Registration Statement No. 333-19215 on Form S-8



[SIGNATURE]
DELOITTE & TOUCHE
CHARTERED ACCOUNTANTS
Saskatoon, Saskatchewan, Canada
March 25, 1998



[LOGO]
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