<PAGE>   1
                                                                      EXHIBIT 13

                                     UNIQUE

                               [POTASH CORP LOGO]




                                                              2000 Annual Report


<PAGE>   2

                                  EXCEPTIONAL



This report on 2000 describes what differentiates Potash Corporation of
Saskatchewan Inc. (commonly known as PotashCorp or PCS) from others in its
sector. Its unique strengths and management's use of those strengths enable the
Company to take advantage of growth in the fertilizer business while reducing
the effects of industry cyclicality. Its operating strategy is designed to
ensure that PCS benefits from fertilizer's upside while shielding earnings on
the downside. Its long-term business strategy focuses on the acquisition of
low-cost capacity that will build on its strengths, complementing it
logistically and adding strategic value. Far more than a commodity producer,
PotashCorp through its operating and acquisition strategies seeks ways to offer
superior returns through perpetual growth. A leader in the industry, it aims to
use best practices to provide products that contribute to better quality of life
for people around the world.


------------------------------------

[Three pictures of corn, cattle and threads]

[CAPTION] PCS produces the three primary nutrients for three distinct customer
          groups:

          1    As the world's largest producer of crop nutrients, it helps
               farmers grow abundant, healthy harvests.

          2    With the most animal feed production capability in the world, PCS
               supplies feed ingredients that help animals grow bigger and
               stronger.

          3    As the world's largest industrial nitrogen producer and one of
               three North American industrial phosphate producers, it supplies
               the base products used in making a wide variety of items that
               enhance daily living.

[SIDEBAR] large, low-cost, globalized, profit-seeking, market-driven,
          shareholder-focused
<PAGE>   3


                          POTASHCORP AT A GLANCE 2000
<TABLE>

<S>                                      <C>                            <C>
Financial Highlights                     Net sales revenue              $2,231.6
(US$ millions except where specified)    Earnings per share (actual)    $   3.78
                                         Gross margin                   $  482.8
                                         EBITDA                         $  524.5
                                         Cash flow from operations      $  480.4
</TABLE>

<TABLE>
<CAPTION>


                          POTASH (K)                      PHOSPHATE (P)                  NITROGEN (N)
<S>                      <C>                              <C>                            <C>
Revenue %                 26%                             35%                            39%

Gross Margin %            63%                             15%                            22%

Customer location         43% North America,              67% North America,             90% North America,
                          57% offshore                    33% offshore                   10% offshore

Customer type             92% fertilizer,                 64% fertilizer,                49% fertilizer,
                          8% non-fertilizer               36% non-fertilizer             51% non-fertilizer

PCS capacity              No. 1 in world potash           No. 3 in world phosphate       No. 3 in world nitrogen

PCS strengths             Owns 52% of world               Low-cost production;           Large percentage of
                          excess capacity; leading        long-term rock reserves;       industrial sales; hedged
                          global player; capable of       flexible production with       on natural gas; ammonia
                          producing more potash           widest range of products       production in Trinidad with
                          than other world companies      in the industry                low-cost gas
                          at lower cost

PCS strategy              Match supply to demand to       Maximize production of         Stabilize earnings by
                          minimize inventory overhang     products with a market         emphasizing industrial
                          and grow earnings, bringing     premium; focus on              sales from North American
                          on excess capacity as           increasing industrial and      production base and using
                          demand increases                feed production to enhance     Trinidad production for
                                                          diversified product position   fertilizer products

PCS highlights            With record potash              PCS continued to refocus its   Its new natural gas contract
                          demand, PCS had the             capital to more rewarding      in Trinidad solidified the
                          advantage of excess             areas by purchasing            PCS competitive position
                          capacity to bring on,           purified acid producer         in Western Hemisphere
                          and sold record volumes         Albright & Wilson Company      nitrogen production

</TABLE>

                     All financial data in this report are stated in US dollars.






<PAGE>   4


[PICTURE OF WILLIAM J. DOYLE]

WILLIAM J. DOYLE
President and
Chief Executive Officer

Report to Shareholders

I welcome this opportunity to report to you on our management of your Company's
day-to-day operations and assets in the year just past, my first full year as
CEO. It was a year of considerable achievement, for PotashCorp was able to use
the unique characteristics of its assets to capitalize on market conditions
while much of the fertilizer industry was mired in one of the longest down
cycles in the history of the business.

In potash, we were able to demonstrate the great resource we have in our excess
capacity, easily meeting higher global demand. In phosphate, our focus on feed
and industrial products paid dividends as the solid fertilizer DAP was under
severe pricing pressure. In nitrogen, we reaped great benefit from our
advantageous natural gas position, thanks to our hedging policy and our new
Trinidad gas contract. This combination allowed us to report net sales of $2.2
billion and earnings per share from continuing operations of $3.81 (a 53 percent
increase over the $2.49 from continuing operations in 1999).

The credit for some of this must go to Mother Nature, for our ore bodies are
truly extraordinary. However, our year would have been much tougher if we had
failed to manage those assets properly. Succeeding amidst intense global
competition requires continual improvement, and our decision to close high-cost
nitrogen and phosphate production in 1999 and our perseverance in negotiating a
new natural gas contract in Trinidad in 2000 served us well. When natural gas
prices jumped, our US gas hedging policy put us in the fortunate position of
having our costs locked in as nitrogen prices rose.

YOUR COMPANY IN A VOLATILE YEAR

The battle is not to the strong alone, Patrick Henry said, but to the vigilant,
the active and the brave. These traits were amply displayed in 2000 by your
management team, which I believe is unmatched in the industry in its blend of
experience and imagination. Recognizing that a company's value is directly tied
to its ability to improve and innovate, your team designed a strategy of
managing each nutrient according to its competitive strengths. Acting with great
resolve, we stayed our course throughout the year and the Company reaped the
rewards. I am confident that the team behind the winning performance in 2000 can
meet whatever challenges the future may bring. Our entrepreneurial attitude will
ensure that PotashCorp doesn't just survive, but rather, succeeds and prospers.

Late in the year, our share price started to reflect this strong performance,
ending 2000 up 63 percent. However, for much of the year the market seemed

                                       2


------------------------------------

[SIDEBAR] RETROSPECTIVE

[SIDEBAR] Our first share buyback was completed ahead of schedule; 2.7 million
          shares purchased at an average price of $49.41
<PAGE>   5


mesmerized by high-tech stocks. To outsiders, they may seem more glamorous than
crop nutrients, but to us, nothing is more significant than providing products
without which one-third of the world would starve. We believe in the long-term
importance of our business and handle our daily operations in this context.

All decisions are made under the direction provided by our Board, led since
November by Chairman Don Phillips of Brandon, Mississippi. He succeeded Chuck
Childers, who retired for personal reasons. Don has more than 30 years of
experience in the industrial and feed businesses that has been, and will
continue to be, a real asset to the Company.

While PotashCorp is publicly recognized for its quality products and strong
financial position, even more significant are the individuals behind the scenes
who make this Company special; committed employees in five countries working
productively together. Their achievements - the 9 million hours worked without a
lost-time injury at Aurora, our largest phosphate plant; the world record for
reliable non-stop production locked up by Augusta, our largest North American
ammonia plant; the provincial mine rescue competitions won by our Lanigan and
New Brunswick potash divisions; and more, as you will see - give all of us in
the Company great pride.

We completed our reorganization in 2000 to increase efficiency and build on our
underlying strengths. Jim Dietz, who joined us when we purchased Arcadian and
became President of PCS Nitrogen, is now using his wealth of experience as Chief
Operating Officer. John Gugulyn retired as Senior Vice President,
Administration, after 13 years as a crucial cog in the PotashCorp wheel. He was
succeeded by Jane Irwin, who has more than 16 years of varied experience in
Human Resources. Dave Delaney, formerly Vice President of the PCS Sales
Industrial Group and another Arcadian bonus, became President of PCS Sales. All
work in our new Chicago office which, in tandem with our head office in
Saskatoon, has immensely improved communications and productivity.

THE ROAD AHEAD

Two of my most important priorities as CEO of PotashCorp are decommoditizing our
business and being a best practices company.

Decommoditizing allows us to distinguish ourselves from the competition. Our
strategy for each nutrient will help us achieve this, aided by our continuing
commitment to being a best practices company. We already have many best
practices, and we are developing consistent programs throughout the Company,
using best practices as our guide. We are focused on making PotashCorp a single
unified company. We see a link between these efforts and superior returns to
shareholders, as we create a work atmosphere that allows our people to strive
for excellence, developing leaders at all levels of the organization.

Looking ahead, we see continuing industry consolidation. We are pursuing
opportunities which present themselves, provided they reinforce our position as

                                       3


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[TWO CHARTS SHOWING TRENDS]

[CAPTION] PotashCorp uses its natural advantages to reach its goal of flattening
          out the ups and downs of the commodity business and having them turn
          around a rising trend line.

[SIDEBAR] PROSPECTIVE

<PAGE>   6



a low-cost domestic supplier of nitrogen or a global producer of potash and
phosphate. They must also meet our criteria for return on investment and
increased shareholder value.

As I write, business fundamentals for 2001 remain uncertain as grain prices - so
key to fertilizer valuation - continue to be depressed. Here is how we see the
current situation:

o    In potash, the issue is not new supply, it's demand. We showed the strength
     of our strategy in 2000 when world consumption grew and we were able to
     supply much of that new demand while other world producers were already at
     full capacity. After such a great year, we may find 2001 will lag a bit,
     though the trend line will continue to rise.

o    The nitrogen story is really about natural gas. We believe that if gas
     prices average above $4 this year, as we predict they will, then enough
     North American capacity will remain shut down to balance the new supply. As
     a result, nitrogen prices should continue to provide a substantial
     contribution to our bottom line. Nitrogen is the fastest growing of the
     three nutrients.

o    In phosphate, the real challenge is the increased capacity around the
     world. I've always said that supply/demand is like the air in a balloon:
     pinch it on one side and it will bulge on the other. When new capacity
     comes on in this industry - as it has in India and Australia - we can't
     help but be affected, in spite of the shutdowns in North America. Phosphate
     fertilizer remains under pressure, which prompted us in mid-January to shut
     down all DAP production at White Springs. We also closed our Davenport feed
     plant to improve margins at our remaining feed plants. This reduction in
     staff was very painful, but the highly competitive nature of our business
     left us no alternative. Our remaining production ensures we can maintain
     our customer supply and lowers our costs moving forward.

Despite the clouds overhead, we continue to benefit from being a triple-
nutrient producer, for one of our nutrients always leads the way as nitrogen is
now doing. We plan to capitalize on the changing landscape of our industry.
We're using our ingenuity to create new products and customer services, new
ventures in both mature and emerging markets and new approaches to production.
By building on the opportunities we find around us, we are increasing the value
of this unique Company for the benefit of all who look to PotashCorp.

/s/ William J. Doyle
--------------------------------
    William J. Doyle
    President and Chief Executive Officer

    February 26, 2001



2001 GOALS

Our goals won't change much from year to year, because they reflect the
fundamental values that guide us: Leadership in our industry, our communities,
our business methods; adding value for customers and shareholders; working
safely; stewardship of our neighborhoods, environment and corporate reputation;
continual improvement.

We intend to improve our performance in every area by building on the
achievements of the preceding year. We have set specific targets for 2001:

o    Outperform our peer group in profitability and total shareholder return,
     through corporate growth and strategic use of capital

o    Solidify our position as the industry's preferred supplier by improving
     service to customers through all phases of the transaction

o    Develop consistent programs throughout the Company that reflect best
     practices

o    Focus on raising public awareness of the importance and benefit of
     fertilizer to the world community

                                       4




<PAGE>   7
                             OVERVIEW OF 2000 GOALS

Immediate goals

1 INCREASE RETURN ON CAPITAL

o    Cash flow return, the closest correlation to shareholder return, increased
     to 11 percent from 8 percent in 1999.

2 IMPROVE OUR COST POSITIONS IN ALL THREE NUTRIENTS

o    We improved our cost positions in potash, phosphate and nitrogen.

3 EXPAND OUR PRODUCT LINE AND CUSTOMER BASE BY BUILDING ON OUR NEWEST
ACQUISITIONS

o    A large, state-of-the-art feed plant is planned at Aurora.

o    Our new Brazilian phosphate feed plant helped supply that fast-growing
     market.

o    We purchased the other half of our purified acid operations from Albright &
     Wilson.

o    PCS Yumbes in Chile began production.

o    We introduced a niche potash fertilizer product, K-Prill.

4 INCREASE POTASH PRICES WHILE BRINGING ON EXCESS CAPACITY

o    We responded to world demand by using 59 percent of capacity, up from 52
     percent in 1999.

o    A domestic increase moved prices above 1999 levels in the fourth quarter,
     but offshore prices remained under pressure. We shall continue to focus our
     efforts here.

5 INCREASE THE PERCENTAGE OF NON-FERTILIZER BUSINESS IN OUR PHOSPHATE PRODUCT
MIX

o    Industrial and animal feed sales volumes made up 36 percent of total
     phosphate volumes and 47 percent of revenue, compared to 33 percent and
     41 percent in 1999.

6 STEADILY INCREASE OUR NITROGEN INDUSTRIAL SALES

o    Our sales of industrial products containing nitrogen rose by 13 percent, on
     top of an 18 percent increase in 1999.

Continuing goals

1 REMAIN THE LEADER AND THE PREFERRED SUPPLIER IN THE WORLD
FERTILIZER INDUSTRY

We:

o    consolidated our US management team in Chicago, improving our focused
     customer service efforts.

o    created the first web site in our industry that allows customers to access
     their accounts.

o    agreed to handle SPA for a producer in Texas and, through our potash and
     phosphate offshore sales agencies, potash and DAP for Former Soviet Union
     (FSU) producers.

o    continuously supplied our customers with nitrogen products when many of our
     competitors shut down their plants.

2 CONTINUE TO OUTPERFORM OUR PEER GROUP IN SHAREHOLDER RETURN

o    PCS outperformed the fertilizer sector in cumulative shareholder return
     every year for the last decade. The streak continued in 2000.

3 REINFORCE OUR UNIQUE STRENGTHS THROUGH ACQUISITIONS

o    While industry pressures were building over the extended downturn in
     fertilizer markets, we have been reviewing many potential acquisitions.
     Some of these may prove a good strategic fit, provided they meet our return
     criteria.

4 BE THE INDUSTRY'S LOW-COST SUPPLIER

o    We own this title in potash, and our long-term gas contracts keep us at the
     top in nitrogen.

o    In phosphate, we are moving to a new ore body with better rock close to our
     Aurora facility, which will reduce production costs once we are established
     there.

5 CONSTANTLY STRESS SAFETY AND CARE FOR THE ENVIRONMENT AT OUR OPERATIONS

o    Care for safety and the environment are cornerstones of the way we do
     business, and we underlined that by establishing the position of Vice
     President, Safety, Health and Environment.

6 TAKE SERIOUSLY OUR RESPONSIBILITIES TO OUR EMPLOYEES AND OUR COMMUNITIES

o    Our community outreach program made anti-drug presentations to more than
     15,000 young people and adults across North America.

o    Our HAZMAT training car took its message of safe ammonia handling to 10
     communities, including the 2,000-strong Firemen's Muster in Atlanta,
     Georgia.

o    We are benchmarking other businesses for best practices in all areas, with
     an eye to implementing new policies as we go forward.

7 ESTABLISH EXPLICIT GOVERNANCE PRACTICES TO SAFEGUARD SHAREHOLDERS' INTERESTS

o    Our Board's corporate governance committee has established a model for the
     Company which has been strongly endorsed by our Chairman. The committee's
     mandate includes the development of policies and procedures for maintaining
     the confidence of all stakeholders.

                                       5



<PAGE>   8
                                  DISTINCTIVE

[Three pictures of men]

[World Leadership Graph]
POTASH

[Product Diversification Graph]
PHOSPHATE

[Western Hemisphere Ammonia Graph]
NITROGEN

[CAPTION] Its excess capacity in potash, broad diversity in phosphate and
          ability to produce almost half its ammonia in Trinidad have
          transformed PotashCorp into a less cyclical fertilizer company with
          higher earnings.

                                       6


<PAGE>   9


POTASH PRODUCTION

prominent, low-cost, market-driven

PotashCorp stands out among world potash companies first by its size. It has
nearly one-quarter of annual global capacity and over half of the world's
excess capacity, and can produce more than any other company and all countries
but Canada. It will be mining for 100 years from its current shafts. Pulling
from seven mines, six of which it owns and operates, it has the world's
lowest-cost production, its second distinguishing trait.

     Cementing its leadership is its strategy of matching supply to demand to
avoid inventory overhang. PCS will bring on its excess capacity as demand grows,
further lowering its costs per tonne.

     An important supplier to developing nations where demand for this vital
nutrient rises steadily, the Company makes more than half its annual sales
offshore. For its many markets, it produces about 20 grades of potash, and at
least 60 percent K2O (95 percent KCl) is guaranteed in its agricultural product.

     It stands out in other ways, too.

     At PCS Yumbes, its new facility in Chile, the Company produces specialty
products to nurture chloride-sensitive crops. Its sodium nitrate, used on
cotton, sugar beets and similar specialty crops, is combined with potash into
potassium nitrate for tobacco and high-value horticultural and greenhouse crops.
Yumbes produces the world's only compacted granular potassium nitrate that can
be consistently blended with other fertilizers, plus a crystalline product
soluble at room temperature.

     At PCS Cory, a decade of research and development has created an innovative
product called K-Prill in partnership with Zen-Noh, Japan's national fertilizer
buying co-operative. This potash prill blends easily with other fertilizer
prills and can withstand the rigors of shipping and application.


                                       7


------------------------------------

[Picture of Corn field]

[CAPTION] At 19 facilities in the United States, Canada, Trinidad, Chile and
          Brazil, PCS produces vital nutrients to serve customers in about 40
          countries on six continents.

[Matching Supply to Demand Graph]

[CAPTION] PCS could almost double its annual production if demand warranted, and
          supply nearly 30 percent of annual world consumption of this natural
          crop nutrient.

[3   Pictures of how potash is used]

[CAPTION] 1    FERTILIZER: Agriculture

          2    INDUSTRIAL: TV/computer screens, soaps, water softeners,
               perfumes, de-icers

          3    FEED SUPPLEMENTS: Livestock, poultry

POTASH PRODUCTION
<TABLE>
<CAPTION>

               2000       1999
<S>            <C>        <C>
WORLD          42.6 MT    41.7 MT
PCS             7.1 MT     6.4 MT
PCS SHARE       17%        15%
</TABLE>
MT = Million Tonnes
<PAGE>   10

POTASH REPORT ON 2000

     With higher world demand for potash and record world trade, PotashCorp
unleashed some of its vast excess capacity in 2000, producing 7.149 million
tonnes, 2 percent above its 1998 record and 12 percent more than in 1999.
Together, its seven Canadian properties operated at 59 percent of capacity. (In
1999, when the mine at Moab, Utah produced for the Company for the entire year,
all potash properties operated at 52 percent of capacity. Moab was sold in
February 2000, though PCS continues to market its potash.) The mines operated
with 38 weeks of shutdown time, 20 weeks less than in 1999.

     The Company's Cassidy Lake property in New Brunswick sharply increased its
output in 2000. With an annual milling capacity of 1.3 million tonnes and a
compaction capacity of 1.0 million tonnes of granular product, it compacted
0.230 million tonnes of standard grade potash from Rocanville, 17 percent more
than in 1999. Cassidy Lake has 32 employees.

     PCS Yumbes began producing in 2000. At full production, in 2002, it will
have annual finished product capacities of 0.285 million tonnes of potassium
nitrate, 0.060 million tonnes of sodium nitrate and 360 tonnes of iodine.

     In addition to potash, New Brunswick (and Moab while the Company owned it)
produced 0.661 million tonnes of sodium chloride (salt), almost 19 percent less
than in 1999. It is used to de-ice winter roads and make various products.


                      2000 PRODUCTION (million tonnes KCl)
<TABLE>
<CAPTION>

                       ANNUAL          2000             1999         MINE SITE
                      CAPACITY       PRODUCTION       PRODUCTION     EMPLOYEES
                      --------       ----------       ----------     ---------
                                                                      (active)
<S>                    <C>             <C>             <C>            <C>
Lanigan SK              3.828           1.720           1.594            316
Rocanville SK           2.295           1.852           1.709            319
Allan SK                1.885           1.047            .676            271
Cory SK                 1.361            .725            .674            167
Patience Lake SK        1.033            .262            .260             65
Esterhazy SK(1)          .951            .726            .726              0
New Brunswick NB         .785            .800            .693            321
Moab UT(2)               .059            .017            .056             --
                       ------           -----           -----          -----
TOTAL                  12.197           7.149           6.388          1,459
</TABLE>

1    Production at Esterhazy is mined from PCS reserves by IMC Esterhazy Canada
     Limited Partnership under a long-term agreement. For calendar year 2001,
     its allocation is 0.816 million tonnes.

2    Sold on February 22, 2000.


                                       8


------------------------------------

[Lowest Production Costs Graph]

[CAPTION] Potash is a remnant of ancient oceans left deep beneath the earth's
          surface. Superior ore bodies ensure economical production for all
          Saskatchewan companies, but PCS is the low-cost leader.

[Picture of tomatoes]

[CAPTION] In 2000, PCS began making granular potassium nitrate that improves the
          size, color and general goodness of tomatoes and other
          chloride-sensitive crops.

[Picture of field]

[CAPTION] Healthy, vigorously-growing plants that result from proper
          fertilization and other best management practices provide protection
          to the soil surface and help prevent erosion.

[SIDEBAR] Using ingenuity to create new products, develop new properties and
          serve new customers

<PAGE>   11

     Allan, Cory, Patience Lake and Rocanville set various productivity records
in 2000. Lanigan and Cory set annual production records, Cory for white product.
New Brunswick also had record production, despite a small, controlled brine
inflow that continued all year.

     Production costs for Saskatchewan mines in 2000 were affected by the rise
in the price of natural gas, which is used mainly for drying product during the
milling process, but also heats brines.

     What is potentially a significant natural gas discovery was confirmed late
in 2000 near PCS New Brunswick's Sussex location. The McCully Field project is
being further explored by joint partners PCS Inc. and Corridor Resources Inc.

PHOSPHATE PRODUCTION

superior reserves, multiple products

PCS is distinctive for the quality and quantity of its phosphate rock reserves
and the quality and flexibility of its production of this natural nutrient. Its
strategy in phosphate is to produce the products with the best margins.

     Abundant, high-quality phosphate rock reserves near its plants at Aurora,
North Carolina and White Springs, Florida have made PCS one of the world's
lowest-cost P(2)O(5) producers. It has multi-year permits to draw on these
reserves, which provide the lowest-cost rock in North America. The Company
expects its average production costs to decline even further, comparatively,
while competitors' costs rise as they transport lower-quality rock longer
distances to their plants.


                                       9


------------------------------------

[Picture of soybeans]

[CAPTION] Potassium chloride, commonly called potash is vital to soybeans. It
          boosts the roots that feed the plants and strengthens the stems and
          branches that carry the beans.

[Picture of panda bear]

[CAPTION] The habitat in China that is home to the world's few remaining giant
          pandas may be safeguarded from encroachment if farmers maintain the
          fertility of their existing agricultural lands by applying crop
          nutrients.


                           PHOSPHORIC ACID PRODUCTION
<TABLE>
<CAPTION>

                    2000            1999
                    ----            ----
<S>            <C>                 <C>
World           27.4 MT EST.       28.0 MT
PCS              2.0 MT             2.1 MT
PCS Share       7%                 7%
</TABLE>

MT = Million Tonnes P(2)O(5)

[SIDEBAR] DIVERSE
<PAGE>   12

     At modern facilities near Aurora, White Springs and Geismar, Louisiana, PCS
produces solid and liquid fertilizers, feed supplements for livestock and
poultry and high-quality technical and food-grade purified acid for food,
beverages and industrial applications.

     It is the world's leading supplier of superphosphoric acid, a fertilizer
intermediate geared to conservation tillage systems. The world's largest
manufacturer of phosphate feed supplements by capacity -- Dical and Monocal for
swine and cattle, primarily, and DFP for poultry -- PCS has 41 percent of United
States capacity. It also produces Dical in Brazil, where demand for feed
products is rising steadily. It plans a $50-million state-of-the-art plant at
Aurora which will be the lowest-cost DFP facility in North America when it
begins operating in 2002.

     In 2000, the Company acquired the other half of its Albright & Wilson joint
venture and renamed it PCS Purified Phosphates. It is one of only three
remaining North American players in industrial phosphoric acid used in food and
industrial processes and products. It uses the economical purified wet acid
method of production, and benefits from the purity of Aurora's rock, which is an
advantage in upgrading to industrial acid.

     PCS Purified Phosphates produces food-grade acid used in making
pharmaceuticals, soft drinks, foods and flavors, vegetable oil refining and
yeast production. Technical-grade acid goes into chemical and electro-polishing,
rustproofing, priming metals, adhesives,


                                       10


------------------------------------

[Phosphate Rock Cash Cost Comparison Graph]

[CAPTION] In addition to its diversified and low-cost production, PCS has
          long-term rock reserves which will lower its costs going forward.

[Picture of wheat]

[CAPTION] Phosphorus that puts energy in plant production and assists
          photosynthesis, reproduction and yield development is obtained from
          phosphate rock deposited by shallow seas eons ago in what is now North
          Carolina and Florida.

[Five pictures of how phosphate is used]

[CAPTION] 1    MGA: Feedstock for other phosphate products: technical and
               food-grade purified acid, feed supplements, fertilizer for
               agriculture

          2    DAP: Agriculture

          3    SPA, LoMag, Poly-N: Liquid fertilizers, feed, industrial products

          4    FEED SUPPLEMENTS: Livestock, poultry

          5    INDUSTRIAL ACID: Food products, soft drinks, industrial
               detergents, metal treating, water treatment, pharmaceuticals

[SIDEBAR] New market ventures:

          o    feed plant in Brazil

          o    new feed plant at Aurora

          o    PCS Purified Phosphates
<PAGE>   13

fireproofing, enamels, industrial and institutional cleaners and water
treatment, among others. Aurora assumed responsibility for technical support of
this business, including analytical and troubleshooting support for all metal
finishing customers. PCS Purified Phosphates is the leading North American
supplier of phosphoric acid used in metal treatment.

PHOSPHATE REPORT ON 2000

     With new world capacity on stream and affecting prices, PCS kept its
production of phosphate fertilizers close to 1999 levels, which had been sharply
reduced from 1998. Production of phosphoric acid was down to 2.042 million
tonnes, representing 82 percent of the combined capacity at Aurora, White
Springs and Geismar.

     World demand for the solid fertilizer DAP continued to fall and PCS reduced
its production by 9 percent, on top of a 10 percent reduction in 1999. It used
80 percent of its capacity to produce 1.573 million tonnes. Production of the
liquids MGA and SPA was similar to the reduced levels of 1999, with 77 percent
and 67 percent, respectively, of capacity used.

     Annual production records were set at Aurora for the liquid fertilizers
Poly11 and LoMag, purified acid products and fluosilicic acid, a byproduct of
the phosphoric acid process used for water treatment.

     Early in 2001, PCS responded to continuing low demand and prices for DAP by
suspending all production of this fertilizer at White Springs. This idled nearly
half of the facility's P(2)O(5) capacity, and mothballed 0.710 million tonnes a
year of DAP capacity. Combined with ongoing DAP cutbacks at Aurora, 40 percent
of the Company's capacity is now suspended, probably for an extended period.

     Preparations for mining at Aurora's NCPC property, its most attractive
phosphate rock reserve, began in the fall of 2000 with land clearing and
pre-stripping. Dragline operations were scheduled for spring of 2001. This
property will provide the lowest-cost rock in North America and further improve
production costs at Aurora, the industry's leader in low-cost production.

                                       11


------------------------------------

[Picture of Apples]

[CAPTION] Apples -- healthy, fat-free and cholesterol-reducing -- benefit in
          both yield and quality from the application of high-quality phosphate
          fertilizer. For all plants, phosphorus is considered the Great
          Energizer.

[World Feed Producer Capacity Graph]

[CAPTION] Already the world's largest animal feed producer by capacity, PCS is
          expanding its prominent position by building a new plant at Aurora.

[Picture of cattle]

[CAPTION] In 2000, PCS purchased a feed plant in Brazil, a country with 160
          million cattle -- almost as many as its human population and more than
          the US and Argentina combined.

<PAGE>   14

PHOSPHATE FEED PRODUCTION

     PotashCorp produced 2 percent less phosphate feed supplements for livestock
and poultry than in 1999. Included was production from its new Brazilian plant,
which produces Dical from White Springs defluorinated phosphoric acid and
calcium from local quicklime. Plant improvements will increase its output and
improve quality. Early in 2001, the Company closed its Davenport, Iowa feed
plant to increase efficiency and better utilize other assets.

     The feed plants continued to increase daily production rates. High natural
gas costs raised conversion costs, particularly for DFP which jumped by 7
percent. White Springs completed projects aimed at improving product quality and
reducing costs.

     Engineering and permitting activities are well underway for the new DFP
plant at Aurora.

PURIFIED ACID

     PCS Purified Phosphates, formerly Albright & Wilson Company, produced 0.141
million tonnes of purified acid for industrial purposes, a new record. That was
84 percent of its rated capacity of 0.168 million tonnes P(2)O(5), which was
increased nearly 13 percent by recent adjustments.


2000 PHOSPHATE FEED PRODUCTION (million tonnes)
<TABLE>
<CAPTION>
                              ANNUAL           2000             1999            EMPLOYEES
                             CAPACITY       PRODUCTION        PRODUCTION        (active)
                             --------       ----------        ----------        ---------
<S>                          <C>              <C>               <C>             <C>
Davenport IA(1)               .280            .088              .088                28
Marseilles IL                 .278            .140              .164                34
White Springs FL (D/M)        .218            .135              .122                19
Weeping Water NE              .209            .142              .149                39
Kinston NC                    .141            .076              .066                22
White Springs FL (DFP)        .100            .083              .079                37
Fosfatos do Brasil            .070            .034               --                 75
                             -----            ----              ----               ---
TOTAL                        1.296*           .698              .668*              254
</TABLE>


* Totals do not include the Saltville VA plant which ceased production August
31, 1999.

1 Closed on January 15, 2001.


2000 ROCK AND ACID PRODUCTION
<TABLE>
<CAPTION>


                         PHOSPHATE ROCK (million tonnes)          PHOSPHORIC ACID (million tonnes P(2)O(5))
                       ----------------------------------     -------------------------------------------------
                       ANNUAL       2000           1999        ANNUAL        2000         1999        EMPLOYEES
                      CAPACITY   PRODUCTION    PRODUCTION     CAPACITY    PRODUCTION   PRODUCTION     (active)
                      --------   ----------    ----------     ---------   ----------   ----------    ----------
<S>                    <C>       <C>           <C>             <C>        <C>          <C>              <C>
Aurora NC               6.0         4.734        4.451          1.202        1.097        1.070         1,158
White Springs FL        3.6         2.870        3.594          1.093         .767         .858           939
Geismar LA               --            --           --           .202         .178         .196            75
                        ---         -----        -----          -----        -----        -----         -----
TOTAL                   9.6         7.604        8.045          2.497        2.042        2.124         2,172

</TABLE>


2000 PHOSPHATE PRODUCTION (million tonnes product)
<TABLE>
<CAPTION>
                                AURORA                              WHITE SPRINGS                           GEISMAR
                  ------------------------------------    ------------------------------------   -----------------------------------
                    ANNUAL
                   CAPACITY       2000        1999         ANNUAL         2000         1999       ANNUAL       2000          1999
                  PRODUCTION   PRODUCTION   PRODUCTION    CAPACITY     PRODUCTION   PRODUCTION   CAPACITY   PRODUCTION    PRODUCTION
                  ----------   ----------   ----------    --------     ----------   ----------   --------   ----------    ----------
<S>         <C>     <C>         <C>           <C>          <C>         <C>           <C>          <C>         <C>            <C>
Liquids:    MGA(1)  1.835        1.609        1.607         1.908        1.230         1.343        .337        .321           .356
            SPA      .676         .451         .398         1.138         .774          .815        .196        .117           .134
Solids      DAP     1.247        1.125        1.152          .710         .448          .585          --          --             --
</TABLE>

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

                                       12


------------------------------------

[Low-cost Industrial Phosphoric Acid graph]

[CAPTION] Using high-quality phosphoric acid from Aurora, PCS Purified
          Phosphates produces the world's lowest-cost industrial acid.

<PAGE>   15

NITROGEN PRODUCTION

low-cost gas, rising industrial sales

Its strengths in nitrogen work together with its operating strategy to stabilize
earnings for PotashCorp in this, the most volatile of the three nutrients. In
this cyclical and regional business, the Company's strategy is to use its
low-cost production facilities in Trinidad to make crop nutrients for North
American agriculture, and to emphasize supply to industrial customers from its
plants in the United States.

     The most flexible producer in the industry, with great versatility within
its product lines, PCS makes all the nitrogen fertilizers as well as many
products used by modern industry in the manufacture of essential and familiar
items in daily use. It produces ammonia at four US plants and a large complex in
Trinidad which alone has almost half the Company's ammonia capacity. At a time
of rising natural gas prices, its advantageous long-term Trinidad gas agreements
provide exceptional benefits.

                                       13


------------------------------------

[Picture of grapes]

[CAPTION] There's nothing so succulent as a sweet plump grape, and balanced
          fertilization helps produce strong vines that carry plenty of fruit.
          Phosphate for example helps grow healthy vines and nitrogen helps
          ensure those vines produce well.

[Five pictures showing how nitrogen is used]

[CAPTION] 1    AMMONIA: Feedstock for industrial and other nitrogen products,
               fertilizer for agriculture

          2    UREA: Agriculture, plastics, pharmaceuticals, resins, adhesives,
               dyes, pool chemicals, humulin for diabetics, feed supplements for
               livestock

          3    NITRIC ACID: Carpets, photography, batteries, lacquers and
               paints, tires, ammonium nitrate

          4    AMMONIUM NITRATE: Agriculture, explosives for mining,
               construction and road work

          5    NITROGEN SOLUTIONS: Agriculture

NITROGEN PRODUCTION
<TABLE>
<CAPTION>

               2000             1999
               ----             ----
<S>            <C>              <C>
WORLD          133.0 MT est.    130.0 MT
PCS              3.3 MT           3.8 MT
PCS SHARE         2%               3%
</TABLE>

MT = Million Tonnes Ammonia

[SIDEBAR] FLEXIBLE

<PAGE>   16

     The sharp rise in natural gas prices was the biggest factor affecting
nitrogen in 2000, for natural gas is the feedstock for ammonia, the base
nitrogen product. By year-end, gas prices accounted for 85 percent of ammonia
production costs for companies without a hedge position which had to buy gas on
the spot market. They could not sell ammonia for prices that covered those gas
costs. As a result, many companies had to shut down production, and by the end
of 2000, 50 percent of US capacity was mothballed. PCS was in the advantageous
position of having permanently closed two high-cost nitrogen plants in 1999.

     The Company stood out in the US ammonia industry in 2000 because of its
well-hedged natural gas position, an insurance policy that paid dividends. Its
gas costs rose 37 percent during the year while the NYMEX price jumped 71
percent. PotashCorp follows a policy of entering every year approximately 50
percent hedged to lock in production costs. It went into 2001 over 50 percent
hedged for its North American production at prices more than 50 percent below
NYMEX prices at that time. This US position, together with its Trinidad gas
contracts which are tied to ammonia prices rather than spot gas prices, means
that PCS is always well-hedged. This becomes more valuable as gas prices rise,
and adds to the competitive advantage gained from its product diversification.

     DAP producers in Florida buy much of the PCS ammonia produced in Trinidad,
and the Company can use the rest for its own DAP and nitrogen fertilizer
production. Its agricultural nitrogen business benefits from strategic plant
locations in the US Midwest, close to customers and profiting from a positive
price differential with the Gulf.

     PCS also makes micro prilled urea which is used as a supplement to help
build protein in beef and dairy cattle, and in horticulture.

2000 PRODUCTION (million tonnes)

<TABLE>
<CAPTION>
                          AMMONIA(1)                        NITRIC ACID(1)(2)                     UREA SOLIDS
              ANNUAL       2000        1999       ANNUAL       2000     1999         ANNUAL    2000       1999
            CAPACITY    PRODUCTION   PRODUCTION   CAPACITY  PRODUCTION  PRODUCTION  CAPACITY PRODUCTION  PRODUCTION
            --------    ----------   ----------   --------  ----------  ---------   -------- ----------  ----------
<S>            <C>       <C>          <C>         <C>       <C>       <C>          <C>        <C>       <C>
Trinidad        1.833     1.277        1.705         --         --         --         .602      .565      .589
Augusta GA       .653      .650         .651       .527       .540       .512         .363      .381      .335
Lima OH          .542      .539         .550       .097       .098       .098         .370      .314      .327
Geismar LA       .483      .502         .396       .844       .788       .566           --        --        --
Memphis TN       .371      .332         .325         --         --         --         .409      .372      .354
                -----     -----        -----      -----      -----      -----        -----     -----     -----
TOTAL           3.882     3.300        3.627*     1.468      1.426      1.176*       1.744     1.632     1.605
</TABLE>

<TABLE>
<CAPTION>
                        AMMONIUM NITRATE SOLIDS                  NITROGEN SOLUTIONS(3)
                   ANNUAL       2000         1999         ANNUAL       2000         1999      EMPLOYEES
                 CAPACITY    PRODUCTION    PRODUCTION    CAPACITY    PRODUCTION  PRODUCTION   (ACTIVE)
                 --------    ----------    ----------    --------    ----------  ----------   ---------
<S>               <C>         <C>           <C>         <C>          <C>           <C>       <C>
Trinidad             --          --            --           --           --            --         354
Augusta GA         .482        .489          .412         .581         .322          .403         121
Lima OH              --          --            --         .227         .144          .131           4(4)
Geismar LA           --          --            --        1.028         .918          .695         114
Memphis TN           --          --            --           --           --            --         124
                   ----        ----          ----        -----        -----         -----        ----
TOTAL              .482        .489          .412*       1.836        1.384         1.229*        717(5)
</TABLE>

*    Totals do not include the Clinton IA and LaPlatte NE plants which closed in
     August 1999.

1    A substantial portion of ammonia and nitric acid is upgraded to other
     products.

2    HNO(3) tonnes.

3    Capacity and production are based on 32% N content.

4    BP Chemicals operates the Lima facility under an operational agreement with
     PCS Nitrogen.

5    413 contract employees work at the nitrogen plants, for a total active
     workforce of 1,130.

                                       14


------------------------------------

[Picture of onions]

[CAPTION] To reach their peak of size and quality, onions need several
          applications of nitrogen fertilizer, which is manufactured from
          feedstock ammonia synthesized from natural gas, steam and air.

[PCS Nitrogen Strengths Graph]

[CAPTION] Balanced production between North America and Trinidad, a large
          percentage of industrial customers in the US and a strong gas hedge
          position work together to strengthen PCS in nitrogen.

[SIDEBAR] Between North America and Trinidad, PCS is always 75 percent hedged in
          natural gas
<PAGE>   17

NITROGEN REPORT ON 2000

     World demand for nitrogen rose in 2000 and prices improved significantly
over 1999 as natural gas prices jumped to record levels. These gas prices were
the most telling factor for producers.

     In these circumstances, PotashCorp benefited from its new contract with the
National Gas Company of Trinidad and its strongly hedged gas position in the
United States. Two Trinidad ammonia plants were shut down January 1 while the
contract was negotiated, and returned to production July 1. Despite the
shutdown, the efficient Trinidad complex produced 39 percent of Company ammonia.
In all, 85 percent of PCS capacity was used to produce 14 percent less ammonia
than in 1999.

     With a full year of production from its new Train 5 nitric acid plant,
Geismar topped by 39 percent its 1999 record for volumes of this product
earmarked for industrial production. It also had record ammonia production.
Augusta produced record tonnage of nitric acid, ammonium nitrate liquor and
prills, and urea liquor and prills.

     In September, Augusta's ammonia plant broke the previous world record of
995 days of continuous production, meaning that production occurred in every
24-hour period. By year-end, the plant had run non-stop for 1,108 production
days.

     There are widespread industrial uses for many of the Company's nitrogen
products, and many of its industrial customers are linked by pipeline.
Seventy-eight percent of the ammonia produced and sold by PotashCorp in the US
in 2000 went to industry, along with 66 percent of urea, 82 percent of ammonium
nitrate and all nitric acid.

     The Memphis plant also produced 0.118 million tonnes of micro prilled urea
for feed and industrial purposes, a new record.

                                       15


------------------------------------

[Picture of corn on the cob]

[CAPTION] Nitrogen, the fundamental building block of plant proteins, helps
          produce longer cobs of corn packed with flavor-rich kernels. In the
          same way, animals need nitrogen for proper nutrition and maturation.

[Hedging Natural Gas Prices Graph]

[CAPTION] PCS hedges its natural gas needs in the US to reduce the volatility in
          the nitrogen business. In Trinidad, its gas costs are tied to ammonia
          prices, sheltering margins.

[Picture of peppers]

[CAPTION] Peppers may be sweet or hot, hotter, hottest, and they come in a
          brilliant array of colors. Nitrogen is at the root of their goodness.

[Picture of children playing]

[CAPTION] Fertilizer use makes it possible for people to enjoy parks. Without
          its help, the 11 percent of Earth that is arable could not feed 6
          billion people and green spaces would have to be plowed up.
<PAGE>   18


                                    OPTIMUM

[Picture of monks eating, boy and cow, and child swimming]

[Rising Sales Volumes Graph]
POTASH

[Stable Non-Fertilizer Prices Graph]
PHOSPHATE

[Industrial Growth Graph]
NITROGEN

[CAPTION] PotashCorp's earnings growth will be achieved through rising global
          potash demand, increasing sales of non-fertilizer phosphate products
          with their more stable margins and growing industrial sales of
          nitrogen products, reinforced by a good gas position.

                                       16


<PAGE>   19

INTRODUCTION TO SALES

more potash records, higher nitrogen prices, phosphate diversity

In 2000, world agriculture suffered under pressure from low grain prices. These
prices encouraged record world grain consumption, drawing down total inventories
for the third consecutive year. Conversely, in the US, grain stocks remained
high, pushing corn prices to their lowest level in over a decade.

     Record government payments made it possible for US farmers to buy the
fertilizer they needed. Globally, as rising world population cuts into the land
available for agriculture, farmers are applying more fertilizer to improve their
productivity and increase production. Sales of potash rose by 3 percent in 2000,
just above the long-term trend. Nitrogen sales rose by 2 percent and phosphate
by 1 percent, both below the trend line.

     The United States is PotashCorp's major single market for fertilizers and
non-fertilizers. The world's largest consumer of potash, the US obtained about
30 percent of its 2000 needs from PCS. The US is a big user of phosphate
fertilizers and PotashCorp has 16 percent of the DAP market and about half the
growing market for liquid fertilizers, plus approximately 40 percent of the
market for phosphate feed products. A major producer and consumer of ammonia and
urea used in agriculture and industry, the US obtained one-sixth of its total
nitrogen needs from PCS and approximately 30 percent of its industrial nitrogen.

     Much of PotashCorp's potash and phosphate is sold offshore in markets that
are growing, though not consistently year by year. A large proportion of its
offshore potash sales is handled by Canpotex, the export sales agency for
Saskatchewan producers. PhosChem, an association for US exports of phosphate
fertilizers, is responsible for offshore phosphate sales. PCS Sales handles
liquid phosphate exports for PhosChem, plus offshore sales of PCS New
Brunswick's potash and Mississippi Chemical's potash from New Mexico, and all
sales of PCS nitrogen products. China, Brazil and India are the major offshore
fertilizer markets.

     China is using more fertilizer as it strives to feed one-fifth of world
population from limited arable land. Potash consumption has risen by an average
of 9 percent a year over the last
                                       17


------------------------------------

[Picture of ship in dock]

[CAPTION] In all three nutrients, PotashCorp serves a stable North American
          market and a growing offshore market, and meets the needs of its 2,000
          customers swiftly and smoothly through its efficient transportation
          and distribution system.

[World Fertilizer Consumption Graph]

[CAPTION] World fertilizer consumption is projected to grow by 2 to 3 percent a
          year, and farmers fulfilled that projection in 2000, using 2 percent
          more NPK.

[Three pictures of location, transportation and shopping]


[CAPTION] PCS MARKET STRENGTHS

          1    Multiple product locations

          2    Efficient transportation network

          3    One-stop shopping

<PAGE>   20

decade, and its annual DAP imports have historically been the largest in the
world. Canpotex is a major supplier of potash to this giant market, and PhosChem
provides about 60 percent of its DAP imports. Until 1997, when it suddenly
halted purchases, China was the world's largest importer of urea. During
discussions on its entry into the World Trade Organization, China agreed to
allow quotas of imported urea, which may prove beneficial in the long run.

     Brazil, the largest country and agricultural producer in South America, is
a major potash consumer and an important PCS market. One of only a few countries
that use more potash than phosphate and nitrogen, Brazil is the largest single
market for product from PCS New Brunswick.

     India is not usually a major potash market for PCS, but its purchases
support prices and absorb tonnage that would otherwise compete with the
Company's product. India is a leading phosphate importer, buying DAP or MGA to
make DAP, depending on price; it also buys phosphate rock. It is increasing its
indigenous production, which reduces its imports.

2000 POTASH SALES

     World demand rose by 3 percent in 2000 and production increased. Both China
and Brazil bought record volumes, and other offshore markets were also hungry
for potash; domestic markets, too, were strong. Prices lagged below 1999 levels
for much of the year, affected by competitive pressures, higher freight rates
and China's purchase of less expensive standard grade potash. No new supply came
on stream. World sales are estimated at 41.6 million tonnes; PCS drew on its
readily-available excess capacity and sold approximately 17 percent of that,
6.912 million tonnes. This new record was 7 percent above 1999 sales, and 57
percent went offshore, 43 percent to domestic markets.

DOMESTIC

     PotashCorp increased its domestic sales by 2 percent in 2000 and almost
matched its all-time record set in 1997. As usual, nearly 90 percent of domestic
sales went to the United States, with large agricultural co-ops and national
firms the major customers.

     First-quarter sales were up 9 percent over 1999, setting a new
first-quarter record. Sales volumes were up 7 percent from 1999 in the second
quarter and 16 percent in the third quarter, due to prospects for an early
harvest and fall application season. After that strong showing, fourth-quarter
sales were down.

                                       18


------------------------------------

[Picture of mother and son]

[CAPTION] A happy mother and son are surrounded by many everyday uses of
          PotashCorp's products: in both large and small vehicles, the soap and
          water, the clothes and, finally, the grass, trees and flowers.

[Potash Fertilizer Consumption Graph]

[CAPTION] Demand for potash fertilizer is rising sharply in Latin America, and
          PCS made about 30 percent of its offshore sales there in 2000.

[SIDEBAR] Valuable marketing agreements:

          o    Uralkali

          o    Apatit

          o    Agrifos

<PAGE>   21

     Domestic prices lagged behind 1999 for much of the year, due to pricing
pressures. An increase was achieved in the second quarter. Greater competition
pulled prices down early in the third quarter but an increase went through in
September and by late in the year, pricing had surpassed 1999 levels.

OFFSHORE

     PotashCorp sold record tonnage into export markets in 2000, 10 percent
above its 1997 record. China and Brazil were again its biggest markets, with
China buying 28 percent of all product sold offshore and Brazil 23 percent.
Brazil was the chief market for potash from PCS New Brunswick, taking 78 percent
of total sales from that facility, which set an export record.

     With sales of 5.89 million tonnes, Canpotex topped its 1999 record by 11
percent. China was again its single biggest customer. Brazil and Japan were
large buyers, Vietnam made record purchases, and Indonesia and India bought
solidly.

     Despite this strong demand, offshore prices were down in 2000. Canpotex
achieved an increase in Brazil in the fall but could not get increases in
contract markets. Effective January 1, 2001, it began marketing potash into
certain markets for FSU producer Uralkali.

SPECIALTY FERTILIZERS

     The first shipments of specialty fertilizers from PCS Yumbes went to the
United States, Spain and Mexico. In total, 0.022 million tonnes were sold, as
well as 84 tonnes of iodine.

NON-FERTILIZER SALES

     PotashCorp's steadily rising sales of potash for industrial purposes jumped
8 percent in 2000, after rising 7 percent in 1999. More than 60 percent of sales
went offshore, mainly to Japan and Korea through Canpotex. Prices were down
slightly from 1999.

     A small amount of PCS potash is sold for animal feed supplements, 0.028
million tonnes in 2000, down from 1999 because the Moab facility was sold.

     All non-fertilizer sales are included in domestic and offshore totals.

2000 PHOSPHATE SALES

     World demand for phosphates in 2000 varied only slightly from 1999. Supply
rose considerably when new DAP capacity came on stream in India and Australia,
even though start-up problems meant both operated at less than half capacity.
World sales of phosphate crop nutrients rose by 1 percent, but with more
indigenous production in various countries,

                                       19


------------------------------------

[Picture of woman in vegetable market]

[CAPTION] Without crop nutrients to help farmers increase their production of
          healthy, nutritious food, one-third of the world would starve.
          PotashCorp made 32 percent of its sales offshore in 2000.

[Picture of cup of tea]

[CAPTION] Rich, strong leaves give tea the aroma and flavor that make it a
          favorite drink around the world, and nitrogen and potash help leaf
          quality and yield.

[Potash Fertilizer Consumption Graph]

[CAPTION] Asia needs much more potash than it now uses to grow the grain to feed
          its rising population and meet their increasing demand for meat. PCS
          provided 11 percent of Asia's potash in 2000.

<PAGE>   22

trade in these fertilizers dropped by an estimated 8 percent. With increased
supply but little change in demand, DAP prices fell, affecting prices for other
phosphate fertilizers.

     World DAP consumption fell to 25.6 million tonnes, influenced particularly
by lower application rates in the important Chinese market due to drought and
commodity prices. China's imports were down by 18 percent. India, usually a
major importer, drew out of stocks and encouraged its producers by almost
doubling the subsidy for locally-produced DAP, making it very difficult for
world suppliers to compete. Its DAP imports dropped by 70 percent, after rising
by that percentage in 1999. These developments were instrumental in keeping DAP
prices down.

     World production and consumption of MGA fell by 2 percent in 2000. India is
the largest single importer of MGA, which it uses to make DAP, and its imports
again made up more than half of international trade. Liquid prices tend to
follow DAP and with DAP prices down, offshore suppliers signed a new liquid
contract with India at a price much below 1999 levels. This affected other
offshore liquid markets and helped inhibit any dramatic DAP recovery. Western
Europe, the second largest importer, accounted for 30 percent of international
trade; most is used to produce upgraded fertilizer products.

     In 2000, PCS sales of phosphate products were down by 3 percent. Two-thirds
of sales were domestic, amounting to 21 percent of North American phosphate
sales, including 38 percent of all non-fertilizer phosphate sales. With
phosphate fertilizer prices affected by oversupply, the Company followed its
strategy of shifting production into non-fertilizer products, where margins are
higher. Feed products made up 24 percent of total 2000 sales, and industrial and
purified products 12 percent.

FERTILIZERS

     PotashCorp sold 7 percent less DAP in 2000, and tough offshore markets were
an important factor. It sells offshore through PhosChem, whose volumes were down
significantly from 1999. Major purchasers were China, the largest by far,
followed by Japan, Thailand and Australia. Offshore sales and prices were down
from 1999. Domestic DAP sales, down 6 percent, made up nearly half of total
sales. Prices were below 1999 levels until the fourth quarter, and down 14
percent year-over-year.

                                       20


------------------------------------

[Picture of bowl of strawberries and blueberries]

[CAPTION] You'll find no phosphate in this scrumptious tart - except for the
          wholesome flour made from good wheat that uses phosphorus, the sugar
          that's refined using food-grade phosphoric acid and, of course, the
          wonderful flavor of the berries.

[Animal Feed Consumption Graph]

[CAPTION] In 2000, PCS acquired a phosphate feed plant in Brazil to stake out a
          position in this important market where demand is rising more than 7
          percent a year.

[Picture of jug of milk and some cheese]

[CAPTION] North American farmers produce high-quality, low-cost food. About 10
          percent of US family income goes for food, compared to 40 percent in
          China and 70 percent in nearly a third of India's poor households -
          without meeting all nutritional needs.

[SIDEBAR] INNOVATIVE

<PAGE>   23


     In 2000, liquid fertilizer sales were down 5 percent. Domestic sales made
up 74 percent of the total. The major product was LoMag, a superphosphoric acid
used in conservation tillage systems, with 45 percent of liquid sales. Domestic
prices were down slightly over the year.

     Offshore liquid sales were 3 percent below 1999; amber MGA was the major
product. PCS sells liquids offshore for PhosChem. India and Brazil were the
biggest markets, followed by Indonesia. Prices were highest in the first
quarter, dropped in the second quarter when the Indian contract was signed, and
rose near year-end.

FEED

     PotashCorp sold 0.907 million tonnes of phosphate feed products in 2000,
including for the first time 0.016 million tonnes of feed mineral salts (made of
salt, Dical and other nutrients) from Fosfatos in Brazil. Monocal made up almost
half of sales, with Dical comprising 20 percent, liquids 18 percent, DFP 12
percent, MAP/DAP 1 percent and salt 2 percent.

     While 77 percent of sales were domestic, offshore sales continued to rise,
with Brazil, Mexico, Thailand and the Philippines the major growth markets. PCS
had 41 percent of total imports into the Asia/Pacific region, where consumer
demand for meat is rising, and 8 percent of the rapidly growing market in
Brazil.

     Domestic prices declined slightly, but offshore prices were up 7 percent
over 1999.

INDUSTRIAL

     Sales of food-grade and technical-grade purified acid produced by PCS
Purified Phosphates at Aurora were up 25 percent in 2000 when the Company became
one of the three remaining North American players in the purified acid business.
Almost all sales were domestic. Most products are sold directly to customers
under contract or supply agreement. Geismar sold 0.146 million tonnes of
phosphoric acid under contract to Rhodia, Inc. as a feedstock for its adjacent
purified acid plant.

2000 NITROGEN SALES

     The onset of new ammonia capacity in 2000 could have severely affected the
supply/demand balance, but high natural gas prices shut down production, more
than offsetting the new supply. Over the next few years, growth in demand for
ammonia is

                                       21


------------------------------------

[Picture of a dog]

[CAPTION] Healthy pets require good nourishment, and PotashCorp's phosphate feed
          products help pet food manufacturers supply all the necessary
          nutrients.

[US SPA Producers by Capacity Chart]

[CAPTION] Conservation tillage was used on 37 percent of total US crop plantings
          in 2000. PotashCorp, North America's largest producer of liquid
          phosphate fertilizers, is particularly important in the SPA used in
          such tillage systems.

[Picture of asparagus]

[CAPTION] Luscious asparagus is full of potassium and phosphate and offers extra
          energy. That may explain why French bridegrooms once dined on three
          courses of asparagus the night before the wedding.

[SIDEBAR] Lower phosphate fertilizer prices and sales but higher feed and
          industrial volumes
<PAGE>   24

projected by outside experts to exceed growth in supply, depending on the level
of US curtailments. The important factor will be gas prices, which are not
expected to return to 1999 levels.

     In urea, supply is now well ahead of demand. New projects in Venezuela and
Argentina with considerable export capacity will affect the North American
market. International markets have not been strong, and prices have been
affected.

     World consumption of ammonia for agriculture and industry rose by 3 million
tonnes in 2000. China and the FSU increased consumption; the US and Mexico used
less than in 1999. Production was up in China, Russia, Saudi Arabia, India,
Indonesia and several other countries, and fell in North America and South
Africa.

NITROGEN PRODUCTS

     Sales of manufactured and purchased nitrogen products were down 3 percent
in 2000, and almost evenly split between fertilizer and non-fertilizer. Domestic
markets took 90 percent. Manufactured product sales fell by 9 percent. With half
its Trinidad ammonia production down during gas contract negotiations, PCS
doubled its purchases from a Russian ammonia producer and resale of purchased
product was up by 106 percent.

     Sales of manufactured ammonia for fertilizer and feedstock were down by 28
percent. Urea and nitrogen solutions sales were down slightly, those of ammonium
nitrate up by 13 percent and nitric acid by 32 percent. Other nitrogen sales
were down 24 percent, mainly because less carbon dioxide was sold.

     Most nitrogen sales are domestic, but PCS sells considerable urea offshore,
shipping from Trinidad; exports were 17 percent of total urea sales. The Company
sold its high-quality nitrogen solutions fertilizer offshore for the first time
in 2000.

     Nitrogen product categories include sales to industrial customers, mostly
domestic; carbon dioxide sales are included. In 2000, these industrial sales
were up slightly from 1999. In the US, federally-mandated requirements for
reducing emissions of nitrogen oxides, which must be implemented by May 2003,
have meant new uses for ammonia and urea products in selective catalytic and
non-catalytic reduction systems.

     Industrial sales of ammonia represented 25 percent of the US industrial
market for ammonia, sales of urea were 48 percent, ammonium nitrate 16 percent
and nitric acid 43 percent. In every case, the PCS market share rose from 1999.

                                       22


------------------------------------

[World Ammonia Consumption Graph]

[CAPTION] Quality of life is improved by many products made with industrial
          nitrogen. The non-fertilizer market for ammonia is projected to grow
          by 3 percent annually.

[Picture of a woman bowling]

[CAPTION] Much more than a fertilizer, nitrogen is hard at work every day, in
          clothing, in building materials and even in this bowling ball.

[Picture of boy having a bath]

[CAPTION] Bath time can be fun time, but before the fun begins the water must be
          treated and softened, jobs that are readily done by PCS phosphate and
          potash products. Its urea goes into the plastic toys, but the smile
          belongs to the boy.

[SIDEBAR] Rising prices, stable costs and higher margins highlight 2000 nitrogen
          results
<PAGE>   25


     Also included in total 2000 sales were 0.111 million tonnes of nitrogen
feed, almost all urea prills and domestic. This was 14 percent more than in
1999, while sales volumes to key accounts grew by 26 percent.

     Prices for all nitrogen products increased substantially during the year,
driven by rising natural gas prices. Fertilizer prices were up by 45 percent,
supported in the first half by tighter supply due to lower Trinidad production,
and in the second half by higher gas prices, as producers with no gas hedge shut
down capacity. Prices for nitrogen products used in industry also rose, from a
small increase for ammonium nitrate to 43 percent for manufactured ammonia. Feed
prices jumped by 32 percent, and supply was tight.

LOOKING AT 2001 AND BEYOND

external factors influential

While PotashCorp also supplies feed and industrial customers, it is primarily
affected by what is happening in agriculture around the world. In fertilizer,
more attention is being paid to replenishing the soil with balanced crop
nutrients as world population, economic growth and environmental concerns
increase. These factors, along with rising world meat consumption, drive the
long-term demand for fertilizer, and PCS, with its wealth of low-cost potash
and phosphate reserves and its efficient nitrogen production, is in an ideal
position to meet that demand. It is a supplier of choice of nitrogen to domestic
markets and of potash and phosphates to developing nations, where rising
population and food requirements drive fertilizer demand.

NEW SUPPLY AFFECTS WORLD TRADE

     For much of the fertilizer industry, the immediate future is filled with
uncertainties that center on supply. Potash is in the best position, for aside
from PCS there is limited excess capacity in the world and no major new capacity
has been formally announced. In phosphate and nitrogen, however, the new
facilities that began to come on stream in 2000 will add considerably to world
production.

     In concert with supply, trade affects pricing so developments there are
closely watched. Ammonia trade is expected to expand as production moves
offshore and imports from nations with low-cost natural gas supplant production
in high-cost gas regions, especially North America. Trade in DAP is not expected
to grow as it feels the effect of new

                                       23


------------------------------------

[Picture of boy eating watermelon]

[CAPTION] Potash has earned its reputation as the Great Enhancer, making this
          watermelon redder and sweeter.

[Picture of computer mouse]

[CAPTION] PotashCorp focuses on creating value for its customers, and in spring
          2000 introduced the first web site in the fertilizer industry that
          enables customers to access their accounts.

[Picture of boy on bike with dad]

[CAPTION] Parents teach children the rules of bicycle riding, and then provide
          helmets made with plastic products containing PCS nitrogen and
          reflectors made with PCS phosphoric acid to help ensure their safety.
<PAGE>   26

production and reduced imports by major importing countries. Phosphoric acid
trade could increase, reflecting additional new DAP production. Potash trade is
expected to decline modestly after a record year in 2000.


NITROGEN, PHOSPHATE AND POTASH WILL BE AFFECTED DIFFERENTLY

     In nitrogen, rising world demand and ongoing US shutdowns should balance
the new ammonia capacity that came on near the end of 2000. In the short term,
ammonia supply could be tight because high gas prices curbed production during
the key inventory-building months. In urea, new South American capacity, much of
it export-oriented, is sure to affect markets, particularly in North America.
Supply is tight in the North American nitrogen solutions market and prices have
risen.

     The phosphate industry is expected to continue to struggle in 2001 as it
strives to absorb the huge DAP capacity that has come on in India and Australia.
North American shutdowns in response to that new capacity were a major factor in
keeping the industry afloat in 2000. Moreover, costs are going up with increased
prices for ammonia, an input for DAP. Imports by China and India will be the key
to 2001. China's DAP quotas will likely fall short of last year, and a question
mark hangs over sales to India, where inventories were comparatively high going
into 2001 and local production is rising. The profitability of this segment will
only return as global supply and demand come back into more reasonable balance.

     Potash is less affected than phosphate and nitrogen by over-production, but
demand could be a factor in 2001. Among major purchasers, China and Brazil
bought record volumes in 2000 and carried over considerable inventory, so their
2001 buying is uncertain. In early February, China agreed to purchase 1.2
million tonnes from Canpotex for delivery through August. Continuation of a
trade dispute between Brazil and Canada would jeopardize potash exports from
both Saskatchewan and New Brunswick.

     In the domestic picture, higher nitrogen prices could affect farmers'
planting decisions and nutrient purchases, making spring 2001 a guessing game.
More soybeans - which fix most of their nitrogen needs from the soil - may be
planted, and less corn, a heavy user of fertilizer. The switch is expected to be
just one to two million acres from total corn

                                       24


------------------------------------
[Picture of parent and child in field]

[CAPTION] Farmers' annual decisions about what to plant are affected by markets,
          government subsidies, crop prices and fertilizer options - and finally
          and always, up to the last minute, by weather.


WORLD FERTILIZER TRADE
<TABLE>
<CAPTION>

                        2001 (FORECAST)      2000 (ESTIMATE)          1999
                        ---------------      ---------------          -----
<S>                     <C>                    <C>                    <C>
POTASH                  33.1 MT                33.3 MT                32.4 MT
PHOSPHORIC ACID          4.6 MT P(2)O(5)        4.4 MT P(2)O(5)        4.5 MT P(2)O(5)
AMMONIA                 15.1 MT                14.8 MT                14.6 MT
</TABLE>
MT = Million Tonnes

[SIDEBAR] Fertilizer Indicators to Watch

          o    Industry's response to new phosphate and nitrogen capacity

          o    Natural gas prices

          o    India's subsidies

          o    China's fertilizer imports

          o    Commodity prices

          o    US acreage planted

          o    Industry consolidation

<PAGE>   27

plantings in 2000 of almost 80 million acres. Farmers may cut back on all
nutrients or buy nitrogen at the expense of potash and phosphate. However,
potash and DAP experienced a weak fall fill in 2000 as farmers uncertain of
nitrogen supplies filled their bins with urea. This could have a positive effect
on spring sales.

GLOBAL FACTORS AFFECT AGRICULTURE

     Against this background, the global agricultural situation is improving.
After record grain demand exceeded production in 2000, world stocks are low. US
stocks fell considerably in the fall of 2000. This was not unexpected, for
prices were extremely low and grain is a self-correcting commodity. Low prices
reduce planted acreage, increase grain fed to livestock and raise exports as
buyers take advantage of low prices, so stocks are drawn down. Though prices
remain at historically low levels, they may have bounced up off the bottom and
begun to move upwards once more. Any serious production problems in the US or
China could result in a quick turnaround in the grain market and positively
affect fertilizer.

     The fertilizer business is influenced by a number of external factors.
Currently it is natural gas prices, but weather, farm income, government
policies and countless other factors beyond producers' control always have a
bearing.

NON-FERTILIZER REMAINS STEADY

     Growing demand for downstream products with more stable margins has
encouraged the Company to focus on developing its industrial sales. Strong sales
to industry are expected in all three nutrients in 2001. Demand for feed
products should continue to rise as US and world meat production increases in
response to growing demand for meat, poultry and dairy products; and even for
pet foods as pet ownership climbs. It takes seven pounds of grain to produce one
pound of beef, four pounds per pound of pork and two pounds per pound of
chicken, and feed products supplement the nutrition grain provides.

     In spite of concerns early in the year about the health of the US economy,
tight supply/demand fundamentals in nitrogen should increase industrial prices.
Industrial phosphate and potash prices should be similar to 2000, demonstrating
the pricing steadiness of this market as customers focus on product quality and
just-in-time delivery. An extended recession could affect growth in this area,
but would be unlikely to reduce current demand. Feed prices are also expected to
be similar to 2000, reflecting continued strong buying in offshore markets.

                                       25


------------------------------------

[Picture of rice field]

[CAPTION] Balanced fertilization is essential to increasing crop yields. In
          experiments in China, nitrogen, phosphate and potash used together
          raised yields of rice by an average of 40 percent, summer corn by 50
          percent and winter wheat by 60 percent.

[SIDEBAR] RESILIENT

[SIDEBAR] NON-FERTILIZER INDICATORS TO WATCH

          o    Health of US economy

          o    Economic growth in Asia, Latin America

          o    Growth in meat consumption worldwide

          o    US meat production

          o    EU ban on feeding meat, bonemeal

<PAGE>   28


Responsible

[Three pictures: woman, building and water]

[Service Awards - 2000 Graph]

[Donations - 2000 Chart]

[Environmental Expenditures Graph]

[CAPTION] PCS honors its partnership with its employees; as a result, staff
          turnover is low. It shares in the communities in which it operates, as
          the PCS Centre at the University of Saskatchewan illustrates, and
          cherishes the environment in which it works, reclaiming mined land for
          the enrichment of people and wildlife.

                                       26


<PAGE>   29

PEOPLE

linking with employees

PotashCorp employees totalled 5,338 at December 31, 2000 and worked in five
countries. Fifty-seven percent worked in the United States, 31 percent in
Canada, 7 percent in Trinidad, 4 percent in Chile and 1 percent in Brazil. The
annual payroll is approximately $228 million.

     Focusing on these widespread human resources, PotashCorp accepted a mandate
that links its future to its people. To maintain and ambitiously grow the
business, the right people must be in place at all levels, and a culture of
teamwork is the best way to capitalize on talent throughout the organization.
Company programs that support getting the best out of its people include
succession planning, skills training, safety and a competitive compensation and
benefits program. Linking solid existing programs with new initiatives that
recognize people as key to Company success establishes PCS as a "great place to
work."

     Already, many PotashCorp employees have made a long-term commitment to the
Company. In 2000, 858 long-service awards recognized and rewarded that
commitment. Looking to the future, the PCS College Scholarship Program awarded
42 new and 30 continuing scholarships to sons and daughters of employees.

COMMUNITIES

working with neighbors

Every year the connection between PotashCorp and the communities in which it
operates expands and deepens as facilities and employees devote time and money
to a wide range of causes. Through its Matching Gift Program, the Company
matches employees' personal donations to their favorite charities, part of its
commitment to building stronger communities.

     In the Saskatoon area, PotashCorp makes financial pledges to many agencies,
particularly in education and health. In June, the PCS Centre at the University
of Saskatchewan's College of Commerce - built with a CDN$5-million donation to
the university's First & Best Campaign - was opened. Late in 2000, the Company
became the first corporate sponsor of the Western Development Museum's new
exhibit for Saskatchewan's Centenary in 2005, Winning the Prairie Gamble: The
Saskatchewan Story.

     Corporate office employees and those at many PCS operations contribute
significantly to their local United Way. Employees at corporate headquarters
received the Campaign Chair Award for their participation, and corporate office,
together with employees from Allan, Cory and Patience Lake, received a second
consecutive Campaign Superstar Award.

                                       27


------------------------------------

[Picture of children digging in dirt]

[CAPTION] Thousands of people from around the world visit Aurora to hunt for
          fossils in a deep pit at the mine. Children, too, can find prehistoric
          mementoes in special digging mounds near the Aurora Fossil Museum.

[SIDEBAR] A work atmosphere that allows people to strive for excellence,
          developing leaders at all levels

<PAGE>   30

     Executive Secretary Dale Pickett, who headed the corporate office campaign,
received a Schmeiser Spirit Award for outstanding performance. All individual
donations were matched by the Company.

     Operations support many charities, emphasizing health, education, science
and environment. A sampling from 2000: Geismar assisted the ChemFriends Expo, a
chemistry fair at which students perform hands-on experiments. Augusta continued
to sponsor the Augusta Boxing Club, which has named an academic scholarship the
PCS Nitrogen Scholarship. Human Resources Manager Pete Brodie was named
Outstanding Volunteer Fundraiser by the Greater Augusta Chapter of the National
Society of Fundraising Executives.

     Trinidad employees helped organize and participated in the country's first
Terry Fox Run for Cancer. White Springs employees contributed wildlife and
scenic photos to a PCS calendar that was donated to three local libraries, the
Hamilton County Chamber of Commerce and MainStreet Hamilton County for sale as a
fundraiser. Memphis hosted a Crawfish Boil for neighbors, regulators and the
community that is geared toward safety and environmental awareness. Rocanville
contributed equipment to a community playground and helped complete the local
arena. Funds raised by Aurora's Dog Days Regatta went to the Humane Society of
Beaufort County.

     The new PotashCorp Community Outreach Program administered by inspirational
speaker and former Dallas Cowboy D.D. Lewis is widely available. The Company's
renowned HAZMAT training program, complete with simulated rail tank car, can be
booked by customers.

ENVIRONMENT AND SAFETY

improving, surpassing standards

Keenly aware of its responsibility for the safety and health of its employees
and care of the environment in which it operates, PotashCorp took important
steps in 2000 to help it better fulfil those commitments. It appointed its first
Vice President responsible for these areas and developed a detailed Safety,
Health and Environment Management System to guide employees.

     The Company's philosophy emphasizes that everyone who works for PotashCorp,
anywhere, is responsible for its safety, health and environment, and that good
performance in these areas is critical to its business success. It resolves to
consult, listen and respond openly to customers, employees, neighbors and the
community, and to report on its performance. Committed to meeting the measurable
safety, health and environment targets that are an integral part of its business
plans, the Company will implement the Safety, Health and Environment Management
System throughout its operations in 2001.

     Of course, PotashCorp has always emphasized safety, health and the
environment. It has notable achievements in those areas, and records and awards
to mark those achievements; the most recent are noted. Now it is resolved to do
more and continue to do it well.

                                       28


------------------------------------

[Picture of people in school]

[CAPTION] PCS Memphis has adopted Lucy Elementary School and employees
          participate in a one-on-one tutorial program for students who need a
          little extra help. Employees also help with achievement awards, a
          science fair project and school maintenance.

[Picture of men next to rail car]

[CAPTION] With its simulated rail tank car as a training tool for HAZMAT teams,
          PCS takes its message about safe handling to fertilizer dealers, fire
          departments and other emergency response agencies throughout North
          America.

[SIDEBAR] Everyone who works at PotashCorp is responsible for safety, health and
          environment

<PAGE>   31


ENVIRONMENT

     Fertilizer, the first link in the global food chain, may affect the
environment when it is produced or when it is applied to the soil to replenish
the nutrients needed by healthy crops. The fertilizer industry concentrates its
environmental protection measures at these two points, through care as it makes
its products and work with the end-users of those products, the world's farmers.

     Care for the environment is a cornerstone of the way PotashCorp does
business. In its operations, it stresses energy efficiency while applying modern
techniques of pollution control and water conservation, and works to improve
those techniques. It works with regulatory bodies and the public, adheres to
environmental regulations and laws, and looks for best practices it can apply.

     PotashCorp supports the wide-ranging work of The Fertilizer Institute
(TFI), the Potash & Phosphate Institute (PPI) and the Fluid Fertilizer
Foundation (FFF). TFI's comprehensive risk-based concentrations assessments of
the levels of non-nutritive elements contained in commercial, inorganic
fertilizer products showed they have a wide margin of safety. It has begun a
multi-million-dollar product testing study consistent with international product
testing protocols. PPI works with farmers for wise fertilizer use, including
programs to teach local growers around the world new ways to more effectively
nourish crops in their unique growing conditions. Long-standing programs strive
to ensure high standards of fertilizer and crop production knowledge among those
who provide information to farmers. FFF supports research into use of fluid
fertilizers in minimum and no-till systems for a wide variety of crops in
several countries.

FARMERS NURTURE THE LAND

     Farmers live by the land and they nurture the health of that land. Many
have adopted the concept of ecological intensification with such practices as
plowing stubble into the soil to create biomass. Increasingly, they favor new
application methods that put the fertilizer beside the seed or seedling.
Minimum-till practices that promote soil conservation are rising in popularity
in North America and elsewhere; they are quickly becoming the system among Latin
American farmers.

     Farming practices that conserve and improve soil quality and productivity
also put more carbon-rich organic matter into soils, providing a global
depository for CO(2) drawn from the atmosphere by growing plants. Such carbon
sequestration in soils offers a unique opportunity to slow global warming while
new, energy-efficient, low-carbon power generation and transportation
technologies are phased in.

     People unaware of the conservation practices of the fertilizer industry and
farmers may unthinkingly blame them for soil and water problems. In fact,
environmental damage would multiply if farmers had to try to produce enough food
for a rising world population without the contribution of fertilizer to soil
fertility and productivity. Every available acre would have to be cultivated.
Fertilizer allows land to be conserved for forests, wetlands and parks and helps
the world's limited arable acreage produce the required healthy food.


                                       29


------------------------------------

[Picture of man testing water]

[CAPTION] Trained environmental technicians regularly test the water at all
          plant locations, including restoration areas created by the Company
          following the completion of phosphate mining.

[SIDEBAR] AWARDS RECEIVED IN 2000

          NEW BRUNSWICK

          o    Shipper of the Year Award given by Port of Saint John NB

          MEMPHIS

          o    Canadian National Illinois Central Railway Award for 1999 safe
               shipping

          GEISMAR

          o    Canadian National Illinois Central Railway Award for 1999 safe
               shipping

          PCS PHOSPHATE

          o    Union Pacific Pinnacle Award for Chemical Transportation Safety

          WHITE SPRINGS

          o    Florida Department of Environmental Protection Public Interest
               Award for land reclamation project

          o    Safe shipping awards from Union Pacific and Burlington Northern
               Railroads for shipping in 1999

          o    Florida Commissioner of Education Business Recognition Award for
               support of education in its area

          o    Exemplary Partner Award, Council for Sustainable Florida

          AURORA

          o    Safe shipping award from Union Pacific

          WEEPING WATER

          o    Gold Award of Honor with distinction, Safety and Health Council
               of Greater Omaha (fifth year)

          o    Safety Achievement Award for 2000, Nebraska Safety Council
<PAGE>   32



CORPORATE CUSTODIANSHIP

     Potash Corporation of Saskatchewan is an active supporter of fertilizer
research and the environmentally-beneficial farming and fertilization practices
being applied around the world. At home, corporate environmental policy requires
it to manage its operations responsibly to safeguard the natural resources
related to or affected by its activities. Each production unit must work
diligently to minimize potential risks to the environment and must comply with
environmental legislation and regulations; in 2000, PotashCorp spent $94.6
million on its environmental efforts.

     During 2000, PCS Joint Venture, a Florida general partnership, continued to
address an environmental issue at its fertilizer and distribution center at
Lakeland, Florida. To eliminate potential endangerment to public health, welfare
or the environment identified by the US Environmental Protection Agency (EPA),
PCS Joint Venture removed 1,450 tonnes of surface soil at its facility in 2000.
It joined Agrico Chemical Company in removing 462 tonnes of soil and ditch
sediments from an adjacent property. Work continued on the remedial
investigation/feasibility study which will result in a plan to address both
on-site and off-site environmental impacts.

     The federal grand jury investigation of environmental matters at PCS
Nitrogen's Geismar facility continues.

     In-depth information on PCS environmental activities is available on its
web site at www.potashcorp.com.

POTASH AND ITS ENVIRONMENT

     All potash operations were internally audited in 2000 and were in material
compliance with applicable environmental requirements. All facilities continue
work to improve their performance.

     New Brunswick replaced a sewage treatment pond and used the treated water
produced to create a wetland habitat. Cory upgraded its tailings management area
and Lanigan began an upgrade by installing a cut-off wall around its future
pond, to be completed in 2001.

     PCS is researching ways of making the potash waste stream more
environmentally friendly. It continues to participate in Saskatchewan Potash
Producers Association research on improving waste management procedures and
developing decommissioning and reclamation techniques. In 2000, species of
naturally salt-tolerant vegetation that could be used in reclamation were grown
on washed potash waste in a greenhouse.

     Potash companies' decommissioning and reclamation plans have been approved
by the Saskatchewan Department of Environment and Resource Management and are to
be revised by 2005. An industry-government working group continues to examine
options. A model will be developed for each site which can predict the long-term
movement of sub-surface brine, with a framework for cost-benefit analyses of
measures

                                       30


------------------------------------

[Picture of field]

[CAPTION] In another important environmental step, more than 3,500 acres of
          native parkland at Rocanville became part of Saskatchewan's
          Representative Area Network, as an example of an untouched ecosystem.

[Picture of wetlands]

[CAPTION] Half the world's wetlands have been lost since 1900, principally to
          agriculture. PCS restores and increases wetlands after mining
          phosphate; Aurora creates 1.6 acres of new wetlands for every wetland
          acre mined.

[SIDEBAR] CONSERVATION

<PAGE>   33

which might reduce brine escape. Another committee will recommend ways of
providing financial assurance for the decommissioning and reclamation plans
during the five-year review period.

PHOSPHATE AND ITS ENVIRONMENT

     Internal audits were conducted at all phosphate facilities and the results
were favorable and in material compliance with applicable environmental
requirements. At Aurora, the experimental upgrading of a scrubber system on one
stack resulted in a 25 percent reduction in particulate emissions from this
source. White Springs completed capital projects that upgraded cooling water
management, spill containment at the Lake City Transload Facility and dust
control in the Monocal plant. White Springs also implemented a computer-assisted
internal spill and release reporting system.

     Aurora planted approximately 67 acres of reclaimed land with hardwood
trees. White Springs reclaimed about 700 acres while mining just over 600 acres.
It received a Florida Department of Environmental Protection Public Interest
Award for a land reclamation project which included a lake with facilities for
the physically handicapped. The lake was named in honor of Gene McNeill, who was
instrumental in development of the project while Director, Environment, Health
and Safety at White Springs.

NITROGEN AND ITS ENVIRONMENT

     Results of internal audits showed that Memphis, Augusta, Lima and Trinidad
were in material compliance with environmental laws, regulations, permits and
good management practices. Employee interviews conducted as part of the audits
provided favorable insight into employees' knowledge of environmental
regulations.

     Geismar's new continuous effluent water monitoring system, the first in
Louisiana and one of only a few in the United States, is improving water systems
discharge. A new Environmental Improvement Plan fosters continuous improvement.
Internal Process Safety Management/Risk Management Plan audits were performed.
Capital projects at Memphis will improve runoff and at Augusta will handle
excess storm water during periods of heavy rain.

     Geismar belongs to Iberville Parish Community Awareness and Emergency
Response Committee, which received a special Sustaining Superior Performance
award from the Chemical Education Foundation. The award recognized its
continuously updated and unique emergency warning system, which includes a
mapping program that can visually pinpoint a potential threat to the communities
involved.

SAFETY

     Safety is another cornerstone of all PotashCorp operations and a constant
focus of every employee. With safety as a way of life at all facilities, large
and small, the Company's safety records regularly improve. On October 6, 2000,
the employees at its largest facility, Aurora, passed the milestone of 9 million
safe hours worked without a lost-time injury, the best record in the history of
the United States fertilizer industry. Such major safety achievements are
recognized with special ceremonies and awards presented by senior management.

     External safety specialists, too, honor the safety achievements of PCS
operations. Employees at White Springs' Swift Creek mine, who have worked 5 1/2
years without a lost-time accident, again received the Sentinels of Safety award
from the Mine Safety and Health Administration (MSHA) of the United States
Department of Labor. Swift Creek has the third longest safe hours record in the
US.

     Augusta had no Occupational Safety and Health Administration (OSHA)
recordable injuries in 2000, extending a four-year record. White Springs
achieved its lowest-ever total of OSHA recordable accidents.

                                       31


------------------------------------

[Picture of truck being loaded]

[CAPTION] For the most recent reporting year, all PCS plants but one reduced
          their TRI emissions, exclusive of the impact of phosphoric acid, an
          important and beneficial fertilizer which is no longer on the EPA list
          of reportable toxic chemicals. Augusta's emissions fell for the eighth
          time in nine years, and at Trinidad - where the Company applies US
          guidelines to its operations - the numbers have fallen every year for
          five years.

[Picture of safety sign]

[CAPTION] Safety is a cornerstone of PotashCorp operations and a priority at its
          three production divisions, each of which had fewer recordable
          injuries than in 1999.
<PAGE>   34


     Contractors at Aurora exceeded 2 million hours without a lost-time injury,
confirming the pervasiveness of the safe operations environment there. PCS and
local emergency responders from the White Springs area were trained on ammonia
response procedures using the Company's training rail tank car.

     Memphis hosted a Shelby County Local Emergency Planning Committee emergency
response drill with excellent participation by all local and state agencies.

     New Brunswick and Lanigan won their respective provincial mine rescue
competitions; Rocanville was runner-up in the Saskatchewan competition. Two team
members and two coaches from Lanigan division were on the Town of Lanigan team
that won the 20th annual PCS Potash firefighters competition, with its events
that demand a range of firefighting skills.

Corporate governance

monitoring, safeguarding

The Board of Directors is ultimately responsible for the governance and
stewardship of PotashCorp, with the goal of ensuring sustained growth in
shareholder value.

     The Board develops the policies and procedures that provide the framework
for PCS operations, and directs the management of the Company's business and
affairs. Guiding senior management on issues of planning, budgeting and
forecasting, the Board each year reviews and approves the annual budget, large
unbudgeted capital expenditures and changes to the capital structure, large
lease commitments and the appointment and remuneration of the CEO. Directors
play a key role in risk management, and review management decisions that might
significantly affect the performance of the Company, its employees and other
stakeholders. In November, directors and management review the major risks to
PotashCorp and its plans to deal with those risks, and in January, participate
in an extensive strategy session.

     The Chairman of the Board provides the leadership necessary to ensure
effective functioning of the Board, assists in effective Board-management
communication and is a member of the executive committee. The Chairman appoints
committee chairs and works with management to set the Board meeting agendas and
to prepare for and preside at annual meetings of PCS.

     The Board has developed and widened its corporate governance practices to
ensure they are open, effective and accountable. Its corporate governance and
nominating committee is responsible for examining and reporting to the Board on
governance matters and for recommending director nominees. In 2000, this
committee recommended and the Board approved important policies:

o    Sessions without management present will continue to be held at the
     beginning of each regularly scheduled Board meeting.

o    The target Board size is 12 members.

o    Directors will not stand for re-election after reaching age 70; this will
     not apply to directors 70 or over holding office when the policy was
     adopted.

     To adhere to Toronto Stock Exchange guidelines for a listed company, a
majority of directors must be unrelated to PCS; that is, free of any
relationship that could reasonably be perceived to interfere with the director's
ability to act in the best interests of the Company. The status of Board members
as related or unrelated directors is reviewed annually, taking into account the
circumstances of each, including previous employment with the Company.

     The Board has adopted a policy which defines an independent director. Its
standard of independence is defined as the standard used by the New York Stock
Exchange in determining the independence of directors on audit committees.
Applying this definition, 11 of 13 directors are unrelated; the related
directors are William Doyle and Thomas Wright. No substantial shareholders are
represented.

                                       32


------------------------------------

[SIDEBAR] Strongly committed to fair treatment of shareholders, the PCS Board
          ensures it receives regular investor relations reports

[SIDEBAR] RECENT SAFETY MILESTONES

          Time without a lost-time injury

          POTASH

          Potash Pilot Plant, Saskatoon SK

          o  20 years on April 14, 2000

          Cassidy Lake NB

          o 3 years on August 22, 2000

          PHOSPHATE

          Aurora NC

          o 8 million hours on May 13, 2000

          o 9 million hours on October 6, 2000

          White Springs FL

          o 4 million hours on March 23, 2000

          Kinston NC

          o 7 years on December 1, 2000

          NITROGEN

          Trinidad WI

          o 3 million hours on February 4, 2000

          Geismar LA

          o 11 years on March 15, 2000
<PAGE>   35


COMMITTEES OF THE BOARD OF DIRECTORS

     Each of the Board's five committees plays a significant role in the
discharge of Board duties and obligations. The audit committee is empowered to
retain outside advisors, and individual directors may engage outside advisors at
the Company's expense upon authorization of the executive committee. Committee
chairs and other directors submit items for Board agendas, develop the agendas
for their respective committees and report to the full Board on their
committee's activities.

     The executive committee at present has five directors. Between meetings of
the Board it has, with certain limitations, all the powers vested in the Board.

     Membership in the audit committee is restricted to directors who are not
current or former employees or officers of the Company and have no relationship
with it that may interfere with the exercise of their independence. It meets
with the Company's financial management personnel, internal auditor and external
auditor at least once each quarter to review financial reporting practices,
procedures and standards and to review and authorize the release of unaudited
quarterly financial statements. The committee reviews the annual financial
statements before their submission to the Board for approval. It recommends to
the Board the external auditors to be proposed to shareholders for appointment
at the annual meeting.

     The compensation committee of, at present, four independent directors makes
recommendations to the Board on compensation issues relating to directors and
senior management of the Company, and on corporate salary and benefits policy.
It reviews and approves, annually, the salary administration program, and is
responsible for the annual report on executive compensation. In consultation
with the CEO, the committee considers and reports to the Board on corporate
succession matters.

     The six-member corporate governance and nominating committee is responsible
for examining and reporting to the Board on all aspects of governance, and for
recommending nominees for election as directors. In discharging its duties, it
considers the size of the Board, its composition and membership mix.

     The environmental affairs committee, composed of four directors, works to
ensure that the Company fulfils its commitment to the protection of the
environment. 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.

     Management meets regularly with institutional shareholders, and quarterly
conference calls are available live on the Company's web site. Shareholder
questions, comments and concerns about corporate governance may be directed to
the Senior Vice President, Corporate Relations, who is responsible for
implementing the disclosure policy, the Corporate Secretary or the Company's
transfer agent.

                                       33


------------------------------------

[Picture of PotashCorp offices]

[CAPTION] At the efficient new PotashCorp offices in Chicago, everyone
          responsible for keeping the Company's customers happy is working under
          one roof.

[Best Practice Corporate Governance Graph]

[CAPTION] A representative survey of buy- and sellside analysts who follow PCS
          shows their No. 1 priority is board independence.

[SIDEBAR] Board committees play a significant role in discharging board duties
          and obligations
<PAGE>   36



                                   FINANCIALS
[Three pictures of men at work]

[Net Sales Graph]    [Gross Margin Graph]   [Cash Flow from Operations Graph]

[CAPTION] Rising nitrogen prices throughout the year and record potash sales
          volumes contributed to increased earnings in 2000, producing higher
          net sales, gross margin and cash flow from operations.

                                       34
<PAGE>   37


                       MANAGEMENT'S DISCUSSION & ANALYSIS

                of Financial Condition and Results of Operations
                                (in US dollars)

2000 versus 1999

GROSS MARGIN

<TABLE>
<CAPTION>
($ millions)                                                                               2000        VS  1999
                                2000               1999         1998         1997         CHANGE       % CHANGE
                               ------             ------       ------       ------        ------       --------
<S>                            <C>                <C>          <C>          <C>           <C>             <C>
Nitrogen                       $104.7             $(21.4)      $ 64.8       $133.2        $126.1           --
Phosphate                        74.1              127.8        228.2        194.4         (53.7)         (42%)
Potash                          304.0              301.9        316.3        257.6           2.1            1%
                               ------             ------       ------       ------        ------          ----
                               $482.8             $408.3       $609.3       $585.2        $ 74.5           18%
                               ======             ======       ======       ======        ======          ====
</TABLE>


     Gross margin in 2000 improved by 18 percent over 1999 levels, due to a
$126.1-million improvement in nitrogen gross margin, more than offsetting a
$53.7-million decline in phosphate gross margin. Potash gross margin remained
essentially flat as record sales volumes were offset by lower product prices.
The improvement in nitrogen gross margin, particularly in the second half of
2000, resulted from North American nitrogen producers responding to a spike in
natural gas costs with plant shutdowns and higher product prices. The Company's
hedged natural gas position for its US plants and its indexed natural gas
contracts in Trinidad provided an advantage to PCS versus its competitors.
Closure of high-cost nitrogen plants in 1999 and renegotiation of a Trinidad
natural gas contract in 2000 helped the Company capitalize on these industry
conditions. The reduction in phosphate gross margin resulted from increased
worldwide phosphate capacity that caused excess product supply, lower fertilizer
sales volumes and lower product prices.

     A comparison of gross margins since 1997 (first partial year for nitrogen
ownership) demonstrates the historical stability of potash earnings and the
relative volatility of nitrogen and phosphate earnings. Continued full year
improvement in nitrogen earnings is expected in 2001, assuming above historical
average natural gas prices that amplify the benefits of the Company's strong gas
hedge position and its Trinidad assets. A modest recovery in phosphate earnings
is expected, but further digestion of newly-constructed industry production
capacity is required to return to 1998 profitability levels.

OVERVIEW

<TABLE>
<CAPTION>

($ millions)                                          % OF NET                      % OF NET
                                         2000           SALES           1999          SALES    % CHANGE
                                       --------       --------        -------       --------   ---------
<S>                                    <C>               <C>          <C>             <C>        <C>
Net Sales                              $2,231.6           100          $2,061.1        100          8
Gross Margin                           $  482.8            22          $  408.3         20         18
Provision for Plant Closures
   and Office Consolidation            $   24.3             1          $   65.0          3        (63)
Provision for Asset Impairment               --            --          $  526.6         26         --
Operating Income (Loss)                $  326.8            15          $ (353.0)       (17)        --
Net Income (Loss)                      $  198.0             9          $ (412.0)       (20)        --
Earnings (Loss) per Share ($)          $   3.78            --          $  (7.60)        --         --

</TABLE>

     Sales results for 2000 reflect the dramatic positive turnaround in nitrogen
prices and record potash sales volumes. Other income increased substantially,
primarily due to the $16.3-million gain on sale of the shares of Moab Salt Inc.
and a weaker Canadian dollar versus the United States dollar, resulting in a
$16.6-million foreign currency translation improvement over 1999. Higher
interest rates and additional short-term borrowings, in part to finance the
share repurchase program, resulted in a $10.1-million increase in interest
expense. Increased profitability resulted in an increase in income tax expense,
51 percent of which is deferred.

                                       35


------------------------------------

[Gross Margin by Quarter Graph]

[CAPTION] Record potash volumes sold early in the year to meet spring season
          requirements were succeeded in their contribution to gross margin by
          rising nitrogen prices in the second half.
<PAGE>   38


POTASH

<TABLE>
<CAPTION>
                                  2000                           1999                         % CHANGE
                        ---------------------------    ----------------------------    -------------------------
                        DOLLARS    TONNES   AVERAGE     DOLLARS    TONNES   AVERAGE    DOLLARS  TONNES  AVERAGE
                       (MILLIONS)  (000'S)   PER MT    (MILLIONS)  (000'S)  PER MT                       PER MT
                       ----------  -------  -------    ----------  -------  -------    -------  ------  --------
<S>                     <C>         <C>     <C>          <C>        <C>      <C>         <C>      <C>     <C>
Net Sales
 North American         $237.8      2,939   $80.92       $237.4     2,870    $82.71       --       2       (2)
 Offshore                340.9      3,973   $85.79        325.9     3,604    $90.42        5      10       (5)
                        ------      -----   ------       ------     -----    ------       --      --       --
                         578.7      6,912   $83.72        563.3     6,474    $87.00        3       7       (4)
                        ------      -----   ------       ------     -----    ------       --      --       --
Cost of Sales
 Cash Costs              233.8              $33.82        224.2              $34.63        4               (2)
 Depreciation and
  Amortization            40.9              $ 5.92         37.2              $ 5.75       10                3
                        ------      -----   ------       ------     -----    ------       --      --       --
                         274.7              $39.74        261.4              $40.38        5               (2)
                        ------      -----   ------       ------     -----    ------       --      --       --
Gross Margin            $304.0              $43.98       $301.9              $46.62        1               (6)
                        ------      -----   ------       ------     -----    ------       --      --       --
</TABLE>

     Potash performance was highlighted by record offshore sales volumes,
primarily as a result of healthy demand from China and Brazil. Domestic sales
volumes were close to the record established in 1997. The combination of these
factors resulted in a new record for total sales tonnes. Average domestic and
offshore sales prices were down due to competitive pressures. In the offshore
market, 83 percent of sales volumes (1999 - 82 percent) were sold through
Canpotex.

     Potash gross margin represented 63 percent (1999 - 74 percent) of
consolidated gross margin.

     Potash unit cost of sales decreased, due primarily to record production
volumes and fewer shutdown weeks.

PHOSPHATE

<TABLE>
<CAPTION>
                                  2000                           1999                        % CHANGE
                       ----------------------------   ----------------------------   ----------------------------
                        DOLLARS    TONNES   AVERAGE    DOLLARS    TONNES   AVERAGE    DOLLARS   TONNES    AVERAGE
                       (MILLIONS)  (000'S)  PER MT    (MILLIONS)  (000'S)   PER MT                         PER MT
                       ----------  -------  -------    ---------  -------  -------   --------  --------  --------
<S>                      <C>         <C>    <C>         <C>        <C>     <C>         <C>       <C>       <C>
Net Sales
 Fertilizer - liquids    $192.3      986    $195.10     $215.5     1,034   $208.47      (11)      (5)        (6)
 Fertilizer - DAP         222.9    1,523    $146.31      278.4     1,645   $169.26      (20)      (7)       (14)
 Feed                     215.4      907    $237.44      216.8       898   $241.30       (1)       1         (2)
 Industrial               151.9      477    $318.48      133.1       439   $303.21       14        9          5
                         ------    -----    -------     ------     -----   -------      ---       --        ---
                          782.5    3,893    $201.00      843.8     4,016   $210.12       (7)      (3)        (4)
                         ------    -----    -------     ------     -----   -------      ---       --        ---
Cost of Sales
 Cash Costs               640.9             $164.63      654.7             $163.02       (2)                  1
 Depreciation and
  Amortization             67.5             $ 17.34       61.3             $ 15.27       10                  14
                         ------    -----    -------     ------     -----   -------      ---       --        ---
                          708.4             $181.97      716.0             $178.29       (1)                  2
                         ------    -----    -------     ------     -----   -------      ---       --        ---
Gross Margin             $ 74.1             $ 19.03     $127.8             $ 31.83      (42)                (40)
                         ------    -----    -------     ------     -----   -------      ---       --        ---
</TABLE>

     Overall, phosphate net sales revenue declined in 2000, due primarily to
lower fertilizer sales volumes and prices.

     Higher industrial sales revenue compared to 1999 was principally due to
securing new business, the Company's purchase of the remaining half-interest in
Albright & Wilson Company and changes in product and customer mix.

     Offshore liquid fertilizer sales volumes decreased compared to 1999,
chiefly due to lower sales to India and Australia. North American sales volumes
were down, due primarily to customer inventory carryover from the previous
season. Offshore DAP sales volumes decreased, mainly due to reduced purchases by
China and India and new production in Australia and India. North American sales
volumes were also down.

     In 2000, 47 percent (1999 - 41 percent) of total phosphate net sales
revenue was earned from non-fertilizer products, which represented 36 percent
(1999 - 33 percent) of phosphate sales volumes. Phosphate gross margin
represented 15 percent (1999 - 31 percent) of consolidated gross margin.

     Phosphate unit cost of sales decreased marginally as the improvement in the
ore body at Aurora and lower sulphur costs more than offset a 36 percent
increase in the per-unit input cost of ammonia.


                                       36


------------------------------------

[Phosphate Net Sales Revenue by Product Graph]

[CAPTION] Due to the diversity of its customer base, phosphate revenues are less
          affected by the fertilizer season and more evenly distributed
          throughout the year.

[Potash Net Sales Revenue by Market Graph]

[CAPTION] Net potash sales revenue was positively affected by record offshore
          sales volumes, which were heavily weighted to the first three quarters
          of the year.
<PAGE>   39
NITROGEN

<TABLE>
<CAPTION>
                                  2000                           1999                        % CHANGE
                       ----------------------------   ----------------------------   ----------------------------
                        DOLLARS    TONNES   AVERAGE    DOLLARS    TONNES   AVERAGE    DOLLARS   TONNES    AVERAGE
                       (MILLIONS)  (000'S)  PER MT    (MILLIONS)  (000'S)   PER MT                         PER MT
                       ----------  -------  -------    ---------  -------  -------   --------  --------  --------
<S>                      <C>         <C>    <C>         <C>        <C>     <C>          <C>       <C>       <C>
Net Sales
 Urea                    $236.3     1,572   $150.33     $180.2     1,614   $111.63       31       (3)        35
 Ammonia                  217.5     1,377   $157.99      198.6     1,915   $103.69       10      (28)        52
 Solutions                135.7     1,593   $ 85.15      110.4     1,681   $ 65.65       23       (5)        30
 Other (1)                145.1     2,265   $ 64.04      117.6     2,307   $ 50.98       23       (2)        26
                         ------     -----   -------     ------     -----   -------      ---      ---        ---
                          734.6     6,807   $107.92      606.8     7,517   $ 80.72       21       (9)        34
Purchased                 135.8       896   $151.55       47.2       434   $108.81      187      106         39
                         ------     -----   -------     ------     -----   -------      ---      ---        ---
                         $870.4     7,703   $112.99     $654.0     7,951   $ 82.25       33       (3)        37
                         ------     -----   -------     ------     -----   -------      ---      ---        ---

Fertilizer               $463.2     3,772   $122.78     $345.5     4,087   $ 84.52       34       (8)        45
Non-fertilizer            407.2     3,931   $103.59      308.5     3,864   $ 79.84       32        2         30
                         ------     -----   -------     ------     -----   -------      ---      ---        ---
                          870.4     7,703   $112.99      654.0     7,951   $ 82.25       33       (3)        37
                         ------     -----   -------     ------     -----   -------      ---      ---        ---
Cost of Sales
 Cash Costs               702.9             $ 91.25      604.4             $ 76.02       16                  20
 Depreciation and
  Amortization             62.8             $  8.15       71.0             $  8.92      (11)                 (9)
                         ------     -----   -------     ------     -----   -------      ---      ---        ---
                          765.7             $ 99.40      675.4             $ 84.94       13                  17
                         ------     -----   -------     ------     -----   -------      ---      ---        ---
Gross Margin             $104.7             $ 13.59    $(21.4)             $ (2.69)      --                  --
                         ------     -----   -------     ------     -----   -------      ---      ---        ---
</TABLE>

(1) Sales volumes of Other nitrogen products include tonnes for the byproduct
carbon dioxide.


     Prices for all nitrogen products were higher than in 1999 due to healthy
demand and tight supply as a result of temporary and permanent plant shutdowns.
The significant increase in US natural gas prices accelerated industry
rationalization in North America.

     Sales volumes of manufactured products decreased compared to 1999,
primarily due to the permanent closure of two of the Company's plants in the
third quarter of 1999 and the temporary shutdown of two ammonia plants in
Trinidad during the first half of 2000 while a new gas contract was being
negotiated. Sales volumes of purchased products increased to replace the loss of
Trinidad volumes.

     The Company sold a larger portion of its North American nitrogen production
to the more stable industrial market. Non-fertilizer products represented 51
percent (1999 - 49 percent) of nitrogen sales volumes and 47 percent (1999 - 47
percent) of net sales revenue. Exclusive of carbon dioxide, the average
non-fertilizer price in 2000 was $128.34 per tonne, compared to $108.43 in 1999.

     In the production of ammonia, the average per-unit natural gas input cost
increased by 37 percent compared to 1999. Higher per-unit production costs, due
to plant shutdown costs and reduced production, also contributed to the increase
in per-unit cost of sales.

EXPENSES

<TABLE>
<CAPTION>

($ millions)                                        2000              1999        % CHANGE
------------                                       ------            ------       --------
<S>                                                <C>               <C>            <C>
Selling and Administrative                         $111.0            $116.3           (5)
Provincial Mining and Other Taxes                    77.2              77.1           --
Interest                                             61.6              51.5           20
Income Taxes                                         67.2               7.5          796
</TABLE>


     Selling and administrative expenses decreased, primarily due to the
reduction in the amortization of goodwill which was partially offset by one-time
relocation costs relating to the Northbrook, Illinois office.

     Provincial mining and other taxes were flat compared to 1999.

     During 2000, the Company accessed the commercial paper market for
short-term funds due to lower borrowing costs, rather than draw down its term
credit facility, resulting in an increase in short-term debt and a reduction in
long-term debt. Overall, interest expense increased by $10.1 million. Weighted
average total debt outstanding increased from $826.8 million in 1999 to $916.4
million in 2000. The weighted average interest rate on total debt outstanding
during the year was 6.8 percent (1999 - 5.8 percent).

     The provision for income taxes in 1999 contained a future tax recovery in
the amount of $48.6 million relating to the plant closures and asset impairment
charge. In 2000, the future tax recovery related to the plant closure charge was
only $6.6 million. The balance of the increase in the provision was due to
higher earnings before tax (exclusive of the gain on sale of Moab Salt Inc.).

                                      37


------------------------------------

[Manufactured Nitrogen Net Sales Revenue by Product Graph]

[CAPTION] Industry shutdowns in the second half of 2000 due to high natural gas
          costs tightened the supply/demand balance in nitrogen and prices rose.

<PAGE>   40

     PCS and certain subsidiaries are subject to federal income taxes (which
includes the Large Corporations Tax) and provincial income taxes in Canada. The
Company's subsidiaries which operate in the United States are subject to US
federal and state income taxes. These subsidiaries are not currently subject to
federal cash income tax by virtue of net operating losses incurred. The
Company's nitrogen subsidiaries which operate in Trinidad are subject to
Trinidad taxes. The effective consolidated tax rate for 2000 was 27 percent
(1999 - 30 percent) of pre-tax income.

PROVISION FOR PLANT CLOSURES

     On January 19, 2001, the Company announced that it was suspending all DAP
production at its White Springs, Florida operations, effective immediately, and
that it permanently closed its Davenport, Iowa phosphate feed plant on January
15, 2001. In the fourth quarter of 2000, the Company recorded a provision of
$24.3 million for asset writedown, severance, inventory allowance,
decommissioning and other expenses attributable to these actions.

     The shutdown at White Springs brings the Company's total cutback in DAP
production in Florida to 0.710 million tonnes on an annualized basis. Production
from Davenport, which had an annual capacity of 0.280 million tonnes of Monocal
and Dical, will be transferred to Feed Division plants in Marseilles, Illinois
and Weeping Water, Nebraska. This will allow these plants to operate at higher
operating rates, thereby reducing overall feed plant operating costs by
approximately $2.0 million on an annualized basis.

1999 versus 1998

OVERVIEW

<TABLE>
<CAPTION>

($ millions)                                 1999     % OF NET SALES     1998    % OF NET SALES  % CHANGE
------------                               --------   ---------------  --------  --------------  --------
<S>                                        <C>             <C>         <C>            <C>           <C>
Net Sales                                  $2,061.1        100         $2,307.8       100           (11)
Gross Margin                               $  408.3         20         $  609.3        26           (33)
Provision for Plant Closures
   and Office Consolidation                $   65.0          3               --        --            --
Provision for Asset Impairment             $  526.6         26               --        --            --
Operating (Loss) Income                    $ (353.0)       (17)        $  442.3        19           (179)
Net (Loss) Income                          $ (412.0)       (20)        $  261.0        11           (258)
(Loss) Earnings per Share ($)              $  (7.60)                   $   4.82                     (258)
</TABLE>

     1999 net income was negatively affected by two primary factors. The first
was several charges for goodwill impairment, asset impairment and plant closures
and office consolidation. The second was a reduction in gross margin principally
due to reduced phosphate and nitrogen prices.

PLANT CLOSURES AND OFFICE CONSOLIDATION

     In the third quarter of 1999, the Board of Directors of the Company
approved a plan to close nitrogen plants at Clinton, Iowa and LaPlatte,
Nebraska; a phosphate feed plant at Saltville, Virginia; and a phosphate


                                       38


------------------------------------

[PCS Potash Prices Chart]  [PCS DAP Prices Chart]  [PCS Ammonia Prices Chart]

[CAPTION] During 2000, potash prices were under pressure but maintained
          stability. DAP prices fell with the threat of new capacity but rose
          following North American shutdowns. In nitrogen, the PCS shutdown in
          Trinidad tightened first-half supply and increased prices; they rose
          again in the fall as high gas prices shut down North American
          production.

<PAGE>   41


terminal at Jacksonville, Florida. The charges associated with these closures
totalled $55.7 million, of which $37.1 million relates to the non-cash writedown
of inventory and property, plant and equipment. The closure of the nitrogen
plants resulted in an annualized reduction in production capacity of 0.420
million tonnes of ammonia, 0.079 million tonnes of ammonium nitrate and 0.599
million tonnes of nitrogen solutions.

     The Company also proceeded with a consolidation of its Raleigh, North
Carolina and Memphis, Tennessee administrative offices with its office in
Northbrook, Illinois. As a result of the consolidation, 115 salaried employees
were terminated, with termination dates ranging from March 31, 2000 through to
September 30, 2000. Terminated employees were entitled to severance pay equal to
two weeks' salary for each year of service (to a maximum of 52 weeks) and,
providing they stayed until their termination date, an additional payment equal
to 35 percent of their annual salary pro-rated for the number of months from
October 1, 1999 to their termination. The Company had contractual commitments
relating to current office leases at all three locations. The charges associated
with the office consolidation were $9.3 million. The annual pre-tax savings from
the office consolidation are expected to be $5.5 million, which will not be
fully realized until 2001 due to transition costs in 2000 (see Note 20 to the
consolidated financial statements).

PROVISION FOR ASSET IMPAIRMENT

     In the third quarter of 1999, the Company assessed the recoverability of
the tangible and intangible assets of the nitrogen operations (due to operating
losses primarily caused by reduced product prices and increased gas costs
relative to certain current and expected future competition) and Florida
Favorite Fertilizer operations (due to continuing operating losses). Based on
these assessments, the Company recorded a provision for asset impairment
relating to goodwill, property, plant and equipment and other assets in the
amount of $526.6 million (see Note 21 to the consolidated financial statements).

POTASH

<TABLE>
<CAPTION>
                                    1999                             1998                         % CHANGE
                        ----------------------------     ----------------------------     -------------------------
                         DOLLARS    TONNES   AVERAGE       DOLLARS   TONNES   AVERAGE     DOLLARS   TONNES  AVERAGE
                        (MILLIONS)  (000'S)   PER MT     (MILLIONS)  (000'S)   PER MT                        PER MT
                        ----------  -------  -------     ----------  -------  -------     -------   ------  -------
<S>                      <C>         <C>      <C>          <C>        <C>      <C>            <C>      <C>     <C>
Net Sales
 North American          $237.4      2,870    $82.71       $227.6     2,702    $84.24         4        6       (2)
 Offshore                 325.9      3,604    $90.42        317.9     3,581    $88.78         3        1        2
                         ------      -----    ------       ------     -----    ------       ---      ---      ---
                          563.3      6,474    $87.00        545.5     6,283    $86.82         3        3       --
                         ------      -----    ------       ------     -----    ------       ---      ---      ---
Cost of Sales
 Cash Costs               224.2               $34.63        193.0              $30.72        16                13
 Depreciation and
  Amortization             37.2               $ 5.75         36.2              $ 5.76         3                --
                         ------      -----    ------       ------     -----    ------       ---      ---      ---
                          261.4               $40.38        229.2              $36.48        14                11
                         ------      -----    ------       ------     -----    ------       ---      ---      ---
Gross Margin             $301.9               $46.62       $316.3              $50.34        (5)                7
                         ------      -----    ------       ------     -----    ------       ---      ---      ---
</TABLE>

     Potash performance was highlighted by sales volumes that were the second
highest on record. Net sales revenue from potash increased, primarily due to an
increase in North American sales volumes and, to a lesser extent, an increase in
offshore sales prices.

     North American potash prices increased in the first half of 1999 (following
price list increases that were introduced in the first quarter of 1999) then
decreased in the third quarter (following disappointing spring season
application rates and lower prices posted by a competitor), ending the year 2
percent lower on a year-over-year basis. North American sales volumes increased
primarily due to a strong fall season (US farmers received government subsidies
and had good fall application weather) and the purchase of the Cassidy Lake mill
with its accessible customer base.

     Potash prices in the offshore market rose during the first three quarters
of the year, primarily due to higher contract prices with Japan, South Korea,
and China. Realized prices fell in the fourth quarter due to product and country
mix and higher ocean freight costs. Canpotex sales volumes to Asia increased by
13 percent from 1998 due to increased sales to India, Indonesia and South Korea.
This increase was partially offset by a 22 percent decrease in sales to Latin
America (primarily Brazil due to the currency devaluation and credit
conditions). Overall, offshore sales volumes ended the year up marginally from
1998. In the offshore market, 82 percent of sales volumes (1998 - 83 percent)
were sold through Canpotex.

     Potash gross margin represented 74 percent (1998 - 52 percent) of
consolidated gross margin.

     Potash unit cost of sales increased due primarily to lower production
volumes, 25 more shutdown weeks, increased gas costs and a stronger Canadian
dollar.


                                       39
<PAGE>   42


PHOSPHATE

<TABLE>
<CAPTION>
                                    1999                             1998                         % CHANGE
                        ----------------------------     ----------------------------     -------------------------
                         DOLLARS    TONNES   AVERAGE       DOLLARS   TONNES   AVERAGE     DOLLARS   TONNES  AVERAGE
                        (MILLIONS)  (000'S)   PER MT     (MILLIONS)  (000'S)   PER MT                        PER MT
                        ----------  -------  -------     ----------  -------  -------     -------   ------  -------
<S>                      <C>         <C>      <C>          <C>        <C>      <C>            <C>      <C>     <C>
Net Sales
 Fertilizer - liquids    $215.5      1,034   $208.47      $  277.3    1,298   $213.57       (22)     (20)      (2)
 Fertilizer - DAP         278.4      1,645   $169.26         371.4    1,950   $190.40       (25)     (16)     (11)
 Feed                     216.8        898   $241.30         229.3      941   $243.81        (5)      (5)      (1)
 Industrial               133.1        439   $303.21         133.0      438   $303.76        --       --       --
                         ------      -----   -------      --------    -----   -------       ---      ---      ---
                          843.8      4,016   $210.12       1,011.0    4,627   $218.50       (17)     (13)      (4)
                         ------      -----   -------      --------    -----   -------       ---      ---      ---
Cost of Sales
 Cash Costs               654.7              $163.02         724.2            $156.52       (10)                4
 Depreciation and
 Amortization              61.3              $ 15.27          58.6            $ 12.66         5                21
                         ------      -----   -------      --------    -----   -------       ---      ---      ---
                          716.0              $178.29         782.8            $169.18        (9)                5
                         ------      -----   -------      --------    -----   -------       ---      ---      ---
Gross Margin             $127.8              $ 31.83      $  228.2            $ 49.32       (44)              (35)
                         ------      -----   -------      --------    -----   -------       ---      ---      ---
</TABLE>

     Phosphate net sales revenue decreased, primarily due to lower volumes in
both North American and offshore markets and, to a lesser extent, to lower
prices.

     In the domestic market, weak spring fertilizer demand resulted in higher
than usual North American inventories, which placed downward pressure on
phosphate prices, especially DAP. Feed supplement prices increased in the first
half of the year and then fell in the third quarter (due to increased
competition) to end the year down marginally from 1998. Industrial product
prices were stable in the first half of 1999, fell in the third quarter due to
higher US imports, and then recovered in the fourth quarter to end the year flat
as compared to 1998. Weak domestic demand also led to decreased liquid and solid
phosphate sales volumes. Feed supplement sales volumes were down, primarily due
to increased competition in the industry.

     In the offshore markets, weak domestic spring fertilizer demand combined
with large North American inventories stimulated additional US exports from
suppliers outside of PhosChem. Prices were also affected by the anticipation of
additional capacity in India and Australia. These factors resulted in lower
offshore prices for solid phosphates, and liquids followed, but not to the same
degree. However, North American production cutbacks in the second half of the
year reduced inventories and stabilized prices. The currency devaluation and
credit conditions in Brazil resulted in lower sales volumes of liquid phosphates
there. Offshore feed supplement sales volumes increased in 1999, primarily due
to improved sales volumes in Brazil, the Caribbean and Venezuela.

     In 1999, 41 percent (1998 - 36 percent) of total phosphate net sales
revenue was earned from non-fertilizer products, which represented 33 percent
(1998 - 30 percent) of phosphate sales volumes. Phosphate gross margin
represented 31 percent (1998 - 37 percent) of consolidated gross margin.

     Phosphate unit cost of sales increased, due primarily to lower production
volumes caused by phosphate rock sourcing problems at Aurora and shutdowns in
the second half of the year. The per-unit cost of sulphur was flat compared to
1998 while the per-unit cost of ammonia decreased by 17 percent.

NITROGEN

<TABLE>
<CAPTION>
                                    1999                             1998                         % CHANGE
                        ----------------------------     ----------------------------     -------------------------
                         DOLLARS    TONNES   AVERAGE       DOLLARS   TONNES   AVERAGE     DOLLARS   TONNES  AVERAGE
                        (MILLIONS)  (000'S)   PER MT     (MILLIONS)  (000'S)   PER MT                        PER MT
                        ----------  -------  -------     ----------  -------  -------     -------   ------  -------
<S>                      <C>         <C>      <C>          <C>        <C>      <C>            <C>      <C>     <C>
Net Sales
 Urea                    $180.2      1,614   $111.63       $199.1     1,425   $139.72       (10)      13      (20)
 Ammonia                  198.6      1,915   $103.69        194.4     1,497   $129.86         2       28      (20)
 Solutions                110.4      1,681   $ 65.65        163.0     2,164   $ 75.32       (32)     (22)     (13)
 Other (1)                117.6      2,307   $ 50.98        129.8     2,185   $ 59.41        (9)       6      (14)
                         ------      -----   -------       ------     -----   -------       ---      ---      ---
                          606.8      7,517   $ 80.72        686.3     7,271   $ 94.39       (12)       3      (14)
Purchased                  47.2        434   $108.81         65.0       554   $117.33       (28)     (22)      (7)
                         ------      -----   -------       ------     -----   -------       ---      ---      ---
                         $654.0      7,951   $ 82.25       $751.3     7,825   $ 96.01       (13)       2      (14)
                         ------      -----   -------       ------     -----   -------       ---      ---      ---
Fertilizer               $345.5      4,087   $ 84.52       $424.3     4,351   $ 97.52       (19)      (6)     (13)
Non-fertilizer            308.5      3,864   $ 79.84        327.0     3,474   $ 94.13        (6)      11      (15)
                         ------      -----   -------       ------     -----   -------       ---      ---      ---
                          654.0      7,951   $ 82.25        751.3     7,825   $ 96.01       (13)       2      (14)
                         ------      -----   -------       ------     -----   -------       ---      ---      ---
Cost of Sales
 Cash Costs               604.4              $ 76.02        615.2             $ 78.62        (2)               (3)
 Depreciation and
  Amortization             71.0              $  8.92         71.3             $  9.11        --                (2)
                         ------      -----   -------       ------     -----   -------       ---      ---      ---
                          675.4              $ 84.94        686.5             $ 87.73        (2)               (3)
                         ------      -----   -------       ------     -----   -------       ---      ---      ---
Gross Margin             $(21.4)             $ (2.69)      $ 64.8             $  8.28        --                --
                         ------      -----   -------       ------     -----   -------       ---      ---      ---
</TABLE>

(1) Sales volumes of Other nitrogen products include tonnes for the byproduct
carbon dioxide.


                                       40
<PAGE>   43


     Nitrogen net sales revenue decreased, primarily due to lower sales prices
in the North American market which were partially offset by increased sales
volumes.

     Weak spring demand combined with non-market pricing from Former Soviet
Union ("FSU") producers and high North American inventories continued to put
pressure on both domestic and offshore prices. North American production
shutdowns in the second half of the year reduced inventories, and prices rose by
year-end.

     North American sales volumes for urea and other nitrogen products were up,
primarily due to growth in the industrial market. Ammonia sales volumes
increased due to a full year of production from the new plant in Trinidad,
increased industrial demand and increased consumption by the US DAP sector.
Sales volumes for nitrogen solutions were down, due primarily to the combination
of fewer acres planted to corn and more to soybeans, favorable weather for use
of other nitrogen products and the permanent shutdown of 25 percent of the
Company's UAN capacity in the second half of the year.

     The Company continued to sell a large portion of its North American
nitrogen production to the more stable industrial market. Non-fertilizer
products grew to 49 percent (1998 - 44 percent) of nitrogen sales volumes and 47
percent (1998 - 44 percent) of net sales revenue.

     PCS Nitrogen reduced its per-unit natural gas cost by 6 percent compared to
1998, primarily due to its natural gas hedging policy in North America and
certain of its natural gas contracts in Trinidad. This decrease was partially
offset by higher per-unit production costs due to plant shutdown costs and
reduced production in the third and fourth quarters of 1999.

EXPENSES

<TABLE>
<CAPTION>

($ millions)                                        1999             1998        % CHANGE
------------                                       ------           ------       --------
<S>                                                <C>              <C>          <C>
Selling and Administrative                         $116.3           $116.0           --
Provincial Mining and Other Taxes                    77.1             80.1           (4)
Interest                                             51.5             63.8          (19)
Income Taxes                                          7.5            117.5          (94)
</TABLE>

     The decrease in provincial mining and other taxes relates to the Potash
Production Tax, which was lower primarily due to higher per-unit production
costs and lower Canadian dollar equivalent prices caused in part by a stronger
Canadian dollar. Various other payments to the Province of Saskatchewan in the
form of royalties and taxes totalled $14.6 million in 1999 (1998 - $13.2
million) and are included in cost of goods sold.

     Interest expense on long-term debt decreased by $17.5 million due to a
reduction of the weighted average long-term debt outstanding from $980.8 million
in 1998 to $637.2 million in 1999. The weighted average interest rate on the
long-term debt outstanding was 6.0 percent (1998 - 6.2 percent). The reduction
in interest expense on long-term debt was partially offset by an increase in
interest expense on short-term debt of $5.2 million due to borrowing under a
commercial paper program.

     The decrease in income taxes was principally due to a deferred tax recovery
of $48.6 million relating to the plant closures and asset impairment charge and
lower income.

     PCS and certain subsidiaries are subject to federal income taxes (which
includes the Large Corporations Tax) and provincial income taxes in Canada.
During 1999, the Company began accruing cash income taxes by virtue of having
fully utilized non-capital losses carried forward. The Company's subsidiaries
which operate in the United States are subject to US federal and state income
taxes. These subsidiaries were not subject to federal cash income tax in 1999
and 1998 by virtue of net operating losses incurred. The Company's nitrogen
subsidiaries which operate in Trinidad are subject to Trinidad taxes. The
effective consolidated tax rate for 1999 was 30 percent (1998 - 31 percent) of
pre-tax income (exclusive of the goodwill impairment).

                                       41


------------------------------------

[PCS Share of 2000 Offshore Marketing Association Sales Charts]

[CAPTION] PCS is the largest contributor to Canpotex, the offshore marketing
          agent for potash, and the second largest in PhosChem, which handles
          phosphate exports for members.
<PAGE>   44


ANALYSIS OF FINANCIAL CONDITION AND CASH FLOW

     The following table summarizes certain of the Company's financial ratios
and cash flow data as calculated from the consolidated financial statements (see
Financial Terms on inside back cover):

<TABLE>
<CAPTION>

                                                              YEAR ENDED DECEMBER 31
                                                         -----------------------------
                                                          2000                   1999       % CHANGE
                                                         ------                 ------      --------
<S>                                                       <C>                   <C>             <C>
Total Shareholder Return                                     65%                 (23)%           --
Book Value per Share                                      $38.81                $36.55            6
Net Debt to Capital (excluding operating leases)             29%                   31%           (6)
Net Debt to Capital (including operating leases)             34%                   40%          (15)
Cash Flow Return                                             11%                    8%           38
Cash provided by operating activities ($ millions)        $480.4                $343.6           40
Cash used in investing activities ($ millions)            $265.4                $177.7           49
Cash used in financing activities ($ millions)            $159.0                $189.9          (16)
</TABLE>


     The increase in cash provided by operating activities relates primarily to
the $74.5-million increase in gross margin (the majority of which is from
nitrogen), the increase in other income (excluding the gain on sale of Moab Salt
Inc.) of $16.5 million and the reduction in cash closure costs of $14.3 million.
These increases were partially offset by an increase in the current provision
for income taxes of $17.9 million.

     The additions to property, plant and equipment include the final sulphur
vessel payment ($7.5 million), the buy-out of certain phosphate operating leases
($38.4 million), leasehold improvements and furniture and equipment for the
Northbrook office ($8.5 million) and additions at PCS Yumbes S.C.M. ($9.2
million). Other investing activities include the purchase of the remaining 50
percent interest in Albright & Wilson Company ($32.0 million), the purchase of
rights to certain manufacturing technology ($11.1 million), pre-operating costs
at PCS Yumbes S.C.M. ($19.3 million) and product development costs ($14.4
million).

     During the year, the Company repaid $29.7 million of the Industrial Revenue
and Pollution Control Obligations and paid dividends of $51.9 million (1999 -
$53.3 million). The Company repurchased 2,070,000 shares at an average price of
$50.31 under the share repurchase program, which was completed in August 2000.

     The Company has a Syndicated Credit Facility which provides for unsecured
advances of up to $500.0 million (less the amount of commercial paper
outstanding), none of which was outstanding at December 31, 2000. In addition,
the Company has short-term lines of credit for up to $290.0 million in borrowing
(less letters of credit of $27.4 million), of which $100.0 million was
outstanding at December 31, 2000. The Company is authorized to borrow up to a
maximum of $500.0 million under the commercial paper program, of which $388.8
million was outstanding at December 31, 2000. The Company may also issue up to
an additional $600.0 million in unsecured debt securities under its existing
shelf registration statement.

     The Company believes that internally generated cash flow, as supplemented
by borrowing from existing financing sources, will be sufficient to meet its
anticipated capital expenditures and other cash requirements, exclusive of any
possible acquisitions, in 2001.

RISKS ASSOCIATED WITH FINANCIAL INSTRUMENTS

     The Company's nitrogen operations are significantly affected 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. The Company does not employ these instruments for trading
purposes. 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.

     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, 2000, the Company's estimated
derivative commodity instruments market risk exposure was $49.6 million (1999 -
$26.6 million). Actual results may differ from the estimate. Changes in the fair
value of such derivative instruments, with maturities in 2001 through 2005, will
generally relate to changes in the spot price of anticipated natural gas
purchases.

                                       42

<PAGE>   45


     The Company also enters into forward foreign exchange contracts for the
sole purpose of limiting its exposure to exchange rate fluctuations relating to
certain trade accounts. Gains or losses resulting from foreign exchange
contracts are recognized monthly and are included in other income.

ENVIRONMENTAL

     The Company is subject to various environmental laws and regulations in the
United States, Canada, Trinidad, Chile and Brazil. 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 2000 totalled $14.4 million (1999 - $8.2 million; 1998 - $14.0 million) while
$78.2 million (1999 - $90.5 million; 1998 - $83.4 million) was incurred as
environmental operating expense. Expenditures in 2001 are expected to be of a
similar magnitude for existing operations.

OUTLOOK

     The Company believes it is well placed to generate strong cash flow and
earnings due to the high quality of its assets. Fertilizer products, which
represent the majority of the Company's sales, are a bulk commodity, where
lowest delivered cost is the underpinning of a company's long-term competitive
position. Rising world population and the demand for more food and better diets,
with meat as a protein source, will drive fertilizer consumption growth over the
long term. The Company's excess potash capacity, contrasted with the high
capital cost of developing new capacity with limited world potash reserves,
should secure the future for potash. Similarly, its low-cost, extensive
phosphate rock reserves, particularly in North Carolina, provide a firm
foundation for its phosphate business. The Company's growing phosphate product
diversification also provides some protection against new capacity developments,
the world opportunities for which are more extensive than with potash.
Long-term, the Company's extensive nitrogen production base in Trinidad, with
lower-priced, indexed natural gas, should provide positive earnings support in
the face of cheap offshore gas nitrogen capacity displacing higher-cost gas
nitrogen plants in North America. Utilizing its superior asset base to grow
earnings over time, the challenge for the Company is to minimize short-term
earnings volatility as a result of fluctuations in demand, particularly with
potash sales in offshore markets, and to fend off the impact of new capacity
additions around the world, particularly in phosphate and nitrogen.

     Domestic and offshore potash sales volumes are expected to decrease
modestly in 2001 versus record volumes in 2000. This is a typical pattern, where
the upward trend line is well established but with some volatility due to key
customer purchasing habits. Domestic sales volumes are expected to be down in
2001, due to farmers spending more of their fertilizer dollars on higher-priced
nitrogen products. Offshore sales volumes may suffer due to record sales to
China and Brazil in 2000 not being completely consumed, resulting in higher
inventory carryover levels. Overall, potash prices are expected to be flat
compared to 2000, with some instability possible, depending on competitor
adjustments to new marketing arrangements for some Russian product in offshore
markets. Reduced volumes, if realized, will require shutdowns at potash mines
for inventory correction which would influence potash production costs on a
year-over-year comparative basis. It is expected that the number of such
shutdowns in 2001 will be higher than the 38 weeks of shutdown incurred in 2000.
Production costs will also be impacted by higher natural gas costs and the
possible strengthening of the Canadian dollar.

     The final year of higher-cost phosphate rock, with some particularly
higher-cost inventory from dredged areas, will be incurred prior to achieving
the savings associated with the move to the NCPC property in North Carolina.
Continuing high ammonia prices will add to higher DAP production costs than were
incurred in 2000. North American phosphate industry shutdowns have reduced
sulphur consumption, already driving down this raw material input cost compared
to the last half of 2000. In the near term, prices for liquid and solid
phosphate fertilizers are expected to firm modestly as domestic plant shutdowns
have brought supply and demand closer into balance. Domestic fertilizer volumes
are expected to

                                       43


------------------------------------

[World's Largest Fertilizer Companies Graph]

[CAPTION] Over and above the advantage it gains from being the largest NPK
          producer, PotashCorp has strengths within each nutrient that truly set
          it apart.

[New Potash Capacity and Demand Graph]

[CAPTION] Growth in demand for potash will far exceed any potential growth in
          supply, and with its excess capacity that can be brought on stream at
          minimal cost, PCS will be in an ideal position to meet this demand.
<PAGE>   46


be down due to the Company's production shutdowns at its Florida plants and
possible reduced spending on phosphate fertilizers, compensating for the need to
purchase higher-priced nitrogen fertilizers. Offshore phosphate fertilizer
volumes are also expected to be down as the world continues to digest the Indian
and Australian capacity additions introduced in 2000. Strong gross margins are
expected to continue in the Company's feed and industrial phosphate business.
Feed sales volumes are expected to increase in the offshore markets and
industrial sales volumes should increase domestically. Prices for industrial
products and feed supplements are expected to increase marginally in comparison
to 2000.

     Market prices for nitrogen products in the near term are expected to be
supported by tight product supply as unhedged natural gas nitrogen producers in
North America continue to struggle with high input costs. Gross margin in 2001
is expected to improve significantly due to expected higher prices during the
year contrasted with the Company's strong hedged gas position. Company sales
volumes of manufactured nitrogen product should revert to sustaining capacity
levels with no planned outage of Trinidad production, which was partially
suspended in 2000 as a new gas contract was negotiated with the Government of
Trinidad.

     Other income is difficult to predict. One of the biggest variables is the
swing in the Canadian and US dollar exchange rate as evidenced by 2000 versus
1999 in which, other than the one-time gain on the sale of Moab, the
year-over-year difference in other income of $16.5 million was entirely
attributable to exchange translation variance.

     Capital expenditures in 2001 for property, plant and equipment are expected
to total $168.0 million, including approximately $34.5 million for opportunity
capital associated with the construction of a feed plant in North Carolina and
development of natural gas wells in New Brunswick.

     The effective consolidated income tax rate for 2001 is expected to
approximate 38 percent, an increase over the 27 percent rate booked in 2000.
This increase will principally show up in future (non-cash) tax rates which,
depending on income and source of income, could approximate 23 percent of
pre-tax earnings in 2001 as opposed to 14 percent in 2000. Current (cash) tax
rates are projected to increase to 15 percent of pre-tax earning versus 13
percent in 2000. For 2001, the impact of this change will have the most effect
on reported net earnings, as opposed to cash flow and free cash flow.

     Overall, the Company is projecting earnings in the range of $4.00 to $4.50
per share in 2001. As evidenced by the earnings surge in 2000 relative to
initial guidance of the Company, unpredicted intervening events, such as the
spike-up in natural gas prices in 2000 or purchasing practices of major
countries like China, Brazil or India, can materially affect the accuracy of
such projections.

FORWARD-LOOKING STATEMENTS

     Certain statements in this annual report and this Management's Discussion
and Analysis of Financial Condition and Results of Operations, including those
in the "Outlook" section, relating to the period after December 31, 2000, are
forward-looking statements subject to risks and uncertainties. A number of
factors could cause actual results to differ materially from those expressed in
the forward-looking statements, including, but not limited to: fluctuation in
supply and demand in fertilizer, sulphur and petrochemical markets; changes in
competitive pressures, including pricing pressures; potential higher costs
incurred in connection with restructuring charges as compared to costs estimated
for purposes of calculating such charges; uncertainty and variations in future
discounted and undiscounted net cash flows from use together with residual
values estimated for purposes of calculating asset impairment; risks associated
with natural gas and other hedging activities; changes in capital markets;
changes in currency and exchange rates; unexpected geological or environmental
conditions; imprecision in reserve estimates; the outcome of legal proceedings;
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 can be expected to shift from one period to
another. The Company disclaims any intention or obligation to update or revise
any forward-looking statements, whether as a result of new information, future
events or otherwise.


                                       44


------------------------------------

[World Potash Outlook Graph]

[CAPTION] PotashCorp drew on its excess capacity in 2000 to meet world demand,
          but it continues to hold 52 percent of the world's excess capacity.
<PAGE>   47


                                 10 YEAR REPORT
                        for the years ended December 31
<TABLE>
<CAPTION>

FINANCIAL DATA ($ Millions)              2000      1999     1998     1997(4)    1996    1995(3)   1994(2) 1993(1)    1992     1991
---------------------------            -------   -------   -------   -------   -------  -------   ------- -------   -------  ------
<S>                                    <C>       <C>       <C>       <C>       <C>        <C>      <C>      <C>       <C>     <C>
Net Sales                              2,231.6   2,061.1   2,307.8   2,325.9   1,403.9    856.1    363.1    212.2     214.1   206.8
Operating Income (Loss)                  326.7    (353.0)    442.3     442.0     297.4    219.6     97.5     56.9      50.6    39.1
Net Income (Loss) *                      198.0    (412.0)    261.0     297.1     209.0    159.5     91.2     44.7      39.8    31.3
Net Income (Loss) per Share (dollars)     3.78     (7.60)     4.82      5.68      4.59     3.68     2.12     1.13      1.03    0.81
Dividends per Share (dollars)             0.99      0.99      0.96      1.03      1.06     1.06     0.77     0.53      0.51    0.51
Cash Provided by Operating Activities    480.4     343.6     578.0     467.8     296.2    233.5    150.7     49.8      57.4    53.8
Working Capital                         (148.7)   (104.8)    329.2     281.7     278.8    136.1    103.3     37.0      70.9    47.4
Total Assets                           4,145.7   3,916.8   4,534.3   4,427.6   2,494.4  2,581.8  1,027.8  1,036.4     915.0   898.8
Total Long-Term Debt                     413.7     437.0     933.3   1,130.0     620.0    714.5      2.0     20.1      48.9    54.4
Shareholders' Equity                   2,012.1   1,962.4   2,453.8   2,227.9   1,405.5  1,241.9    964.3    903.7     809.5   788.9
                                       -------   -------   -------   -------   -------  -------  -------  -------    ------   -----
OPERATING DATA (Thousands)
EMPLOYEES AT YEAR-END (Actual Numbers)   5,338     5,498     5,744     5,751     4,490    4,579    1,781    1,818     1,415   1,227
                                       -------   -------   -------   -------   -------  -------  -------  -------    ------   -----
POTASH PRODUCTION (KCl) Tonnage          7,149     6,388     6,995     6,483     5,782    6,071    5,298    3,902     3,850   4,030
                                       -------   -------   -------   -------   -------  -------  -------  -------    ------   -----
PHOSPHATE PRODUCTION (P2O5) Tonnage      2,042     2,124     2,363     2,282     2,096    1,008       --       --        --      --
                                       -------   -------   -------   -------   -------  -------  -------  -------    ------   -----
NITROGEN PRODUCTION (N) Tonnage          2,706     3,138     3,121     2,349        --       --       --       --        --      --
                                       -------   -------   -------   -------   -------  -------  -------  -------    ------   -----
POTASH SALES - KCl Tonnes                6,912     6,474     6,283     6,640     5,612    5,848    5,569    3,795     3,737   3,909
                                       -------   -------   -------   -------   -------  -------  -------  -------    ------   -----
PHOSPHATE SALES - Product Tonnes         3,893     4,016     4,627     4,434     4,305    2,206       --       --        --      --
                                       -------   -------   -------   -------   -------  -------  -------  -------    ------   -----
NITROGEN SALES - Product Tonnes          7,703     7,951     7,825     6,775       535      115       --       --        --      --
                                       -------   -------   -------   -------   -------  -------  -------  -------    ------   -----
INTERCOMPANY SALES
Ammonia - Product Tonnes                   389       404       488       120        --       --       --       --        --      --
Potash - KCl Tonnes                        110       106       126       129       120      108       99       99        91      --
                                       -------   -------   -------   -------   -------  -------  -------  -------    ------   -----

NET SALES ($ Millions)
POTASH                                   578.7     563.3     545.5     504.2     403.2    421.0    363.1    212.2     214.1   206.8
PHOSPHATE                                782.5     843.8   1,011.0     953.6     892.0    412.1       --       --        --      --
NITROGEN                                 870.4     654.0     751.3     868.1     108.7     23.0       --       --        --      --
                                       -------   -------   -------   -------   -------  -------  -------  -------    ------   -----
TOTAL NET SALES                        2,231.6   2,061.1   2,307.8   2,325.9   1,403.9    856.1    363.1    212.2     214.1   206.8
                                       =======   =======   =======   =======   =======  =======  =======  =======    ======   =====
</TABLE>

(1)  Data for 1993 and thereafter reflect the acquisition of Potash Company of
     America assets on October 7, 1993.
(2)  The financial statements of the Company for 1994 and prior years have been
     restated to US dollars in accordance with accounting principles generally
     accepted in Canada using the Translation of Convenience Method. The
     Canadian dollar amounts for these periods have been converted to US dollars
     at the exchange rate of US$1.00 - CDN$1.4028.
(3)  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.
(4)  Data for 1997 and thereafter reflect the acquisition of Arcadian
     Corporation on March 6, 1997.

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 31 to the Company's consolidated financial statements).

NOTES TO SELECTED TEN-YEAR DATA:

1.   There were no extraordinary items nor were there any discontinued
     operations in any of the accounting periods.
2.   Fully diluted net (loss) income per share did not differ materially from
     net (loss) income per share in any of the accounting periods.

ADDITIONAL INFORMATION
* Data for 1999 include the effects of charges for plant closures and office
  consolidation and asset impairments of $591.6 million. Net income in 2000 and
  1999, exclusive of one-time charges, was $199.5 million and $135.1 million
  respectively.


                                       45

<PAGE>   48



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 accounting principles generally accepted in Canada and include
amounts based on estimates and judgments. Financial information included
elsewhere in this report is consistent with the consolidated financial
statements.

     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 LLP, provide an objective,
independent audit of the consolidated financial statements. Their report for
2000 is included.

     The Board of Directors, through the audit committee composed exclusively of
outside directors, meets regularly with the independent auditors - both jointly
and separately - to review significant accounting, reporting and internal
control matters. The audit committee also recommends to the Board the
independent 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.

/s/ William J. Doyle                       /s/ W. Brownlee
------------------------------             ------------------------------------
W. Doyle                                   W. Brownlee
President and                              Senior Vice President and
Chief Executive Officer                    Chief Financial Officer
February 8, 2001

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, 2000 and 1999 and the
consolidated statements of income and retained earnings and of cash flow for
each of the years in the three-year period ended December 31, 2000. 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.

     With respect to the consolidated financial statements for the year ended
December 31, 2000, we conducted our audit in accordance with Canadian generally
accepted auditing standards and United States generally accepted auditing
standards. With respect to the consolidated financial statements for each of the
years in the two-year period ended December 31, 1999, we conducted our audits in
accordance with Canadian 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. We believe that our
audits provide a reasonable basis for our opinion.

     In our opinion, these consolidated financial statements present fairly, in
all material respects, the financial position of the Company as at December 31,
2000 and 1999, and the results of its operations and its cash flows for each of
the years in the three-year period ended December 31, 2000 in accordance with
accounting principles generally accepted in Canada.

Saskatoon, Saskatchewan                    /s/ Deloitte & Touche LLP
February 8, 2001                           -----------------------------------
                                           Chartered Accountants


                                       46
<PAGE>   49


CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
as at December 31                                    in millions of US dollars
<TABLE>
<CAPTION>

                                                                            2000         1999
                                                                         ---------     --------
<S>                                                                       <C>          <C>
ASSETS
Current Assets
 Cash and cash equivalents                                                $ 100.0      $    44.0
 Accounts receivable (Note 5)                                               326.6          269.3
 Inventories (Note 6)                                                       406.2          377.2
 Prepaid expenses                                                            38.9           35.7
                                                                         --------      ---------
                                                                            871.7          726.2
Property, plant and equipment (Note 7)                                    2,910.1        2,877.1
Goodwill (Note 8)                                                           106.4          109.4
Other assets (Note 9)                                                       257.5          204.1
                                                                         --------      ---------
                                                                         $4,145.7       $3,916.8
                                                                         --------      ---------
LIABILITIES
Current Liabilities
 Short-term debt (Note 10)                                                $ 488.8      $   474.5
 Accounts payable and accrued charges (Note 11)                             525.9          349.1
 Current portion of long-term debt (Note 12)                                  5.7            7.4
                                                                         --------      ---------
                                                                          1,020.4          831.0
Long-term debt (Note 12)                                                    413.7          437.0
Future income tax liability (Note 23)                                       435.1          409.4
Accrued post-retirement/post-employment benefits (Note 14)                  175.1          148.4
Accrued reclamation costs (Note 15)                                          83.0          112.2
Other non-current liabilities and deferred credits                            6.3           16.4
                                                                         --------      ---------
                                                                          2,133.6        1,954.4
                                                                         --------      ---------
CONTINGENCIES (Note 27)
SHAREHOLDERS' EQUITY
Share Capital (Note 16)                                                   1,177.4        1,216.5
Unlimited authorization of common shares without par value;
  issued and outstanding 51,840,572 and 53,694,209 shares
  in 2000 and 1999, respectively
Unlimited authorization of first preferred shares; none outstanding
Contributed Surplus (Note 17)                                               264.2          321.5
Retained Earnings                                                           570.5          424.4
                                                                         --------      ---------
                                                                          2,012.1        1,962.4
                                                                         --------      ---------
                                                                         $4,145.7      $ 3,916.8
                                                                         --------      ---------
</TABLE>

(See Notes to the Consolidated Financial Statements)


                             Approved by the Board,


       /s/ Dallas Howe                          /s/ E. Robert Stromberg
--------------------------------           ----------------------------------
          Director                                       Director

                                       47
<PAGE>   50


CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
for the years ended December 31                       in millions of US dollars
<TABLE>
<CAPTION>

                                                         2000             1999              1998
                                                       --------         --------          --------
<S>                                                    <C>              <C>               <C>
Net sales (Note 18)                                    $2,231.6         $2,061.1          $2,307.8
Cost of goods sold                                      1,748.8          1,652.8           1,698.5
                                                       --------         --------          --------
GROSS MARGIN                                              482.8            408.3             609.3
                                                       --------         --------          --------
Selling and administrative                                111.0            116.3             116.0
Provincial mining and other taxes (Note 19)                77.2             77.1              80.1
Provision for plant closures and
office consolidation (Note 20)                             24.3             65.0                --
Provision for asset impairment (Note 21)                     --            526.6                --
Other income                                              (56.5)           (23.7)            (29.1)
                                                       --------         --------          --------
                                                          156.0            761.3             167.0
                                                       --------         --------          --------
OPERATING INCOME (LOSS)                                   326.8           (353.0)            442.3

INTEREST EXPENSE (Note 22)                                 61.6             51.5              63.8
                                                       --------         --------          --------
INCOME (LOSS) BEFORE INCOME TAXES                         265.2           (404.5)            378.5

INCOME TAXES (Note 23)                                     67.2              7.5             117.5
                                                       --------         --------          --------
NET INCOME (LOSS)                                         198.0           (412.0)           261.0

RETAINED EARNINGS, BEGINNING OF YEAR                      424.4            889.7             680.4

DIVIDENDS                                                 (51.9)           (53.3)            (51.7)
                                                       --------         --------          --------
RETAINED EARNINGS, END OF YEAR                          $ 570.5         $  424.4          $  889.7
                                                       --------         --------          --------
NET INCOME (LOSS) PER SHARE (Note 24)                   $  3.78         $  (7.60)         $   4.82
                                                       --------         --------          --------
DIVIDENDS PER SHARE (Note 25)                           $  0.99         $   0.99          $   0.96
                                                       --------         --------          --------

</TABLE>
(See Notes to the Consolidated Financial Statements)


                                       48
<PAGE>   51



CONSOLIDATED STATEMENTS OF CASH FLOW
for the years ended December 31                       in millions of US dollars
<TABLE>
<CAPTION>

                                                                  2000             1999            1998
                                                                --------         --------        --------
<S>                                                              <C>              <C>             <C>
OPERATING ACTIVITIES
Net income (loss)                                                 $198.0         $(412.0)          $261.0
Items not affecting cash
  Depreciation and amortization                                    187.0           191.1            190.9
  (Gain) loss on disposal of assets                                (17.9)            0.5             (0.1)
  Provision for future income tax                                   34.6            (7.2)            98.1
  Provision for plant closures and office consolidation             10.7            37.1               --
  Provision for asset impairment                                      --           526.6               --
  Provision for post-retirement/post-employment benefits            10.9             7.4              5.9
                                                                  ------         -------           ------
                                                                   423.3           343.5            555.8
CHANGES IN NON-CASH OPERATING WORKING CAPITAL
  Accounts receivable                                              (52.2)           33.8             48.8
  Inventories                                                      (27.4)          (16.1)            (7.9)
  Prepaid expenses                                                  (3.1)            3.2            (16.6)
  Accounts payable and accrued charges                             137.4            (5.0)             1.3
  Current income taxes                                              15.1             8.1             (3.8)
Accrued reclamation costs                                           (2.4)          (20.7)            (7.4)
Other non-current liabilities and deferred credits                 (10.3)           (3.2)             7.8
                                                                  ------         -------           ------
CASH PROVIDED BY OPERATING ACTIVITIES                              480.4           343.6            578.0
                                                                  ------         -------           ------
INVESTING ACTIVITIES
Additions to property, plant and equipment                        (185.6)         (118.8)          (190.2)
Acquisition of Minera Yolanda S.C.M.                                  --           (36.9)              --
Acquisition of Albright & Wilson Company (Note 4)                  (32.0)             --               --
Proceeds from disposal of assets                                     8.6             1.9             31.9
Additions to other assets                                          (56.4)          (23.9)           (85.0)
                                                                  ------         -------           ------
CASH USED IN INVESTING ACTIVITIES                                 (265.4)         (177.7)          (243.3)
                                                                  ------         -------           ------
CASH BEFORE FINANCING ACTIVITIES                                   215.0           165.9            334.7
                                                                  ------         -------           ------
FINANCING ACTIVITIES
Proceeds from long-term obligations                                 11.1              --            143.0
Repayment of long-term obligations                                 (36.1)         (490.1)          (376.3)
Proceeds from short-term debt                                      169.5           379.6            215.0
Repayment of short-term debt                                      (155.2)             --           (222.0)
Dividends                                                          (51.9)          (53.3)           (51.7)
Repurchase of shares                                              (104.2)          (29.3)              --
Issuance of shares                                                   7.8             3.2             16.5
                                                                  ------         -------           ------
CASH USED IN FINANCING ACTIVITIES                                 (159.0)         (189.9)          (275.5)
                                                                  ------         -------           ------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                    56.0           (24.0)            59.2
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                        44.0            68.0              8.8
                                                                  ------         -------           ------
CASH AND CASH EQUIVALENTS, END OF YEAR                            $100.0         $  44.0          $  68.0
                                                                  ------         -------           ------
Supplemental cash flow disclosure
  Interest paid                                                   $ 66.4         $  57.7          $  68.4
  Income taxes paid                                               $ 13.4         $   5.8          $  19.2
                                                                  ------         -------           ------
</TABLE>

(See Notes to the Consolidated Financial Statements)


                                       49
<PAGE>   52


Notes to the consolidated financial statements in millions 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 and one mine and two mills located in the Province of New
Brunswick. 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 four states and one in Brazil, two
industrial phosphoric acid plants, 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 four domestic plants located in the
states of Georgia, Louisiana, Ohio and Tennessee and large-scale operations in
Trinidad. The Company has a plant in Chile that is producing sodium nitrate and
potassium nitrate. 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 5,000 rail cars.

     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, potassium nitrate and sodium nitrate products. Phosphate
Chemicals Export Association, Inc. ("PhosChem"), an unrelated phosphate export
association established under United States law, is the principal vehicle
through which the Company executes offshore marketing and sales for its
phosphate fertilizers.

2.  SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

     The Company's accounting policies are in accordance with accounting
principles generally accepted in Canada ("Canadian GAAP"). These policies are
consistent with accounting principles generally accepted in the United States
("US GAAP") in all material respects except as outlined in Note 31. 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
principal operating subsidiaries:

o    PCS Sales (Canada) Inc.

     -    PCS Joint Venture, L.P.

o    PCS Sales (USA), Inc.

o    PCS Phosphate Company, Inc.

     -    PCS Purified Phosphates (formerly Albright & Wilson Company)

o    White Springs Agricultural Chemicals, Inc. ("White Springs")

o    PCS Nitrogen, Inc.

     -    PCS Nitrogen Fertilizer, L.P.

     -    PCS Nitrogen Ohio, L.P.

     -    PCS Nitrogen Limited

     -    PCS Nitrogen Fertilizer Limited

     -    PCS Nitrogen Trinidad Limited

o    PCS Cassidy Lake Company ("PCS Cassidy Lake")

o    PCS Yumbes S.C.M.

o    PCS Fosfatos do Brasil Ltda.

     All significant intercompany balances and transactions have been
eliminated.

CASH EQUIVALENTS

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

INVENTORIES

     Inventories of finished 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 relating 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, renewals and interest
during construction are capitalized. The Company periodically reviews property,
plant and equipment for indicators of potential impairment, which would be
measured by comparing book value against the estimated undiscounted future cash
flows. Any such impairment loss is 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 property, plant and equipment 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 and is
carried at cost. 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. Impairment
is measured by comparing book value against the estimated undiscounted future
cash flows and any such impairment is included in the statement of income.


                                       50

<PAGE>   53



Notes to the consolidated financial statements in millions of US dollars

2. Significant Accounting Policies (continued)

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.

     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 property, plant and equipment. Gains or
losses resulting from sale-leaseback transactions are deferred and amortized in
proportion to the amortization of the leased asset. Rental payments under
operating leases are 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. Provisions for estimated costs are recorded
when environmental remedial efforts are likely and the costs can be reasonably
estimated. In determining the provisions, the Company uses the most current
information available, including similar past experiences, available technology,
regulations in effect, the timing of remediation and cost-sharing arrangements.

STOCK-BASED COMPENSATION PLANS

     The Company has two stock-based compensation plans, which are described in
Note 16. No compensation expense is recognized for these plans when stock
options are issued 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. Any consideration paid on exercise of stock options is
credited to share capital.

FOREIGN EXCHANGE TRANSACTIONS

     PCS and its operating subsidiaries have the US dollar as their functional
currency.

     Canadian dollar operating transactions are translated to US dollars at the
average exchange rate of the previous month. Trinidad dollar operating
transactions are translated to US 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
monthly 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 provisions, 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. CHANGE IN ACCOUNTING POLICY

     The Company has adopted the provisions of section 3461 of the Canadian
Institute of Chartered Accountants Handbook "Employee Future Benefits". Under
this accounting policy, the cost of post-retirement/post-employment benefits is
recognized over the periods in which employees render services to the Company in
return for such benefits. The effect of this change on prior period financial
statements and current period results is not significant.

                                       51
<PAGE>   54


Notes to the consolidated financial statements in millions of US dollars

4. ACQUISITION OF ALBRIGHT & WILSON COMPANY

     On March 23, 2000, the Company acquired the remaining 50 percent
partnership interest in Albright & Wilson Company ("A&W"). A&W is an industrial
phosphoric acid manufacturer with plants in Aurora, North Carolina and
Cincinnati, Ohio. Concurrent with the completion of the acquisition, the name
A&W was changed to PCS Purified Phosphates.

     The acquisition has been accounted for by the purchase method of accounting
and, accordingly, the results of operations of PCS Purified Phosphates have been
included in the consolidated financial statements from March 24, 2000.

Net assets acquired were:

<TABLE>
<S>                                <C>
Working capital                    $   2.4
Property, plant and equipment         26.8
Other assets                           2.8
                                   -------
Net assets acquired                $  32.0
                                   -------
</TABLE>

     The following unaudited pro forma financial information presents the
combined results of operations of the Company and PCS Purified Phosphates as if
the acquisition had occurred at the beginning of the years presented. There were
no significant pro forma adjustments.

     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>
                                    2000         1999
                                 ----------   ----------
                                  (unaudited pro forma)
<S>                              <C>          <C>
Net sales                        $ 2,246.0    $ 2,114.1
Operating income (loss)              330.3       (340.5)
Net income (loss)                    200.5       (403.7)
Net income (loss) per share      $    3.83   $    (7.44)
</TABLE>

5.   ACCOUNTS RECEIVABLE

<TABLE>
<CAPTION>
                                            2000        1999
                                          --------    --------
<S>                                       <C>         <C>
Trade accounts - Canpotex                 $   31.4    $   37.6
               - Other                       268.8       215.0
Non-trade accounts                            34.1        23.7
                                          --------    --------
                                             334.3       276.3
Less allowance for doubtful accounts           7.7         7.0
                                          --------    --------
                                          $  326.6    $  269.3
                                          --------    --------
</TABLE>

6.   INVENTORIES

<TABLE>
<CAPTION>
                              2000        1999
                            --------    --------
<S>                         <C>         <C>
Finished product            $  176.6    $  165.3
Materials and supplies         114.5       110.6
Raw materials                   16.9        53.3
Work in process                 98.2        48.0
                            --------    --------
                            $  406.2    $  377.2
                            --------    --------
</TABLE>

7.   PROPERTY, PLANT AND EQUIPMENT

<TABLE>
<CAPTION>
                                                  2000
                                 -------------------------------------
                                              ACCUMULATED
                                            DEPRECIATION AND  NET BOOK
                                    COST      AMORTIZATION     VALUE
                                 ---------    ------------   ---------
<S>                              <C>           <C>           <C>
Land and improvements            $   221.7     $    30.2     $   191.5
Buildings and improvements           448.8         139.4         309.4
Machinery and equipment            3,219.4         896.0       2,323.4
Mine development costs               132.0          46.2          85.8
                                 ---------     ---------     ---------
                                 $ 4,021.9     $ 1,111.8     $ 2,910.1
                                 ---------     ---------     ---------
</TABLE>

<TABLE>
<CAPTION>
                                                 1999
                                 -------------------------------------
                                              ACCUMULATED
                                            DEPRECIATION AND  NET BOOK
                                    COST      AMORTIZATION     VALUE
                                 ---------    ------------   ---------
<S>                              <C>           <C>           <C>
Land and improvements            $   213.4     $    26.2     $   187.2
Buildings and improvements           446.9         127.5         319.4
Machinery and equipment            3,035.8         754.1       2,281.7
Mine development costs               132.0          43.2          88.8
                                 ---------     ---------     ---------
                                 $ 3,828.1     $   951.0     $ 2,877.1
                                 ---------     ---------     ---------
</TABLE>

     Depreciation and amortization of property, plant and equipment included in
Cost of Goods Sold and in Selling and Administrative was $170.6 (1999 - $161.1;
1998 - $154.2).

8.   GOODWILL

<TABLE>
<CAPTION>
                                2000        1999
                              --------    --------
<S>                           <C>         <C>
Cost                          $  110.7    $  110.7
Accumulated amortization           4.3         1.3
                              --------    --------
                              $  106.4    $  109.4
                              --------    --------
</TABLE>

     Amortization of goodwill included in Selling and Administrative was $3.0
(1999 - $11.7; 1998 - $14.7).

9.   OTHER ASSETS

<TABLE>
<CAPTION>
                                          2000        1999
                                        --------    --------
<S>                                     <C>         <C>
Deferred charges - net of
 accumulated amortization               $   90.2    $   49.7
Prepaid pension costs                       26.5        14.4
Land held for sale                           3.5         3.5
Investments, at equity                      20.7        21.9
Investment, at cost                         92.8        92.8
Rotational plant maintenance costs
- net of accumulated amortization           18.3        16.1
Other                                        5.5         5.7
                                        --------    --------
                                        $  257.5    $  204.1
                                        --------    --------
</TABLE>

     Amortization of deferred charges and rotational plant maintenance costs
included in Cost of Goods Sold and in Selling and Administrative was $13.4 (1999
- $18.3; 1998 - $22.0).

10.  SHORT-TERM DEBT

     Short-term debt was $488.8 at December 31, 2000 (1999 - $474.5). The
weighted average interest rate on this debt was 6.98% (1999 - 6.02%). The
Company had available lines of credit for short-term financing (net of letters
of credit of $27.4) in the amount of $190.0 at December 31, 2000 (1999 -
$195.7). The lines of credit are unsecured. In addition, the Company is
authorized to borrow a further $111.2 under the commercial paper program.

11.  ACCOUNTS PAYABLE AND ACCRUED CHARGES

<TABLE>
<CAPTION>
                                 2000        1999
                               --------    --------
<S>                            <C>         <C>
Trade accounts                 $  268.9    $  231.8
Cash margins collected            105.9          --
Accrued reclamation                22.3        22.7
Accrued interest                    5.7         5.4
Accrued payroll                     8.6        11.9
Accrued integration                40.0        40.5
Accrued plant closure and
office consolidation               26.0        20.6
Income taxes                       35.6         2.5
Dividends                          12.9        13.7
                               --------    --------
                               $  525.9    $  349.1
                               --------    --------
</TABLE>

                                       52

<PAGE>   55


Notes to the consolidated financial statements in millions of US dollars

11. Accounts Payable and Accrued Charges (continued)

     During the year, the Company paid severance, relocation and other related
costs in the amount of $0.5 (1999 - $2.2), which were charged against accrued
integration.

12.  LONG-TERM DEBT

<TABLE>
<CAPTION>
                                                        2000             1999
                                                      ------           ------
<S>                                                   <C>              <C>
Industrial Revenue and Pollution
  Control Obligations                                 $ 13.6           $ 43.3
  Adjustable Rate Industrial Revenue and
  Pollution Control Obligations with varying
  interest rates and with maturity dates
  ranging from 2003 to 2005. No sinking
  fund requirements prior to maturity. The
  Adjustable Rate Industrial Revenue and
  Pollution Control Obligations bear interest
  at 5.08%. These loans are secured by
  bank letters of credit.
Notes Payable                                          400.0            400.0
  7.125% notes payable June 15, 2007.
  No sinking fund requirements prior to
  maturity. These notes were issued under
  a shelf registration statement covering
  up to $1,000 of debt securities.
  The notes are unsecured.
Other                                                    5.8              1.1
                                                      ------           ------
                                                       419.4            444.4
Less current maturities                                  5.7              7.4
                                                      ------           ------
                                                      $413.7           $437.0
                                                      ------           ------
</TABLE>

     The fair values of all long-term obligations (except the Notes Payable
whose approximate fair value at December 31, 2000 was $385.2) are approximated
by their face values.

     Long-term debt at December 31, 2000 will mature as follows:

<TABLE>
     <S>                            <C>
     2001                           $  5.7
     2002                              0.3
     2003                              2.7
     2004                              0.3
     2005                              9.3
     Subsequent years                401.1
                                    ------
                                    $419.4
                                    ------
</TABLE>

13.  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, the latest of which expires in 2020 (excluding mineral
leases).

     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 $27.0. The initial terms of the leases
expire in March 2003 and 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 $384.0 costs of construction. The Company has
an option to purchase the plants, subject to certain conditions, during the
terms of the leases for prices approximating their fair market values at the
date of exercise.

     Future minimum lease payments under these operating leases will be
approximately as follows:

<TABLE>
      <S>                                  <C>
      2001                                 $ 71.7
      2002                                   68.8
      2003                                   40.1
      2004                                   27.6
      2005                                   31.4
      Subsequent years                      168.1
</TABLE>

     Rental expense for operating leases for the years ended December 31, 2000,
1999 and 1998 was $86.4, $94.1 and $86.6, respectively.

OTHER COMMITMENTS

     The Company has entered into raw material purchase commitments based upon
market rates at the time of delivery through 2008 in the amount of approximately
$85.6, of which approximately $18.6 relates to 2001.

     The Company's Trinidad subsidiaries 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.

14.  POST-RETIREMENT/POST-EMPLOYMENT BENEFITS

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 percent of salary).

     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 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"). 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.

TRINIDAD

     The Company has contributory defined benefit pension plans that cover a
substantial majority of its employees. Benefits are based on service. The plans'
assets consist mainly of local government and other bonds, local mortgage and
mortgage-backed securities, fixed income deposits and cash.

                                       53
<PAGE>   56


Notes to the consolidated financial statements in millions of US dollars

14. POST-RETIREMENT/POST-EMPLOYMENT BENEFITS (CONTINUED)

ALL PENSION PLANS

     The components of net pension expense for the Company's pension plans,
computed actuarially, were as follows:

<TABLE>
<CAPTION>
                                      2000        1999        1998
                                    -------     -------     -------
<S>                                 <C>         <C>         <C>
Service cost for benefits
 earned during the year             $  12.0     $  13.7     $  11.7
Interest cost on projected
 benefit obligations                   25.7        23.3        22.0
Expected return on plan assets        (20.8)      (35.9)      (29.9)
Net amortization and deferral           1.3         2.5         1.7
                                    -------     -------     -------
Net pension expense                 $  18.2     $   3.6     $   5.5
                                    -------     -------     -------
</TABLE>

     Significant actuarial assumptions used in calculating the net pension
expense for the Company's funded plans were as follows:

<TABLE>
<CAPTION>
                                          2000        1999        1998
                                          -----       -----       -----
<S>                                       <C>         <C>         <C>
Discount rate                             7.50%       7.75%       6.75%
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>

OTHER POST-RETIREMENT PLANS

     The Company provides certain contributory health care plans and
non-contributory life insurance benefits for retired employees. These plans
contain certain cost-sharing features such as deductibles and coinsurance, and
are unfunded with benefits subject to change.

     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" and SFAS
No. 132 "Employers' Disclosures about Pensions and Other Postretirement
Benefits". These statements require 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, and prescribe certain disclosure
requirements.

     The components of this expense, computed actuarially, were as follows:

<TABLE>
<CAPTION>
                                            2000        1999        1998
                                           -----       -----       -----
<S>                                        <C>         <C>         <C>
Service cost for benefits
 earned during the year                    $ 3.3       $ 3.9       $ 2.9
Interest cost on projected
 benefit obligations                        10.2         9.3         8.0
                                           -----       -----       -----
Net post-retirement expense                $13.5       $13.2       $10.9
                                           -----       -----       -----
</TABLE>

     The significant actuarial assumptions used in determining post-retirement
benefit expense were as follows:

<TABLE>
<S>                                       <C>        <C>             <C>
Discount rate                             7.50%      7.75%           6.80%
Health care cost trend rate               6.00%      6.00%          10.00%
</TABLE>

     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>
                                            2000        1999        1998
                                           -----       -----        ----
<S>                                        <C>         <C>          <C>
Accumulated post-retirement
 benefit obligation                        $21.1       $15.5        $6.3
Aggregate of service and
 interest cost                               2.0         2.9         0.6
</TABLE>


     If the health care cost trend rate was decreased by 1.0 percent, the
accumulated post-retirement benefit obligation and the aggregate of service and
interest cost would have decreased as follows:

<TABLE>
<CAPTION>
                                            2000        1999          1998
                                           -----       -----        ----
<S>                                        <C>         <C>            <C>
Accumulated post-retirement
 benefit obligation                        $17.2       $19.4          $2.8
Aggregate of service and
 interest cost                               1.9         0.4           0.3
</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 and the recorded
liability for these costs were not significant for any of the years presented.

     All of the Company's US employees may participate in defined contribution
savings plans. These plans are subject to US federal tax limitations and provide
for voluntary employee salary deduction contributions of up to 15 percent of
salary and Company matching contributions of up to 5 percent of salary. The
Company's matching contributions were $4.8 and $3.5 for 2000 and 1999,
respectively. All of the Company's Canadian salaried employees participate in
the PCS Inc. Savings Plan which was effective January 1, 1999. The Company
contributes 5 percent of salary to the plan and employees may make voluntary
contributions. The Company's contributions in 2000 were $1.4 (1999 - $1.3).

     The change in benefit obligations and change in plan assets for the above
pension and post-retirement/post-employment plans were as follows:

                                       54

<PAGE>   57


Notes to the consolidated financial statements in millions of US dollars

14. POST-RETIREMENT/POST-EMPLOYMENT BENEFITS (CONTINUED)

<TABLE>
<CAPTION>
                                                                                                         POST-RETIREMENT/
                                                                                     PENSION             POST-EMPLOYMENT
                                                                            ---------------------     ---------------------
                                                                              2000         1999          2000        1999
                                                                            --------     --------     --------     --------
<S>                                                                         <C>          <C>          <C>          <C>
Change in Benefit Obligations
 Balance, beginning of year                                                 $  347.2     $  360.2     $  135.3     $  136.3
 Service cost                                                                   12.0         13.7          3.3          3.9
 Interest cost                                                                  25.7         23.3         10.2          9.3
 Participants' contributions                                                     0.3          0.4           --           --
 Actuarial (loss) gain                                                          (5.6)       (35.7)         5.6         (0.4)
 Amendments                                                                     15.0           --           --         (9.5)
 Benefits paid                                                                 (18.8)       (14.7)        (4.2)        (4.3)
                                                                            --------     --------     --------     --------
 Balance, end of year                                                          375.8        347.2        150.2        135.3
                                                                            --------     --------     --------     --------
Change in Plan Assets
 Fair value, beginning of year                                                 373.0        368.8           --           --
 Actual return on plan assets                                                   20.8         11.7           --           --
 Employer contributions                                                          3.9          8.4          4.2          3.6
 Participants' contributions                                                     0.3          0.4           --          0.7
 Valuation allowance                                                            (5.3)        (1.6)          --           --
 Benefits paid                                                                 (18.8)       (14.7)        (4.2)        (4.3)
                                                                            --------     --------     --------     --------
 Fair value, end of year                                                       373.9        373.0           --           --
                                                                            --------     --------     --------     --------
Funded Status                                                                   (1.9)        25.8       (150.2)      (135.3)
Unrecognized Net (Loss) Gain                                                      --        (26.1)         9.2          6.9
Unrecognized Prior Service Cost                                                   --          1.2         (5.7)       (10.2)
                                                                            --------     --------     --------     --------
(Accrued) Prepaid Benefit Cost                                                  (1.9)         0.9       (146.7)      (138.6)
Less current portion                                                              --           --           --          3.7
                                                                            --------     --------     --------     --------
(Accrued) Prepaid Post-retirement/Post-employment Benefits                  $   (1.9)    $    0.9     $ (146.7)    $ (134.9)
Amounts recognized in the statements of financial position consist of:
 Long-term liability                                                        $  (28.4)    $  (13.5)    $ (146.7)    $ (134.9)
 Prepaid pension costs                                                          26.5         14.4           --           --
                                                                            --------     --------     --------     --------
                                                                            $   (1.9)    $    0.9     $ (146.7)    $ (134.9)
                                                                            --------     --------     --------     --------
</TABLE>

     The aggregate pension accumulated benefit obligations and aggregate fair
value of plan assets for pension plans with accumulated benefit obligations in
excess of plan assets are as follows:

<TABLE>
<CAPTION>
                                                             POST-RETIREMENT/
                                         PENSION             POST-EMPLOYMENT
                                    ------------------    --------------------
                                      2000      1999        2000        1999
                                    -------    -------    --------    --------
<S>                                 <C>        <C>        <C>         <C>
Accumulated benefit obligation      $  93.4    $  84.4    $  146.7    $  134.9
Fair value of plan assets           $  61.9    $  72.2          --          --
</TABLE>

15. ENVIRONMENTAL COSTS

RECLAMATION AND RESTORATION COSTS

     Site restoration and reclamation costs have been accrued for various sites.
At December 31, 2000, the Company has accrued $27.3 (1999 - $28.5) for the
Aurora, North Carolina facility, $54.9 (1999 - $55.8) for the White Springs,
Florida facility, $nil (1999 - $27.4) for the Moab, Utah facility (which was
sold during the year), $0.3 (1999 - $0.6) for various sulphur facilities, $18.6
(1999 - $18.4) for certain Florida Favorite Fertilizer facilities and $4.2 (1999
- $4.2) for the Cassidy Lake facility. 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 2000 totalled $22.3 (1999 - $22.7). These amounts
represent the Company's current estimate of potential site restoration and
reclamation costs which were last assessed in December 2000. These expenditures
are generally incurred over an extended period of time.

     Annual environmental expenditures for reclamation and restoration during
the years ended December 31, 2000, 1999 and 1998 were $59.9, $79.3 and $71.9
respectively. Of the 2000 amount, $55.2 (1999 - $70.3; 1998 - $63.0) was charged
to operations, $2.7 (1999 - $3.1; 1998 - $4.1) was capitalized and $2.0 (1999 -
$5.9; 1998 - $4.8) was charged against accrued reclamation costs.

                                       55
<PAGE>   58


Notes to the consolidated financial statements in millions of US dollars

15. ENVIRONMENTAL COSTS (CONTINUED)

CAPPING OF BYPRODUCT GYPSUM STACKS

     Various jurisdictions have established programs that require companies to
reduce the potential environmental impact associated with gypsum stacks. In
Florida, the regulations implementing this legislation require companies to
"cap" the gypsum stacks in order to reduce seepage into the groundwater, when
such stacks reach their design capacity (for the Company, in approximately 35
years), or after March 25, 2001 if groundwater standards are not being met. At
December 31, 2000, a balance of $35.4 (1999 - $35.4) 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 stacks must comply with the laws in place at that time.
Under Louisiana regulations, capping of gypsum stacks will be required when the
stacks are no longer active.

OTHER ENVIRONMENTAL COSTS

     Other than reclamation, 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 2000. At December 31, 2000,
environmental provisions recorded by the Company, other than those related to
reclamation, restoration and gypsum stack capping, as discussed above, were
approximately $0.9.

     The Company's estimated operating expenses, other than reclamation,
restoration and gypsum stack capping, relating to compliance with environmental
laws and regulations governing ongoing operations were approximately $23.0 for
the year ended December 31, 2000 (1999 - $20.2; 1998 - $20.5). In addition,
capital expenditures for other environmental compliance were approximately $11.7
for the year ended December 31, 2000 (1999 - $5.1; 1998 - $9.9).

16. 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:                                     2000              1999                 1998
                                       CONSIDERATION      CONSIDERATION        CONSIDERATION
                                       -------------      -------------        -------------
<S>                                       <C>                <C>                  <C>
Issued, beginning of year                 $1,216.5           $1,227.6             $1,211.1
Shares issued under option                     7.0                1.4                 15.4
Shares issued for dividend
reinvestment plan                              0.8                1.8                  1.1
Shares repurchased                           (46.9)             (14.3)                  --
                                          --------           --------             --------
Issued, end of year                       $1,177.4           $1,216.5             $1,227.6
                                          --------           --------             --------
</TABLE>


<TABLE>
<CAPTION>
Issued:                             2000              1999              1998
                                 NUMBER OF          NUMBER OF         NUMBER OF
                                   COMMON            COMMON            COMMON
                                   SHARES            SHARES            SHARES
                                 ----------        -----------       -----------
<S>                              <C>               <C>               <C>
Issued, beginning of year        53,694,209        54,243,795        53,896,186
Shares issued under option          202,000            46,450           332,800
Shares issued for dividend
reinvestment plan                    14,363            33,964            14,809
Shares repurchased               (2,070,000)         (630,000)               --
Issued, end of year              51,840,572        53,694,209        54,243,795
                                 ----------        ----------        ----------
</TABLE>

STOCK OPTIONS

     The Company has two option plans. Under the Officers and Employees Plan,
the Company may, after February 3, 1998, issue up to 6,926,125 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 is the quoted market
closing price of the Company's common shares on the last trading day immediately
preceding the date of the grant and an option's maximum term is 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.

     A summary of the status of the plans as of December 31, 2000, 1999 and 1998
and changes during the years ending on those dates is presented below:

NUMBER OF SHARES SUBJECT TO OPTION

<TABLE>
<CAPTION>
                                        2000              1999            1998
                                      ---------        ---------        ---------
<S>                                   <C>              <C>              <C>
Outstanding,
 beginning of year                    3,745,975        2,947,075        2,461,125
Granted                                 929,400          857,100          824,000
Exercised                              (202,000)         (46,450)        (332,800)
Cancelled                              (237,100)         (11,750)          (5,250)
                                      ---------        ---------        ---------
Outstanding, end of year              4,236,275        3,745,975        2,947,075
                                      ---------        ---------        ---------
</TABLE>

Weighted Average Exercise Price

<TABLE>
<CAPTION>
                                        2000         1999             1998
                                       ------       ------           ------
<S>                                    <C>          <C>              <C>
Outstanding,
 beginning of year                     $64.72       $70.35           $68.11
Granted                                 61.27        43.69            67.88
Exercised                               34.72        30.34            47.45
Cancelled                               65.83        77.62            82.61
Outstanding, end of year                65.04        64.72            70.35
</TABLE>

     The weighted-average grant-date fair value of options granted during the
year was $20.0 (1999 - $11.6; 1998 - $18.7).

     The following table summarizes information about stock options outstanding
at December 31, 2000:

                                       56

<PAGE>   59


Notes to the consolidated financial statements in millions of US dollars

16. SHARE CAPITAL (CONTINUED)

<TABLE>
<CAPTION>
                                                OPTIONS OUTSTANDING                                OPTIONS 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                  9,000            1 year               $18.38                9,000               $18.38
$20.00 to $25.38                 93,050            3 years               21.73               93,050                21.73
$32.25                          130,850            4 years               32.25              130,850                32.25
$43.69                          634,150            9 years               43.69              205,600                43.69
$61.27                          929,400           10 years               61.27                   --                   --
$67.88                          755,500            8 years               67.88              755,500                67.88
$70.38 to $74.75                886,575            6 years               72.43              886,575                72.43
$81.75 to $86.75                797,750            7 years               86.44              797,750                86.44
</TABLE>

     The foregoing options have expiry dates ranging from November 5, 2001 to
November 21, 2010.

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 was renewed in 1998 and now
expires following the Company's annual meeting in 2001, unless otherwise renewed
or extended.

SHARE REPURCHASE PLAN

     The Board of Directors of the Company approved an open market repurchase
program with respect to the Company's common shares on November 3, 1999. Under
this program, the Company has repurchased 2,700,000 of its outstanding common
shares. The Company cancelled shares purchased under the program.

17.  CONTRIBUTED SURPLUS

     Contributed surplus has been charged with the excess of the cost of
purchasing the common shares under the open market repurchase program over the
stated value of the shares as follows:

<TABLE>
<CAPTION>
                                                                                2000         1999        1998
                                                                               ------       ------      ------
<S>                                                                            <C>          <C>         <C>
Balance, beginning of year                                                     $321.5       $336.5      $336.5
Excess of cost of common shares repurchased over their stated value             (57.3)       (15.0)         --
                                                                               ------       ------      ------
Balance, end of year                                                           $264.2       $321.5      $336.5
                                                                               ------       ------      ------
</TABLE>

18. SEGMENT INFORMATION

     The Company has three reportable business segments: potash, phosphate and
nitrogen. All three segments produce fertilizers for sale to agricultural
customers. In addition, approximately 47 percent of nitrogen and 47 percent of
phosphate net sales revenue is from non-fertilizer products. These business
segments are differentiated by the chemical nutrient contained in the product
that each produces. Inter-segment net sales are made under terms which
approximate market value. Each of the phosphate and nitrogen business segments
was acquired as a unit.

<TABLE>
<CAPTION>
                                                                                            2000
                                                             ----------------------------------------------------------------------
                                                             POTASH        PHOSPHATE      NITROGEN      ALL OTHERS     CONSOLIDATED
                                                             -------       ---------      --------      ----------     ------------
<S>                                                          <C>            <C>            <C>            <C>            <C>
Net sales - third party                                      $ 578.7        $ 782.5        $ 870.4        $    --        $2,231.6
Inter-segment net sales                                          8.4            7.9           60.1             --              --
Gross margin                                                   304.0           74.1          104.7             --           482.8
Other income                                                     3.2           17.6           11.6           24.1            56.5
Depreciation and amortization                                   40.9           68.1           66.1           11.9           187.0
Provision for plant closures and office consolidation             --           24.3             --             --            24.3
Operating income (loss)                                        224.7           47.9           93.0          (38.8)          326.8
Assets                                                       1,165.4        1,522.9        1,250.9          206.5         4,145.7
Expenditures for segment capital assets                         45.5          136.5           34.2           12.6           228.8
</TABLE>

                                       57
<PAGE>   60



Notes to the consolidated financial statements in millions of US dollars

18. SEGMENT INFORMATION (CONTINUED)

<TABLE>
<CAPTION>
                                                                                            1999
                                                             ------------------------------------------------------------------
                                                              POTASH      PHOSPHATE     NITROGEN     ALL OTHERS    CONSOLIDATED
                                                             --------     ---------     ---------    ----------    ------------
<S>                                                          <C>           <C>          <C>           <C>           <C>
Net sales - third party                                      $  563.3      $  843.8     $   654.0     $     --      $ 2,061.1
Inter-segment net sales                                           8.7           1.6          47.7           --             --
Gross margin                                                    301.9         127.8         (21.4)          --          408.3
Other income                                                      3.1           5.2          10.5          4.9           23.7
Depreciation and amortization                                    37.2          61.8          83.5          8.6          191.1
Provision for plant closures and office consolidation             1.3           8.2          55.5           --           65.0
Provision for asset impairment                                     --           7.6         519.0           --          526.6
Operating income (loss)                                         221.4         106.6        (615.9)       (65.1)        (353.0)
Assets                                                        1,036.9       1,388.5       1,324.5        166.9        3,916.8
Expenditures for segment capital assets                          78.0          41.7          40.6          5.7          166.0
</TABLE>

<TABLE>
<CAPTION>
                                                                                                1998
                                                             ------------------------------------------------------------------
                                                              POTASH      PHOSPHATE     NITROGEN     ALL OTHERS    CONSOLIDATED
                                                             --------     ---------     ---------    ----------    ------------
<S>                                                          <C>          <C>           <C>          <C>           <C>
Net sales - third party                                      $  545.5     $ 1,011.0     $   751.3    $     --      $ 2,307.8
Inter-segment net sales                                          10.3           1.3          66.7          --             --
Gross margin                                                    316.3         228.2          64.8          --          609.3
Other income                                                      2.1           6.5          10.6         9.9           29.1
Depreciation and amortization                                    36.2          59.1          86.7         8.9          190.9
Operating income (loss)                                         231.3         225.7          42.5       (57.2)         442.3
Assets                                                        1,037.3       1,359.3       1,931.3       206.4        4,534.3
Expenditures for segment capital assets                          43.2          67.0          83.3        92.2          285.7
</TABLE>

Financial information by geographic area is summarized in the following table:

<TABLE>
<CAPTION>
                                                                       COUNTRY OF ORIGIN
                                                -------------------------------------------------------------------
                                                 CANADA     UNITED STATES   TRINIDAD        OTHER      CONSOLIDATED
                                                ---------   -------------   ---------     ----------   ------------
<S>                                             <C>          <C>            <C>           <C>           <C>
2000
Net sales to customers outside the Company
 Canada                                         $    28.0    $     52.9     $      --     $       --    $     80.9
 United States                                      209.4       1,195.2         133.9             --       1,538.5
 PhosChem                                              --         146.3            --             --         146.3
 Canpotex                                           268.9            --            --             --         268.9
 Other                                               72.4          53.3          58.9           12.4         197.0
                                                ---------    ----------     ---------     ----------    ----------
                                                $   578.7    $  1,447.7     $   192.8     $     12.4    $  2,231.6
                                                ---------    ----------     ---------     ----------    ----------
Operating income (loss)                         $   216.2    $     96.0     $    15.4     $     (0.8)   $    326.8
                                                ---------    ----------     ---------     ----------    ----------
Capital assets and goodwill                     $   794.4    $  1,862.6     $   294.3     $     83.5    $  3,034.8
                                                ---------    ----------     ---------     ----------    ----------

1999
Net sales to customers outside the Company
 Canada                                         $    21.4    $     29.3     $      --     $       --    $     50.7
 United States                                      209.7       1,080.7         122.1             --       1,412.5
 PhosChem                                              --         186.5            --             --         186.5
 Canpotex                                           254.7           --             --             --         254.7
 Other                                               71.2          39.2          46.3             --         156.7
                                                ---------    ----------     ---------     ----------    ----------
                                                $   557.0    $  1,335.7     $   168.4     $       --    $  2,061.1
                                                ---------    ----------     ---------     ----------    ----------
Operating income                                $   179.1    $   (511.9)    $   (20.2)    $       --    $   (353.0)
                                                ---------    ----------     ---------     ----------    ----------
Capital assets and goodwill                     $   796.6    $  1,871.7     $   301.7     $     32.5    $  3,002.5
                                                ---------    ----------     ---------     ----------    ----------

1998
Net sales to customers outside the Company
 Canada                                         $    21.9    $     29.8     $      --     $       --    $     51.7
 United States                                      200.0       1,279.6         110.1             --       1,589.7
 PhosChem                                              --         262.2            --             --         262.2
 Canpotex                                           252.5            --            --             --         252.5
 Other                                               65.4          35.2          51.1             --         151.7
                                                ---------    ----------     ---------     ----------    ----------
                                                $   539.8    $  1,606.8     $   161.2     $       --    $  2,307.8
                                                ---------    ----------     ---------     ----------    ----------
Operating income                                $   209.8    $    220.2     $    12.3     $       --    $    442.3
                                                ---------    ----------     ---------     ----------    ----------
Capital assets and goodwill                     $   823.8    $  2,448.6     $   316.0     $       --    $  3,588.4
                                                ---------    ----------     ---------     ----------    ----------
</TABLE>

                                       58

<PAGE>   61


Notes to the consolidated financial statements in millions of US dollars

19. PROVINCIAL MINING AND OTHER TAXES

Provincial mining taxes and other taxes consist of:

<TABLE>
<CAPTION>
                                                 2000        1999        1998
                                                -----       -----       -----
<S>                                             <C>         <C>         <C>
Potash Production Tax                           $55.6       $58.0       $61.6
Saskatchewan corporate capital taxes             21.6        19.1        18.5
                                                -----       -----       -----
                                                $77.2       $77.1       $80.1
                                                -----       -----       -----
</TABLE>


20.  PROVISION FOR PLANT CLOSURES AND OFFICE CONSOLIDATION

2000

     On January 19, 2001, the Company announced it was suspending all DAP
production at its White Springs, Florida operations, effective immediately, and
that it permanently closed its Davenport, Iowa phosphate feed plant on January
15, 2001. The Company has recorded a provision of $24.3 for asset writedown,
severance, inventory allowances, decommissioning and other expenses attributable
to these actions.

1999

     In the third quarter of 1999, the Board of Directors of the Company
approved a plan to close nitrogen plants at Clinton, Iowa and LaPlatte,
Nebraska; a phosphate feed plant at Saltville, Virginia; and a phosphate
terminal at Jacksonville, Florida.

     The decision to close these facilities triggered an assessment of the fair
value of these assets, with fair value being determined based on estimated sales
proceeds less costs to sell.

     The Company also consolidated its Raleigh, North Carolina and Memphis,
Tennessee administrative offices with the Company's office in Northbrook,
Illinois.

     All on-site inventory at Clinton and LaPlatte has been sold and the
decommissioning of the ammonia storage tanks there has been completed. The
Company has contracted out the demolition of the Clinton facility and demolition
activity is in process. The Company is attempting to sell this property and
therefore certain structures which add value to the site will not be demolished
at this time. The Company has received an offer for the sale of the LaPlatte
plant site. If this sale is completed, it is not expected that there will be any
significant further environmental or decommissioning activities required
relating to this site. If the sale is not completed, demolition is expected to
start in the second quarter of 2001. There is one employee remaining at each
site.

     The Company is currently in negotiations for the sale of the Saltville
site. Dismantling procedures are now complete.

     The office consolidation is complete.

     Charges associated with these plant closures and office consolidation are
as follows:

<TABLE>
<CAPTION>
                                        BALANCE AT                                      RESERVE                    BALANCE AT
                                      DEC. 31, 1999   PROVISION       AMOUNT PAID       UTILIZED    ADJUSTMENTS   DEC. 31, 2000
                                      -------------   ---------       -----------       --------    -----------   -------------
<S>                                      <C>           <C>              <C>              <C>          <C>           <C>
PLANT CLOSURES
Severance                                $   2.7       $   9.0          $  (2.5)         $   --       $    --       $   9.2
Decommissioning                              0.3           4.6             (0.9)             --           0.3           4.3
Environmental remediation                    1.9            --             (1.4)             --            --           0.5
Contractual commitments                      6.5            --             (3.1)             --          (3.4)           --
Non-cash parts inventory writedown           8.2           1.4               --            (7.8)           --           1.8
Non-cash writedown of property,
plant and equipment                         27.1           9.3               --            (0.1)          0.3          36.6
                                         -------       -------          -------          ------       -------       -------
                                            46.7          24.3             (7.9)           (7.9)         (2.8)         52.4
OFFICE CONSOLIDATION

Severance                                    6.2            --             (5.2)             --            --           1.0
Contractual commitments                      3.0            --             (3.0)             --            --            --
                                         -------       -------          -------          ------       -------       -------
                                         $  55.9       $  24.3          $ (16.1)         $ (7.9)      $  (2.8)      $  53.4
                                         -------       -------          -------          ------       -------       -------
</TABLE>

21.  PROVISION FOR ASSET IMPAIRMENT

1999

     Due to operating losses primarily caused by reduced product prices and
increased gas costs relative to certain current and expected future competition,
the Company assessed the recoverability of the tangible and intangible assets
related to the nitrogen operations. The Company projected the undiscounted
future net cash flows from use together with the residual value of these assets
and determined that in certain cases they were less than the carrying amount.
Third party forecasts of future nitrogen prices indicate that they would not
reach the levels experienced in 1997 when the nitrogen operations were
purchased. These circumstances were the primary cause of a permanent impairment
in the value of certain nitrogen assets. Accordingly, the Company recorded a
provision for asset impairment of $519.0, of which $438.5 relates to goodwill,
$79.5 relates to property, plant and equipment at the Memphis, Tennessee plant
and $1.0 relates to other assets. The provision for asset impairment for the
nitrogen operations was calculated as the difference between the carrying amount
and the undiscounted future net cash flows from use together with residual
values. Estimates of such undiscounted future net cash flows from use together
with residual values are subject to significant uncertainties and assumptions.
Accordingly, actual results could vary significantly from such estimates.

     Due to a history of operating losses and a projection of continuing
operating losses, the Company assessed the recoverability of the tangible and
intangible assets related to the Florida Favorite Fertilizer ("FFF") operations.
The Company estimated the undiscounted future net cash flows from use together
with the residual value of these assets and determined that in certain cases
they were less than the carrying amount. Accordingly,

                                       59
<PAGE>   62

Notes to the consolidated financial statements in millions of US dollars

21. Provision for Asset Impairment (continued)

the Company recorded a provision for asset impairment of $7.6, of which $6.4
relates to property, plant and equipment primarily at the Lakeland, Florida and
Moultrie, Georgia locations and $1.2 relates to intangibles. The provision for
asset impairment for the FFF operations was calculated as the difference between
third party sales offers and the carrying amount of the various properties. This
provision relates to the phosphate business segment.

     These writedowns will result in a reduction of amortization expense of
approximately $11.7 and a reduction of depreciation expense of approximately
$4.9 on an annualized basis.

22.  INTEREST EXPENSE

<TABLE>
<CAPTION>
                                   2000        1999        1998
                                  ------      ------      ------
<S>                               <C>         <C>         <C>
Interest on
 Short-term debt                  $ 29.7      $  8.1      $  2.9
 Long-term debt                     31.9        43.4        60.9
                                  ------      ------      ------
                                  $ 61.6      $ 51.5      $ 63.8
                                  ------      ------      ------
</TABLE>

23.  INCOME TAXES

     As the Company operates in a specialized industry and in several tax
jurisdictions, its income is subject to various rates of taxation.

     The provision for income taxes differs from the amount that would have
resulted from applying the Canadian statutory income tax rates to income (loss)
before income taxes as follows:

<TABLE>
<CAPTION>
                                                 2000        1999        1998
                                             ---------    ---------    ---------
<S>                                          <C>          <C>          <C>
Income (loss) before income taxes
Canada                                       $   155.4    $   126.2    $   122.5
United States                                     95.0       (509.0)       243.3
Trinidad                                          15.4        (21.7)        12.7
Other                                             (0.6)          --           --
                                             ---------    ---------    ---------
                                             $   265.2    $  (404.5)   $   378.5
                                             ---------    ---------    ---------
Federal and Provincial
 Statutory tax rates                             46.12%       46.12%       46.12%
                                             ---------    ---------    ---------
Tax at statutory rates                       $   122.3    $  (186.6)   $   174.6
Adjusted for the effect of:
 Net non-deductible provincial
  taxes and royalties and
  resource allowances                             16.4         20.6         19.3
 Additional tax deductions                       (43.2)       (43.6)       (63.3)
 Difference between Canadian
  rate and rates applicable to
  subsidiaries in other countries                 (5.2)         5.2        (14.1)
 Goodwill impairment                                --        207.7           --
 Other                                           (23.1)         4.2          1.0
                                             ---------    ---------    ---------
Income tax expense                           $    67.2    $     7.5    $   117.5
                                             ---------    ---------    ---------
</TABLE>

     Details of income tax expense are as follows:

<TABLE>
<S>                                     <C>           <C>           <C>
Canada
 Current                                $  23.2       $   9.4       $    2.4
 Future                                    30.2          68.4           75.4
United States - Federal
 Current                                     --           3.4            6.2
 Future                                     7.4         (70.8)          10.7
United States - State
 Current                                    7.1           1.1            5.0
 Future                                     1.5           2.7           14.6
Trinidad
 Current                                    2.3           0.8            5.8
 Future                                    (4.5)         (7.5)          (2.6)
                                        -------       -------       --------
Income tax expense                      $  67.2       $   7.5       $  117.5
                                        -------       -------       --------
</TABLE>

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

<TABLE>
<CAPTION>
                                                        2000         1999
                                                     --------      --------
<S>                                                  <C>           <C>
Future income tax assets:
 Loss and credit carryforwards                       $  263.8      $  246.4
 Post-retirement/post-employment benefits                58.7          50.6
 Accrued reclamation costs                               29.1          40.3
 Other                                                    5.2           2.8
                                                     --------      --------
Total future income tax assets                          356.8         340.1
                                                     --------      --------
Future income tax liabilities:
 Basis difference in fixed assets                       751.2         724.5
 Other                                                   40.7          25.0
                                                     --------      --------
Total future income tax liabilities                     791.9         749.5
                                                     --------      --------
Net future income tax liability                      $  435.1      $  409.4
                                                     --------      --------
</TABLE>

     At December 31, 2000, the Company has income tax losses carried forward of
approximately $686.0 which will begin to expire in 2010. The benefit relating to
these loss carryforwards has been recognized by reducing future income tax
liabilities. In addition, the Company has alternative minimum tax credits of
approximately $18.0 which carry forward indefinitely.

24. NET INCOME (LOSS) PER SHARE

     Net income (loss) per share was calculated on the weighted average number
of shares issued and outstanding during the twelve months ended December 31,
2000 of 52,410,000 (1999 - 54,230,000; 1998 - 54,177,000). Fully diluted net
income (loss) per share for the year ended December 31, 2000 was $3.74, (1999 -
$(7.60); 1998 - $4.77).

25.  DIVIDENDS PER SHARE

     Prior to June 30, 1999, the Company declared its dividends in Canadian
dollars. Subsequent to that date, the Company declared its dividends in US
dollars.

26.  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, 2000, the Company had commitments in the form of foreign
exchange contracts to sell US dollars in the amount of $18.0 (1999 - $36.0).

     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.

     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 US
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 collected as at December 31, 2000
totalled $105.9 (1999 - $4.4 was advanced and included in inventory) and are
included in accounts payable.

                                       60

<PAGE>   63


Notes to the consolidated financial statements in millions of US dollars

26. Financial Instruments and Risk Management (continued)

     As at December 31, 2000, the Company had derivatives qualifying for
deferral in the form of futures and swaps. The futures represented a notional
amount of 6.1 million Btus of natural gas with maturities in 2001 through 2002.
The swaps represented a notional amount of 90.4 million Btus with maturities in
2001 through 2005. As at December 31, 2000, net gains arising from settled
hedging transactions, which are included as a component of finished goods
inventory, were $11.5 (1999 - $nil).

     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. The Company seeks to manage the
credit risk relating to these sales through a credit management program.
Internationally, the Company's products are sold primarily through two export
associations whose accounts receivable are either insured or secured by letters
of credit.

     The carrying amount of the Company's cash and cash equivalents, accounts
receivable, short-term debt and accounts payable and accrued charges
approximates fair values because of short-term maturities. The carrying amount
of the Company's long-term debt (except the Notes Payable whose approximate fair
value at December 31, 2000 was $385.2) approximates estimated fair value.

27. 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 2000.

     In common with other companies in the industry, the Company is unable to
acquire insurance for underground assets.

     In 1997, five former officers of Arcadian Corporation filed lawsuits
against PCS. 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. Two of the claims were settled in January
1999. On December 1, 1998, the court entered judgments in the amount of $18.5
(plus additional amounts to offset the effect of excise taxes) with respect to
three of the claims. The Company appealed these judgments. On February 2, 2001,
the Appellate Court substantially affirmed the judgments and remanded the case
for further proceedings, which are expected to result in a reduction of the
judgments by approximately $1.0 million. Management of the Company believes that
the lawsuits will not have a material adverse effect on the Company's financial
condition or results of operations.

     On May 11 and 12, 1999, representatives of the United States Environmental
Protection Agency ("EPA"), Federal Bureau of Investigation and other state and
local agencies executed a search warrant on the Company's Geismar facility in
connection with a grand jury investigation. The grand jury investigation is
continuing. The Company cannot predict at this time what may result from the
government investigation, or whether any such result would have a material
adverse effect on the Company.

     In 1999, pursuant to an Administrative Order by Consent, PCS Joint Venture
submitted to the EPA Phase I of a work plan to conduct a Remedial Investigation
and Feasibility Study ("RI/FS") of certain releases to the soil and groundwater
of the PCS Joint Venture facility in Lakeland, Florida and other area properties
(collectively, "the site"). The Florida Department of Environmental Protection
("FDEP") had also commenced an investigation and filed a lawsuit against PCS
Joint Venture and a number of other defendants regarding the site, but this
action has been relatively inactive since EPA became involved. In 2000, PCS
Joint Venture and another party completed an interim removal action in which
contaminated soils at the site were excavated. PCS Joint Venture continued to
assess and evaluate the nature and extent of the impacts at the site. No final
determination has yet been made of the nature, timing or cost of remedial action
that may be needed nor to what extent costs incurred may be recoverable from
third parties.

     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's financial condition or results of operations.

28. 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, 2000 were $268.9 (1999 - $254.7; 1998 - $252.5).

     Account balances resulting from the Canpotex transactions are included in
the Consolidated Statements of Financial Position and settled on normal trade
terms.

                                       61
<PAGE>   64


Notes to the consolidated financial statements in millions of US dollars

29. 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 QUARTER   SECOND QUARTER    THIRD QUARTER    FOURTH QUARTER
                                                          -------------   --------------    -------------    --------------
<S>                                                         <C>              <C>              <C>               <C>
2000
Net sales                                                   $  590.6         $  560.8         $  542.7          $  537.5
                                                            --------         --------         --------          --------
Gross Margin                                                $  133.7         $  122.4         $  120.6          $  106.1
                                                            --------         --------         --------          --------
Operating Income                                            $  106.6         $   97.2         $   80.1          $   42.9
                                                            --------         --------         --------          --------
Net Income                                                  $   71.6         $   60.1         $   46.4          $   19.9
                                                            --------         --------         --------          --------
Net Income per Share                                        $   1.34         $   1.15         $   0.89          $   0.39
                                                            --------         --------         --------          --------

1999
Net sales                                                   $  549.3         $  564.5         $  453.6          $  493.7
                                                            --------         --------         --------          --------
Gross Margin                                                $  122.0         $  140.7         $   66.3          $   79.3
                                                            --------         --------         --------          --------
Provision for plant closures and office consolidation       $     --         $     --         $   55.4          $    9.6
                                                            --------         --------         --------          --------
Provision for asset impairment                              $     --         $     --         $  525.1          $    1.5
                                                            --------         --------         --------          --------
Operating Income (Loss)                                     $   74.0         $   96.3         $ (552.0)         $   28.7
                                                            --------         --------         --------          --------
Net Income (Loss)                                           $   39.5         $   61.8         $ (524.2)         $   10.9
                                                            --------         --------         --------          --------
Net Income per Share (Loss)                                 $   0.73         $   1.14         $  (9.66)         $   0.20
                                                            --------         --------         --------          --------
</TABLE>

     Net Income (Loss) 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.

30. COMPARATIVE FIGURES

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

31. UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES

     A description of certain significant differences between Canadian GAAP and
US GAAP follows:

     MARKETABLE SECURITIES: The Company's investment in Israel Chemicals Ltd.
("ICL") is stated at cost. US GAAP would require that this investment be
classified as available-for-sale and be stated at market value.

     PROPERTY, PLANT AND EQUIPMENT AND GOODWILL: The net book value of property,
plant and equipment and goodwill under Canadian GAAP is higher than under US
GAAP as provisions for asset impairment under Canadian GAAP were measured based
on the undiscounted cash flow from use together with the residual value of
assets, whereas under US GAAP they were measured based on fair value, which was
lower than the undiscounted cash flow from use together with the residual value
of the assets.

     PRE-OPERATING COSTS: Operating costs incurred during the start-up phase of
new projects are deferred until commercial production levels are reached, at
which time they are amortized over the estimated life of the project. US GAAP
would require that these costs be expensed as incurred.

     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 in
accordance with Canadian GAAP. 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.

     COMPREHENSIVE INCOME: Comprehensive income is not recognized under Canadian
GAAP. US GAAP would require the recognition of comprehensive income.

     PROVISION FOR ASSET IMPAIRMENT: The provision for asset impairment under
Canadian GAAP is measured based on the undiscounted cash flow from use together
with the residual value of the asset. US GAAP would require that the provision
for asset impairment be measured based on fair value, which resulted in
additional writedowns of property, plant and equipment and goodwill for US GAAP
purposes.

     PROVISION FOR PLANT CLOSURES: The provision for plant closures under
Canadian GAAP includes the non-cash parts inventory writedown. US GAAP would
require that this writedown be included in selling and administrative expenses.

     The provision for plant closures under Canadian GAAP also includes
severance expense, which was accrued when management having the appropriate
authority approved the plan. US GAAP would require that severance not be accrued
until the plan was announced to the employees.

     DEPRECIATION AND AMORTIZATION: Depreciation and amortization under Canadian
GAAP is higher than under US GAAP as the net book values of property, plant and
equipment and goodwill under Canadian GAAP are higher than under US GAAP.

     STOCK-BASED COMPENSATION: In 1995, the Financial Accounting Standards Board
issued SFAS 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 (LOSS), NET INCOME (LOSS) PER SHARE,
TOTAL ASSETS AND SHAREHOLDERS' EQUITY:

                                       62

<PAGE>   65



Notes to the consolidated financial statements in millions of US dollars

31. United States Generally Accepted Accounting Principles (continued)

<TABLE>
<CAPTION>
                                                                      2000              1999              1998
                                                                --------------    --------------    --------------
<S>                                                             <C>               <C>               <C>
Net income (loss) as reported - Canadian GAAP                   $        198.0    $       (412.0)   $        261.0
Items increasing (decreasing) reported net income (loss)
 Provision for plant closures                                              9.0                --                --
 Provision for asset impairment                                             --            (218.0)               --
 Pre-operating costs                                                     (19.3)             (4.6)               --
 Depreciation and amortization                                             9.8                --                --
 Future income taxes                                                       0.3              52.0                --
                                                                --------------    --------------    --------------
Approximate net income (loss) - US GAAP                         $        197.8    $       (582.6)   $       261.0
                                                                --------------    --------------    --------------
Weighted average shares outstanding - US GAAP                       52,410,000        54,230,000        54,177,000
                                                                --------------    --------------    --------------
Approximate net income (loss) per share - US GAAP               $         3.77    $       (10.74)   $         4.82
                                                                --------------    --------------    --------------

Total assets as reported - Canadian GAAP                        $      4,145.7    $      3,916.8    $      4,534.3
Items increasing (decreasing) reported total assets
 Available-for-sale security (unrealized holding gain)                    41.7              26.2              14.9
 Property, plant and equipment                                          (160.2)           (168.6)               --
 Pre-operating costs                                                     (23.9)             (4.6)               --
 Goodwill                                                                (48.0)            (49.3)               --
                                                                --------------    --------------    --------------
Approximate total assets - US GAAP                              $      3,955.3    $      3,720.5    $      4,549.2
                                                                --------------    --------------    --------------

Total shareholders' equity as reported - Canadian GAAP          $      2,012.1    $      1,962.4    $      2,453.8
Items increasing (decreasing) reported shareholders' equity
Other comprehensive income, net of tax                                    28.1              16.9               8.9
 Provision for plant closures                                              9.0                --                --
 Provision for asset impairment                                         (218.0)           (218.0)               --
 Depreciation and amortization                                             9.8                --                --
 Pre-operating costs                                                     (23.9)             (4.6)               --
 Future income taxes                                                      52.3              52.0                --
                                                                --------------    --------------    --------------
Approximate shareholders' equity - US GAAP                      $      1,869.4    $      1,808.7    $      2,462.7
                                                                --------------    --------------    --------------
</TABLE>

SUPPLEMENTAL US GAAP DISCLOSURE

AVAILABLE-FOR-SALE SECURITY

     The Company's investment in ICL is classified as available-for-sale. The
fair market value of this investment at December 31, 2000 was $134.5 and the
unrealized holding gain was $41.7.

NEW ACCOUNTING PRONOUNCEMENTS

     During 2000, the Financial Accounting Standards Board ("FASB") issued SFAS
No.138, "Accounting for Certain Derivative Instruments and Certain Hedging
Activities (an amendment of FASB Statement No.133)". The impact of the adoption
of SFAS No.133 on the Company's Consolidated Statements of Income and Retained
Earnings should not be significant as the Company has designated all of its
hedges as cash flow hedges and historical data have shown that the prior hedges
have been highly effective. The effect of SFAS No.133 on the Consolidated
Statements of Financial Position will likely be significant. Current assets and
comprehensive income are likely to increase or decrease significantly as the
Company records the change in fair value of its hedges. Whether this fair value
will increase or decrease will depend on which way the price of natural gas
moves. SFAS No.133 will have no effect on the Consolidated Statements of Cash
Flow. The Company expects that at January 1, 2001 (when the price of natural gas
was at near-record highs), it will record a cumulative transition adjustment to
Other Comprehensive Income of $218.4 million for derivatives designated in cash
flow-type hedges prior to adopting SFAS No.133. The spot price of natural gas
has fallen significantly since that time.

STOCK COMPENSATION PLANS

     The Company has two stock-based compensation plans which are described in
Note 16. The Company applies APB 25 and related interpretations in accounting
for its plans. No compensation cost has been recognized under APB 25 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. 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 SFAS No.123, the Company's net income (loss) and net income (loss) per share
for the years ending December 31, 2000, 1999 and 1998 would have been reduced to
the pro forma amounts indicated below:

<TABLE>
<CAPTION>
                                                  2000                            1999                           1998
                                       -------------------------      --------------------------      --------------------------
                                       AS REPORTED     PRO FORMA      AS REPORTED      PRO FORMA      AS REPORTED      PRO FORMA
                                       -----------     ---------      -----------      ---------      -----------      ---------
<S>                                      <C>            <C>             <C>             <C>              <C>             <C>
Net income (loss)                        $197.8         $184.6          $(582.6)        $(602.5)         $261.0          $239.7
Net income (loss) per share              $ 3.77         $ 3.52          $(10.74)        $(11.11)         $ 4.82          $ 4.42
</TABLE>

                                       63


<PAGE>   66


Notes to the consolidated financial statements in millions of US dollars

31. United States Generally Accepted Accounting Principles (continued)

In calculating the foregoing pro forma amounts, the fair value of each option
grant was estimated as of the date of grant using the Modified Black-Scholes
option-pricing model with the following weighted average assumptions:

<TABLE>
<CAPTION>
                                          2000       1999         1998
                                        -------    -------     --------
<S>                                       <C>        <C>          <C>
Expected dividend                         $1.00      $0.99        $0.92
Expected volatility                         31%        28%          30%
Risk-free interest rate                   5.76%      6.03%        4.83%
Expected life of option                 8 YEARS    8 years     10 years
Expected forfeitures                        10%        10%          26%
</TABLE>


     The following supplemental schedules present the Consolidated Financial
Position, Income and Retained Earnings, Cash Flow and Comprehensive Income in
accordance with US GAAP as adjusted for the GAAP differences described in this
note.

SUPPLEMENTAL SCHEDULE OF CONSOLIDATED FINANCIAL POSITION
As at December 31

<TABLE>
<CAPTION>
                                                           2000         1999
                                                       ----------    ----------
<S>                                                    <C>           <C>
ASSETS
Current Assets
 Cash and cash equivalents                             $    100.0    $     44.0
 Accounts receivable                                        326.6         269.3
 Inventories                                                406.2         377.2
 Prepaid expenses                                            38.9          35.7
                                                       ----------    ----------
                                                            871.7         726.2
Property, plant and equipment                             2,749.9       2,708.5
Goodwill                                                     58.4          60.1
Other assets                                                275.3         225.7
                                                       ----------    ----------
                                                       $  3,955.3    $  3,720.5
                                                       ----------    ----------
LIABILITIES
Current Liabilities

 Short-term debt                                       $    488.8    $    474.5
 Accounts payable and accrued charges                       516.8         349.1
 Current portion of long-term debt                            5.7           7.4
                                                       ----------    ----------
                                                          1,011.3         831.0
Long-term debt                                              413.7         437.0
Future income tax liability                                 396.5         366.8
Accrued post-retirement/post-employment benefits            175.1         148.4
Accrued reclamation costs                                    83.0         112.2
Other non-current liabilities and deferred credits            6.3          16.4
                                                       ----------    ----------
                                                          2,085.9       1,911.8
                                                       ----------    ----------
SHAREHOLDERS' EQUITY

Share Capital                                             1,177.4       1,216.5
Contributed Surplus                                         264.2         321.5
Retained Earnings                                           420.6         274.7
Foreign Currency Translation Adjustment                     (20.9)        (20.9)
Other Comprehensive Income                                   28.1          16.9
                                                       ----------    ----------
                                                          1,869.4       1,808.7
                                                       ----------    ----------
                                                       $  3,955.3    $  3,720.5
                                                       ----------    ----------
</TABLE>

                                       64

<PAGE>   67



Notes to the consolidated financial statements in millions of US dollars

31. United States Generally Accepted Accounting Principles (continued)

SUPPLEMENTAL SCHEDULE OF CONSOLIDATED INCOME AND RETAINED EARNINGS
For the Years Ended December 31

<TABLE>
<CAPTION>
                                                             2000         1999        1998
                                                          ---------    ---------    ---------
<S>                                                       <C>          <C>          <C>
Net sales                                                 $ 2,541.0    $ 2,350.1    $ 2,601.7
Cost of goods sold                                          1,981.4      1,869.7      1,914.8
                                                          ---------    ---------    ---------
GROSS MARGIN                                                  559.6        480.4        686.9
                                                          ---------    ---------    ---------
Selling, distribution and administrative                      198.7        201.2        193.6
Provincial mining and other taxes                              77.2         77.1         80.1
Provision for plant closures and office consolidation          13.9         56.7           --
Provision for asset impairment                                   --        744.6           --
Other income                                                  (56.5)       (23.7)       (29.1)
                                                          ---------    ---------    ---------
                                                              233.3      1,055.9        244.6
                                                          ---------    ---------    ---------
OPERATING INCOME (LOSS)                                       326.3       (575.5)       442.3
INTEREST EXPENSE                                               61.6         51.5         63.8
                                                          ---------    ---------    ---------
INCOME (LOSS) BEFORE INCOME TAXES                             264.7       (627.0)       378.5
INCOME TAXES (RECOVERY)                                        66.9        (44.4)       117.5
                                                          ---------    ---------    ---------
NET INCOME (LOSS)                                             197.8       (582.6)       261.0
RETAINED EARNINGS, BEGINNING OF YEAR                          274.7        910.6        701.3
DIVIDENDS                                                     (51.9)       (53.3)       (51.7)
                                                          ---------    ---------    ---------
RETAINED EARNINGS, END OF YEAR                            $   420.6    $   274.7    $   910.6
                                                          ---------    ---------    ---------
NET INCOME (LOSS) PER SHARE - BASIC                       $    3.77    $  (10.74)   $    4.82
                                                          ---------    ---------    ---------
NET INCOME (LOSS) PER SHARE - FULLY DILUTED               $    3.77    $  (10.74)   $    4.80
                                                          ---------    ---------    ---------
DIVIDENDS PER SHARE                                       $    0.99    $    0.99    $    0.96
                                                          ---------    ---------    ---------
</TABLE>

                                       65

<PAGE>   68


Notes to the consolidated financial statements in millions of US dollars

31. United States Generally Accepted Accounting Principles (continued)

SUPPLEMENTAL SCHEDULE OF CONSOLIDATED CASH FLOW
For the Years Ended December 31

<TABLE>
<CAPTION>
                                                                       2000         1999         1998
                                                                     -------      -------      -------
<S>                                                                  <C>          <C>          <C>
OPERATING ACTIVITIES
Net income (loss)                                                    $ 197.8      $(582.6)     $ 261.0
Items not affecting cash
 Depreciation and amortization                                         177.2        191.1        190.9
 Loss (gain) on disposal of assets                                     (17.9)         0.5         (0.1)
 Provision for plant closures and office consolidation                  10.7         37.1           --
 Provision for asset impairment                                           --        744.6           --
 Provision for future income tax                                        34.2        (59.2)        97.2
 Provision for post-retirement/post-employment benefits                 10.9          7.4          6.8
CHANGES IN NON-CASH OPERATING WORKING CAPITAL
 Accounts receivable                                                   (52.2)        33.8         48.8
 Inventories                                                           (27.4)       (16.1)        (7.9)
 Prepaid expenses                                                       (3.1)         3.2        (16.6)
 Accounts payable and accrued charges                                  128.4         (5.0)         1.3
 Current income taxes                                                   15.1          8.1         (3.8)
Accrued reclamation costs                                               (2.4)       (20.7)        (7.4)
Other non-current liabilities and deferred credits                     (10.3)        (3.2)         7.8
                                                                     -------      -------      -------
CASH PROVIDED BY OPERATING ACTIVITIES                                  461.0        339.0        578.0
                                                                     -------      -------      -------
INVESTING ACTIVITIES
Additions to property, plant and equipment                            (185.6)      (118.8)      (190.2)
Acquisition of Minera Yolanda S.C.M. (Note 4)                             --        (36.9)          --
Acquisition of Albright & Wilson Company                               (32.0)          --           --
Proceeds from disposal of assets                                         8.6          1.9         31.9
Additions to other assets                                              (37.0)       (19.3)       (85.0)
                                                                     -------      -------      -------
CASH USED IN INVESTING ACTIVITIES                                     (246.0)      (173.1)      (243.3)
                                                                     -------      -------      -------
FINANCING ACTIVITIES
Proceeds from long-term obligations                                     11.1           --        143.0
Repayment of long-term obligations                                     (36.1)      (490.1)      (376.3)
Proceeds from short-term debt                                          169.5        379.6        215.0
Repayment of short-term debt                                          (155.2)          --       (222.0)
Dividends                                                              (51.9)       (53.3)       (51.7)
Repurchase of shares                                                  (104.2)       (29.3)          --
Issuance of shares                                                       7.8          3.2         16.5
                                                                     -------      -------      -------
CASH USED IN FINANCING ACTIVITIES                                     (159.0)      (189.9)      (275.5)
                                                                     -------      -------      -------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                        56.0        (24.0)        59.2
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                            44.0         68.0          8.8
                                                                     -------      -------      -------
CASH AND CASH EQUIVALENTS, END OF YEAR                               $ 100.0      $  44.0      $  68.0
                                                                     -------      -------      -------
</TABLE>

SUPPLEMENTAL SCHEDULE OF CONSOLIDATED COMPREHENSIVE INCOME
For the Years Ended December 31

<TABLE>
<CAPTION>
                                                                      2000         1999         1998
                                                                     -------      -------      -------
<S>                                                                  <C>          <C>          <C>
Net income (loss)                                                    $ 197.8      $(582.6)     $ 261.0
Other comprehensive income
 Change in unrealized holding gain on available-for-sale security       15.5         11.3         14.9
 Future income tax expense related to other comprehensive income        (4.2)        (3.4)        (6.0)
                                                                     -------      -------      -------
Other comprehensive income, net of tax                                  11.3          7.9          8.9
                                                                     -------      -------      -------
Comprehensive income (loss)                                          $ 209.1      $(574.7)     $ 269.9
                                                                     -------      -------      -------
</TABLE>

                                       66

<PAGE>   69


Shareholder information

ANNUAL MEETING

The Annual Shareholders Meeting will be held at 10:30 a.m. Central Standard Time
May 10, 2001 in the Adam Ballroom, Delta Bessborough Hotel, 601 Spadina Crescent
East, Saskatoon, Saskatchewan.

It will be carried live on the Company's web site, www.potashcorp.com.

Holders of common shares as of March 22, 2001 are entitled to vote at the
meeting and are encouraged to participate.

DIVIDEND REINVESTMENT POLICY

Registered shareholders can have dividends reinvested in newly-issued common
shares of PCS at prevailing market rates.

INFORMATION FOR SHAREHOLDERS OUTSIDE CANADA

Dividends paid to residents in countries with which Canada has bilateral tax
treaties are generally subject to the 15 percent Canadian non-resident
withholding tax. 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
government in Canada levies estate taxes or succession duties.

INVESTOR INQUIRIES

Betty-Ann Heggie, Senior Vice President,
Corporate Relations
Toll-free lines: Canada: (800) 667-0403
                 US:     (800) 667-3930
e-mail:
corporate.relations@potashcorp.com

WEB SITE: www.potashcorp.com

INTERIM REPORTS, NEWS RELEASES AND FORM 10-K

Non-registered shareholders who wish to receive quarterly reports should contact
the Corporate Relations department. News releases are available via fax and
e-mail.

Copies of the Company's most recent Form 10-K are available upon request or on
its web site.

SHARES LISTED

Toronto Stock Exchange
New York Stock Exchange

OWNERSHIP

On February 26, 2001, there were 2,385 holders of record of the Company's common
shares.

COMMON SHARE TRANSFER AGENT
In Canada:
CIBC Mellon Trust Company
Suite 750 - One Lombard Place
Winnipeg, Manitoba  R3B 0X3
Phone: (204) 987-2490
       (800) 387-0825
WEB SITE: www.cibcmellon.com

IN THE UNITED STATES:
Mellon Investor Services, L.L.C.
85 Challenger Road, Overpeck Center
Ridgefield Park, New Jersey  07660
Phone: (800) 526-0801
WEB SITE: www.chasemellon.com

Inquiries about shareholdings, share transfer requirements, direct deposit of
dividends, elimination of duplicate mailings, address changes or lost
certificates should be directed to CIBC Mellon Trust or to the Corporate
Secretary, PCS, Suite 500, 122 First Avenue South, Saskatoon, Saskatchewan S7K
7G3.

[2000 PCS Share Price - NYSE Chart]


Common Share Prices and Volumes

The adjacent 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 and the
New York Stock Exchange (composite transactions) on a quarterly basis. Potash
Corporation of Saskatchewan Inc. is on the S&P/TSE 60 index and the TSE 100.

<TABLE>
<CAPTION>
                              Toronto Stock Exchange(1)            New York Stock Exchange
                           -------------------------------     -------------------------------
                             High      Low        Volume        High      Low         Volume
                           -------   -------    ----------     ------    ------     ----------
<S>                         <C>       <C>        <C>           <C>       <C>        <C>
2000
First Quarter               87.450    61.000     8,375,483     59.688    42.000     10,064,200
Second Quarter              89.900    70.000     8,665,148     60.062    48.250     13,076,400
Third Quarter               84.000    72.500     5,966,751     57.000    48.750      7,960,100
Fourth Quarter             120.400    72.500    11,509,256     80.125    48.000     11,572,100
                           -------   -------    ----------     ------    ------     ----------
YEAR 2000                  120.400    61.000    34,516,638     80.125    42.000     42,672,800
                           -------   -------    ----------     ------    ------     ----------
1999
First Quarter              112.500    80.250     4,585,148     74.188    53.250     11,222,700
Second Quarter              95.500    73.750     5,915,180     64.188    50.188      8,975,500
Third Quarter               91.000    74.950     7,576,043     61.250    50.000      9,953,400
Fourth Quarter              76.750    62.000     6,459,241     52.125    42.563      8,098,200
                           -------   -------    ----------     ------    ------     ----------
YEAR 1999                  112.500    62.000    24,535,612     74.188    42.563     38,249,800
                           -------   -------    ----------     ------    ------     ----------
1998
First Quarter              138.200   112.000     5,456,109     97.188    78.500     13,056,600
Second Quarter             132.000   108.500     3,618,117     92.938    73.250      7,033,200
Third Quarter              114.700    75.000     5,090,801     77.375    48.375     11,262,400
Fourth Quarter             109.000    75.000     4,021,223     70.875    50.563     12,011,600
                           -------   -------    ----------     ------    ------     ----------
YEAR 1998                  138.200    75.000    18,186,250     97.188    48.375     43,363,800
                           -------   -------    ----------     ------    ------     ----------
</TABLE>

(1) Trading prices are in CDN$

                                       67


<PAGE>   70


BOARD OF DIRECTORS

[PICTURE OF ISABEL ANDERSON]                      ISABEL B. ANDERSON, of
                                                  Calgary, Alberta, a former
                                                  University of Saskatchewan
                                                  economics professor and a
                                                  specialist in international
                                                  economics and Canadian public
                                                  policy, is President and Chief
                                                  Executive Officer of A&L
                                                  Information Brokers. She
                                                  joined the PCS Board in
                                                  1989.(1,2)

[PICTURE OF DOUGLAS J. BOURNE]                    DOUGLAS J. BOURNE, of Houston,
                                                  Texas, is former Chairman and
                                                  CEO of Battle Mountain Gold
                                                  Company and of Duval
                                                  Corporation, the mining
                                                  subsidiary of Pennzoil
                                                  Company, and held many
                                                  positions in various
                                                  fertilizer and mining
                                                  associations. He was elected
                                                  to the PCS Board in 1990.(1,4)

[PICTURE OF WILLIAM J. DOYLE]                     WILLIAM J. DOYLE, President
                                                  and CEO of Potash Corporation
                                                  of Saskatchewan Inc., has
                                                  served on the PCS Board since
                                                  1989. He became President of
                                                  PCS Sales in 1987, after a
                                                  career with International
                                                  Minerals and Chemical
                                                  Corporation. He is on the
                                                  boards of Canpotex Limited,
                                                  The Fertilizer Institute and
                                                  the Potash & Phosphate
                                                  Institute, and Vice President,
                                                  Canada for the International
                                                  Fertilizer Industry
                                                  Association.(1)

[PICTURE OF THE HONOURABLE WILLARD Z. ESTEY]      THE HONOURABLE WILLARD Z.
                                                  ESTEY, Q.C., of Toronto,
                                                  Ontario, is a former Chief
                                                  Justice of Ontario and Justice
                                                  of the Supreme Court of Canada
                                                  and was named Companion, Order
                                                  of Canada, in 1991. He is a
                                                  director of CamVec
                                                  Corporation. In 1990, he
                                                  joined the PCS Board.(3,5)

[PICTURE OF DALLAS J. HOWE]                       DALLAS J. HOWE, of Calgary,
                                                  Alberta, is Chairman and CEO
                                                  of Advanced DataSystems Ltd.
                                                  and BDM Information Systems
                                                  Group of Companies. For over
                                                  25 years he has been a founder
                                                  of high technology information
                                                  and data systems companies. He
                                                  served on the Board of the PCS
                                                  Crown corporation from 1982 to
                                                  1989 and on the PCS Inc. Board
                                                  since 1991.(3,5)

[PICTURE OF JEFFREY J. MCCAIG]                    JEFFREY J. MCCAIG, of Calgary,
                                                  Alberta, is President, CEO and
                                                  a director of Trimac
                                                  Corporation. Before joining
                                                  Trimac in 1983, he was a
                                                  lawyer specializing in
                                                  corporate financing and
                                                  securities. He sits on the
                                                  boards of BOVAR Corporation
                                                  and Richland Petroleum
                                                  Corporation. He joined the PCS
                                                  Board in 2001.(5)

[PICTURE OF DONALD E. PHILLIPS]                   DONALD E. PHILLIPS, of
                                                  Brandon, Mississippi, former
                                                  President and CEO of Pitman-
                                                  Moore Inc., joined the PCS
                                                  Board in 1991 and became
                                                  Chairman in November 2000. He
                                                  is Chairman of the board of
                                                  directors of Synbiotics Inc.,
                                                  San Diego, California, and a
                                                  director of Great Lakes REIT
                                                  Inc., Oak Brook, Illinois.
                                                  (1,3)

[PICTURE OF PAUL J. SCHOENHALS]                   PAUL J. SCHOENHALS, of
                                                  Calgary, Alberta, President of
                                                  Petroleum Industry Training
                                                  Service, was Chairman of
                                                  Potash Corporation of
                                                  Saskatchewan, the Crown
                                                  corporation, from 1987 to
                                                  1989. He joined the PCS Inc.
                                                  Board in 1992. He is a former
                                                  Member of the Legislative
                                                  Assembly and Cabinet Minister
                                                  in Saskatchewan.(2,4)

[PICTURE OF DARYL K. SEAMAN]                      DARYL K. SEAMAN, Chairman and
                                                  President of Dox Investments
                                                  Inc. in Calgary, Alberta,
                                                  joined the PCS Board in 1989.
                                                  Former Chairman and CEO of Bow
                                                  Valley Industries Ltd., he is
                                                  a director of many mining and
                                                  energy companies, and co-owner
                                                  and director of the Calgary
                                                  Flames Hockey Club.(2,3)

[PICTURE OF E. ROBERT STROMBERG]                  E. ROBERT STROMBERG, Q.C., of
                                                  the Saskatchewan law firm
                                                  Robertson Stromberg, was
                                                  elected to the PCS Board in
                                                  1991. He is a member of the
                                                  boards of NorSask Forest
                                                  Products Inc. and Hitachi
                                                  Canadian Industries Ltd., a
                                                  member of the Provincial Court
                                                  Commission and Chairman of the
                                                  Saskatoon Airport
                                                  Authority.(1,4)

[PICTURE OF JACK G. VICQ]                         JACK G. VICQ, Professor
                                                  Emeritus of Accounting,
                                                  University of Saskatchewan,
                                                  was formerly Associate Dean of
                                                  Commerce and responsible for
                                                  the Centre for International
                                                  Business Studies. He sits on
                                                  committees of the Saskatchewan
                                                  and Canadian Institutes of
                                                  Chartered Accountants, and on
                                                  the board of the Saskatoon and
                                                  District Chamber of Commerce.
                                                  He joined the PCS Board in
                                                  1989.(5)

[PICTURE OF BARRIE A. WIGMORE]                    BARRIE A. WIGMORE, a Retired
                                                  Partner with New York
                                                  investment banking firm
                                                  Goldman, Sachs Group, Inc.,
                                                  headed its corporate finance
                                                  activities in the electric,
                                                  gas, pipelines and
                                                  telecommunications industries.
                                                  He writes on financial history
                                                  and current financial markets.
                                                  He joined the PCS Board in
                                                  1989.(2,3)

[PICTURE OF THOMAS J. WRIGHT]                     THOMAS J. WRIGHT, of Raleigh,
                                                  North Carolina, was elected to
                                                  the PCS Board in May 1999 and
                                                  retired on June 30 as
                                                  President of PCS Phosphate.
                                                  Formerly President and CEO of
                                                  Texasgulf Inc., the
                                                  predecessor to PCS Phosphate,
                                                  he has been active in many
                                                  fertilizer industry
                                                  associations.(3,4)

-----
(1) executive committee
(2) compensation committee
(3) corporate governance and nominating committee
(4) environmental affairs committee
(5) audit committee

                                       68



<PAGE>   71


CORPORATE INFORMATION

CORPORATE OFFICERS AND KEY MANAGEMENT

POTASH CORPORATION OF SASKATCHEWAN INC.

WILLIAM J. DOYLE
President and Chief Executive Officer

WAYNE R. BROWNLEE
Senior Vice President, Treasurer and Chief Financial Officer

JAMES F. DIETZ
Executive Vice President and Chief Operating Officer

JOHN L. M. HAMPTON
Senior Vice President, General Counsel and Secretary

BETTY-ANN L. HEGGIE
Senior Vice President, Corporate Relations

BARRY E. HUMPHREYS
Senior Vice President and Chief Information Officer

BARBARA JANE IRWIN
Senior Vice President, Administration

G. DAVID DELANEY
President, PCS Sales

GARTH W. MOORE
President, PCS Potash

THOMAS J. REGAN, JR.
President, PCS Phosphate

KAREN G. CHASEZ
Vice President, Procurement

ROBERT A. JASPAR
Vice President, Internal Audit

DONALD R. ROBERTS
Vice President, Safety, Health and Environment

DENIS A. SIROIS
Vice President and Corporate Controller

CORPORATE OFFICES

POTASH CORPORATION OF SASKATCHEWAN INC.
Suite 500, 122 -1st Avenue South
Saskatoon, SK  S7K 7G3
Phone: (306) 933-8500

POTASHCORP
1101 Skokie Boulevard, Suite 400
Northbrook, IL  60062
Phone: (847) 849-4200

FINANCIAL TERMS

TOTAL SHAREHOLDER RETURN = (change in market price per common share + dividends
per share) / beginning market price per common share

BOOK VALUE PER SHARE = total shareholders' equity / number of common shares
outstanding

NET DEBT TO CAPITAL (excluding operating leases) = (total debt - cash and cash
equivalents) / (total debt - cash and cash equivalents + total shareholders'
equity)

NET DEBT TO CAPITAL (including operating leases) = (total debt - cash and cash
equivalents + present value of future operating lease payments) / (total debt -
cash and cash equivalents + total shareholders' equity + present value of future
operating lease payments)

CASH FLOW RETURN = (operating income - cash taxes paid + depreciation and
amortization + unusual non-cash items) / weighted average (assets + accumulated
depreciation and amortization - non-interest bearing current liabilities)

EBITDA represents Earnings (net income) Before Interest, Taxes,
Depreciation and Amortization

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

GLOSSARY

FERTILIZER TONNES

Metric tonne            2204.6 pounds, used for offshore sales; to convert to
                        short tons, multiply by 1.1023

Short ton               2000 pounds, used for sales in the United States; to
                        convert to metric tonnes, divide by 1.1023

K(2)O tonne             Measures the potassium content of fertilizers having
                        different chemical analyses; to convert to a KCl tonne,
                        divide by 0.61

P(2)O(5) tonne          Measures the phosphorus content of fertilizers having
                        different chemical analyses

N tonne                 Measures the nitrogen content of fertilizers having
                        different chemical analyses

Nutrient tonne          Measures the nutrient weight of potassium, phosphate
                        and nitrogen fertilizers; consists of K(2)O tonnes,
                        P(2)O(5) tonnes and N tonnes

Product tonne           Standard measure of the weights of all types of potash,
                        phosphate and nitrogen products


SCIENTIFIC TERMS

POTASH               KCl            potassium chloride
                     K(2)O          potassium oxide
                     KNO(3)         potassium nitrate
                     NaNO(3)        sodium nitrate

PHOSPHATE            P(2)O(5)       phosphoric acid
                     MGA            merchant grade acid, 54% P(2)O(5) (liquid)
                     DAP            diammonium phosphate, 46% P(2)O(5) (solid)
                     MAP            monoammonium phosphate, 52% P(2)O(5) (solid)
                     SPA            superphosphoric acid, 70% P(2)O(5) (liquid)

NITROGEN             NH(3)          anhydrous ammonia, 82% N (gas, liquid)
                     HNO(3)         nitric acid (liquid)
                     NH(4)NO(3)     ammonium nitrate, 34% N (solid, liquid)
                     CO(NH(2))(2)   urea, 46% N (solid)
                     UAN solution   nitrogen solution, 28-32% N (liquid)

NITROGEN PRODUCTION FACTORS

To produce
1 short ton of:                     Requires:
---------------                     ---------
Ammonia                             33.5 million Btu of natural gas

Urea solution                       0.58 tons of ammonia
                                    0.78 tons of carbon dioxide (CO(2))

Urea prills (46% N)                 1.01 tons of urea solution

Nitric acid (22% N)                 0.29 tons of ammonia

Ammonium nitrate solution           0.80 tons of nitric acid
                                    0.22 tons of ammonia

UAN solution (32% N)                0.45 tons of ammonium nitrate solution
                                    0.35 tons of urea solution

[Recycle logo]      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.



<PAGE>   72



                  [PCS VS. REST OF FERTILIZER INDUSTRY GRAPH]
                      Cumulative Total Shareholder Return

                                    [Chart]

By applying its successful operating strategy to the best assets in the world,
PotashCorp has been able to outperform its competitors in total shareholder
return, and expects to continue to do so.




[POTASHCORP LOGO]

    Suite 500, 122 - 1st Avenue South Saskatoon Saskatchewan Canada S7K 7G3
                               www.potashcorp.com