<PAGE>   1
 
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                    U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                      ------------------------------------
                                   FORM 10-K
 
                 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
 
                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
                         COMMISSION FILE NUMBER 1-10351
 
                      ------------------------------------
 
                    POTASH CORPORATION OF SASKATCHEWAN INC.
           (Exact name of the registrant as specified in its charter)
 
<TABLE>
<S>                                            <C>
                 SASKATCHEWAN                                       N/A
       (State or other jurisdiction of                        (I.R.S. employer
        incorporation or organization)                      identification no.)
</TABLE>
 
                             122 - 1ST AVENUE SOUTH
                    SASKATOON, SASKATCHEWAN, CANADA S7K 7G3
                                  306-933-8500
 (Address and telephone number of the registrant's principal executive offices)
 
          SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
 
<TABLE>
<S>                                            <C>
             TITLE OF EACH CLASS                    NAME OF EXCHANGE ON WHICH REGISTERED
         Common Shares, No Par Value                      New York Stock Exchange
(Including rights under the Shareholder Rights
                  Agreement)
</TABLE>
 
        SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
 
     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.  Yes [X]  No
 
     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.  [X]
 
     At March 15, 1999, the registrant had 54,253,103 Common Shares outstanding,
and the aggregate market value of the 54,209,474 Common Shares held by
non-affiliates of the registrant was approximately $3,005,237,715.
 
                      DOCUMENTS INCORPORATED BY REFERENCE
 
     Portions of the registrant's Annual Report to Shareholders for the fiscal
year ended December 31, 1998 (the "1998 Annual Report") are incorporated by
reference into Part II.
 
     Portions of the registrant's Proxy Circular for its Annual Meeting of
Shareholders to be held on May 6, 1999 (the "1999 Proxy Circular") are
incorporated by reference into Part III.
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<PAGE>   2
 
                                     PART I
 
ITEMS 1 AND 2.  BUSINESS AND PROPERTIES.
 
GENERAL
 
     Potash Corporation of Saskatchewan Inc. ("PCS") and its direct and indirect
subsidiaries (together with PCS' predecessors, the "Company") is one of the
world's largest integrated fertilizer and related industrial and feed products
companies. In 1998, the Company's potash production represented an estimated 16%
of global potash production. In 1998, the Company had 24% of global potash
capacity and an estimated 57% of global excess potash capacity, giving it more
available potash capacity than any single company or country other than Canada.
The Company is the third largest producer of phosphates worldwide by capacity,
currently representing approximately 9% of world phosphates production and 7% of
world phosphates capacity. The Company is also the largest nitrogen producer in
the Western Hemisphere.
 
     PCS is incorporated under the laws of the Province of Saskatchewan and is
the successor to a corporation without share capital established by the Province
of Saskatchewan in 1975. Between 1976 and 1990, the Company acquired substantial
interests in the Saskatchewan potash industry. It purchased the Cory mine in
1976, the Rocanville and Lanigan mines in 1977, and, by 1990, 100% of the Allan
mine when the Company acquired all of the outstanding shares of Saskterra
Fertilizers Ltd. In addition, in 1978 the Company acquired reserves at
Esterhazy, which are mined by a third party.
 
     In November 1989, the Company was privatized by the Province of
Saskatchewan through the sale of 12.86 million common shares (the "Common
Shares") to the public at Cdn$18.00 per Common Share. While the Province of
Saskatchewan initially retained an ownership interest in the Company, this
interest had been reduced to zero by the end of 1993. At the time of
privatization, limitations on ownership of Common Shares were imposed in order
to restrict the ability of non-residents of Canada to own and vote the Common
Shares and to restrict any one person or group of associated persons from
holding more than 5% of the Common Shares, regardless of residency or
citizenship. In 1994, all restrictions on the holdings of the Common Shares were
eliminated.
 
     In October 1993, the Company acquired from Rio Algom Limited ("Rio") its
New Brunswick potash mine and port facilities and its Patience Lake mine in
Saskatchewan (the "Rio Acquisition").
 
     In April 1995, the Company purchased all of the outstanding shares of
Texasgulf Inc. ("Texasgulf") from Elf Aquitaine, Inc. ("Elf (USA)") and Williams
Acquisition Holding Company, Inc. ("Williams"), for an aggregate purchase price
of $833 million (including acquisition costs). At the time of the acquisition,
the name "Texasgulf Inc." was changed to PCS Phosphate Company, Inc. ("PCS
Phosphate"). PCS Phosphate manufactures and sells solid and liquid phosphate
fertilizers, animal feed supplements, and purified phosphoric acid which is used
in food products and industrial processes. Its facility in Aurora, North
Carolina is the largest vertically-integrated phosphate mine and processing
plant in the world. Other assets of PCS Phosphate include: animal feed plants in
four states; two industrial phosphoric acid plants owned through a 50% interest
in a joint venture carrying on business as Albright & Wilson Company
("Albright"); a solution potash and salt mine in Moab, Utah; an undivided 50%
interest in an ammonia storage terminal in Savannah, Georgia; and PCS
Phosphate's product distribution infrastructure.
 
     In October 1995, the Company purchased all of the outstanding shares of
White Springs Agricultural Chemicals, Inc. ("White Springs") from Occidental
Chemical Corporation ("OxyChem"), for an aggregate purchase price of $291.5
million (including acquisition costs). White Springs' primary assets are a
phosphate mine and two chemical plant complexes in northern Florida, Swift Creek
and Suwannee River, and a bulk terminal facility in Jacksonville, Florida. Other
assets of White Springs include an animal feed plant in Davenport, Iowa, two
additional animal feed plants at the Suwannee River facility, and the remaining
undivided 50% interest in the ammonia storage terminal in Savannah, Georgia
owned with PCS Phosphate.
 
     In November 1995, the Company, in an underwritten public offering, sold 2.3
million Common Shares at $73 per share, for gross proceeds of $167,900,000. The
offering proceeds were used in connection with the Company's purchase of the
shares of White Springs.
 
                                       I-1
<PAGE>   3
 
     In March 1997, the Company through its subsidiary PCS Nitrogen, Inc. ("PCS
Nitrogen") acquired all of the outstanding shares of Arcadian Corporation
("Arcadian") in exchange for 8,029,092 Common Shares and $563.6 million in cash.
PCS Nitrogen produces nitrogen fertilizers and nitrogen chemicals at facilities
in Georgia, Iowa, Louisiana, Nebraska, Ohio and Tennessee in the United States,
and has large scale operations in Trinidad. Other assets of PCS Nitrogen include
a 50% interest in a joint venture that owns and operates an ammonia storage
terminal near Houston, Texas and a 50% joint venture interest in a carbon
dioxide processing operation at PCS Nitrogen's plant in Augusta, Georgia.
 
     In December 1998, the Company purchased, pursuant to a public offering by
the State of Israel, 108,359,925 Ordinary Shares of Israel Chemicals Ltd.
("ICL") for an aggregate purchase price of NIS 382,510,535 (approximately $92
million). This purchase represented 9.03% of the issued and outstanding Ordinary
Shares of ICL. ICL, through its subsidiaries, is a potash, phosphate and bromine
producer and is also involved in other specialty chemical products.
 
     PCS has its head office and executive offices at Suite 500, 122 - 1st
Avenue South, Saskatoon, Saskatchewan, Canada S7K 7G3. In this Form 10-K, the
term "Company" means PCS, its predecessors and its direct and indirect
subsidiaries unless the context otherwise indicates.
 
     The Company has three principal business segments: potash, phosphate and
nitrogen. For information with respect to the net sales revenue, operating
income and assets attributable to each segment and to the Company's domestic and
international sales, see Note 17 to the Company's audited consolidated financial
statements as at December 31, 1998 and 1997 and for each of the three years
ended December 31, 1998 (together with the Notes thereto, the "Consolidated
Financial Statements"), incorporated by reference under Item 8.
 
     The Company presents its financial statements in accordance with accounting
principles generally accepted in Canada ("Canadian GAAP"). See Note 27 to the
Consolidated Financial Statements for a discussion of certain significant
differences between Canadian GAAP and accounting principles generally accepted
in the United States as they relate to the Company.
 
     Unless otherwise specified, dollar amounts are stated in U.S. Dollars.
 
     Except for the historical statements and discussions contained herein,
statements contained in this Report on Form 10-K constitute "forward looking
statements" within the meaning of Section 27A of the U.S. Securities Act of 1933
and Section 21E of the U.S. Securities Exchange Act of 1934. Forward looking
statements may include words such as "expect", "estimate", "project",
"anticipate", "should", "intend" and similar expressions or variations on such
expressions. Any filing of the Company with the U.S. Securities and Exchange
Commission may include forward looking statements. In addition, other written or
oral statements which constitute forward looking statements have been made and
may in the future be made by or on behalf of the Company, including statements
concerning future operating and financial performance, the Company's share of
new and existing markets, general industry trends and the Company's performance
relative thereto and the Company's expectations as to requirements for capital
expenditures and environmental matters.
 
     These forward looking statements rely on a number of assumptions concerning
future events and are subject to a number of uncertainties and other factors,
many of which are outside the Company's control, that could cause actual results
to differ materially from such statements. These factors include, but are not
limited to, fluctuations in supply and demand in fertilizer, sulfur and
petrochemical markets, changes in competitive pressures, including pricing
pressures, changes in capital markets, changes in currency and exchange rates,
unexpected geological and environmental conditions, imprecision in reserve
estimates, the outcome of legal proceedings and changes in government policy and
regulation, including environmental regulation.
 
     The Company disclaims any obligation to update or revise any forward
looking statements, whether as a result of new information, future events or
otherwise.
 
                                       I-2
<PAGE>   4
 
POTASH OPERATIONS
 
     The Company's potash operations include the mining and production of
potash, which is predominantly used as fertilizer.
 
PROPERTIES
 
     The Company controls the right to mine 695,800 acres of land in
Saskatchewan. Included in these holdings are mineral rights to 492,500 acres
contained in blocks around the six mines in which the Company has an interest,
of which acres approximately 35% are owned by the Company, approximately 50% are
under lease from the Province of Saskatchewan and approximately 15% are leased
from other parties. The majority of the leases are for 21-year terms, renewable
at the Company's option. The Company's remaining 203,300 acres are located
elsewhere in Saskatchewan.
 
     Potash is mined by the Company from two main potash bearing formations in
Saskatchewan; the Patience Lake member of the prairie evaporites in the north
and the Esterhazy member of the prairie evaporites in the south. The Patience
Lake member is mined at the Lanigan, Allan, Patience Lake and Cory mines, and
the Esterhazy member is mined at the Rocanville and Esterhazy mines.
 
     Under a long-term mining and processing agreement (the "Mining and
Processing Agreement") effective through 2026, International Minerals & Chemical
(Canada) Limited Partnership ("IMC") mines and processes PCS reserves at the
Esterhazy mine. PCS has the option to terminate this agreement every five years.
It did not opt to give notice to terminate in December 1995. IMC has the option
of abandoning the mine at any time after 2011, thus terminating the Mining and
Processing Agreement. In 1998, the Mining and Processing Agreement was amended
to provide for the operation of the agreement on a calendar year basis as
opposed to a fiscal year ending June 30. In each year the maximum the Company is
permitted to take under the Mining and Processing Agreement is 952,500 tonnes
and the minimum required amount is 453,600 tonnes. For the year ending December
31, 1999, the Company has notified IMC that it requires 726,700 tonnes of
finished product.
 
     Water inflow at the Esterhazy mine has continued, to a greater or lesser
degree, since December 1985. Substantial pumping capacity has been installed and
remedial efforts have been undertaken. The Company's share of water inflow
remediation costs for 1998 was $4.4 million. IMC has stated that it will
continue conventional mining. PCS has no indication from IMC that solution
mining or substitute shafts will be pursued at this time.
 
     Potash is also produced by the Company at its New Brunswick mine from the
flank of an elongated salt structure and at its solution mining and milling
operation in Moab, Utah.
 
     In the first quarter of 1998, the Company acquired all of the outstanding
shares of Potash Company of Canada Limited ("Potacan"). Potacan's mine flooded
in 1997 and its primary asset is a potash mill facility near Cassidy Lake, New
Brunswick. The mill is currently being used to further process standard grade
product from certain of the Company's other mine sites into coarse and granular
product.
 
PRODUCTION
 
     The Company produces potash using both conventional and solution mining
methods. In conventional operations, shafts are sunk to the ore body and mining
machines cut out the ore, which is lifted to the surface for processing. In
solution mining, the potash is dissolved in a warm brine and pumped to the
surface for processing.
 
     In 1998, the Company's conventional potash operations mined 20.56 million
tonnes of ore at an average grade of 22.3% K(2)O. In 1998 the Company's potash
produced consisted of 6.99 million tonnes of potash (KCl) with an average grade
of 61.02% K(2)O, representing approximately 41% of North American production.
 
     The Company's present annual potash production capacity is approximately
12.2 million tonnes KCl, which includes maximum annual production under the
Mining and Processing Agreement with IMC of approximately one million tonnes at
Esterhazy. In December 1998, the Company's production capacity
                                       I-3
<PAGE>   5
 
represented approximately 53% of the North American total while its excess
capacity was an estimated 89% of North American excess production capacity. The
Company allocates production among its mines on the basis of various factors,
including the grades of product which can be produced and cost efficiency. The
Patience Lake mine, which was originally a conventional underground mine, now
employs a solution mining method, while the other Saskatchewan mines which the
Company owns or in which it has an interest employ conventional underground
mining methods.
 
     The New Brunswick mine is a conventional cut and fill mine, while the Moab,
Utah mine employs a solution mining method. In addition to their potash
production, these mines also produced 897,674 tonnes of sodium chloride (salt)
in 1998.
 
     As part of the Rio Acquisition, the Company granted a royalty interest to
Rio based upon production and revenue from the New Brunswick and Patience Lake
potash mines and mills (the "Royalty"). The terms of the Royalty provide that if
production meets specified base production levels or the sales of potash are at
prices which meet specified base sales prices, a royalty per tonne is to be
paid, calculated on a formula basis. Payments under the Royalty are limited to a
term expiring October 7, 2003 and to a maximum aggregate payment of Cdn$50
million. No payments have been made in respect of the Royalty to date.
 
RESERVES
 
     The Company estimates that its conventional mines in Saskatchewan contained
4.93 billion tonnes of recoverable ore at an average grade of 22.9% K(2)O as at
December 31, 1998, and that such ore will yield 1.6 billion tonnes of finished
product (KCl) at an average grade of 60% K(2)O.
 
     The Company's ore reserve estimates for its conventional mining operations
in Saskatchewan are based on exploration drill hole data, seismic data and
actual mining results during the past 25 years. The Company's estimated
recoverable ore and the estimated volumes of finished product from such ore are
as follows:
 
<TABLE>
<CAPTION>
                                                  RECOVERABLE    FINISHED
MINE                                                  ORE        PRODUCT
----                                              -----------    --------
                                                   (MILLIONS OF TONNES)
<S>                                               <C>            <C>
Allan...........................................    1,282.0        412.8
Cory............................................    1,073.4        358.4
Esterhazy.......................................       79.0         25.2
Lanigan.........................................    1,852.4        597.8
Rocanville......................................      642.4        204.6
                                                    -------      -------
  Total.........................................    4,929.3      1,598.8
                                                    =======      =======
</TABLE>
 
     The Company believes that, with production rates at full capacity and
utilizing current technology, each of the Allan, Cory and Lanigan mines has a
reserve life in excess of 100 years, the Rocanville mine has a reserve life in
excess of 90 years, and that the Esterhazy mine has a reserve life of at least
20 years.
 
     Given the characteristics of the solution mining method employed at the
Patience Lake mine, it is not possible to estimate definitively the productive
capacity of or the recoverable ore from this operation. However, based on
information obtained upon the acquisition of the mine, current technology and
the present mining area for this operation, the Company believes that the mine
has a reserve life of at least 40 years for the existing mine workings.
Different techniques will have to be utilized to mine reserves outside of the
existing mine workings.
 
     Based on geophysics, exploration drill hole data, definition drilling
underground and actual mining results, the Company estimates proven reserves of
49.9 million tonnes of recoverable ore and 18.2 million tonnes of estimated
finished product (KCl) at its New Brunswick mine. The Company believes that,
based upon its proven reserves, the New Brunswick mine has a reserve life of at
least 23 years with production at full capacity. The Company estimates that
probable reserves at the New Brunswick mine consist of 200 million tonnes of
recoverable ore and 72 million tonnes of estimated finished product (KCl). The
Company believes
 
                                       I-4
<PAGE>   6
 
that, based upon its proven and probable reserves, the New Brunswick mine has a
reserve life in excess of 100 years at full production capacity and utilizing
current technology.
 
     The Moab solution operation has an estimated remaining life of 8 years, at
diminishing capacity.
 
PHOSPHATE OPERATIONS
 
     The Company mines phosphate ore and manufactures solid and liquid
fertilizers, animal feed supplements and purified phosphoric acid which is used
in food products and industrial processes.
 
PROPERTIES
 
     The Company conducts its phosphate operations primarily at two facilities,
one a 35,000-acre facility near Aurora, North Carolina (the "Aurora Facility")
and the other a 96,000-acre facility near White Springs in northern Florida (the
"White Springs Facility"). The Company believes the Aurora Facility to be the
largest integrated phosphate mine and phosphate processing complex at one site
in the world. The Aurora Facility includes a six million tonne per-year mining
operation, four sulfuric acid plants, four phosphoric acid plants, a liquid
fertilizer (11-37-0) plant, a superphosphoric acid plant, two diammonium
phosphate ("DAP") plants and a solid fertilizer plant capable of producing DAP,
granular triple superphosphate ("GTSP") or monoammonium phosphate ("MAP"). The
Company has also entered into the Albright joint venture which produces high
purity phosphoric acid at Aurora. The White Springs Facility is the third
largest P(2)O(5) producer, by capacity, in the United States, with an annual
capacity of 1.1 million tonnes. The White Springs Facility includes a mine and
two production facilities, Suwannee River and Swift Creek, with two sulfuric
acid plants, three phosphoric acid plants, two DAP plants, a superphosphoric
acid plant, a dicalcium phosphate plant and a defluorinated phosphate rock plant
located at the Suwannee River complex and two sulfuric acid plants and a
phosphoric acid plant located at the Swift Creek complex. The Company's other
properties include animal feed plants in Davenport, Iowa; Kinston, North
Carolina; Marseilles, Illinois; Saltville, Virginia; and Weeping Water,
Nebraska, and bulk terminal facilities at Jacksonville, Florida and Morehead
City, North Carolina.
 
     At its Geismar, Louisiana facility, acquired as part of the Arcadian
acquisition, the Company manufactures a variety of phosphate products that are
used for agricultural and industrial purposes.
 
PRODUCTION
 
     The Company extracts phosphate ore using surface mining techniques. At each
mine site, the ore is mixed with recycled water to form a slurry, which is
pumped from the mine site to the Company's processing facilities. The ore is
then screened to remove coarse materials, washed to remove clay and floated to
remove sand to produce phosphate "rock". The annual production capacity of the
Company's mines is currently 9.6 million tonnes of phosphate rock. During 1998,
the Aurora Facility's total production of phosphate rock was 4.7 million tonnes
and the White Springs Facility's total production of phosphate rock was 3.4
million tonnes. The Company generally operates its phosphate mine and phosphate
processing plants 24 hours a day, seven days a week, using rotating shifts. The
sequence for mining portions of the Aurora property has been identified in the
permit issued by the U.S. Army Corps of Engineers in 1997. For the next two
years, the Company expects to be mining in an area of non-optimal mining
conditions. The quality and condition of the ore is relatively inferior to ore
previously mined at the Aurora facility. This, combined with the general
configuration of the area, does not allow efficient use of the Company's mining
equipment and technology. Following this two-year period, the Company expects to
enter areas believed to hold ore superior in thickness and quality, located
closer to the Company's chemical plants, and configured so as to generally allow
efficient use of Company mining equipment and technology.
 
     Phosphate rock is the major input in the Company's phosphorus processing
operations. In addition to phosphate ore, the principal raw materials required
by the Company are sulfur, sulfuric acid and ammonia. The production of
phosphoric acid requires substantial quantities of sulfur, which the Company
purchases from third parties. In December 1997, the Company entered into a
ten-year supply contract with an offshore supplier to supply a portion of the
Company's sulfur requirements and also committed to build a multipurpose
ocean-going vessel to ship such sulfur as well as handle sulfuric acid,
phosphoric acid and other chemicals.
                                       I-5
<PAGE>   7
 
The Company produces sulfuric acid at both the Aurora Facility and White Springs
Facility and purchases additional sulfuric acid from unaffiliated sellers. The
Company also transports surplus production of sulfuric acid at the White Springs
Facility to the Aurora Facility as needed. Sulfur and sulfuric acid have been in
abundant supply in recent years. However, in 1998, the remaining U.S. Frasch
sulfur producer announced the closure of one of its two mines, an action which
has reduced readily available U.S. supplies of sulfur and increased prices,
notwithstanding a world market having excess supplies of sulfur.
 
     The Company purchases all of its ammonia from or through PCS Nitrogen and
PCS Sales (USA), Inc., wholly owned subsidiaries of the Company. The Company
reacts phosphoric acid with ammonia to produce DAP and MAP, as well as liquid
fertilizers. In addition, ammonia operations include the purchase, sale and
terminalling of anhydrous ammonia. Most of the ammonia that is currently
purchased by PCS Nitrogen is produced in Russia and imported through a White
Springs-operated ammonia terminal located within the port of Savannah (Garden
City, Georgia). The Company's ammonia expenses at the Aurora Facility are
slightly higher than those of many of its competitors because of higher
transportation costs incurred in transporting ammonia from Savannah to Aurora,
North Carolina by rail.
 
     Substantially all of the phosphate rock produced by the Company is used
internally for the production of phosphoric acid, superphosphoric acid ("SPA"),
chemical fertilizers, purified phosphoric acid and animal feed products.
 
     A portion of the Company's phosphoric acid production, merchant grade
phosphoric acid ("MGA"), is sold in liquid form, mostly to foreign and domestic
producers of solid fertilizers. The solid fertilizers produced by the Company
are DAP and, to a lesser extent, GTSP and MAP. Over one-half of the Company's
DAP is exported, with the balance sold domestically, mostly to large regional
dealers that custom blend solid fertilizers.
 
     The Company's liquid fertilizer products, 66% of which was sold
domestically, consist principally of low-magnesium SPA, which the Company
markets under the name "LoMag". The Company believes that it is the largest U.S.
producer of SPA.
 
     The Company also processes phosphoric acid to produce animal feed
supplements for the poultry and livestock markets. The Albright joint venture
produces purified phosphoric acid for use in various food products and
industrial processes.
 
     In addition to nitrogen products, the Company also produces phosphate
products at the Geismar plant for which supplies of phosphate rock and sulfur
are necessary. PCS Nitrogen purchases phosphate rock from Morocco pursuant to an
agreement with a Moroccan government-owned company, the current term of which
expires on December 31, 2002, wherein prices are reset annually through
negotiation. If no agreement on price is reached, either party may terminate the
agreement. Changes in the agreement could affect the stability of the supply of
the raw material and the profitability of these phosphate products.
 
RESERVES
 
     At December 31, 1998, the Company's Aurora phosphate mine had estimated
proven and probable reserves of approximately 386 million tonnes of phosphate
rock, at an average grade of 30.7% P(2)O(5). These reserves would permit mining
to continue at current rates for about 75 years. The Aurora phosphate mine has
an estimated annual capacity of 6.0 million tonnes of phosphate rock and its
processing plants have the capacity to produce 1.152 million P(2)O(5) tonnes of
phosphoric acid. Prior to the acquisition of Texasgulf by the Company in April
1995, approximately 408 million tonnes of phosphate reserves were transferred by
Texasgulf to a newly established company, the common stock of which was
transferred to Elf (USA) and Williams. The Company was granted a 20-year right
of first refusal (from April 10, 1995) in the event that the newly established
company proposes to sell the reserves. In addition, the newly established
company and Elf (USA) and Williams agreed, for a period of ten years from April
10, 1995, not to compete, and for the first five years not to make certain
preparations to compete, with the Company with respect to those reserves.
 
     The White Springs phosphate mine had estimated proven and probable reserves
of approximately 54 million tonnes of phosphate rock, at an average grade of
30.7% P(2)O(5). The Company estimates that an
                                       I-6
<PAGE>   8
 
additional 11 million tonnes of phosphate rock could be purchased at market
rates from nearby owners. Accordingly, the total reserves of 65 million tonnes
of phosphate rock at White Springs would sustain the mine for 18 years at a
mining rate of 3.6 million tonnes per year. The White Springs mine has an
estimated annual capacity of 3.6 million tonnes of phosphate rock and the
processing plants have the capacity to produce annually 1.093 million P(2)O(5)
tonnes of phosphoric acid. See "Environmental Matters -- Permits".
 
NITROGEN OPERATIONS
 
     The Company's nitrogen operations include production of nitrogen
fertilizers and nitrogen chemicals. These products are used for both
agricultural and industrial purposes.
 
PROPERTIES
 
     PCS Nitrogen manufactures nitrogen products at seven facilities, of which
six are located in the United States and one is located in Trinidad. The
following table sets forth the facility locations and production capabilities:
 
<TABLE>
<CAPTION>
PLANT LOCATIONS                                             PRODUCTS PRODUCED
---------------                                             -----------------
<S>                                    <C>
Augusta, Georgia.....................  Ammonia, urea, nitric acid, ammonium nitrate and nitrogen
                                       solutions
Clinton, Iowa........................  Ammonia, nitric acid, ammonium nitrate and nitrogen
                                       solutions
Geismar, Louisiana...................  Ammonia, nitric acid, ammonium nitrate, nitrogen solutions,
                                       phosphoric acid, super-phosphoric acid, phosphate solutions
                                       and sulfuric acid
LaPlatte, Nebraska...................  Ammonia, nitric acid, ammonium nitrate and nitrogen
                                       solutions
Lima, Ohio...........................  Ammonia, urea, nitric acid, ammonium nitrate and nitrogen
                                       solutions
Memphis, Tennessee...................  Ammonia and urea
Point Lisas, Trinidad................  Ammonia and urea
</TABLE>
 
     The plant at Wilmington, North Carolina ceased production on June 8, 1998.
 
PRODUCTION
 
     Unlike potash and phosphate, nitrogen is not mined. It is taken from the
air and reacted with a hydrogen source, usually natural gas reformed with steam,
to produce ammonia. PCS Nitrogen produces ammonia at all domestic plants and in
Trinidad. The ammonia is used to produce a full line of upgraded nitrogen
products, including urea, ammonium nitrate, nitric acid and nitrogen solutions.
 
SERVICE AGREEMENTS
 
     The Geismar plant is integrated with a larger chemical manufacturing
complex owned by Allied-Signal, Inc. ("Allied"). PCS Nitrogen and Allied have an
agreement to provide certain support services to each other, including the
provision of utilities, the discharge of wastewater, security and emergency
services, and other essential services. PCS Nitrogen believes that most of the
services that PCS Nitrogen requires are available from other sources, if
necessary. However, the termination of, or the need to replace, certain of the
services provided (such as steam, well water supply and dock services) could, in
the aggregate, involve potentially significant capital expenditures, increased
operating costs and disruptions to the operations of the Geismar plant.
 
     BP Chemicals Inc. ("BPC") operates the Lima plant on PCS Nitrogen's behalf
under an operating agreement that can be terminated by either party with nine
months' notice. PCS Nitrogen's payments to BPC under the operating agreement are
generally based on BPC's previous cost of operating the Lima plant and are made
through the reimbursement of expenses incurred by BPC in providing such
operating services. In addition, due to the mutual interdependence of the Lima
plant and BPC's operations, PCS Nitrogen and BPC have agreed to provide each
other with certain manufacturing support services at cost pursuant to a contract
 
                                       I-7
<PAGE>   9
 
extending for as long as the plants continue to operate and either party is
required to provide support services thereunder.
 
     PCS Nitrogen uses contract labor personnel provided by Augusta Service
Company, Inc., which is owned 50% by PCS Nitrogen and 50% by DSM Chemicals North
America, Inc., to provide purchasing, stores and spare parts management,
maintenance, repair and shipping services for the Augusta plant.
 
RAW MATERIALS
 
     Natural gas is the primary raw material used for the production of ammonia
and, as a result, virtually all of PCS Nitrogen's other nitrogen products. The
purchase and transportation of natural gas accounts for approximately 40% of PCS
Nitrogen's total domestic production cost. PCS Nitrogen's current natural gas
strategy, given the addition in 1998 of a fourth ammonia plant in Trinidad, is
to purchase approximately 28% of its natural gas in the spot market or on
short-term contracts and approximately 28% of its natural gas pursuant to
fixed-price physical contracts or forward contracts which fix the price of
future deliveries. The remaining approximately 44% of its natural gas is
purchased in Trinidad using a pricing formula related to the market price of
ammonia. With the exception of the Trinidad facility, PCS Nitrogen purchases
nearly all its natural gas from producers or marketers at the point of delivery
of the natural gas into the pipeline system, then pays the pipeline company and,
where applicable, the local distribution company to transport the natural gas to
PCS Nitrogen's facilities. Approximately 85% of PCS Nitrogen's domestic
consumption of natural gas is delivered pursuant to firm transportation
contracts which do not permit the pipeline or local distribution company to
interrupt service to, or divert natural gas from, the plant.
 
PCS JOINT VENTURE
 
     The Company indirectly holds all outstanding interests in a limited
partnership (the "PCS Joint Venture") doing business in Florida as Florida
Favorite Fertilizer and in Georgia and Alabama as Farmer's Favorite Fertilizer.
PCS Joint Venture manufactures, processes and distributes fertilizer and other
agricultural supplies from plants located in Florida, Alabama and Georgia.
 
MARKETING
 
     The following table summarizes the Company's net sales revenue of potash,
phosphate and nitrogen products (by nutrient) in the past three calendar years:
 
<TABLE>
<CAPTION>
                                                                1998       1997       1996
                                                              --------   --------   --------
                                                                  (THOUSANDS OF DOLLARS)
<S>                                                           <C>        <C>        <C>
Potash
  Canada....................................................  $ 21,885   $ 14,460   $ 14,507
  United States.............................................   205,701    195,780    143,137
  Canpotex..................................................   252,464    229,666    184,025
  Other.....................................................    65,441     64,261     61,526
Phosphates
  Canada....................................................    25,386     24,268     17,672
  United States.............................................   688,198    632,616    564,074
  PhosChem..................................................   262,168    261,502    275,644
  Other.....................................................    35,237     35,223     34,575
Nitrogen
  Canada....................................................     4,422      2,879      --
  United States.............................................   585,672    694,566    108,708
  Other.....................................................   161,189    170,708      --
Florida Favorite Fertilizer.................................    55,344     57,156     58,004
</TABLE>
 
                                       I-8
<PAGE>   10
 
     The following table summarizes the Company's net sales revenue from
products, by category:
 
<TABLE>
<CAPTION>
                                                                1998       1997       1996
                                                              --------   --------   --------
                                                                  (THOUSANDS OF DOLLARS)
<S>                                                           <C>        <C>        <C>
Potash......................................................  $545,491   $504,167   $403,196
Florida Favorite Fertilizer.................................    55,344     57,156     58,004
Phosphates
  Liquid Fertilizers........................................   365,006    309,063    239,716
  Solid Fertilizers (DAP, MAP, GTSP)........................   374,525    362,625    379,326
  Animal Feed...............................................   187,557    191,016    186,145
  Phosphate Rock, Industrial Products.......................    83,901     90,905     86,777
Nitrogen
  Ammonia...................................................   258,387    376,972    108,708
  Urea......................................................   200,103    209,825      --
  Nitrogen Solutions........................................   163,018    162,885      --
  Other.....................................................   129,775    118,472      --
</TABLE>
 
     For further financial information about the Company's business segments and
domestic and international sales, see Note 17 to the Consolidated Financial
Statements.
 
     The Company has a diversified customer base, and apart from sales to
Canpotex Limited ("Canpotex") and Phosphate Chemicals Export Association, Inc.
("PhosChem"), no one customer accounted for as much as 10% of the Company's
sales in 1998.
 
     Potash from the Company's Saskatchewan mines produced for use outside North
America is sold exclusively to Canpotex. PCS Sales (Canada) Inc. executes
offshore marketing and sales for the Company's New Brunswick potash and executes
marketing and sales for the Company's potash, phosphate and nitrogen products in
Canada. PCS Sales (USA), Inc. executes marketing and sales for the Company's
potash, phosphate and nitrogen products in the United States. PhosChem, an
association formed under the U.S. Webb-Pomerene Act, is the principal vehicle
through which the Company executes offshore marketing and sales for its
phosphate fertilizers. See "Offshore Marketing".
 
     Ammonia, urea, ammonium nitrate and nitrogen solutions are sold as
fertilizers to agricultural customers and to industrial customers for various
applications, while nitric acid is sold to industrial customers as an
intermediate chemical feedstock.
 
     In the past, fertilizer prices have been volatile. No assurance can
therefore be given that the average market prices for the Company's fertilizer
products will continue at current levels.
 
NORTH AMERICAN MARKETING
 
     In 1998, North American net sales revenue from potash products represented
10% of the Company's total net sales revenue, substantially all of which was
attributable to potash customers in the United States. Typically, North American
potash sales of the Company are greatest in the second calendar quarter. The
vast majority of sales are made on the spot market with the balance made under
short-term contracts. The Company has no material contractual obligations in
connection with North American sales to sell potash in the future at a fixed
price.
 
     In 1998, North American net sales revenue from phosphate products
represented 31% of the Company's total net sales revenue, substantially all of
which was attributable to phosphate customers in the United States. Typically,
North American phosphate product sales are greatest in the first and second
calendar quarters. In 1998, the majority of PCS Phosphate's phosphate product
sales were made on the spot market, with the balance made under short-term
contracts (generally on an annual basis) and a limited number of sales made
pursuant to multi-year contracts. The Company has no material contractual
obligations in connection with North American sales to sell phosphate in the
future at a fixed price.
 
                                       I-9
<PAGE>   11
 
     In 1998, North American net sales revenue from nitrogen products
represented 30% of the Company's total net sales revenue and PCS Nitrogen's
non-fertilizer products accounted for approximately 44% of PCS Nitrogen's
nitrogen revenue and 100% of PCS Nitrogen's gross margin. Typically, North
American nitrogen fertilizer sales are greatest in the second calendar quarter.
In 1998, the majority of PCS Nitrogen's nitrogen product sales were made on the
spot market, with the balance made under short-term contracts and a limited
number of sales made pursuant to multi-year contracts. The Company has no
material contractual obligations in connection with North American sales to sell
nitrogen in the future at a fixed price.
 
     Ammonia purchased by PCS Nitrogen which is not used in the Company's
operations is sold to third party customers by PCS Sales (USA), Inc.
 
     The primary customers for fertilizer products are retailers, dealers,
cooperatives, distributors and other fertilizer producers. Such retailers,
dealers and cooperatives have both distribution and application capabilities.
The primary customers for industrial products are chemical product
manufacturers.
 
     At December 31, 1998, the Company's North American sales functions were
handled by 80 employees in Chicago, Illinois and various other locations in the
United States, and 20 employees in Saskatoon, Saskatchewan.
 
OFFSHORE MARKETING
 
     Potash produced by the Company in Saskatchewan for sale outside North
America is sold to Canpotex, which is owned in equal shares by the three potash
producers in the Province of Saskatchewan (including the Company). Canpotex,
which was incorporated in 1970 and commenced operations in 1972, acts as an
export company and as a unified marketing force for all Saskatchewan potash
production in the offshore marketplace. Each shareholder of Canpotex has an
equal voting interest as a shareholder and through its nominees on the board of
directors. The Company and the other shareholders of Canpotex have agreed that,
as long as they are members of Canpotex, and with respect to potash produced in
Canada, they will not make offshore sales independently. The Company's
production from its New Brunswick mine has been exempted from this requirement
by the members of Canpotex. Any member may terminate its membership in Canpotex
at specified times of the year on six months notice.
 
     In general, Canpotex sales are allocated among the producers based on
production capacity. If a shareholder cannot satisfy demand for potash by
Canpotex, the remaining shareholders are entitled to satisfy the demand pro rata
based on their allotted production capacity. The Company currently supplies
55.65% of Canpotex's requirements. Canpotex sells potash to government agencies
and private firms pursuant to six-month contracts at negotiated prices or by
spot sales.
 
     The following table sets forth the percentage of sales by Canpotex for the
past three calendar years in the various geographical regions:
 
<TABLE>
<CAPTION>
                                                              1998    1997    1996
                                                              ----    ----    ----
<S>                                                           <C>     <C>     <C>
Asia........................................................   69%     72%     70%
Latin America...............................................   17      14      14
Oceania.....................................................    9       9      11
Europe......................................................    5       5       5
                                                              ----    ----    ----
Total.......................................................  100%    100%    100%
                                                              ====    ====    ====
</TABLE>
 
     For 1998, sales to Canpotex represented 11% of the total net sales of the
Company and net sales revenue from offshore sales of potash from the New
Brunswick mine, through PCS Sales (Canada) Inc., represented 3% of the total net
sales of the Company.
 
     Since 1975, PhosChem has been the principal vehicle for United States
exports of phosphate fertilizers. Currently, the members of PhosChem are PCS
Phosphate, IMC-Agrico Company ("IMC-Agrico"), a joint venture between IMC Global
Inc. and Phosphate Resource Partners LLP, Mississippi Phosphates Corporation
("MissChem") and Mulberry Corporation. The PhosChem members have agreed to
export their
 
                                      I-10
<PAGE>   12
 
fertilizer products exclusively through PhosChem, except for exports to Canada
or to any member state of the European Union or the European Economic Area,
sales pursuant to AID ("Agency for International Development") Tenders and sales
to certain buyers affiliated with members. Historically, PhosChem negotiated
prices and other terms for the export sale of fertilizer products. According to
the terms of a PhosChem agreement effective January 1, 1995, IMC-Agrico is
responsible for the marketing of solid fertilizers (DAP, MAP and GTSP), and PCS
Phosphate, or its sales affiliate (PCS Sales (USA), Inc.), is responsible for
the marketing of liquid fertilizer products (MGA) to export countries. Total
sales for 1998 were apportioned as follows: 64% to IMC-Agrico, 23% to PCS
Phosphate, 7% to MissChem, and 6% to Mulberry Corporation. The PhosChem
agreement will be in effect through December 31, 1999, and subject to renewal
thereafter. If the PhosChem agreement is not renewed, the Company does not
believe the disbanding of PhosChem would materially affect the Company's sales
of fertilizer, but there can be no assurance that, if PhosChem were to be
disbanded, the Company would be able to find alternative outlets for its
products or sell its products at prices or on terms similar to those expected to
be obtained by PhosChem. The Company's estimated 1999 PhosChem allocation is
26.59%.
 
     Revenue from sales to PhosChem accounted for approximately 11% of the
Company's total net sales in 1998. Other offshore phosphate sales accounted for
approximately 2% of the Company's total net sales in 1998. All of the Company's
phosphate sales to China and India were made through PhosChem. Most of the
Company's sales of phosphate products to China are made to the central
purchasing authority of the Chinese government. Sales in India were made through
the Fertilizer Association of India to many independent buyers.
 
     The following table sets forth the percentage of sales of PhosChem for the
past three calendar years in the various geographical regions:
 
<TABLE>
<CAPTION>
                                                              1998    1997    1996
                                                              ----    ----    ----
<S>                                                           <C>     <C>     <C>
Asia........................................................   85%     88%     82%
Latin America...............................................    7       8      17
Europe......................................................   --      --       1
Mid East....................................................    1       1      --
Other.......................................................    7       3      --
                                                              ----    ----    ----
Total.......................................................  100%    100%    100%
                                                              ====    ====    ====
</TABLE>
 
     With respect to offshore sales of nitrogen, ammonia and urea sales
predominate and originate primarily from Trinidad, with other sales coming from
purchased product locations. For 1998, net sales revenue from offshore sales of
nitrogen represented 2% of the net sales revenue of the Company.
 
     Offshore sales are subject to those risks customarily encountered in
foreign operations, including (i) fluctuations in foreign currency exchange
rates, (ii) changes in currency and exchange controls, (iii) the availability of
foreign exchange, (iv) laws, policies and actions affecting foreign trade and
(v) other economic, political and regulatory policies of foreign governments.
 
DISTRIBUTION AND TRANSPORTATION
 
     The Company has an extensive infrastructure and distribution system to
transport and store its products. Other than storage facilities located at
production plants, in 1998 the Company used 147 locations to store and handle
its products in the field. The Company owns or net leases 1,605 railcars and
full service leases an additional 3,462 railcars.
 
     Transportation costs add significantly to the total amounts paid by
purchasers of potash. Producers have a definite advantage in markets close to
their sources of supply (e.g. Saskatchewan producers in the Midwestern United
States, New Brunswick producers on the U.S. Eastern Seaboard and New Mexico
producers in the Southern and Western United States). International shipping
cost variances permit offshore producers (including those in the FSU, Germany,
Israel and Jordan) to compete effectively in some of the Company's traditional
markets.
 
                                      I-11
<PAGE>   13
 
     Most of the Company's potash for North American customers is shipped by
rail. Shipments are also made by rail from each of the Company's Saskatchewan
mines to Thunder Bay, Ontario, for shipment by lake vessel to the Company's
warehouses and storage facilities in Canada and the United States.
 
     Potash from the New Brunswick mine is shipped primarily by ocean-going
vessel from the Port of Saint John, although truck and rail transport are also
used for North American customers.
 
     In the case of the Company's sales to Canpotex, potash is transported by
rail principally to Vancouver, British Columbia, where port facilities exist for
storage pending shipment overseas. The Company has an equity interest in
Canpotex Bulk Terminals Limited, which is a part owner of these port facilities.
The Company, through Canpotex, has an interest in a port facility located in
Portland, Oregon which became operational during 1997.
 
     With respect to phosphates, the Company has long-term leases on shipping
terminals in Morehead City and Beaufort, North Carolina, through which it
receives and stores raw materials for, as well as the products manufactured by,
the Aurora Facility. The Company owns nine barges (four used for solid products,
two for phosphoric acid, one for sulfuric acid and two for sulfur) and three tug
boats, which are used to transport materials between its Aurora Facility and
Morehead City. Raw materials and products are also transported to and from the
Aurora Facility by rail. The Company transports sulfur it purchases from Canada
in large, dedicated unit trains. Both CSX Corporation and Norfolk Southern
Corporation serve the Aurora Facility. The Company believes that its location
and diversified transportation and terminalling capabilities put it in a
comparable position to most of its Florida competitors in purchasing sulfur. In
December 1997, the Company entered into a ten-year supply contract with an
offshore supplier to supply a portion of the Company's sulfur requirements and
also committed to build a multipurpose ocean-going vessel to ship such sulfur as
well as handle sulfuric acid, phosphoric acid and other chemicals. The Company
receives ammonia for its phosphate operations at Aurora through its ammonia
terminal in Savannah, Georgia; the ammonia is shipped by rail from Savannah to
the Aurora Facility.
 
     Sulfur is delivered to the White Springs Facility by unit trains from
Canada and by rail from multiple domestic sources. The Company receives ammonia
for its phosphate operations at White Springs through its ammonia terminal in
Savannah, Georgia; ammonia is shipped by rail from Savannah to the White Springs
Facility. The Norfolk Southern Corporation is currently the only railroad
serving the White Springs Facility. However, a transload facility at Lake City,
Florida serviced by the CSX Corporation is expected to become operational in
1999. Most of the phosphoric acid and chemical fertilizers produced at the White
Springs Facility are shipped to domestic destinations by rail. The Company also
ships some of its phosphoric acid, chemical fertilizers and animal feed
products, produced at the White Springs Facility, through the bulk terminal
located in Jacksonville, Florida, for offshore sales.
 
     The Company makes domestic deliveries of animal feed products (bulk and
bagged) by rail or truck from its manufacturing facilities and from several
warehouses supplied from its manufacturing facilities.
 
     The Company distributes its nitrogen products by barge, railcar, truck, and
direct pipeline to its customers and through its strategically located storage
terminals in high consumption areas. The Company leases or owns approximately 50
nitrogen terminal facilities with an aggregate storage capacity of approximately
600,000 tons of product. The terminals provide off-season storage and also serve
local dealers during the peak seasonal demand period.
 
     The Company distributes products from the Trinidad plant to markets in
Latin America and Europe in addition to the United States. The Company's
distribution operations in Trinidad employ two long-term chartered ocean-going
vessels and utilize spot charters as necessary for the transportation of
ammonia. All bulk urea production is shipped through third-party carriers.
 
                                      I-12
<PAGE>   14
 
COMPETITION
 
     The markets for potash, both domestic and foreign, are highly competitive.
Since potash is a commodity, producers must compete based on price and service
(e.g., delivery time and ability to supply all grades). Apart from competitive
pricing, the Company's principal method of competition is the quality of service
it provides to customers. Among other things, the Company provides quality
service by maintaining warehouses and leasing railcars to enhance its delivery
capability. The high cost of transporting potash limits competition in various
areas.
 
     The Company's potash competition includes three North American producers
and potash producers located outside North America in the FSU, Israel, Jordan,
Germany and France. Because of the high capital cost and lead time required to
construct a new mine, the Company's principal competition is expected to
continue to come from the owners of existing operations.
 
     Most phosphate products, particularly solid fertilizers, are commodities,
with little or no product differentiation, and thus trade on the basis of prices
determined in highly competitive markets. The vast majority of the United States
phosphate rock not mined by the Company is produced in central Florida,
southeast of Tampa, and most of the United States phosphate processing capacity,
other than at Aurora, is located in Florida and along the coast of the Gulf of
Mexico.
 
     The Company's principal advantage at Aurora in competing with other
producers is that it operates integrated phosphate mine and phosphate processing
complexes while most of its competitors are required to ship phosphate rock by
rail or truck from their mines to their chemical processing plants, thus
incurring substantially higher transportation costs.
 
     As a result of its location in North Carolina and the relatively high cost
of transportation, the Company's U.S. phosphate sales from Aurora have a natural
advantage in the Northeast, mid-Atlantic and eastern Midwest regions, while
White Springs and other Florida producers have a natural advantage in the South,
and Gulf coast producers have a natural advantage in areas of the Midwest
accessible to barge traffic up the Mississippi River.
 
     The Company also competes with governmental enterprises and independent
phosphate producers in important exporting countries, including Morocco,
Tunisia, Jordan and South Africa.
 
     Although there has been extensive consolidation and privatization
worldwide, substantial competition exists in the nitrogen industry. The Company
competes domestically with a broad range of companies in the production and sale
of nitrogen products, including subsidiaries of larger chemical companies, farm
cooperatives, integrated energy companies and independent fertilizer companies.
Because fertilizer is a commodity, competition takes place largely on the basis
of price and delivery. The relative cost of, and availability of transportation
for, raw materials and finished products to manufacturing facilities and markets
are important competitive factors.
 
     The Company also competes with foreign companies whose nitrogen products
are imported into the United States. Although diminishing in number, various
foreign competitors receive subsidies from their governments. Some countries
also have natural gas supplies that are surplus to domestic demand. This surplus
natural gas may have a low alternative value and, when used as feedstock for the
manufacture of ammonia and urea, can result in low-cost production. These
low-cost products are being imported into the U.S. and compete with domestically
manufactured nitrogen fertilizers, including the Company's. In addition, other
importers subsidized by their governments may import products into the U.S. for
reasons not related to U.S. fertilizer market conditions, such as a need to
obtain U.S. dollars.
 
     Pursuant to the Uruguay Round Agreements Act, on March 1, 1999, the U.S.
Department of Commerce and the U.S. International Trade Commission commenced a
"sunset" review of antidumping orders restricting exports of urea from the
former Soviet Union and Romania into the United States in order to determine
whether such orders should be terminated or should remain in effect.
 
     The Company's nitrogen production capability is the largest in the Western
Hemisphere. The Company's domestic nitrogen plants serve agricultural markets
with a diversified crop base that span a lengthy growing
                                      I-13
<PAGE>   15
 
season and chemical industrial manufacturers located throughout the U.S. Those
plants are strategically located in agricultural as well as industrial end-use
markets in the Southeast, Midwest and Gulf Coast regions. The Company believes
that it is more economical to transport natural gas, the primary raw material in
the production of nitrogen fertilizers and chemicals, to plants situated in the
product markets than to transport such products over long distances. Several of
the Company's domestic nitrogen plants are located closer to their primary
customers than are their competitors. The Company concentrates its nitrogen
marketing efforts on these nearby markets where lower transportation costs offer
the potential for better margins. The Company believes that its product mix
diversity and the number and geographic diversity of its nitrogen plants provide
competitive advantages in manufacturing, distribution, marketing, customer
service and other areas when compared to competitors controlling only a few
facilities. In addition, the industrial demand for nitrogen products is
typically less volatile and follows different demand cycles than agricultural
demand for fertilizer. The Company believes that its industrial sales add a
measure of stability to its revenue and are a desirable complement to
agricultural demand.
 
EMPLOYEES
 
     At December 31, 1998, the Company actively employed 5,744 persons, of whom
2,033 were salaried and 3,711 were hourly paid. Of these employees, the
Company's potash operations employed 1,604 people, the phosphate operations
employed 2,629 people, the nitrogen operations employed 1,219 and 100 people
were employed at PCS Joint Venture. The corporate office had a staff of 90 and
100 people were employed in the Company's sales group.
 
     The Company has entered into nine collective bargaining agreements with
labor organizations representing employees. The collective bargaining agreements
at the Allan, Cory and Patience Lake divisions expire on April 30, 2000. The
Lanigan agreement expires on January 31, 2001. The Company and the Rocanville
Potash Employees Association have a contract that expires on May 31, 2001. The
agreement between IMC and the union representing the employees at the Esterhazy
mine expires on January 31, 2001. The union agreement at PCS Cassidy Lake
expired December 31, 1998 and negotiations are expected to commence in April
1999. The Company's Sussex, New Brunswick and Aurora operations are non-union.
The collective bargaining agreement with the union representing employees at the
White Springs plant expires on December 1, 2000 and the agreement with the
employees at the Jacksonville terminal expires September 30, 2001. PCS Nitrogen
has three locations with collective bargaining agreements: Clinton, which
contract expires July 31, 1999; Memphis, which contract expires September 17,
2000; and LaPlatte, with a new contract that expires January 31, 2003. In
addition, the agreement between BPC and the union representing employees at the
Lima plant expires February 16, 2002. The Company believes its relations with
its employees to be good.
 
ROYALTIES AND CERTAIN TAXES
 
     Saskatchewan potash production is taxed at the provincial level under The
Mineral Taxation Act, 1983 (Saskatchewan). This tax consists of a base payment
and a profit tax. In addition to the Potash Production Tax, rental fees, taxes
and royalties are payable to the Province of Saskatchewan and municipalities by
potash producers in respect of potash reserves or production of potash in the
Province of Saskatchewan. The Company's taxes, fees and royalty expenses were
$74.8 million in 1998.
 
     The Company is subject to capital tax on its paid-up capital (as defined in
The Corporation Capital Tax Act of Saskatchewan). In addition, a resource
corporation in the Province of Saskatchewan pays a corporate capital tax surtax
based on the value of Saskatchewan resource sales. This surtax is only payable
to the extent that it exceeds the regular capital tax. In 1998, the Company paid
capital tax of $5.3 million and surtax of $13.1 million.
 
     The Company pays royalties to the New Brunswick government on the basis of
production from its New Brunswick mine. In addition, the Company pays municipal
taxes. The Company's expenses for such royalties and municipal taxes were $5.6
million in 1998.
 
     The Company does not make royalty payments in connection with its phosphate
and nitrogen operations.
 
                                      I-14
<PAGE>   16
 
INCOME TAXES
 
     PCS and certain subsidiaries are subject to federal and provincial income
taxes in Canada. By virtue of deductions with respect to non-capital losses
carried forward, capital cost allowance, Canadian development expense and earned
depletion allowance, such taxes have not yet become payable. However, PCS is
subject to the Large Corporations Tax. In addition, PCS records a deferred tax
provision at the effective rate of 35%. The Company expects to begin paying
Canadian income taxes in 1999.
 
     The subsidiaries of the Company which operate in the United States are
subject to U.S. federal and state income taxes. By virtue of certain income tax
deductions available, these subsidiaries are not currently subject to regular
federal cash income taxes. However, they are subject to the Alternative Minimum
Tax, which may be carried forward indefinitely as a credit applied against
future regular income tax liabilities. The Company's nitrogen subsidiaries
operating in Trinidad are subject to Trinidad taxes.
 
     The effective consolidated tax rate for 1998 was 31% (1997 -- 19%) of
income before income taxes, of which 5 percentage points (1997 -- 13 percentage
points) represented cash income taxes and 26 percentage points (1997 -- 6
percentage points) represented deferred income taxes. The reduction in the cash
component of the provision was largely due to a reduction in the amount of U.S.
withholding taxes on certain payments received from the Company's U.S.
subsidiaries.
 
RESEARCH AND DEVELOPMENT
 
     The Company maintains potash research and development facilities located in
Saskatoon, Saskatchewan, employing approximately 30 persons who concentrate on
improving efficiency in mine operations and product quality. Research continues
on the use of three-dimensional seismic methods and other geophysical tools to
detect geological disturbances in ore seams. The Company is also proceeding with
automation of mining machines. Other research includes measures to maintain and
enhance product quality in transit and at offsite storage facilities. The
Company supports research in agronomy through Potash & Phosphate Institute
programs.
 
     The Company continues to evaluate ways to more fully automate its phosphate
production facilities, including improvements to its beneficiation (mill),
sulfuric acid and phosphoric acid plants. The Company is also exploring ways of
further debottlenecking its phosphate production facilities and selectively
adding capacity through technological enhancements. The Aurora Facility has
increased direct blending of gypsum and clays which the Company expects should
reduce long-term gypsum handling and reclamation costs.
 
     PCS Nitrogen is utilizing a newly designed balancing system for large, high
speed, rotating equipment to reduce downtime by improving motor stability and
decreasing bearing wear by decreasing vibration and lowering oil temperatures.
Other technology enhancements being considered for improving plant reliability
are expanded applications of dry gas seals, better material selections in
reforming and waste heat recovery systems and improved automation.
 
ENVIRONMENTAL MATTERS
 
     The Company's operations are subject to numerous environmental requirements
under Canadian, U.S. and Trinidad and Tobago federal, provincial, state and
local laws and regulations. Such laws and regulations govern, among other
matters, air emissions, waste water discharges, land use and reclamation and
solid and hazardous waste management. Many of these laws and regulations are
becoming increasingly stringent, and the cost of compliance with these
requirements can be expected to increase over time. In particular, the
Parliament of Trinidad and Tobago is considering legislation providing for the
increased regulation of environmental matters. Due to the uncertain and emerging
nature of this legislation and the regulations to be issued thereunder, PCS
Nitrogen is not currently able to accurately predict the impact that such
legislation and associated regulations may have on its operations in Trinidad.
However, PCS Nitrogen does not currently expect that such legislation or
regulations will have a material adverse effect on the Company's financial
condition or results of operations.
 
                                      I-15
<PAGE>   17
 
     The Company believes that it is currently in material compliance with
applicable environmental laws and regulations and believes that it is well
positioned to meet anticipated requirements under these laws and regulations.
Although significant capital expenditures and operating costs have been incurred
and will continue to be incurred on account of these laws and regulations, the
Company does not believe, except as otherwise set out herein, that such
environmental laws and regulations have had, or will have, a material adverse
effect on its business. However, the Company cannot predict the impact of new or
changed laws or regulations or permit requirements, including the
recently-enacted potash decommissioning regulations discussed below or changes
in the ways that such laws and regulations are administered or interpreted. The
Company anticipates that its routine expenditures related to environmental
regulatory matters in 1999 will not differ materially from the previous year.
 
     The Company and its facilities are also subject to a range of environmental
statutes and programs focused on site reclamation and restoration and on
investigation and, where necessary, remediation of contaminated properties. The
Company's obligations and potential liabilities under these programs have been
and can be expected to continue to be significant. The Company does not believe,
except as set out herein, that such obligations and potential liabilities have
had, or will have, a material adverse effect on its business. However, it is
often difficult to estimate and predict the potential costs and liabilities
associated with these programs and there is no guarantee that the Company will
not in the future be identified as potentially responsible for additional costs
under these programs, either as a result of changes in existing laws and
regulations or as a result of the identification of additional matters or
properties covered by these programs.
 
ENVIRONMENTAL EXPENDITURES
 
Reclamation and Restoration Costs
 
     Site restoration and reclamation costs have been accrued for various sites.
At December 31, 1998, the Company had accrued the following amounts for site
reclamation and restoration: $29.1 million for the Aurora Facility, $66.4
million for the White Springs Facility, $27.4 million for the Moab, Utah
Facility, $9.2 million for various idle sulfur facilities, and $5.0 million for
the Cassidy Lake Facility. The idle sulfur facilities were part of the
acquisition of Texasgulf and are undergoing dismantlement and environmental
restoration efforts. The current portion of restoration and reclamation costs
accrued in 1998 totaled $7.7 million. These amounts represent the Company's
current estimate of potential site restoration and reclamation costs as last
assessed in December 1998. The expenditures are generally incurred over an
extended period of time.
 
     Annual environmental expenditures for reclamation and restoration during
the year ended December 31, 1998 were $71.9 million. Of this amount, $63.0
million was charged to operations, $4.1 million was capitalized and $4.8 million
was charged against accrued reclamation costs.
 
Capping of By-product Gypsum Stacks
 
     In 1993, the State of Florida passed certain legislation requiring
companies to reduce the potential environmental hazards associated with
accumulations of by-product gypsum (gypsum stacks). The regulations implementing
this legislation require companies to "cap" the gypsum stacks in order to reduce
seepage into 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, 1998, a balance of $35.4 million
was included in accrued reclamation costs for this gypsum stack capping
requirement. The obligations of White Springs regarding the gypsum stacks are
guaranteed by PCS (see "Site Assessment and Remediation").
 
     In North Carolina, on exhaustion of the mine's phosphate reserves,
disposition of the remaining gypsum must comply with the laws in effect at that
time.
 
                                      I-16
<PAGE>   18
 
Other Environmental Costs
 
     The Company's operating expenses, other than reclamation and restoration
and gypsum stack capping, relating to compliance with environmental laws and
regulations governing ongoing operations were approximately $20.5 million for
the year ended December 31, 1998 as compared to $15.5 million for the year ended
December 31, 1997.
 
Capital Expenditures
 
     Each year the Company undertakes capital projects to improve pollution
control facilities. In 1998, a total of approximately $9.9 million in capital
expenditures (exclusive of capitalized reclamation expenditures) was spent to
meet the Company's environmental control objectives as compared to $10.5 million
in 1997. The Company expects that its capital requirements for environmental
projects may increase in the future due to increasingly stringent environmental
regulations arising from current and future requirements of law.
 
     With respect to air emissions, the Company anticipates that additional
expenditures may be required to meet increasingly stringent U.S. federal and
state regulatory and permit requirements. These requirements include existing
and anticipated regulations under the U.S. federal Clean Air Act, particularly
the 1990 amendments thereto, and under state law. In particular, both federal
and state regulation of hazardous air pollutants (including ammonia in certain
states) are expected to require additional air emission control equipment and
increased operating expenditures at some U.S. facilities. Further, the U.S.
Environmental Protection Agency ("EPA") has published new National Ambient Air
Quality Standards for both ozone and particulate matter which are more stringent
than existing standards. Such standards are being challenged in the U.S.
District Court for the District of Columbia. EPA has also enacted a new rule
requiring easternmost states (including four states in which the Company
operates) to commence reducing their nitrogen oxide (NOx) emissions by 2003,
with such reductions to be fully achieved by 2007. State regulations
implementing these requirements may require additional pollution control
equipment at certain Company facilities.
 
     The federal Clean Air Act operating permit program is also expected to
require the addition of enhanced emissions monitoring equipment at some
facilities, as well as the imposition of permit fees based upon facility air
pollutant emissions. If the Company undertakes facility expansion at its Aurora,
White Springs, Geismar, Lima and/or certain other plants, a federal Prevention
of Significant Deterioration or New Source Review Permit may need to be obtained
prior to any such expansion of these facilities. Such permits would impose
certain restrictions on air pollutant emissions from the expanded portions of
such plants and compliance with those restrictions would likely require
installation and use of additional pollution control devices.
 
SITE ASSESSMENT AND REMEDIATION
 
     In addition to environmental regulation of its present operations, the
Company also may incur costs and liabilities in connection with its and its
predecessors' past and present waste disposal practices and ownership and
operation of real property and facilities, as well as its mining activities. The
U.S. federal Comprehensive Environmental Response, Compensation and Liability
Act of 1980 ("CERCLA") and other U.S. federal and state laws impose liability
on, among others, past and present owners and operators of properties or
facilities at which hazardous substances have been released into the environment
and persons who arrange for disposal of hazardous substances that are released
into the environment. Liability under these laws may be imposed jointly and
severally and without regard to fault or the legality of the original actions,
although such liability may be divided or apportioned according to various
equitable and other factors. In the course of its present and former operations,
including those of divested businesses, PCS Phosphate, White Springs and PCS
Nitrogen have generated and the Company will generate wastes that could result
in liability for the Company under these laws.
 
     During the past ten years, EPA officials or EPA contractors have conducted
independent, limited site assessments at Aurora, Marseilles and Saltville
facilities. Following a November, 1989 site visit at Aurora, an EPA contractor
issued a report regarding potential contamination in March, 1991, recommending
further evaluation of possible pesticide impacts, but no further action has
taken place. An EPA contractor visited the Company's Marseilles, Illinois
facility in May, 1990, and officials of the Illinois Environmental Protection
                                      I-17
<PAGE>   19
 
Agency ("Illinois EPA") visited the site in April, 1995 as part of an evaluation
of properties that included the Company's Marseilles facility. During February,
1996, the Company received a CERCLA Site Inspection Report from Illinois EPA
officials who later verbally advised Company officials that the site would be
given a "no further action" status. As part of a review of former Olin
Corporation facilities, an EPA contractor visited the Company's Saltville,
Virginia plant. A Health Consultation received by the Company in October, 1996
noted the presence of lead in the soil near a tank foundation. The Company
analyzed the soil and disposed of soil having elevated levels of lead.
 
     The Company has no information indicating that any cleanup required in
connection with the Aurora, Marseilles and Saltville sites will have a material
adverse effect upon the Company's financial condition or results of operation.
Further, the Company believes that if it has any material liability for such
costs, it would have claims against third parties in connection with such
liability. Any such claims would be based on statutory and/or common law causes
of action against third parties, such as former owners, occupiers or disposers.
 
     PCS Phosphate was initially named as a potentially responsible party in two
cleanup matters involving the Colorado School of Mines Research Institute
("CSMRI") in connection with hazardous substances allegedly generated at some of
the former operations of CSMRI. During May, 1995, Elf (USA) advised EPA that Elf
(USA) was handling the matter on behalf of Texasgulf and another former Elf
(USA) subsidiary, Texasgulf Metals and Minerals Co. On January 28, 1997, EPA
issued a notice that the required cleanup work at one of the sites had been
completed. To date, PCS Phosphate has had no further involvement with these
matters.
 
     PCS Joint Venture and its general partner, Potash Corporation of
Saskatchewan (Florida) Inc. ("PCS Florida"), a wholly-owned subsidiary of the
Company, are subject to various environmental laws of the federal and local
governments in the United States, and from time to time investigations relating
to such laws. Currently, the Florida Department of Environmental Protection
("FDEP") is conducting an investigation into soil and ground water contamination
of a PCS Joint Venture fertilizer plant located in Lakeland, Florida and certain
adjoining property. Assessment of the contamination of the plant site and of
certain adjoining property is continuing. On April 8, 1997, FDEP filed a
Complaint and Petition for Enforcement against PCS Joint Venture and others. The
Company filed an Answer, Affirmative Defenses and Cross Claims on May 12, 1997.
Discovery is continuing in this litigation. On October 30, 1998, EPA notified
the Company of potential liability under Section 107(a) of CERCLA. The Company
initially responded on November 16, 1998, indicating that, while it had found no
facts indicating it had any liability, the Company was willing to investigate
and participate in discussions. On December 1, 1998, the Company replied to
EPA's Initial Information Request. By letter dated February 8, 1999, EPA
notified PCS Joint Venture that EPA was initiating a 60 day period for
negotiations to assist in the preparation of an Administrative Order on Consent
and Remedial Investigation Feasibility Study Work Plan. The Company is
continuing to evaluate the nature and extent of the contamination present in
soil and groundwater at the Lakeland facility and is engaged in ongoing
discussions with FDEP regarding possible actions which the Company could take
with respect to this contamination. No connection between the operations of PCS
Joint Venture (or its predecessor Florida Favorite Fertilizer, Inc.) and the
pesticide contamination has been established. No determination has yet been made
as to the extent or nature of any remedial action that may be required or
appropriate. The Company thus has not yet determined the cost of such remedial
action and also has not yet determined the extent to which it may be able to
recover any costs it may incur from third parties.
 
     In June 1994, the Georgia Department of Natural Resources, Environmental
Protection Division ("GEPD"), wrote to PCS Joint Venture seeking certain
environmental information regarding its Moultrie, Georgia location. In October
1994, an additional request for information was received from the EPA pursuant
to Section 104(e) of CERCLA. Responses to both requests have been provided by
PCS Joint Venture. Based on a preliminary investigation, there appears to be
lead-contaminated soil at the site. The initial assessment is that this lead
contamination is attributable to former operations at the site, the facilities
of which were dismantled some time ago. However, a complete assessment of the
site has not yet been completed, and the full nature and extent of the
contamination cannot be quantified at this time. On September 30, 1997, the GEPD
requested that Farmers Favorite Fertilizer submit a Compliance Status Report
("CSR") by
                                      I-18
<PAGE>   20
 
March 30, 1998, pursuant to the applicable state site remediation program. A
consultant prepared and submitted the CSR for Farmers Favorite Fertilizer. On
September 22, 1998, GEPD requested that a revised CSR be prepared and submitted
by December 31, 1998. On December 15, 1998, a Request for Extension to File the
revised CSR was submitted to GEPD, seeking an extension until May 15, 1999, to
complete needed field work and correspondingly revise the CSR. GEPD and Farmers
Favorite Fertilizer have executed a Consent Order authorizing the extension.
 
     PCS Joint Venture is co-operating with regulatory authorities in their
investigations of the Lakeland and Moultrie sites. It is also attempting to
determine the number and location of other parties who may be liable for
remediation of these sites. However, because site assessments are ongoing and
because other parties may be liable for some or all costs of remediation, the
ultimate liability of PCS Joint Venture has not yet been determined.
 
     The Company received a request for information dated August 28, 1998, from
the United States Department of Agriculture Forest Service ("USDA Forest
Service") alleging that a subsidiary of Texasgulf, dissolved over forty-five
years ago, may have contributed to environmental impacts in the Klamath National
Forest in northern California. In a letter dated November 2, 1998, a
representative of the Washoe Tribe of Nevada and California invited the Company
to evaluate its potential liability and to participate in an assessment of
natural resource damages. The Company has advised the USDA Forest Service that
the Company does not believe it is a potentially responsible party with respect
to the alleged impacts and also has advised the Washoe Tribe that the Company
did not wish to participate in the assessment.
 
     In February 1996, the North Carolina Department of Environment, Health and
Natural Resources notified PCS Nitrogen that the Navassa, North Carolina
terminal site had been included on the state's Inactive Hazardous Waste Sites
Priority List. Listed sites normally are subject to detailed assessment of the
environmental condition of concern and the feasible remediation options. PCS
Nitrogen nonetheless currently expects that the cost and liability, if any,
associated with the Navassa terminal site will not have a material adverse
effect on the Company's financial condition or results of operations.
 
     In 1991, after extensive environmental assessments, PCS Nitrogen
voluntarily installed a remediation system at the Memphis plant to address
certain contaminants found in the groundwater. The Tennessee Department of
Environment and Conservation ("TDEC") in 1993 proposed to include the Memphis
plant on the state's list of Inactive Hazardous Substance Sites. The Tennessee
Solid Waste Disposal Control Board rejected a similar proposal made by the TDEC
in 1989. Listed sites normally are subject to detailed assessment of the
environmental condition of concern and the feasible remediation options, but
that process may not be fully appropriate as to the Memphis plant in view of PCS
Nitrogen's existing remediation system. In 1994, PCS Nitrogen entered into a
voluntary consent agreement and order with the TDEC providing for oversight and
possible modification by the TDEC of PCS Nitrogen's current remedial action,
including authority for requiring assessments of soils associated with PCS
Nitrogen's wastewater treatment system. There can be no assurance that the
Memphis plant will not be listed in the future, but in the event that it is
listed, PCS Nitrogen expects that the compliance costs will not have a material
adverse effect on the Company's financial condition or results of operations.
 
     In 1990, PCS Nitrogen implemented a voluntary program to assess groundwater
quality at the Clinton plant due to the presence of nitrates in the groundwater.
PCS Nitrogen provided the results of its investigation to the Iowa Department of
Natural Resources ("IDNR"). Pursuant to negotiations with the IDNR, the Company
has conducted and will conduct further investigations and, if necessary, further
remediation. Further, the Clinton plant site is immediately adjacent to the
Quantum Superfund site at which groundwater remediation is currently being
conducted. Certain volatile organic compounds associated with the Quantum site
have been detected in small amounts in the groundwater at the Clinton plant. It
is also possible that remediation activities at the Quantum site could result in
increased levels of nitrates in groundwater at the Clinton plant. In late 1997,
IDNR officials contacted PCS Nitrogen concerning elevated levels of nitrates in
a receiving water down gradient of the Clinton plant. Although PCS Nitrogen
disagrees with IDNR regarding the source of the nitrate levels, in June 1998,
PCS Nitrogen proposed a voluntary remediation plan agreed to by IDNR which
provides for remediation of nitrates at the site by (i) phytoremediation
(planting of trees to
 
                                      I-19
<PAGE>   21
 
absorb nitrates); (ii) installation of a groundwater recovery trench and
discharge through an existing water effluent outfall; and (iii) restoration of
approximately 100 acres of farmland to its natural state of grasses and
woodlands. Nonetheless, based on currently available information, PCS Nitrogen
expects that the cost of the remediation and any further assessment of nitrates
will not have a material adverse effect on the Company's financial condition or
results of operations.
 
     DSM, which conducts manufacturing operations immediately adjacent to the
Augusta plant, is subject to certain corrective action requirements under its
Resource Conservation and Recovery Act ("RCRA") hazardous waste management
permit. Pursuant to these requirements, the GEPD identified a number of solid
waste management units on DSM's property, including several on property formerly
leased from DSM by PCS Nitrogen, for assessment and potential remediation.
During 1996, PCS Nitrogen purchased the formerly leased land and the GEPD
required PCS Nitrogen to enter into a corrective action consent order for the
performance of the assessment and remediation actions which would have been
required of DSM with respect to the purchased land under its RCRA permit. PCS
Nitrogen has submitted a draft remediation investigation work plan to the GEPD
providing for the assessment of the solid waste management units identified by
the GEPD at the Augusta plant which is in the final stages of review. Although
the work plan is subject to final GEPD approval, currently it does not appear
GEPD will require PCS Nitrogen to perform significant assessment or corrective
action activities. Therefore, PCS Nitrogen does not expect to incur material
costs.
 
PERMITS AND REGULATORY APPROVALS
 
     Many of the Company's operations and facilities are required by federal,
provincial, state and local environmental laws to obtain and operate in
compliance with a range of permits and regulatory approvals. Such permits and
approvals typically have to be renewed or reissued periodically. The Company may
also become subject to new laws or regulations that require it to obtain new or
additional permits or approvals. The Company believes that it is in material
compliance with its current permits and regulatory approvals and also believes
that it is well-positioned to obtain and comply with the additional permits or
approvals that it anticipates may be required in the future. However, there can
be no assurance that such permits or approvals will issue in the ordinary
course. Further, the terms and conditions of future permits and approvals may be
more stringent and may require increased expenditures on the part of the
Company.
 
     A significant portion of the Company's phosphate reserves in Aurora, North
Carolina is located in wetlands and, under the U.S. federal Clean Water Act, a
permit must be obtained from the U.S. Army Corps of Engineers (the "Corps")
before mining activity that will disturb the wetlands may occur. As part of the
permit process for PCS Phosphate, the Corps issued a draft Environmental Impact
Statement in January 1994 which was supplemented in May 1995. In 1997, PCS
Phosphate received its required authorizations from the State of North Carolina
and on August 14, 1997, the Corps issued a permit granting approval to mine
certain areas described in the Environmental Impact Statement through 2017. The
permit contains a section on wetlands mitigation approach and methods regarding
wetland impacts associated with mining covered by the permit. The Company has
acquired additional land adjacent to its Aurora, North Carolina facilities for
mitigation purposes. In order to demonstrate the feasibility of such activities,
as of December 31, 1998, the Company had created or restored 2,580 acres of
wetlands.
 
     In addition to the wetlands permit from the Corps, the Company also needs
additional authorizations from agencies of the State of North Carolina to
continue its mining activities in North Carolina. The Company is required to
have State mining permits that contain bonding and reclamation requirements. The
Company has a State mining permit for the areas presently being mined by the
Company that is effective through 2003, but this permit must be amended
periodically to add additional acreage during this period. The Company also
holds another mining permit from the State for the area of the property that
contains the wetlands covered by the permit issued by the Corps. This State
permit has been renewed until 2005.
 
     Gypsum is a byproduct of the production of phosphoric acid. Gypsum is
normally placed in above-ground storage areas called gypsum stacks. The gypsum
stacks at the White Springs Facility will continue to be used and when closed
will be covered or capped to the extent required under applicable regulations.
The Florida Phosphogypsum Rule permits the use of existing gypsum stacks until
they reach capacity, if groundwater
 
                                      I-20
<PAGE>   22
 
standards are met as of and after March 25, 2001. The Company's management
believes that it will be in compliance with such Rule and as such should be
allowed to continue using its three gypsum stacks for their useful lives of
approximately 35 years; however, until a final determination is made by Florida
environmental authorities, it is not certain how long White Springs will be
allowed to continue using its gypsum stacks beyond the year 2001. A regulatory
prohibition on use of existing stacks would result in a closure/new stack
construction cost currently estimated in excess of $100 million.
 
     Lands mined by White Springs after July 1, 1975 and unmined lands used in
the mining operations after July 1, 1984 are subject to mandatory reclamation
requirements of the State of Florida. Wetlands must be reclaimed on an
acre-for-acre basis under the rules of the State of Florida Department of
Environmental Protection ("FDEP") unless otherwise provided in, or pursuant to,
a Memorandum of Agreement ("MOA"), dated February 1, 1995, between OxyChem and
FDEP (which agreement was later assigned to the Company). The MOA established
alternate procedures for the Company to follow. The cost of reclamation of
mandatory lands is borne solely by White Springs. The current practice of White
Springs is to return most upland areas to commercial pine plantation, which is
the predominant pre-operation land use. Reclaimed lands include uplands,
wetlands and lakes.
 
     Land reclamation at White Springs is currently performed pursuant to
federal, state, and local regulatory approvals granted in 1996 and 1997 to
implement the 1995 MOA between OxyChem and FDEP. The MOA provides for mitigation
of mining impacts, particularly impacts to wetlands, to be done through funding
of public acquisition of environmentally sensitive lands in the region. Land
reclamation continues to be done on-site but is undertaken using the alternate
standards of the MOA which do not require the on-site reclamation of wetlands
and which allow for the construction of lands that are expected to be of greater
future utility. The Company's contributions for the land acquisition program in
1997 and 1998 totaled $2.5 million.
 
     White Springs has initiated a process for securing an additional federal
permit and ancillary modifications of state and local regulatory approvals
needed for continuation of mining operations beyond the expiration of its
current federal permit in 2002. The process involves environmental studies of
potential mining areas and evaluation of mine plan and reclamation alternatives.
All affected regulatory authorities, various commenting agencies, and interested
outside parties are participating in the process and completion of the process
is targeted approximately for the middle of the year 2000. Selection of mine
plan and reclamation alternatives and the results of the environmental studies
could result in changes to reclamation and mitigation practices with higher
costs and changes to mining areas with reserve impacts. The magnitude of such
cost impacts cannot be estimated until the studies and evaluations are
completed. Failure to secure the required approvals for continuation of the
mining operations under any reclamation or mitigation alternative would
negatively affect reserves and costs.
 
     The Lima plant discharges wastewater to the Ottawa River under a National
Pollutant Discharge Elimination System permit issued by the Ohio Environmental
Protection Agency ("OEPA"). When the permit was renewed in 1989, the OEPA
initially proposed to impose substantial limitations on certain substances
present in the wastewater, based on concerns over the already impaired quality
of the river water as a result of industrial or municipal discharges. The OEPA
later agreed in an administrative settlement to a five year permit for the Lima
plant with discharge conditions that were more acceptable to the Lima plant's
prior owner, BP Chemicals Inc. The permit expired in 1994, was administratively
extended and renewed by the OEPA in July 1996, for a shorter than customary term
ending October 31, 1997. PCS Nitrogen has filed an application for permit
renewal and is entitled to operate under the current permit until such
application is processed and acted upon. While PCS Nitrogen does not expect that
substantial additional discharge restrictions will be imposed in conjunction
with the next renewal, the OEPA may again seek to impose a reduction in the
permitted discharge levels. Such restrictions may require the installation of
improved treatment technology, the cost of which will depend on the limitations
ultimately imposed.
 
POTASH DECOMMISSIONING REGULATIONS
 
     The environmental regulatory authorities in the Province of Saskatchewan
have enacted regulations to require decommissioning and reclamation plans and
financial assurances with respect to decommissioning by
 
                                      I-21
<PAGE>   23
 
owners and operators of mines. Pursuant to the regulations, the Company filed a
decommissioning plan for each of the Company's Saskatchewan mines with the
responsible Minister in the spring of 1997. These plans contained a proposal for
financial assurance to ensure completion of the plans and are subject to the
approval of the Minister. An approved financial assurance plan must be
established by March 31, 1999, or one year following approval of the
decommissioning and reclamation plan, whichever is later. An initial response to
the proposed plans was received by the Company in February 1998 and discussions
with the environmental regulatory authorities are continuing. The Company has
been advised that, although the technical aspects of the plan are acceptable,
the regulatory authorities do not accept the schedules proposed in the plans for
decommissioning of the waste salt piles. The regulatory authorities have asked
that the proposed schedules be advanced and discussions continue with the
regulators regarding the format for the revised plans and a submission date.
Because of the uncertainty surrounding the timing of the plan's implementation
and the structure of the financial assurance mechanism, the Company is unable at
this time to accurately estimate the financial implications to the Company.
 
GOVERNMENT REGULATIONS
 
     In September 1987, legislation was adopted in Saskatchewan that authorized
the government to control production at potash mines located in the Province of
Saskatchewan. The legislation, which has not taken effect but which can be
brought into effect by proclamation of the Cabinet of Saskatchewan, permits the
Cabinet, and the Potash Resources Board which would be created under such
legislation, to prescribe rates of potash production in Saskatchewan and to
allocate production among individual mines. In determining rates for individual
mines, the Potash Resources Board would take into account a mine's productive
capacity, the rate of production from the mine, the present and future inventory
and stockpile requirements for the mine, the portion of demand for potash that
has been fulfilled by the primary production of potash from the mine and any
additional factors that may be prescribed by regulation. Increases in production
capacity would be subject to the approval of the government of Saskatchewan. The
Company cannot predict at this time if or when the legislation will be
proclaimed or its effects on the Company's financial condition or results of
operations.
 
EXECUTIVE OFFICERS OF THE COMPANY
 
     The name, age, period of service and position held for each of the
executive officers of the Company as at February 28, 1999 are as follows:
 
<TABLE>
<CAPTION>
                                               SERVED
NAME                                     AGE   SINCE    POSITION HELD
----                                     ---   ------   -------------
<S>                                      <C>   <C>      <C>
CHARLES E. CHILDERS....................  66     1987    Chairman of the Board and Chief Executive
                                                        Officer
WILLIAM J. DOYLE.......................  48     1987    President and Chief Operating Officer
JOHN GUGULYN...........................  63     1987    Senior Vice President, Administration
BARRY E. HUMPHREYS.....................  55     1976    Senior Vice President, Finance and Treasurer
JOHN L.M. HAMPTON......................  45     1988    Senior Vice President, General Counsel and
                                                        Secretary
WAYNE R. BROWNLEE......................  46     1988    Senior Vice President, Expansion and
                                                        Development
BETTY-ANN L. HEGGIE....................  45     1981    Senior Vice President, Corporate Relations
THOMAS J. WRIGHT.......................  66     1995    President, PCS Phosphate
GARTH W. MOORE.........................  50     1982    President, PCS Potash
GARY E. CARLSON........................  45     1997    President, PCS Sales
JAMES F. DIETZ.........................  52     1997    President, PCS Nitrogen
PETER BRAUN............................  59     1977    Vice President, Audit
DENIS A. SIROIS........................  43     1978    Vice President and Corporate Controller
</TABLE>
 
     All of the officers have had the principal occupation indicated for the
previous five years except as follows: Mr. Doyle was President of Potash
Corporation of Saskatchewan Sales Limited ("PCS Sales") and located in
 
                                      I-22
<PAGE>   24
 
Chicago, Illinois prior to 1995, was Executive Vice President, Potash and Sales,
of the Company from 1995 until March 1997, and President PCS Sales from March
1997 to July 1998; Mr. Wright was President and Chief Executive Officer of
Texasgulf from 1993 to April 1995. Prior to March 1997, Mr. Wright was Executive
Vice President, PCS Phosphate. On April 27, 1995, Mr. Hampton, Mr. Brownlee, and
Ms. Heggie were promoted from Vice President to Senior Vice President, and Mr.
Braun was promoted from Director, Internal Audit, to Vice President. Prior to
March 1997, Mr. Moore was Senior Vice President, Technical Services of the
Company and prior to April 1995, he was Vice President, Technical Services. Mr.
Carlson was Vice President of American Cyanamid, International Agricultural
Products Group from 1993 to June 1996, was Senior Vice President, Marketing of
Arcadian from June 1996 to March 1997, and President of PCS Nitrogen from March
1997 to July 1998. Mr. Dietz was Vice President, Manufacturing of Arcadian
Corporation from 1993 to March 1997 and Executive Vice President of PCS Nitrogen
from March 1997 to July 1998. Mr. Sirois was Controller of the Company prior to
1997.
 
     The terms and conditions of Mr. Childers' employment with the Company are
governed by an employment agreement, the current term of which expires June 30,
2002 and pursuant to which Mr. Childers shall serve as Chairman of the Board and
Chief Executive Officer of the Company until June 30, 1999 and thereafter as
Chairman of the Board and as a special advisor to the Company to June 30, 2002.
 
ITEM 3.  LEGAL PROCEEDINGS.
 
AGREEMENT SUSPENDING POTASH DUMPING INVESTIGATION
 
     In March 1987, the U.S. International Trade Commission made a preliminary
determination that there was a reasonable indication that the U.S. potash
producers had been injured by imports of Canadian potash, assuming that Canadian
potash had been "dumped" into the U.S. market at less than "fair value". On
August 26, 1987, the U.S. Department of Commerce ("Commerce") determined on a
preliminary basis that Canadian potash was, or was likely to be, sold in the
United States at less than "fair value".
 
     On January 8, 1988, Commerce signed a suspension agreement with all of the
potash producers in Canada, suspending the dumping investigation by Commerce.
The agreement stipulates that each producer's minimum price for potash sold in
the United States is to be based upon a formula determined by Commerce for each
producer that is designed to limit any dumping by that producer in the future.
Compliance with the agreement is monitored by Commerce. The agreement can be
terminated without termination of the suspended investigation if Commerce
determines that sales are made below the price determined under the formula,
producers having 15% or more of the total Canadian volume or value exported into
the United States withdraw from the agreement, or the conditions of the
agreement are otherwise not being met, in which case the suspended investigation
could be resumed by Commerce.
 
     In accordance with procedures established by the Uruguay Round Agreements
Act, Commerce and the U.S. International Trade Commission will initiate a
"sunset" review of the suspended investigation in April 1999 to determine
whether the suspended investigation and suspension agreement should be
terminated or should remain in effect.
 
CIVIL ANTITRUST COMPLAINTS
 
     In June, 1993, PCS and PCS Sales (Canada) Inc. ("PCS Sales (Canada)") were
served with a complaint relating to a suit filed in the United States District
Court for Minnesota against most North American potash producers, including the
Company. The complaint alleged a conspiracy among the defendants to fix the
price of potash purchased by the plaintiffs as well as potash purchased by the
members of a class of certain purchasers proposed by the plaintiffs. Similar
complaints were filed in the United States District Courts for the Northern
District of Illinois and the Western District of Virginia. On motion of the
defendants, all of the complaints were transferred and consolidated for
pre-trial purposes in the United States District Court for Minnesota. Amended
complaints were filed in March and April 1994. On January 12, 1995, the
Minnesota Federal Court granted the plaintiffs' motion for class certification.
The complaint sought treble damages in an unspecified amount and other relief.
PCS and PCS Sales filed a motion for summary judgment on December 22, 1995. On
January 2, 1997, Judge Richard H. Kyle issued an order granting the defendants'
                                      I-23
<PAGE>   25
 
motions for summary judgment and dismissing the lawsuit. The plaintiffs appealed
that order to the United States Court of Appeals for the Eighth Circuit, on
January 31, 1997. Oral arguments were heard on November 17, 1997.
 
     Additional complaints were filed in the California and Illinois State
Courts on behalf of purported classes of indirect purchasers of potash in those
states. PCS moved to dismiss the California State Court lawsuit for lack of
personal jurisdiction and the court ruled that it does not have personal
jurisdiction over PCS but that it does have personal jurisdiction over PCS
Sales. The case remains at an early stage; no merits discovery has taken place.
The parties have agreed to stay proceedings pending the outcome of the appeal to
the United States Court of Appeals for the Eighth Circuit. The Illinois State
Court complaint has been dismissed for failure to state a cause of action.
 
FORMER ARCADIAN EXECUTIVE PROCEEDINGS
 
     On May 7, 1997, J. Douglas Campbell, Alfred L. Williams, Peter H. Kesser,
and David Alyea, former officers of Arcadian, filed lawsuits against the Company
in the United States District Court for the Western District of Tennessee. The
complaints allege that the Company breached employment agreements between
Arcadian and the officers and breached the related assumption agreement among
the Company, PCS Nitrogen, and Arcadian. In addition, Mr. Alyea's complaint
names Charles Childers, John Gugulyn, and John Hampton as additional defendants
and alleges that the defendants interfered with and conspired to interfere with
his employment agreement, and did not accurately state their intentions in
entering into the assumption agreement. The complaints of Mr. Campbell, Mr.
Williams, Mr. Kesser, and Mr. Alyea seek damages in excess of $22.2 million,
$6.2 million, $3.7 million, and $4.2 million, respectively. In addition, on
October 14, 1997, Charles Lance, a former officer of Arcadian Corporation, filed
a lawsuit in the same court against the Company also alleging breaches of his
employment agreement and the related assumption agreement. Mr. Lance seeks
damages in an amount exceeding $3.0 million. Each complaint also seeks certain
additional unspecified damages. On August 11, 1998, the Court ruled that the
Company had assumed the obligations of the employment agreements and that
equitable claims and defenses asserted against the executives for breaches of
fiduciary duties, corporate waste, and self-dealing should be asserted by PCS
Nitrogen in the state court action described below. Trial with respect to the
claims of Mr. Campbell, Mr. Williams and Mr. Kesser commenced on August 17, 1998
and concluded on August 25, 1998. On December 1, 1998 the court entered
judgments in the amounts of $12.7 million, $3.2 million, and $2.6 million in
favor of Mr. Campbell, Mr. Williams and Mr. Kesser, respectively, subject to
pending applications for attorneys' fees or additional amounts to compensate the
former Arcadian executives for the impact of certain excise taxes, if
applicable. The Company has filed Notices of Appeal with respect to these
judgments. The Company has settled the claim of Mr. Alyea for $700,000 and
$50,000 of attorneys' fees (subject to the application for additional fees) and
the claim of Mr. Lance for a total amount of $600,000.
 
     On September 15, 1997, the Company and PCS Nitrogen filed an action in the
Circuit Court of Tennessee for the Thirtieth Judicial District at Memphis
against J. Douglas Campbell, Peter H. Kesser, Alfred L. Williams, Charles W.
Lance, Jr., and David L. Alyea, for declaratory relief and damages. The Company
and PCS Nitrogen alleged that the defendants, all former executives of Arcadian,
committed breaches of their fiduciary duties in the negotiation of, obtaining
approval for, and execution of the employment agreements each of them had with
Arcadian. In addition, the Company and PCS Nitrogen also sought a declaratory
judgment with respect to the unenforceability of the employment agreements. On
October 14, 1997, the defendants removed this action from the Circuit Court of
Tennessee to the United States District Court for the Western District of
Tennessee. On October 21, 1997, the five defendants filed counterclaims: (i)
under the Employee Retirement Income Security Act of 1974, as amended (ERISA),
against PCS Nitrogen, (ii) alleging that the Company and PCS Nitrogen unlawfully
interfered with their attainment of benefits under their employment agreements,
and (iii) incorporating by reference all claims asserted in their individually
filed complaints. The damages sought by the defendants in these counterclaims
appear substantially equivalent to the damages sought in their individually
filed suits as plaintiffs. On July 20, 1998 the federal court dismissed all of
the former executives' claims under ERISA and remanded the case to
 
                                      I-24
<PAGE>   26
 
state court, where it remains pending. Pursuant to the settlements with Mr.
Alyea and Mr. Lance, the claims and counterclaims as they concern these
individuals have been non-suited.
 
     Management of the Company, having consulted with legal counsel, believes
that the lawsuits will not have a material adverse effect on the Company's
financial condition or results of operations.
 
PORT AUTHORITY PROCEEDINGS
 
     On March 13, 1996, PCS Nitrogen, two other nitrogen producers, and up to 30
unidentified parties were named as defendants in a lawsuit filed in the name of
the Port Authority of New York and New Jersey (the "Port Authority") in New
Jersey state court. The lawsuit was actually filed by attorneys hired by the
Port Authority's subrogated insurance carriers. The Port Authority's insurers
are seeking to recover damages allegedly incurred as a result of the explosion
at the World Trade Center in New York City on February 26, 1993. The Port
Authority's insurers allege in their complaint that the two other named
defendants and one or more unidentified parties (as manufacturers of ammonium
nitrate), PCS Nitrogen and one or more unidentified parties (as producers of
urea), and one or more unidentified makers of nitric acid are liable under
various tort theories for unspecified property damages, business interruption
losses, lost rent and other damages allegedly incurred by the Port Authority as
a result of the World Trade Center explosion. The lawsuit was removed to federal
court in New Jersey. On February 7, 1997, the defendants filed a motion to
dismiss the suit for failure to state a claim upon which relief could be
granted. On December 19, 1997, that motion was granted and the complaint was
dismissed with prejudice. On January 15, 1998, the Port Authority appealed the
dismissal to the United States Court of Appeals for the Third Circuit. The case
was briefed and oral argument was heard on September 17, 1998. Although neither
the Port Authority nor its subrogated insurers have alleged or otherwise
revealed the amount of damages sought from PCS Nitrogen in the lawsuit, the Port
Authority stated in an affidavit submitted to the court in support of its motion
to disqualify its insurers' counsel that as of April 9, 1996, the Port Authority
had submitted to its insurers claims relating to the explosion totaling
approximately $340 million, of which the insurers had paid approximately $160
million. PCS Nitrogen is unaware of any basis for liability and intends to
continue to vigorously defend the lawsuit.
 
DOJ INVESTIGATIONS
 
     In 1993, PCS Nitrogen learned that the Antitrust Division of the Department
of Justice (the "DOJ") had initiated a grand jury investigation of pricing
practices in the explosives industry. In response to a subpoena issued in that
investigation, PCS Nitrogen produced to the DOJ in 1994 and 1995 documents
concerning ammonium nitrate sold to explosives manufacturers. In late 1996 and
early 1997, PCS Nitrogen learned that the DOJ had begun contacting current and
former PCS Nitrogen employees seeking information concerning PCS Nitrogen's
pricing of ammonium nitrate in 1992. PCS Nitrogen cooperated fully with the DOJ
investigation and was informed by the DOJ in 1997 that, based on available
information, neither PCS Nitrogen nor any of its current or former directors,
officers or employees was a target of the investigation. PCS Nitrogen has been
informed that the DOJ's investigation of these matters as they relate to PCS
Nitrogen, has concluded.
 
ENVIRONMENTAL PROCEEDINGS
 
     For a description of certain environmental proceedings involving the
Company, see "Environmental Matters".
 
ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
 
     Not applicable.
 
                                      I-25
<PAGE>   27
 
                                    PART II
 
ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
 
     The information under "Common Share Prices and Volumes", "Shareholder
Information -- Ownership" and "Selected Ten-Year Data" in the registrant's 1998
Annual Report is incorporated herein by reference.
 
     Dividends paid to U.S. holders of Common Shares, who do not use the shares
in carrying on a business in Canada, will be subject to a Canadian withholding
tax under the Income Tax Act. Under the Canada-U.S. Income Tax Convention (1980)
(the "Convention"), the rate of withholding is generally reduced to 15%. Subject
to certain limitations, the Canadian withholding tax will be treated as a
foreign income tax that can generally be claimed as a deduction from income or
as a credit against the U.S. income tax liability of the holder. Holders will
generally not be subject to tax under the Income Tax Act with respect to any
gain realized from a disposition of Common Shares.
 
ITEM 6.  SELECTED FINANCIAL DATA.
 
     The information under "Selected Ten-Year Data" in the registrant's 1998
Annual Report is incorporated herein by reference.
 
ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS.
 
     The information under "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in the registrant's 1998 Annual Report is
incorporated herein by reference.
 
ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
 
     The Consolidated Financial Statements contained in the registrant's 1998
Annual Report are incorporated herein by reference.
 
ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE.
 
     Not applicable.
 
                                      II-1
<PAGE>   28
 
                                    PART III
 
ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
 
     The information under "Election of Directors" in the 1999 Proxy Circular is
incorporated herein by reference. Information concerning executive officers is
set forth under "Executive Officers of the Company" in Part I.
 
ITEM 11.  EXECUTIVE COMPENSATION.
 
     The information under "Executive Compensation" in the 1999 Proxy Circular
is incorporated herein by reference.
 
ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
 
     The information under "Ownership of Shares" and "Election of Directors" in
the 1999 Proxy Circular is incorporated herein by reference.
 
ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
 
     The information under "Election of Directors" and "Executive Compensation"
in the 1999 Proxy Circular is incorporated herein by reference.
 
                                      III-1
<PAGE>   29
 
                                    PART IV
 
ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
 
(a) List of Documents Filed as Part of this Report
 
1.   Consolidated Financial Statements in Annual Report
 
<TABLE>
<S>                                                           <C>
Auditors' Report............................................     44
Consolidated Statements of Financial Position...............     45
Consolidated Statements of Income and Retained Earnings.....     46
Consolidated Statements of Cash Flow........................     47
Notes to the Consolidated Financial Statements..............  48-61
</TABLE>
 
2.   Schedules
 
     All Schedules are omitted because the required information is inapplicable
or it is presented in the Consolidated Financial Statements.
 
3.   Exhibits
 
<TABLE>
<CAPTION>
EXHIBIT
NUMBER                     DESCRIPTION OF DOCUMENT
-------                    -----------------------
<S>      <C>
2        Agreement and Plan of Merger dated September 2, 1996, as
         amended, by and among the registrant, Arcadian Corporation
         and PCS Nitrogen, Inc., incorporated by reference to Exhibit
         2(a) to Amendment Number 2 to the registrant's Form S-4
         (File No. 333-17841).
3(a)     Restated Articles of Incorporation of the registrant dated
         October 31, 1989, as amended May 11, 1995, incorporated by
         reference to Exhibit 3(i) to the registrant's report on Form
         10-K for the year ended December 31, 1995 (the "1995 Form
         10-K").
3(b)     Bylaws of the registrant dated March 2, 1995, incorporated
         by reference to Exhibit 3(ii) to the 1995 Form 10-K.
4(a)     Term Credit Agreement between The Bank of Nova Scotia and
         other financial institutions and the registrant dated
         October 4, 1996, incorporated by reference to Exhibit 4(b)
         to the registrant's Form S-4 (File No. 333-17841).
4(b)     First Amending Agreement to Term Credit Agreement between
         The Bank of Nova Scotia and other financial institutions and
         the registrant dated November 6, 1997, incorporated by
         reference to Exhibit 4(b) to the registrant's report on Form
         10-K for the year ended December 31, 1997 (the "1997 Form
         10-K").
4(c)     Second Amending Agreement to Term Credit Agreement between
         The Bank of Nova Scotia and other financial institutions and
         the registrant dated December 15, 1997, incorporated by
         reference to Exhibit 4(c) to the 1997 Form 10-K.
4(d)     Third Amending Agreement to Term Credit Agreement between
         The Bank of Nova Scotia and other financial institutions and
         the registrant dated October 2, 1998, incorporated by
         reference to Exhibit 4(d) to the registrant's report on Form
         10-Q for the quarterly period ended September 30, 1998.
4(e)     Indenture dated as of June 16, 1997, between the registrant
         and The Bank of Nova Scotia Trust Company of New York,
         incorporated by reference to Exhibit 4(a) the registrant's
         report on Form 8-K dated June 18, 1997.
</TABLE>
 
     The registrant hereby undertakes to file with the Securities and Exchange
Commission, upon request, copies of any constituent instruments defining the
rights of holders of long-term debt of the registrant or its subsidiaries that
have not been filed herewith because the amounts represented thereby are less
than 10% of the total assets of the registrant and its subsidiaries on a
consolidated basis.
 
                                      IV-1
<PAGE>   30
 
<TABLE>
<CAPTION>
EXHIBIT
NUMBER                     DESCRIPTION OF DOCUMENT
-------                    -----------------------
<S>      <C>
10(a)    Suspension Agreement concerning Potassium Chloride from
         Canada dated January 7, 1988, among U.S. Department of
         Commerce, the registrant, International Minerals and
         Chemical (Canada) Limited, Noranda, Inc. (Central Canada
         Potash Co.), Potash Company of America, a Division of Rio
         Algom Limited, S & P Canada, II (Kalium Chemicals), Cominco
         Ltd., Potash Company of Canada Limited, Agent for
         Denison-Potacan Potash Co. and Saskterra Fertilizers Ltd.,
         incorporated by reference to Exhibit 10(a) to the
         registrant's registration statement on Form F-1 (File No.
         33-31303) (the "F-1 Registration Statement").
10(b)    Sixth Voting Agreement dated April 22, 1978, between Central
         Canada Potash, Division of Noranda, Inc., Cominco Ltd.,
         International Minerals and Chemical Corporation (Canada)
         Limited, PCS Sales and Texasgulf Inc., incorporated by
         reference to Exhibit 10(f) to the F-1 Registration
         Statement.
10(c)    Canpotex Limited Shareholders Seventh Memorandum of
         Agreement effective April 21, 1978, between Central Canada
         Potash, Division of Noranda Inc., Cominco Ltd.,
         International Minerals and Chemical Corporation (Canada)
         Limited, PCS Sales, Texasgulf Inc. and Canpotex Limited as
         amended by Canpotex S & P amending agreement dated November
         4, 1987, incorporated by reference to Exhibit 10(g) to the
         F-1 Registration Statement.
10(d)    Producer Agreement dated April 21, 1978, between Canpotex
         Limited and PCS Sales, incorporated by reference to Exhibit
         10(h) to the F-1 Registration Statement.
10(e)    Agreement of Limited Partnership of Arcadian Fertilizer,
         L.P. dated as of March 3, 1992 (form), and the related
         Certificate of Limited Partnership of Arcadian Fertilizer,
         L.P., filed with the Secretary of State of the State of
         Delaware on March 3, 1992 (incorporated by reference to
         Exhibits 3.1 and 3.2 to Arcadian Partners L.P.'s
         Registration Statement on Form S-1 (File No. 33-45828)).
10(f)    Amendment to Agreement of Limited Partnership of Arcadian
         Fertilizer L.P. and related Certificates of Limited
         Partnership of Arcadian Fertilizer L.P. filed with the
         Secretary of State of the State of Delaware on March 6, 1997
         and November 26, 1997.
10(g)    Geismar Complex Services Agreement dated June 4, 1984,
         between Allied Corporation and Arcadian Corporation,
         incorporated by reference to Exhibit 10.4 to Arcadian
         Corporation's Registration Statement on Form S-1 (File No.
         33-34357).
10(h)    Canpotex/PCS Amending Agreement, dated with effect October
         1, 1992, incorporated by reference to Exhibit 10(f) to the
         1995 Form 10-K.
10(i)    Canpotex PCA Collateral Withdrawing/PCS Amending Agreement,
         dated with effect October 7, 1993, incorporated by reference
         to Exhibit 10(g) to the 1995 Form 10-K.
10(j)    Esterhazy Restated Mining and Processing Agreement dated
         January 31, 1978, between International Minerals and
         Chemical Corporation (Canada) Limited and the registrant's
         predecessor, incorporated by reference to Exhibit 10(e) to
         the F-1 Registration Statement.
10(k)    Agreement dated December 21, 1990, between International
         Minerals & Chemical Corporation (Canada) Limited and the
         registrant, amending the Esterhazy Restated Mining and
         Processing Agreement dated January 31, 1978, incorporated by
         reference to Exhibit 10(p) to the registrant's report on
         Form 10-K for the year ended December 31, 1990.
10(l)    Agreement effective August 27, 1998, between International
         Minerals & Chemical (Canada) Global Limited and the
         registrant, amending the Esterhazy Restated Mining and
         Processing Agreement dated January 31, 1978 (as amended).
10(m)    Agreement effective August 31, 1998, among International
         Minerals & Chemical (Canada) Global Limited, International
         Minerals & Chemical (Canada) Limited Partnership and the
         registrant assigning the interest in the Esterhazy Restated
         Mining and Processing Agreement dated January 31, 1978 (as
         amended) held by International Minerals & Chemical (Canada)
         Global Limited to International Minerals & Chemical (Canada)
         Limited Partnership.
</TABLE>
 
                                      IV-2
<PAGE>   31
 
<TABLE>
<CAPTION>
EXHIBIT
NUMBER                     DESCRIPTION OF DOCUMENT
-------                    -----------------------
<S>      <C>
10(n)    Operating Agreement dated May 11, 1993, between BP Chemicals
         Inc. and Arcadian Ohio, L.P., as amended by the First
         Amendment to the Operating Agreement dated as of November
         20, 1995, between BP Chemicals Inc. and Arcadian Ohio, L.P.
         ("First Amendment"), incorporated by reference to Exhibit
         10.2 to Arcadian Partners L.P.'s current report on Form 8-K
         for the report event dated May 11, 1993, except for the
         First Amendment which is incorporated by reference to
         Arcadian Corporation's report on Form 10-K for the year
         ended December 31, 1995.
10(o)    Second Amendment to Operating Agreement between BP
         Chemicals, Inc. and Arcadian Ohio, L.P., dated as of
         November 25, 1996, incorporated by reference to Exhibit
         10(k) to the 1997 Form 10-K.
10(p)    Manufacturing Support Agreement dated May 11, 1993, between
         BP Chemicals Inc. and Arcadian Ohio, L.P., incorporated by
         reference to Exhibit 10.3 to Arcadian Partners L.P.'s
         current report on Form 8-K for the report event dated May
         11, 1993.
10(q)    First Amendment to Manufacturing Support Agreement between
         BP Chemicals, Inc. and Arcadian Ohio, L.P., dated as of
         November 25, 1996, incorporated by reference to Exhibit
         10(l) to the 1997 Form 10-K.
10(r)    Amended and Restated Agreement for Lease dated as of May 16,
         1997, between Trinidad Ammonia Company, Limited Partnership,
         and PCS Nitrogen Fertilizer, L.P., incorporated by reference
         to Exhibit 10(n) to the registrant's report on Form 10-Q for
         the quarterly period ended June 30, 1997 (the "Second
         Quarter 1997 Form 10-Q").
10(s)    Amended and Restated Lease Agreement dated as of May 16,
         1997, between Trinidad Ammonia Company, Limited Partnership,
         and PCS Nitrogen Fertilizer, L.P., incorporated by reference
         to Exhibit 10(o) to the Second Quarter 1997 Form 10-Q.
10(t)    Amended and Restated Agreement for Lease dated as of May 16,
         1997, between Nitrogen Leasing Company, Limited Partnership,
         and PCS Nitrogen Fertilizer, L.P., incorporated by reference
         to Exhibit 10(p) to the Second Quarter 1997 Form 10-Q.
10(u)    Amended and Restated Lease Agreement dated as of May 16,
         1997, between Nitrogen Leasing Company, Limited Partnership,
         and PCS Nitrogen Fertilizer, L.P., incorporated by reference
         to Exhibit 10(q) to the Second Quarter 1997 Form 10-Q.
10(v)    Amended and Restated Purchase Option Agreement dated as of
         May 16, 1997, between Nitrogen Leasing Company, Limited
         Partnership, and PCS Nitrogen Fertilizer Operations, Inc.,
         incorporated by reference to Exhibit 10(r) to the Second
         Quarter 1997 Form 10-Q.
10(w)    Amended and Restated Purchase Option Agreement dated as of
         May 16, 1997, between Trinidad Ammonia Company, Limited
         Partnership and PCS Nitrogen Fertilizer Operations, Inc.,
         incorporated by reference to Exhibit 10(s) to the Second
         Quarter 1997 Form 10-Q.
10(x)    Agreement dated January 1, 1997 between the registrant and
         Charles E. Childers, incorporated by reference to Exhibit
         10(s) to the 1997 Form 10-K.
10(y)    Potash Corporation of Saskatchewan Inc. Stock Option Plan --
         Directors, incorporated by reference to Exhibit 4(b) to the
         registrant's Post-effective Amendment No. 1 to Form S-8
         (File No. 333-19215) (the "Form S-8").
10(z)    Potash Corporation of Saskatchewan Inc. Stock Option Plan --
         Officers and Key Employees, incorporated by reference to
         Schedule D to the registrant's proxy circular for the annual
         and special meeting of shareholders held on May 7, 1998.
10(aa)   Short-Term Incentive Plan of the registrant, as amended May
         7, 1997, incorporated by reference to Exhibit 10(w) to the
         Second Quarter 1997 Form 10-Q.
10(bb)   Long-Term Incentive Plan of the registrant, as amended May
         7, 1997, incorporated by reference to Exhibit 10(x) to the
         Second Quarter 1997 Form 10-Q.
10(cc)   Resolution and Forms of Agreement for Supplemental
         Retirement Income Plan, for officers and key employees of
         the registrant, incorporated by reference to Exhibit 10(o)
         to the 1995 Form 10-K.
</TABLE>
 
                                      IV-3
<PAGE>   32
 
<TABLE>
<CAPTION>
EXHIBIT
NUMBER                     DESCRIPTION OF DOCUMENT
-------                    -----------------------
<S>      <C>
10(dd)   Forms of Agreement dated December 30, 1994, between the
         registrant and certain officers of the registrant,
         concerning a change in control of the registrant,
         incorporated by reference to Exhibit 10(p) to the 1995 Form
         10-K.
10(ee)   Form of Agreement of Indemnification dated August 8, 1995,
         between the registrant and certain officers and directors of
         the registrant, incorporated by reference to Exhibit 10(q)
         to the 1995 Form 10-K.
10(ff)   Deferred Compensation Plan, for certain officers of PCS
         Phosphate Company, Inc., incorporated by reference to
         Exhibit 10(r) to the 1995 Form 10-K.
10(gg)   Supplemental Retirement Benefits Plan, for eligible
         employees of PCS Phosphate Company, Inc., incorporated by
         reference to Exhibit 10(s) to the 1995 Form 10-K.
10(hh)   Second Amended and Restated Membership Agreement dated
         January 1, 1995, among Phosphate Chemicals Export
         Association, Inc. and members of such association, including
         Texasgulf Inc., incorporated by reference to Exhibit 10(t)
         to the 1995 Form 10-K.
10(ii)   International Agency Agreement dated January 1, 1995,
         between Phosphate Chemicals Export Association, Inc. and
         Texasgulf Inc. establishing Texasgulf Inc. as exclusive
         marketing agent for such association's wet phosphatic
         materials, incorporated by reference to Exhibit 10(u) to the
         1995 Form 10-K.
10(jj)   General Partnership Agreement forming Albright & Wilson
         Company, dated July 29, 1988 and amended January 31, 1995,
         between Texasgulf Inc. and Albright & Wilson Americas, Inc.,
         incorporated by reference to Exhibit 10(v) to the 1995 Form
         10-K.
10(kk)   Royalty Agreement dated October 7, 1993, by and between the
         registrant and Rio Algom Limited, incorporated by reference
         to Exhibit 10(x) to the 1995 Form 10-K.
10(ll)   Amending Resolution and revised forms of agreement regarding
         Supplemental Retirement Income Plan of the registrant,
         incorporated by reference to Exhibit 10(x) to the
         registrant's report on Form 10-Q for the quarterly period
         ended June 30, 1996.
10(mm)   Employment Agreement dated January 21, 1998, by and between
         PCS Phosphate Company, Inc. and Thomas J. Wright,
         incorporated by reference to Exhibit 10(ii) to the 1997 Form
         10-K.
10(nn)   Shareholder Rights Agreement as amended and restated on
         March 2, 1998, incorporated by reference to Schedule B to
         the registrant's proxy circular for the annual and special
         meeting of shareholders held on May 7, 1998.
11       Statement re Computation of Per Share Earnings.
13       1998 Annual Report.
21       Subsidiaries of the Registrant.
23       Consent of Deloitte & Touche LLP.
27       Financial Data Schedule.
</TABLE>
 
(b) No reports on Form 8-K were filed by the registrant during the last quarter
of 1998.
 
Copies of Exhibits to the Form 10-K may be obtained upon request from the
Corporate Secretary, Potash Corporation of Saskatchewan Inc., Suite 500, 122
First Avenue South, Saskatoon, Saskatchewan S7K 7G3, Canada. The Company
reserves the right to recover its reasonable expenses in providing copies of the
Exhibits, such expenses not to exceed $.25 per page.
                                      IV-4
<PAGE>   33
 
                                   SIGNATURES
 
     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
 
                                     POTASH CORPORATION OF SASKATCHEWAN INC.
 
                                     By: /s/ CHARLES E. CHILDERS
                                       -----------------------------------------
                                       Charles E. Childers
                                       Chief Executive Officer
                                       March 26, 1999
 
     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
 
<TABLE>
<CAPTION>
                SIGNATURE                                     TITLE                          DATE
                ---------                                     -----                          ----
<C>                                         <S>                                         <C>
         /s/ CHARLES E. CHILDERS            Chairman of the Board and Chief Executive   March 26, 1999
------------------------------------------  Officer
           Charles E. Childers
 
          /s/ BARRY E. HUMPHREYS            Senior Vice President, Finance and          March 26, 1999
------------------------------------------  Treasurer (Principal Financial and
            Barry E. Humphreys              Accounting Officer)
 
          /s/ ISABEL B. ANDERSON            Director                                    March 26, 1999
------------------------------------------
            Isabel B. Anderson
 
          /s/ DOUGLAS J. BOURNE             Director                                    March 26, 1999
------------------------------------------
            Douglas J. Bourne
 
            /s/ DENIS J. COTE               Director                                    March 26, 1999
------------------------------------------
              Denis J. Cote
 
           /s/ WILLIAM J. DOYLE             Director                                    March 26, 1999
------------------------------------------
             William J. Doyle
 
      /s/ HON. WILLARD Z. ESTEY, Q.C        Director                                    March 26, 1999
------------------------------------------
        Hon. Willard Z. Estey, Q.C
 
            /s/ DALLAS J. HOWE              Director                                    March 26, 1999
------------------------------------------
              Dallas J. Howe
 
           /s/ JAMES F. LARDNER             Director                                    March 26, 1999
------------------------------------------
             James F. Lardner
</TABLE>
<PAGE>   34
 
<TABLE>
<CAPTION>
                SIGNATURE                                     TITLE                          DATE
                ---------                                     -----                          ----
<C>                                         <S>                                         <C>
          /s/ DONALD E. PHILLIPS            Director                                    March 26, 1999
------------------------------------------
            Donald E. Phillips
 
           /s/ PAUL SCHOENHALS              Director                                    March 26, 1999
------------------------------------------
             Paul Schoenhals
 
           /s/ DARYL K. SEAMAN              Director                                    March 26, 1999
------------------------------------------
             Daryl K. Seaman
 
       /s/ E. ROBERT STROMBERG, Q.C         Director                                    March 26, 1999
------------------------------------------
        E. Robert Stromberg, Q.C.
 
             /s/ JACK G. VICQ               Director                                    March 26, 1999
------------------------------------------
               Jack G. Vicq
 
          /s/ BARRIE A. WIGMORE             Director                                    March 26, 1999
------------------------------------------
            Barrie A. Wigmore
 
             /s/ PAUL S. WISE               Director                                    March 26, 1999
------------------------------------------
               Paul S. Wise
</TABLE>
<PAGE>   35
 
                                 EXHIBIT INDEX
 
<TABLE>
<CAPTION>
EXHIBIT
NUMBER                     DESCRIPTION OF DOCUMENT                     PAGE
-------                    -----------------------                     ----
<S>      <C>                                                           <C>
2        Agreement and Plan of Merger dated September 2, 1996, as
         amended, by and among the registrant, Arcadian Corporation
         and PCS Nitrogen, Inc., incorporated by reference to Exhibit
         2(a) to Amendment Number 2 to the registrant's Form S-4
         (File No. 333-17841).
3(a)     Restated Articles of Incorporation of the registrant dated
         October 31, 1989, as amended May 11, 1995, incorporated by
         reference to Exhibit 3(i) to the registrant's report on Form
         10-K for the year ended December 31, 1995 (the "1995 Form
         10-K").
3(b)     Bylaws of the registrant dated March 2, 1995, incorporated
         by reference to Exhibit 3(ii) to the 1995 Form 10-K.
4(a)     Term Credit Agreement between The Bank of Nova Scotia and
         other financial institutions and the registrant dated
         October 4, 1996, incorporated by reference to Exhibit 4(b)
         to the registrant's Form S-4 (File No. 333-17841).
4(b)     First Amending Agreement to Term Credit Agreement between
         The Bank of Nova Scotia and other financial institutions and
         the registrant dated November 6, 1997, incorporated by
         reference to Exhibit 4(b) to the registrant's report on Form
         10-K for the year ended December 31, 1997 (the "1997 Form
         10-K").
4(c)     Second Amending Agreement to Term Credit Agreement between
         The Bank of Nova Scotia and other financial institutions and
         the registrant dated December 15, 1997, incorporated by
         reference to Exhibit 4(c) to the 1997 Form 10-K.
4(d)     Third Amending Agreement to Term Credit Agreement between
         The Bank of Nova Scotia and other financial institutions and
         the registrant dated October 2, 1998, incorporated by
         reference to Exhibit 4(d) to the registrant's report on Form
         10-Q for the quarterly period ended September 30, 1998.
4(e)     Indenture dated as of June 16, 1997, between the registrant
         and The Bank of Nova Scotia Trust Company of New York,
         incorporated by reference to Exhibit 4(a) the registrant's
         report on Form 8-K dated June 18, 1997.
10(a)    Suspension Agreement concerning Potassium Chloride from
         Canada dated January 7, 1988, among U.S. Department of
         Commerce, the registrant, International Minerals and
         Chemical (Canada) Limited, Noranda, Inc. (Central Canada
         Potash Co.), Potash Company of America, a Division of Rio
         Algom Limited, S & P Canada, II (Kalium Chemicals), Cominco
         Ltd., Potash Company of Canada Limited, Agent for
         Denison-Potacan Potash Co. and Saskterra Fertilizers Ltd.,
         incorporated by reference to Exhibit 10(a) to the
         registrant's registration statement on Form F-1 (File No.
         33-31303) (the "F-1 Registration Statement").
10(b)    Sixth Voting Agreement dated April 22, 1978, between Central
         Canada Potash, Division of Noranda, Inc., Cominco Ltd.,
         International Minerals and Chemical Corporation (Canada)
         Limited, PCS Sales and Texasgulf Inc., incorporated by
         reference to Exhibit 10(f) to the F-1 Registration
         Statement.
</TABLE>
<PAGE>   36
 
<TABLE>
<CAPTION>
EXHIBIT
NUMBER                     DESCRIPTION OF DOCUMENT                     PAGE
-------                    -----------------------                     ----
<S>      <C>                                                           <C>
10(c)    Canpotex Limited Shareholders Seventh Memorandum of
         Agreement effective April 21, 1978, between Central Canada
         Potash, Division of Noranda Inc., Cominco Ltd.,
         International Minerals and Chemical Corporation (Canada)
         Limited, PCS Sales, Texasgulf Inc. and Canpotex Limited as
         amended by Canpotex S & P amending agreement dated November
         4, 1987, incorporated by reference to Exhibit 10(g) to the
         F-1 Registration Statement.
10(d)    Producer Agreement dated April 21, 1978, between Canpotex
         Limited and PCS Sales, incorporated by reference to Exhibit
         10(h) to the F-1 Registration Statement.
10(e)    Agreement of Limited Partnership of Arcadian Fertilizer,
         L.P. dated as of March 3, 1992 (form), and the related
         Certificate of Limited Partnership of Arcadian Fertilizer,
         L.P., filed with the Secretary of State of the State of
         Delaware on March 3, 1992 (incorporated by reference to
         Exhibits 3.1 and 3.2 to Arcadian Partners L.P.'s
         Registration Statement on Form S-1 (File No. 33-45828)).
10(f)    Amendment to Agreement of Limited Partnership of Arcadian
         Fertilizer L.P. and related Certificates of Limited
         Partnership of Arcadian Fertilizer L.P. filed with the
         Secretary of State of the State of Delaware on March 6, 1997
         and November 26, 1997.
10(g)    Geismar Complex Services Agreement dated June 4, 1984,
         between Allied Corporation and Arcadian Corporation,
         incorporated by reference to Exhibit 10.4 to Arcadian
         Corporation's Registration Statement on Form S-1 (File No.
         33-34357).
10(h)    Canpotex/PCS Amending Agreement, dated with effect October
         1, 1992, incorporated by reference to Exhibit 10(f) to the
         1995 Form 10-K.
10(i)    Canpotex PCA Collateral Withdrawing/PCS Amending Agreement,
         dated with effect October 7, 1993, incorporated by reference
         to Exhibit 10(g) to the 1995 Form 10-K.
10(j)    Esterhazy Restated Mining and Processing Agreement dated
         January 31, 1978, between International Minerals and
         Chemical Corporation (Canada) Limited and the registrant's
         predecessor, incorporated by reference to Exhibit 10(e) to
         the F-1 Registration Statement.
10(k)    Agreement dated December 21, 1990, between International
         Minerals & Chemical Corporation (Canada) Limited and the
         registrant, amending the Esterhazy Restated Mining and
         Processing Agreement dated January 31, 1978, incorporated by
         reference to Exhibit 10(p) to the registrant's report on
         Form 10-K for the year ended December 31, 1990.
10(l)    Agreement effective August 27, 1998, between International
         Minerals & Chemical (Canada) Global Limited and the
         registrant, amending the Esterhazy Restated Mining and
         Processing Agreement dated January 31, 1978 (as amended).
10(m)    Agreement effective August 31, 1998, among International
         Minerals & Chemical (Canada) Global Limited, International
         Minerals & Chemical (Canada) Limited Partnership and the
         registrant assigning the interest in the Esterhazy Restated
         Mining and Processing Agreement dated January 31, 1978 (as
         amended) held by International Minerals & Chemical (Canada)
         Global Limited to International Minerals & Chemical (Canada)
         Limited Partnership.
10(n)    Operating Agreement dated May 11, 1993, between BP Chemicals
         Inc. and Arcadian Ohio, L.P., as amended by the First
         Amendment to the Operating Agreement dated as of November
         20, 1995, between BP Chemicals Inc. and Arcadian Ohio, L.P.
         ("First Amendment"), incorporated by reference to Exhibit
         10.2 to Arcadian Partners L.P.'s current report on Form 8-K
         for the report event dated May 11, 1993, except for the
         First Amendment which is incorporated by reference to
         Arcadian Corporation's report on Form 10-K for the year
         ended December 31, 1995.
</TABLE>
<PAGE>   37
 
<TABLE>
<CAPTION>
EXHIBIT
NUMBER                     DESCRIPTION OF DOCUMENT                     PAGE
-------                    -----------------------                     ----
<S>      <C>                                                           <C>
10(o)    Second Amendment to Operating Agreement between BP
         Chemicals, Inc. and Arcadian Ohio, L.P., dated as of
         November 25, 1996, incorporated by reference to Exhibit
         10(k) to the 1997 Form 10-K.
10(p)    Manufacturing Support Agreement dated May 11, 1993, between
         BP Chemicals Inc. and Arcadian Ohio, L.P., incorporated by
         reference to Exhibit 10.3 to Arcadian Partners L.P.'s
         current report on Form 8-K for the report event dated May
         11, 1993.
10(q)    First Amendment to Manufacturing Support Agreement between
         BP Chemicals, Inc. and Arcadian Ohio, L.P., dated as of
         November 25, 1996, incorporated by reference to Exhibit
         10(l) to the 1997 Form 10-K.
10(r)    Amended and Restated Agreement for Lease dated as of May 16,
         1997, between Trinidad Ammonia Company, Limited Partnership,
         and PCS Nitrogen Fertilizer, L.P., incorporated by reference
         to Exhibit 10(n) to the registrant's report on Form 10-Q for
         the quarterly period ended June 30, 1997 (the "Second
         Quarter 1997 Form 10-Q").
10(s)    Amended and Restated Lease Agreement dated as of May 16,
         1997, between Trinidad Ammonia Company, Limited Partnership,
         and PCS Nitrogen Fertilizer, L.P., incorporated by reference
         to Exhibit 10(o) to the Second Quarter 1997 Form 10-Q.
10(t)    Amended and Restated Agreement for Lease dated as of May 16,
         1997, between Nitrogen Leasing Company, Limited Partnership,
         and PCS Nitrogen Fertilizer, L.P., incorporated by reference
         to Exhibit 10(p) to the Second Quarter 1997 Form 10-Q.
10(u)    Amended and Restated Lease Agreement dated as of May 16,
         1997, between Nitrogen Leasing Company, Limited Partnership,
         and PCS Nitrogen Fertilizer, L.P., incorporated by reference
         to Exhibit 10(q) to the Second Quarter 1997 Form 10-Q.
10(v)    Amended and Restated Purchase Option Agreement dated as of
         May 16, 1997, between Nitrogen Leasing Company, Limited
         Partnership, and PCS Nitrogen Fertilizer Operations, Inc.,
         incorporated by reference to Exhibit 10(r) to the Second
         Quarter 1997 Form 10-Q.
10(w)    Amended and Restated Purchase Option Agreement dated as of
         May 16, 1997, between Trinidad Ammonia Company, Limited
         Partnership and PCS Nitrogen Fertilizer Operations, Inc.,
         incorporated by reference to Exhibit 10(s) to the Second
         Quarter 1997 Form 10-Q.
10(x)    Agreement dated January 1, 1997 between the registrant and
         Charles E. Childers, incorporated by reference to Exhibit
         10(s) to the 1997 Form 10-K.
10(y)    Potash Corporation of Saskatchewan Inc. Stock Option Plan --
         Directors, incorporated by reference to Exhibit 4(b) to the
         registrant's Post-effective Amendment No. 1 to Form S-8
         (File No. 333-19215) (the "Form S-8").
10(z)    Potash Corporation of Saskatchewan Inc. Stock Option Plan --
         Officers and Key Employees, incorporated by reference to
         Schedule D to the registrant's proxy circular for the annual
         and special meeting of shareholders held on May 7, 1998.
10(aa)   Short-Term Incentive Plan of the registrant, as amended May
         7, 1997, incorporated by reference to Exhibit 10(w) to the
         Second Quarter 1997 Form 10-Q.
10(bb)   Long-Term Incentive Plan of the registrant, as amended May
         7, 1997, incorporated by reference to Exhibit 10(x) to the
         Second Quarter 1997 Form 10-Q.
10(cc)   Resolution and Forms of Agreement for Supplemental
         Retirement Income Plan, for officers and key employees of
         the registrant, incorporated by reference to Exhibit 10(o)
         to the 1995 Form 10-K.
10(dd)   Forms of Agreement dated December 30, 1994, between the
         registrant and certain officers of the registrant,
         concerning a change in control of the registrant,
         incorporated by reference to Exhibit 10(p) to the 1995 Form
         10-K.
</TABLE>
<PAGE>   38
 
<TABLE>
<CAPTION>
EXHIBIT
NUMBER                     DESCRIPTION OF DOCUMENT                     PAGE
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<S>      <C>                                                           <C>
10(ee)   Form of Agreement of Indemnification dated August 8, 1995,
         between the registrant and certain officers and directors of
         the registrant, incorporated by reference to Exhibit 10(q)
         to the 1995 Form 10-K.
10(ff)   Deferred Compensation Plan, for certain officers of PCS
         Phosphate Company, Inc., incorporated by reference to
         Exhibit 10(r) to the 1995 Form 10-K.
10(gg)   Supplemental Retirement Benefits Plan, for eligible
         employees of PCS Phosphate Company, Inc., incorporated by
         reference to Exhibit 10(s) to the 1995 Form 10-K.
10(hh)   Second Amended and Restated Membership Agreement dated
         January 1, 1995, among Phosphate Chemicals Export
         Association, Inc. and members of such association, including
         Texasgulf Inc., incorporated by reference to Exhibit 10(t)
         to the 1995 Form 10-K.
10(ii)   International Agency Agreement dated January 1, 1995,
         between Phosphate Chemicals Export Association, Inc. and
         Texasgulf Inc. establishing Texasgulf Inc. as exclusive
         marketing agent for such association's wet phosphatic
         materials, incorporated by reference to Exhibit 10(u) to the
         1995 Form 10-K.
10(jj)   General Partnership Agreement forming Albright & Wilson
         Company, dated July 29, 1988 and amended January 31, 1995,
         between Texasgulf Inc. and Albright & Wilson Americas, Inc.,
         incorporated by reference to Exhibit 10(v) to the 1995 Form
         10-K.
10(kk)   Royalty Agreement dated October 7, 1993, by and between the
         registrant and Rio Algom Limited, incorporated by reference
         to Exhibit 10(x) to the 1995 Form 10-K.
10(ll)   Amending Resolution and revised forms of agreement regarding
         Supplemental Retirement Income Plan of the registrant,
         incorporated by reference to Exhibit 10(x) to the
         registrant's report on Form 10-Q for the quarterly period
         ended June 30, 1996.
10(mm)   Employment Agreement dated January 21, 1998, by and between
         PCS Phosphate Company, Inc. and Thomas J. Wright,
         incorporated by reference to Exhibit 10(ii) to the 1997 Form
         10-K.
10(nn)   Shareholder Rights Agreement as amended and restated on
         March 2, 1998, incorporated by reference to Schedule B to
         the registrant's proxy circular for the annual and special
         meeting of shareholders held on May 7, 1998.
11       Statement re Computation of Per Share Earnings.
13       1998 Annual Report.
21       Subsidiaries of the Registrant.
23       Consent of Deloitte & Touche LLP.
27       Financial Data Schedule.
</TABLE>
 
(b) No reports on Form 8-K were filed by the registrant during the last quarter
of 1998.