This section details PotashCorp's economic impact on stakeholders. Our measures comply with standards set by the newest (G3) Global Reporting Initiative (GRI).

Value Generated

PotashCorp economic value generated has more than tripled in the last four years. We generated economic value of more than $9.4 billion in 2008 based on the G3 framework, up from a record $4.9 billion in 2007. Although the primary reason for the increase was rising net prices of our products, appreciation in the income from our global potash investments in SQM, APC, ICL and Sinofert also contributed.

Sales and Net Sales

PotashCorp's overall net sales were up 89 percent from 2007's record and included record net sales for all three nutrient segments. Although sales volumes were slightly lower than last year, realized prices were higher for all three nutrients – particularly for potash, which had average realized prices 169 percent higher than 2008. Prices for some phosphate and nitrogen products fell dramatically at the end of 2008, moderating results for the year.

Generally, sales have the following geographic trends:

• Offshore sales volumes in potash are up 16 percent since 2004, reflecting higher demand as farmers work to correct decades of under-application and attempt to take advantage of higher commodity prices.
• Roughly two-thirds of phosphate sales volumes are in North America, where we typically benefit from higher realized prices.
• Nitrogen products are sold to North American customers on a spot or contract basis. Sales – particularly of ammonia – are generally regional due to logistics and transportation costs.

Markets

Offshore markets continue to grow faster than mature North American markets.

Value Distributed

Economic value distributed – as defined by the G3 framework – has increased more than 160 percent in four years.

Goods, Materials and Services Purchased

Ongoing expansion projects led to increases in potash capital purchases in 2008. Capital projects also affected purchases in the phosphate segment, but most of the increase in phosphate was attributable to the rising costs of sulfur and, to a lesser extent, ammonia – both of which are important feedstocks for phosphate end products. In nitrogen, purchases rose with the higher cost of natural gas, an important feedstock for ammonia. Sulfur and ammonia prices began to decline in late 2008, a trend which continued in early 2009.

PotashCorp's full-time contract employee expense declined by $1.8 million after the company assumed operating responsibility in January 2008 at the Lima plant, adding employees to fill formerly contracted positions. This was offset by increased full-time contract employee expenses at Aurora, Augusta and Geismar.

Employee Wages and Benefits

Overall PotashCorp employee wage costs increased by 14 percent in 2008, due to the addition of 298 people to our workforce, a merit pay increase for all employees and the impact of making all hourly employees eligible for an annual bonus. After assuming operating responsibility in January 2008, over 100 employees were added at Lima. Potash facilities also increased staff to accommodate expansions.

Benefit costs were nearly flat compared to 2007.

Payments to Providers of Capital

We incurred short-term debt throughout the year to finance expenses such as repurchasing more than 22.8 million shares, or 7.2 percent of the average outstanding. The increased debt led to higher short-term interest expense.

Long-term interest expense decreased year over year, since more of the interest expense was capitalized against the cost of our potash expansions over the life of the projects.

The rise in dividends declared reflected the first full year in which the company's dividend increase – from $.05 to $.10 per share – was in force. The board ratified the increase in May 2007.

Taxes and Royalties

Taxes and royalties have increased more than 570 percent over the last five years, with more than two-thirds of these coming from our Canadian potash business. In 2008, PotashCorp taxes to Saskatchewan accounted for about 10 percent of the provincial government's operating budget.

Other significant tax contributions were made to the US and Trinidad. Tax expenses incurred and paid in other countries were not significant and were attributed to the parent as "all other taxes" in Canada.

Charitable Donations

Total donations to PotashCorp's host communities and other causes rose 87 percent year over year. Corporate cash donations more than doubled from $2.5 million to $5.4 million. Higher contributions by employees to the matching gift program increased the company's share by 24 percent. Our in-kind donations, such as employees volunteering on company time, increased by 19 percent.

We again exceeded our target of giving more than 1 percent of our after-tax earnings, defined as the average earnings of the five years prior to the year the money is donated.

More information on community and charitable contributions by our company and employees can be found in the Social and Site Performance sections.

Shareholder Return and Book Value of Equity

Our total shareholder return was -49 percent from 2007, below the -41 percent generated by our sector and above the -52 percent return of the Dow Jones US Basic Materials Index. The global financial crisis in the second half of 2008 led to a broad sell-off of commodity holdings, with many investors divesting their North American fertilizer stocks, which had greatly appreciated earlier in the year.

The decline in book value is largely due to the diminished fair value of investments in Israeli Chemicals Limited (11 percent share) and Sinofert Limited (22 percent share) in the wake of global financial events.

Value Retained

PotashCorp economic value retained has increased more than 500 percent over the last four years. Economic value retained is the difference between the economic value generated and the economic value distributed, as defined by the G3 framework. Rising retained value is the sign of a growing company.

Direct Economic Impacts

Wages

To attract and retain employees, PotashCorp offers fair and competitive wages. In all jurisdictions where we operate, our entry-level salaries are significantly higher than the local minimum wage. In 2008, we made all employees eligible for an annual bonus.

Pension Plans

PotashCorp provides pension and other post-retirement benefits for most employees. A pension plan helps attract and retain a dedicated workforce and supports long-term financial planning and stability for the organization.

The pension plan's investment portfolio includes equity and fixed income investments but does not include private equity, real estate and hedge fund holdings.

Local Purchasing

PotashCorp local purchasing was 59 percent in 2008, just below our 60 percent target.

Local Hiring

We typically hire local residents for our positions. Most employees reside in communities near our facilities.

Financial Assistance from Governments

PotashCorp received no financial assistance from any level of government in 2008.

Market, Indirect Impacts

Through wages, hiring and local purchasing policies, PotashCorp has an economic impact on local labor markets.

Economic Impacts

According to an impact study completed by SJ Research Services in 2008, PotashCorp expansion projects at our Rocanville, Allan, Lanigan, Cory and Patience Lake potash operations are expected to:

• Add $4.7 billion in cumulative (direct + indirect) GDP to Saskatchewan during construction (2007-2012);
• Add $3.8 billion in annual GDP from ramp-up in 2014 onward;
• Create more than 14,500 direct and indirect jobs in the province;
• Generate taxes totaling $390 million over the five-year construction period, plus $290 million per year after 2014.

See how Canadian communities are affected by our potash expansions.

Capital Structure

Capital structure includes items from the G3 framework that demonstrate how we finance activities.

Short-Term and Long-Term Debt

We bought back more than 22 million shares of our stock in 2008 and we continued our potash expansions. These programs were financed with short-term, long-term debt and internally generated funds.

Total Debt to Capital

In 2008, the company's debt to capital ratio was increased to historic levels.

Dividend Payout Ratio

The ratio of dividends to earnings per share (EPS) decreased relatively in recent years because EPS increased from higher profits in all of our three nutrient groups.

Consolidated Financial Position

The Consolidated Financial Position table includes items from our statements of financial position to show trends for assets, liabilities and shareholders' equity. Shareholder equity has increased by 92 percent over five years, primarily reflecting the strong earnings growth over this period.

Current Assets

With the tightening of the global market in the last four months of 2008, accounts receivable and inventories increased over 2007. This increase was partially offset by a reduction in cash to pay for potash expansions and other items.

Property, Plant and Equipment

Assets increased mainly due to expansions in potash and, to a lesser extent, in phosphate.

All Other Assets

The decline in fair value of our Israeli Chemicals Limited (ICL) and Sinofert Limited (Sinofert) investments in the difficult market conditions of late 2008 was the biggest contributor to decreases in this category.

Current Liabilities

These liabilities increased as we took on short-term debt to finance expenses such as potash expansions and to buy back common shares.

Long-Term Debt

This debt was used to finance expenses such as potash expansions and to buy back common shares.

All Other Liabilities

Due to falling natural gas prices, we incurred $120 million of liabilities in our gas hedging under this category.

Contributed Surplus

The increase is primarily driven by the cost of the performance stock option plans.

Accumulated Other Comprehensive Income

The reduction is driven by a decline in the fair value of our ICL and Sinofert investments.