finding a healthy balance with shareholders

We believe our shareholders recognize that strong corporate governance and sustainable practices in all areas of our business protect their investment in the long-term. In making their investment decisions, they need information that is accurate, timely, balanced and comprehensive.

our commitment to shareholders

We are committed to creating a strong, long-term return on investment for our shareholders. We believe that balancing the needs of stakeholders is essential in sustaining these returns. We also believe it is essential to strive to continually improve our communication with shareholders on all aspects of our performance.

Expansion of our potash business by over two million tonnes will improve our earnings capacity.

After each quarter, Agrium hosts a conference call where analysts ask questions.

opportunities and challenges

• We are continually challenged to improve long-term economic performance while delivering short-term gains.
• As Agrium grows in size and diversity, we are challenged to maintain an effective company-wide corporate governance system. This system needs to protect shareholder value, ensure ongoing management of issues and promote the right corporate behaviors.
• Maintaining an ongoing dialogue with shareholders is crucial to ensure they have the information they need.

actions

Long-Term View
The actions we have taken in the past two years have laid important groundwork to enhance stable earnings and our long-term viability. Our recent acquisitions, expansions, new product developments and a greater focus on distribution helped to diversify our business. These steps are expected to strengthen earnings through the business cycle and reduce short-term volatility.

As we transform our business, we continually focus on providing value in a sustainable manner. Agrium has averaged a return on invested capital of 10.2 percent over the past 10 years and 13.5 percent since 2003.

To help ensure our employees’ interests are aligned with those of our shareholders, our management compensation programs and a number of our employee incentive programs are tied to shareholder returns that Agrium achieves relative to our peers. To achieve financial success in a sustainable manner, these incentives are also linked to our EH&S performance.

Corporate Governance
Agrium believes strong corporate governance practices help protect our shareholders’ investment. Our corporate governance practices are described in our Corporate Governance Guidelines, our Charters for the Board of Directors and the Committees of the Board, our Terms of Reference for our Board Chair, Committee Chairs, Individual Directors and the Chief Executive Officer, our Code of Business Conduct & Ethics, Corporate Disclosure Policy and our Audit Committee Whistleblower Procedures. GovernanceMetrics International (GMI) provided Agrium with a score of 10 out of 10 in its global governance ratings in 2005. Agrium was one of only 33 companies to receive this rating out of 3,200 companies ranked globally. GMI’s analysis incorporates data points across six broad categories: board accountability; financial disclosure and internal controls; executive compensation; shareholder rights; ownership base and takeover provisions; and corporate behavior and social responsibility.

In 2005, Agrium enhanced its risk management system. The new system provides a single source where risks to the company can be inventoried, classified and prioritized. Risks are then assigned owners who work with internal and external experts to develop mitigation plans and communication resources. Risks are reported to senior management and the Board on a quarterly basis. The system also allows Agrium to work more effectively with its industry associations in the management of industry-wide risks like climate change, nutrients in the environment and increasing North American energy costs.

Shareholder Engagement
We are committed to communicating in a timely, factual, balanced and complete manner with shareholders. We communicate through both formal and informal means including annual and quarterly reports, conference calls, our annual general meeting, conferences, presentations and face-to-face meetings. In 2006, we have a goal of meeting with a minimum of 90 percent of our top 10 shareholders at least twice per year and 80 percent of the next top 15 shareholders annually. In 2005, we held more than 120 meetings in Canada, the U.S., and Europe with shareholders and potential shareholders. We value their input when making decisions.

Feedstock Alternatives Could Protect the Environment and Shareholder Value Over Long-Term

Natural gas is the feedstock used to provide hydrogen for anhydrous ammonia production. With the increasing cost of natural gas in North America, this feedstock currently accounts for over 90 percent of the costs of producing anhydrous ammonia. To address the issue and our Alaskan supply concerns, Agrium is actively exploring alternative sources of hydrogen. One of the most promising alternatives is the gasification of lower value hydrocarbons and waste streams (i.e., coal, low grade bitumen, coke). This technology provides hydrogen and nitrogen for anhydrous ammonia production and carbon dioxide (CO2) for urea. Although the process produces significantly more CO2, much of it can be used for enhanced oil recovery with the potential of reducing overall emissions from existing levels. Further benefits could come from an integration with a power facility to support the growing consumer demand for electricity. Agrium is currently evaluating the sustainability of this opportunity in Alaska and Alberta.

performance

Employees

Profit Profile In 2005, the majority of our profits were generated from our North America Wholesale operations. The growth of our Retail and specialty businesses should result in a more balanced profit profile.

Share Price

A key measure of our financial performance is our ability to create value for shareholders. Agrium’s share price increased by 148 percent between 2000 and 2005. Over this period, Agrium’s relative price performance consistently remained above the industry peer average.