Creating competitive edge, making impact

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(1)yara. Financial report 2011. building on its unique business model, Yara is dedicated to profitable growth. Creating. competitive edge, making impact based on its unrivalled presence, Yara is delivering strong results.

(2) yara is positioned to create value: With our unique busi ness model and unrivalled market presence, we create competitive edge, delivering strong results, / page 10 / Our mission is to create better yield – for our shareholders, / page 14 / customers, and society at large. Through our extensive operation / page 37–38 / we are set to seize. business opportunities / page 39–40 / in existing and new. Scan this code to see the video presentation of how Yara creates impact.. markets, influenced by global megatrends affecting com pany and customers alike. Notably, we offer solutions to. some of the major global challenges / impact review / of our time; creating impact. yara is poised to create impact: With our strategic approach and growth ambition, / page 40–42 / we employ our extensive knowledge, focusing in particular on the key areas of resource management, food security and environmental issues – identifying. connections between global challenges and business opportunities. Supporting a viable agricultural sector by developing solutions for improved productivity, / page 53 / we increase yields; creating value. The yara hisTory Yara International ASA was established by a demerger from Norsk Hydro in 2004, and can trace its origin to the foundation of Hydro, the world pioneer of mineral fertilizers, in 1905. Starting as a Scandinavian pioneer, the company took a European position in the 1970s and 80s, gradually enforcing its growth strategy – and establishing a truly global presence. This timeline depicts milestones in Yara’s history, in terms of new plants and key acquisitions.. 1907. 1928 1929. Notodden Regular production commenced. 1905 Norway Norsk Hydro established; world’s first nitrogen fertilizer produced. 1910. Notodden First ammonia production. 1920. Porsgrunn New plant opened. 1930. 1940. 1911. 1919. 1934. Rjukan New plant opened. Denmark Sales office in Copenhagen opened. Heavy water Production started, introducing the industrial products portfolio.

(3) C / yara in brief Yara Financial Report 2011. Who we are yara delivers solutions for sustainable agriculture and the environment. Our fertilizers and crop nutrition programs help produce the food required for the growing world population. Our industrial products and solutions reduce emissions, improve air quality and support safe and efficient operations. Founded in Norway in 1905, Yara has a worldwide presence with sales to 150 countries. Safety is always our top priority.. What we do supply and trade is a global function res ponsible for optimization of energy and raw mate rial purchases, ammonia trade and shipping, mari time logistics, thirdparty sourcing, and feed phosphates.. upstream is the backbone of Yara’s manufacturing system. It includes mass production of ammonia, urea, nitrates and other nitrogenbased products as well as phosphoric acid. downstream offers a complete fertilizer portfolio to growers worldwide. It provides knowledge and tools to secure the right nutrients and optimize application and yield with minimal environmental impact. IndustrIal is a reliable partner in chemical products. It enables innovative solutions based on ammonia production and knowledge, and helps customers reach compliance with environmental legislation.. What we offer aGrICultural produCts: We offer a complete portfolio of fertilizers covering all neces sary nutrients for any crop.. IndustrIal produCts: We offer a wide range of nitrogen and specialty chemicals in addition to CO2, dry ice and civil explosives solutions.. BACK. 1945. 600 kg. BACK. BACK. NPK. 600 kg. Sweden Sales office in Stockholm opened. BACK. 600 kg. BACK. envIronmental solutIons: We offer complete solutions for NOx abatement, odor control, water treat ment and corrosion prevention.. 600 kg. NPK. 600 kg. BACK. BACK. NPK. 600 kg. 1972. 1979. CO2 plants in Norway (1972), Sweden (1976) and Denmark (1978) acquired. Netherlands NSM acquired. 1949. 1977 Thailand Sales partnership established. Glomfjord Ammonia production commenced. 1950. BACK. BACK. 1960. 1970. 1980. 1949. 1969. 1981. USA Marketing commenced. Qatar Qafco JV established. Sweden Supra acquired. scandinavian pioneer european position Global presence. 1977 Brazil Sales office in Rio de Janeiro opened.

(4) D / yara in brief Yara Financial Report 2011. Where we are Global player: As the industry’s. only global player, we have production on six continents, operations in 51 countries – and sales to about 150 countries.. 1984 Germany Ruhr Stickstoff acquired. 1982. Yara plants 2011 Joint venture plants 2011 Sales offices 2011 Sales 2011 Development programs R&D units. FertIlIzer sales by reGIon 2011. 1985 Zimbabwe Regional office for southern Africa opened. UK Acquisition of Fisons. 1990. Industrial gases plant in Sri Lanka acquired. 1991. 1994. Germany DMW Rostock acquired. Technology N-Sensor tool introduced. 1997/2006 UK Phosyn acquired. 1990. 1982 China Chiwan terminal opened. Europe: 9,300 North America: 2,887 Latin America: 3,798 Africa: 1,188 Asia: 2,276. Thousand tons. 1986. 1990. France Cofaz acquired. CO2 plant in Malaysia acquired. 2000. 1991 Trinidad Tringen JV established. 1996. 2000. Italy Enichem Agricoltura acquired. Brazil Adubos Trevo acquired.

(5) Yara Financial Report 2011 Contents / 1. Report contents. Performance overview / page 2 CEO message / page 4 Report of the Board of Directors / page 6 Governance / page 16 Management discussion & analysis / page 34 Downstream / page 53 Industrial / page 56 Upstream / page 59 The Yara share / page 65. Financial statements / page 68 Consolidated financial statements / page 69 Financial statements for Yara International ASA / page 127. YARA REPORTING: This Financial Report,. together with the separate Impact Review, constitutes Yara’s annual report 2011. Both are available in print and on the web. Annual reports and supplementary corporate information are found on www.yara.com. 2005. 2007. Australia Burrup JV established. Finland Kemira GrowHow acquired. 2004 CO2 plant opened in Germany. 2005. 2006. 2008. 2010. Innovation Crop Nutrition Concept unveiled. Climate Carbon footprint guarantee launched. 2009. AdBlue Mexico Air1 brand Olmeca launched acquired. Libya Lifeco JV established. 2012. 2010. 2004. 2005. 2007. Technology N2O catalyst technology unveiled. Africa program launched. CO2 Praxair JV established. 2006/2007 Brazil Fertibras acquired. 2008 Canada Saskferco acquired. 2010 DEF American market for Diesel Exhaust Fluid (DEF; AdBlue) entered. 2011. Yara expands its global capacity with the commencement of production at the Qafco 5 and 6 plants in Qatar, adding to the expansion with Sluiskil Urea 7 in the Netherlands in 2011. In Australia, Yara increased its ownership in Burrup Holding, planning the construction of a new plant for the production of technical ammonium nitrate.. Sweden. Petro Miljö. acquired.

(6) 2 / yara in brief Yara Financial Report 2011. how we performed 2011. 2010. 2009. 2008. 2007. NOK millions NOK millions NOK millions. 80,352 13,240 18,163. 65,374 7,467 15,315. 61,418 1,271 5,549. 88,775 12,281 17,917. 57,486 4,987 8,441. NOK millions NOK millions % NOK millions % % NOK NOK millions NOK 31 December. 12,066 3,643 12 7,363 20.9 25.8 41.99 44,779 240.0. 8,729 4,373 27 7,093 17.4 20.6 30.24 35,334 337.5. 3,782 6,192 56 11,925 8.5 7.4 13.08 28,863 263.70. 8,228 16,040 84 3,986 22.9 29.0 28.27 29,638 148.75. 6,037 7,797 42 4,305 16.1 22.4 20.60 21,141 251.50. 7,627 4.0. 7,348 3.8. 7,629 2.7. 7,971 3.5. 8,173 3.3. 11.2 219. 13.1 223. 12.5 208. 16.0 207. 16.4 191. Financial performance. Revenue and other income Operating income EBITDA 1) Net income after noncontrolling interests Investments 2) Debt/equity ratio 3) Cash flow from operations CROGI 4) ROCE 5) Earnings per share 6) Total equity Share price on OSE. Notes 1) EBITDA: Earnings before Interest, Tax, Depreciation and Amortization. 2) Investment in property, plant and equipment, long-term securities, intangibles, long-term advances and investments in equity-accounted investees. 3) Net interest-bearing debt divided by share holders’ equity plus non-controlling interest. 4) CROGI: Cash Return on Gross Investment (12 month rolling average). 5) ROCE: Return On Capital Employed (12 month rolling average). 6) Yara currently has no share-based compensation program that results in a dilutive effect on earnings per share. 7) TRI: Number of Total Recordable Injuries per million hours worked. 2007–2009 figures are for Yara employees only; 2010–2011 also include contractors. 8) GHG emissions adjusted for new plants.. Social performance. Employees TRI rate 7). Number at year-end Per million hours worked. Environmental performance. GHG emissions 8) Energy use. Million tons CO2 eq. Petajoule. our strategic goals. 1. safety. Yara’s goal is to be a leading performer in the area of worker safety, with a targeted accident rate as close to zero as possible.. 2. Profitability. Yara’s goal is to deliver a Cash Return On Gross Investment (CROGI) of more than 10% as an average over the business cycle.. 3. Relative competi tiveness and solidity. Yara’s goal is to deliver a Gross Return (EBITDA/Total Assets) in the top quartile of its peer group and to maintain an investment grade credit rating.. 4. Overall growth. Yara’s goal is to increase its own-produced and JV sales volumes by 8 million tons from 2010 to 2016.. 5. Cash returns. Yara’s goal is that cash return to shareholders should average 40–45% of net income, with dividends at a minimum 30% over the busi ness cycle. Share buybacks will constitute the rest.. +38%. 41.99. NOK. 2011 net InCome after non-controlling. interests was NOK 12,066 million, com pared to NOK 8,729 million in 2010.. 2011 earnInGs per share were. a record-high NOK 41.99, up from NOK 30.24 in 2010..

(7) Yara Financial Report 2011 yara in brief / 3. What we did 2011 Yara entered an agreement with the leading Moroccan company OCP S.A. in December, to establish a 50/50 JV in Brazil, further strengthening its already strong platform in this growth market. read more: Management discussion & analysis / page. 43. Yara officially opened the new Urea 7 plant at Sluiskil, the Netherlands, in October. With an output of 3,500 tons of urea a day, this plant increases production capacity and supplies a vital raw material for the growing environmental solutions segment. The new plant has state of-the-art resource efficiency and heavily reduced emission levels. read more: Management discussion & analysis. /. page. 43. Yara’s Annual General Meeting in May approved a dividend of NOK 5.50 per share, and renewed the authorization of the Board of Directors to acquire own shares. read more: Report of the Board of Directors / page. 14. Yara reduced its ownership in some ventures during 2011, including its 37.7% stake in Yaibera Holding (‘Rossosh’) in Russia, and its 49% stake in JSC Nordic Rus Holding. In October, Yara signed an agree ment with Praxair, Inc., reducing its ownership in the JV Yara Praxair Holding AS from 50 to 34%, with a gain of NOK 309 million. read more: Management discussion & analysis / page. 45. Yara entered several new contracts for delivery and distribution of its AdBlue solution to leading oil and truck companies. Yara opened a new terminal for Diesel Exhaust Fluid (DEF) in Texas, and a US Gateway terminal in Louisiana in November.. Early 2012, Yara increased its ownership share of the Australian JV Burrup Holdings Limited to 51%, with Apache Energy holding the remaining 49%. The company was renamed Yara Pilbara, marking a more active role for Yara in the region.. read more: Management discussion & analysis. read more: Management discussion & analysis. /. page. 45. /. page. 42. Yara signed an agreement – acquiring Petro Miljö, the world leader in Selective Non Catalytic Reduction (SNCR) technology in October – as a first step towards adding a vital dimension to existing business based on the supply of NOx abatement reagents.. On 20 February 2011, production in the Libyan JV plant, Lifeco, was suspended due to the unrest in the country. This safeguarded employees and the plant, and lead to a loss of NOK 131 million in 2011.. read more: Management discussion & analysis. read more: Management discussion & analysis. /. page. 58. /. page. 60. read more: Strategic goals / page. 6. Creating Impact. Yara’s goal is to positively address major global challenges, shaped by three focal areas: resources, food and environment.. 7. Innovation. Yara’s goal is to develop an innovation culture to set the standard for both products/solutions and improvement of operations.. 8. Environment. Yara’s goal is to be among the most energy efficient in the industry, and to reduce greenhouse gas emissions by 45% from 2004 to 2013.. 9. Growth in lowcost gas supply. Yara’s goal is to increase its proportion of production in low-cost gas regions in order to reduce the average pro duction cost of its fertilizer products.. 10. 48. human resource Management. Yara’s goal is to optimize the management of our people, to ensure that the company continues to have the skilled and engaged workforce it will need to meet future business challenges.. +2,848. + 24%. NOK million. 2011 ebItda ended at NOK 18,163. 2011 delIverIes of environmental. million, compared with NOK 15,315 million in 2010.. solutions increased by 24%, compared. with 2010..

(8) 4 / Ceo Yara Financial Report 2011. CEO JøRGEN OlE HaslEstad. Best year so far. yara had its best year so far in 2011. Yara’s revenues and net income levels were at an all-time high, mainly reflecting higher margins. The margins’ increase was supported by healthy farming profits and by Yara’s strategy to leverage our portfolio and crop nutrition knowledge, increasing sales of premium products and to cash crop segments.. The sTronG fundaMenTals in the agricultural markets. are underscored by the FAO’s Food Price Index, which on average was at a higher level in 2011 than in 2008, the year of the food price crisis. The increased margins more than offset a slight reduction in total volumes and increased energy prices. In 2011, I updated Yara’s strategic growth goal. Volumes shall increase by 8 million tons by 2016, about a 40% increase of our total volumes. This ambitious target will be reached through a combination of growth initiatives. Optimization of production processes, step growth and brownfield and greenfield expansions will all be taken into consideration. Last year, several expansions were finalized or ongoing. The Qafco 5 and 6 expansions come into production during 2012. Our Dutch plant, Sluiskil, finalized a urea expansion on schedule, under budget. This Urea 7 plant adds 500,000 tons annually, which is targeted at the value-added AdBlue/DEF market.. The Urea 7 expansion supports Yara’s ambition to grow in the US DEF market. Yara is the leading global provider of the cleans ing fluid used to remove hazardous NOx emissions from diesel engines. This is a global market set to grow as nations worldwide introduce legislation to safeguard human health and reduce environmental impact from combustion processes.. Our JV in Libya, Lifeco, halted production in February 2011 following the unrest in the country. We aim to restart the plant during 2012. Looking forward, we are exploring the opportunity to expand our Belle Plaine plant in Canada. If conditions are right, this can also be a large scale add-on to Yara’s capacity. The fundamental factors which pull the fertilizer market, such as population growth and dietary changes, provide strong support for Yara’s fertilizer products. Assuming continued growth in global food consumption, the world needs another record grain crop in 2012 in order to prevent a further decline in inventories. The combination of severe weather conditions, financial turmoil and price volatility in agricultural markets is likely to remain part of everyday business life. Interestingly, volatility in energy and agricultural prices became a new top-five ranked risk in the World Economic Forum (WEF) Global Risks report 2012. Taking these global trends into consideration, Yara has renewed its approach, launching the strategic framework ‘Creating Impact’. This is a framework for identifying and exploring connections between business opportunities and benefits for society. We recognize how business solutions and societal interests intersect. Being a front runner means identifying how mutual interest can.

(9) Yara Financial Report 2011 yara in brief / 5. “ Volumes shall. increase by 8 million. tons by 2016. ”. Scan this code to see the CEO’s presentation of the annual report.. create a sustainable competitive advantage to Yara. As an example, using our expertise on nitrogen chemistry to reduce harmful emis sions has a positive impact on human health, social economics and Yara’s business. The scope of Creating Impact is to create value for shareholders, cus tomers, employees and society at large – while creating a sustainable competitive edge for Yara. This provides Yara with a framework for its engagement at the World Economic Forum, the G20 summits and similar high-level venues. Here, we contribute our knowledge towards global leadership on sustainable development of agricul ture. Our message is that agriculture needs to improve yield levels, but this must be done sustainably. We need more crop per drop of water, using fertilizer and land areas more efficiently. We have defined three focal areas; food, resources and environment. Within these Yara has a position and a knowledge base which pro vides opportunities. As a contributor to finding solutions on global food security, environmental issues and efficient use of resources, we will harvest volumes, margins and new opportunities.. Growth depends upon trust, and Yara takes pride in being a reli able partner. Doing business in about 150 countries implies being involved in markets challenged by lack of governance principles. We have chosen to adhere to a Code of Conduct which describes how we want to do business responsibly. When I assumed position as President and CEO of Yara, I strengthened efforts by establishing a Compliance and Ethics unit to intensify efforts on ethical behavior. In 2011, Yara reported two potential cases of criminal offenses to the Norwegian National Authority for Investigation and Prosecu tion of Economic and Environmental Crime (Økokrim). To make sure Yara gets to the bottom of these cases, we also initiated an external investigation. I enforce a strict standard on compliance. I want growth – sustainable growth – reflecting my belief that high social and ethical performance lead to high financial performance.. JørgEN OLE HAsLEsTAd. President and CEO.

(10) 6 / report of the board of directors Yara Financial Report 2011. Quick overview durInG 2011, Yara delivered its highest annual result so far. Continuously employing its strong platform, unique busi ness model and unrivalled global presence, Yara is well positioned to leverage strong fundamentals in the agricultural markets. With mineral fertilizer demand remaining strong through 2011, we achieved our best revenues and income so far. 2011 exceeded the previous record year of 2010 and strengthened Yara’s financial position. Safety remained an operational priority, as did compliance, with strict ethical guidelines.. GS ARE. earnInGs per sHare. 1. 2007. 2008. 2009. 2010. 2011.

(11) Yara Financial Report 2011 report of the Board of directors / 7. capitalizing on its unique platform, Yara achieved its highest annual result so far. report of the board of directors. Core content In tHIs seCtIon: Strategy page 8 / Market conditions page 9 / Financial performance and operations page 10 / Risk management page 11 / Creating Impact page 11 / Health, environment and safety page 12 / People develop ment page 13 / Corporate governance page 13 / Board of Directors and Executive management page 14 / Yara International ASA page 14 / Dividend and buy-backs page 14 / Outlook page 14.

(12) 8 / report of the board of directors Yara Financial Report 2011. REPORT OF THE BOARD OF DIRECTORS 2011. strong earnings and cash flow. in 2011, yara achieved its best annual result so far, exceeding the previous record year of 2010 and continuing the strong trend for global agricultural markets which began in the previous year and kept fertilizer demand and prices strong also in 2011.. The Board of Directors believes that the long-term fundamentals of fertilizer demand will remain strong, as a growing and increas ingly prosperous world population continues to improve its diet. More and better fertilizer usage is a crucial element of achieving sustainable improvement in agricultural productivity. With its global market presence and product portfolio, Yara is well posi tioned to meet the demand for greater agricultural productivity and to address the growing challenges of climate change, air pollution and water scarcity. Yara’s growth ambitions are built on attractive long-term market fundamentals, a proven track record of profitable growth initia tives and a flexible and scalable business model. However, Yara will continue to be patient in pursuing growth, aiming to pick the best opportunities at the right time. STRATEGY. Yara is a company that focuses on the production, distribution and sale of nitrogen chemicals. The main application is fertilizers, while industrial uses are also an important and faster-growing segment. Yara employs its scale, flexibility and global presence to ensure reliable supplies of mineral fertilizer and related industrial products to customers worldwide. Yara is headquartered in Oslo, Norway and is listed on the Oslo Stock Exchange. Yara benefits from scale: it is the world’s largest producer of ammonia, nitrate and complex NPK fertilizers, and carries out approximately. 20% of global ammonia trade. Historically, the majority of Yara’s production system has been located in Europe. However, the com pany’s growth initiatives in recent years have extended its presence into other markets and regions around the world. Yara has developed a global presence unrivalled in the fertilizer industry, with a global distribution and marketing network including more than 200 terminals, warehouses, blending plants and bagging facilities located in more than 50 countries. Yara has built a knowledge margin in the market, based on its insight into local markets, close customer relations, agronomic expertise and ability to develop new product offerings from its extensive production base. Building on its comprehensive knowledge base, Yara is stepping up its innovation efforts. The company’s R&D has created innovative crop nutrition concepts and environmental solutions that position Yara well in growing markets. In the future, innovation will drive Yara’s ability to thrive on the business opportunities involved in solving major global challenges, such as those of food security and climate change. One element of this is the need for innovative concepts that can close the growing gap between food demand and supply, for a future global population of more than nine billion. Closing the existing yield gap and doubling agricultural production by 2050 requires improved agricultural productivity – based on sustainable, knowledge-based solutions. In 2011, Yara’s R&D costs were NOK 123 million, compared with NOK 102 million in 2010..

(13) Yara Financial Report 2011 report of the board of directors / 9. Yara’s global footprint, both in terms of production assets and market presence, delivers industry-leading flexibility, meaning that challenging conditions experienced by an individual plant or market can normally be mitigated through sourcing or sales arbitrage within the wider Yara system. The majority of Yara’s operational cash costs are variable, as purchases and plants are adjustable at short notice in the event of delivery slowdowns. Increased energy costs in Europe can be mitigated by import ing instead of producing ammonia: Yara is the global leader in ammonia trading and shipping and most of the company’s European production facilities have access to deep-sea import/ export terminals for ammonia. Yara also has the world’s largest fertilizer storage capacity. This means that the company can build up stocks before peak periods, to cope with delivery volatility and take advantage of geographical arbitrage opportunities.. – expected for completion during 2012. Yara has a 25% ownership share in Qafco and currently markets approximately 50% of the company’s urea production. Yara continued to deliver on its growth ambitions during 2011. A new world-scale urea plant replacing old assets started up at the Sluiskil production site in the Netherlands in July 2011, with a total investment cost of EUR 400 million. The plant increases Yara’s urea capacity by approximately 500,000 tons per year, taking advantage of urea upgrading margins on excess ammonia capacity in Sluiskil. The new plant also improves the site’s energy efficiency, environmental performance and maintenance costs.. Yara has firm growth ambitions, to continue realizing profitable growth based on its track record of consistently generated strong earnings through the business cycle. Yara has a scalable business model enabling synergies through improved utilization of its mar keting and distribution system. Since its launch as an independent company in 2004, Yara has built an industry-leading track record in profitable acquisitions and green/brownfield investments.. During 2011, Yara announced further brownfield expansion pro jects within its existing asset base. In Belle Plaine (Canada) Yara is studying a potential world-scale ammonia/urea expansion, and in Porsgrunn (Norway) a smaller investment and de-bottlenecking program will increase NPK capacity by approximately 300,000 tons by 2013. In early 2012, Yara increased its share in the Burrup (Australia) ammonia plant from 35% to 51% and announced a Heads of Agreement with Orica and Apache Energy to construct a 330,000 tons p.a. technical ammonium nitrate facility adjacent to the existing ammonia plant.. STRONG EARNINGS AND GROwTH OPPORTUNITIES. MARKET CONDITIONS. Going forward, Yara’s focus on growth opportunities will remain combined with strict valuation and capital discipline. When evaluating growth projects, Yara will always start by assessing the synergies it can potentially realize, compared with estimated competitor synergies. Market and business cycle assumptions are carefully considered and compared with estimates of the seller’s and alternative buyers’ views. Timing is essential in creating value from acquisitions, and we combine a continuous search for projects with patience and discipline in execution. Yara’s growth initiatives focus on increasing the company’s access to competi tive raw materials, expanding its presence in high-growth mar kets and participating in consolidation in mature markets.. After increasing in through 2010, prices of agricultural com modities remained at a high level during 2011, although declining modestly through the year. The FAO Food Price Index average for 2011 reached its highest level so far, and exceeded its previous 2008 peak by 14%. Even the price level at the end of the year exceeded the 2008 average. Despite the very strong incentives to farm on more acreage, and to increase fertilizer application in order to increase yields, estimates the US Department of Agriculture that grain production during 2011/12 will only match consumption, leaving global grain stocks unchanged. Fundamentals for ferti lizer demand remained strong through 2011. However, macro economic turbulence, modestly declining crop prices, and a higher fertilizer price level all contributed to reduced willingness to buy earlier than necessary. Fertilizer markets turned weaker in the fourth quarter, as normal pre-buying for the Northern hemi sphere spring did not take place due to increased risk aversion.. Yara’s production in competitive gas areas will further increase with the ongoing Qafco 5 and Qafco 6 expansion projects, which started in 2007 with the construction of two world-scale ammo nia and urea plants in Qatar – at a total cost of USD 3.8 billion. NET INCOME AFTER NONCONTROLLING INTEREST. EBITDA NOK billion,. 15. 2007–2011. 12. 20 16. NOK billion, 2007–2011. 9. 12. 6. 8. 3. 4. 0. 2007. 2008. 2009. 2010. 2011. 0. 2007. 2008. 2009. 2010. 2011.

(14) 10 / report of the board of directors Yara Financial Report 2011. CROGI (12-MONTH ROLLING AVERAGE). ROCE (12-MONTH ROLLING AVERAGE). 25 20. Percent, 2007–2011. 30 24. Percent, 2007–2011. 15. 18. 10. 12. 5. 6. 0. 2007. 2008. 2009. 2010. 2011. For urea, the supply-demand balance was not only supported by strong demand, but also by stronger restrictions on Chinese urea exports. From exporting 7.0 million tons in 2010, the official number for urea exports reached only 3.6 million tons in 2011. In addition, due to strong export taxes, as much as 1 million tons are likely to have been exported either in small bags (<10kg) exempted from export tax, or sold into Vietnam without paying export tax. In addition, exports of fertilizers containing both nitrogen and phos phates increased sharply, adding to nitrogen leaving the country. Consequently the tax changes in China supported the urea market more than the overall nitrogen market. The global market price for urea was largely determined by the balance between Chinese supply costs including the tax, and strong demand from the rest of the world. Increased exports came mostly from Iran, due to new plants, and improved capacity utilization in Russia and Ukraine. First half 2011 saw increases in nitrogen fertilizer use both in Europe and North America. As this was anticipated, the addi tional supply was to a large extent secured already during second half 2010, when Chinese urea was available. So for the calendar year 2011, increased urea imports by India and Brazil are the most important demand contributors to the tighter market. Due to strong farm economics, demand for phosphate and potash fertilizers, including NPK, also improved in 2011. But towards the end of the year, the market for these nutrients was negatively affected by reduced Indian demand, as the Indian Government allowed P and K prices at the farm gate to double during the year. The phosphate market was also negatively affected by significantly higher Chinese exports. Nitrogen sales for industrial applications have recovered from the decline that followed the financial turmoil of 2008. A major growth area is products for NOx-abatement of truck emissions, which was initiated by new European legislation in 2006. Legisla tion along the same lines was implemented in the USA early in 2010, creating a new and rapidly growing market for Yara’s prod ucts. The trend remains strong, with more countries preparing similar regulations. The broad economic recovery, along with recent unrest in North Africa and the Middle East, has increased European oil and gas. 0. 2007. 2008. 2009. 2010. 2011. costs significantly compared to one year ago. Elsewhere, North American fertilizer production continues to benefit from lower gas prices following the development of new domestic nonconventional gas resources. FINANCIAL PERFORMANCE AND OPERATIONS. Net income was NOK 12,090 million, up 37% from 2010. 2011 earnings per share were NOK 41.99, compared with NOK 30.24 in 2010. Yara’s after-tax measure for return on capital, CROGI (Cash Return on Gross Investment), was at 20.9% compared with a target of minimum 10% average over the business cycle, and up from 17.4% in 2010. Operating income was NOK 13,240 million, up from NOK 7,467 million in 2010. EBITDA increased to NOK 18,163 million, from NOK 15,315 million in 2010. Yara’s revenue and other income was NOK 80.4 billion in 2011, up from 65.4 bil lion in 2010. Yara’s 2011 results improved significantly from 2010 due to higher prices and margins, more than offsetting higher energy prices and lower volumes. Overall fertilizer deliveries were 4% lower than in 2010, with lower second-half sales in Europe only partially offset by stronger sales elsewhere. Average realized nitrate prices were 49% higher than 2010, while realized urea prices increased 37%. The major positive non-recurring items were generated by the sale of Yara’s share in Rossosh and the partdivestment of Yara’s share in Yara Praxair. The Downstream segment delivered an EBITDA of NOK 5,085 million, a strong result as a tight fertilizer market improved margins and increased sales to premium markets outside Europe. Strong global grain prices increased farm margins, lifting ferti lizer demand and, subsequently, fertilizer prices during 2011. Realized sales prices were up for all main products. The Industrial segment delivered strong results with an EBITDA of NOK 2,001 million, including a gain of NOK 967 million for the sale of Yara’s 16% ownership in Yara Praxair. The underlying EBITDA was 6% below 2010 despite the 7% volume increase, which did not compensate for the loss in margins in CO 2 and environmental products. The Upstream segment delivered an EBITDA of NOK 11,446 mil lion, an increase of 92% from 2010. The result reflects the increase in prices for all products, which more than offset the negative.

(15) Yara Financial Report 2011 report of the board of directors / 11. effect of higher energy cost. Finished fertilizer production volumes were in line with 2010, whereas ammonia production decreased 9% compared with 2010. The EBITDA includes the one-time gain of NOK 1,419 million for the sale of Yara’s share of Rossosh. EBITDA excluding special items was up 69% compared with 2010. Net cash from operating activities in 2011 was NOK 7,363 mil lion, reflecting strong earnings based on a continued strong market situation for Yara’s products. Net cash from operating activities in 2010 was NOK 7,093 million. Net cash from investment activities for 2011 was NOK 431 million, a positive cash flow due to proceeds from the Rossosh and Yara Praxair divestments. Yara strengthened its financial position during 2011. The debt/ equity ratio decreased from 0.27 to 0.12 primarily due to strong earnings sale. Yara’s net interest-bearing debt at the end of the year was NOK 5,539 million, while total assets were NOK 73,900 million. Total equity attributable to shareholders of the parent company as of 31 December 2011 amounted to NOK 44,623 mil lion. At the end of the year, Yara had NOK 5,868 million in cash and cash equivalents and approximately NOK 10,585 million in undrawn committed bank facilities. We consider the company’s cash and financial position to be strong. In the opinion of the Board of Directors, the consolidated finan cial statements provide a true and fair view of the group’s financial performance during 2011 and financial position at 31 December 2011. According to section 3–3 of the Norwegian Accounting Act, we confirm that the consolidated financial statements and the financial statements of the parent company have been prepared based on the going concern assumption, and that it is appropriate to make that assumption. Subsequent events On 1 February 2012, Yara acquired additional 16% of Burrup Holdings Limited (BHL) for USD 143 million, increasing its own ership share in the company to 51%. Yara will consolidate BHL and its subsidiaries from the acquisition date, including possible goodwill, and measure all identifiable assets acquired and liabili ties assumed at their acquisition-date fair values.. DEBT/EQUITY RATIO Percent, 2007–2011. On 1 March 2012 Yara signed a heads of agreement with Orica and Apache via joint venture to build a 330,000 metric tons ammonium nitrate plant on the Burrup peninsula and to distri bute ammonium nitrate and other explosives products to mining customers in the Pilbara region. Yara will be the operator of the ammonium nitrate plant and Orica will manage the sales and dis tribution. Final agreement is subject to concluding negotiations on the contract for the engineering, procurement and construc tion of the ammonium nitrate plant and Board approvals. RISK MANAGEMENT. Yara’s total risk exposure is analyzed and evaluated at corporate level. Risk evaluations are integrated in all business activities, both at corporate and business unit level, increasing Yara’s ability to miti gate risk and take advantage of business opportunities. Yara’s most significant market risk is related to the margin between nitrogen fertilizer prices and natural gas prices. Although there is a positive long term correlation between these prices, margins are influenced by the supply/demand balance for food relative to energy. The Board carries out annual reviews of the company’s most impor tant areas of exposure to risk and its internal control arrangements. Reference is made to pages 28–33 in the annual report for a more comprehensive description of Yara’s risk and risk management. CREATING IMPACT. During 2011, Yara reviewed its previous citizenship approach, broadening its scope through establishing the Creating Impact strategic framework. As a strategic ambition, Creating Impact is closely connected to the company mission, ‘Better yield’. Subsequent to the Board’s approval, the Creating Impact approach was launched internally in 2011. It is a business approach building on three interlinked dimensions, mutually reinforcing each other in a virtuous cycle: competitive advantages, value creation and creating impact. Yara creates value by executing the company’s strategy for profit able and sustainable growth. Sustainable value creation in a global industry and competitive world market depends on competitive advantages. In the case of Yara, these derive largely from the. 100. EARNINGS PER SHARE. 50. 80. NOK,. 40. 2007–2011. 60. 30. 40. 20. 20. 10. 0. 2007. 2008. 2009. 2010. 2011. 0. 2007. 2008. 2009. 2010. 2011.

(16) 12 / report of the board of directors Yara Financial Report 2011. TRI RATE* Total Recordable Injuries per million hours worked, 2007–2011. or lower. The TRI rate includes lost-time injuries, restricted work cases where employees and contractors were allowed to carry out work different from their normal duties, and medical treatment cases. The LTI rate (Lost-Time Injuries per million hours worked) for Yara employees and contractors ended at 1.80, a slight increase from 2010. Yara’s ultimate goal is zero injuries. The company’s accident rate is half the average for European fertilizer producers. Absence due to illness at Yara’s production plants was 3.6% in 2011, slightly higher than the 3.5% in 2010.. 5 4 3 2. *). 2007–2009 figures 1 are for Yara em ployees only; 2010– 2011 also include 0 contractors.. 2007. 2008. 2009. 2010. 2011. company’s unique business model, global position and extensive knowledge assets. Creating value allows Yara to create impact: to develop improvements along its own value chain, to drive improvements in the industry’s overall performance, and to contribute solutions to major global chal lenges, impacting on society and delivering on the company mission. By adding the Creating Impact dimension, Yara further explores the opportunities arising from addressing and contributing towards societal benefits which are linked to Yara’s core business, position or knowledge. By making these interconnections, Yara will create sustainable competitive advantages.. » See separate Impact Review. HEALTH, ENvIRONMENT AND SAFETY. Yara has a strong track record with respect to health, environ mental and safety performance. The company has a longstanding commitment to workers’ safety, founded on the belief that every accident is preventable. This forms the basis for a strong safety program within the company. Similarly, Yara works systemati cally to reduce the environmental impacts of its operations and to contribute to environmental improvements in agriculture and the transportation and industrial sectors. In 2011, Yara achieved a TRI rate (Total Recordable Injuries per million hours worked) of 4.0 for employees and contractors com bined, up from 3.8 in 2010 and above the target of a TRI at 3.5. GHG EMISSIONS VS TARGETS. 25. Million ton of CO2 equivalents, adjusted for new plants. 20. Target Actual *). 0.7 of the 1.9 mill tons CO2e reduc tion from 2010 are attributable to the closure of produc tion in Lifeco.. 53% down. Target 2013: 45% down vs 2004. 15. In 2011, the company upgraded and strengthened technical and operational procedures for contractors, who have historically been more prone to undesired incidents than Yara employees. Yara also continued to develop the BBS (Behavior-Based Safety) program, focusing on better employee safety performance feedback, and strengthening management commitment through more safety walks. The Upstream segment proceeded to focus on operational discipline, including new training initiatives for engi neers, leaders, supervisors and operators, and technical safety in its Process Safety program, while Yara continued to raise safety awareness and improve reporting and hazard identification in the Downstream and Industrial segments. As to managing environmental impacts, Yara continues to reduce its carbon footprint. The company’s goal has been to reduce greenhouse gas (GHG) emissions by 45% by 2013 compared to a 2004 baseline. Yara reached this goal in 2010 and maintained the achieved level with some further improvements in 2011. In 2011, the level of greenhouse gas emissions was reduced a further 15% from the previous year, though partly due to closure of the Lifeco plant. All of the company’s nitric acid plants have installed Yara’s N2O catalyst technology, or similar technology, which reduces respective GHG emissions by up to 90%. Yara will meet the new requirements for nitric acid plants under the EU Emissions Trading System (EU ETS) coming into force in 2013 by having installed such reduction technologies. The company will continue investments in its ammonia plants, pursuing higher energy and cost efficiency as well as lower emissions. In 2011, Yara’s total energy consumption in production was 219 million GJ, a 2% decrease from 2010. Energy consumption per ton of finished product also continued to decrease.. 10 5 0. Yara experienced three serious accidents in 2011, of which one had a fatal outcome. In Brazil, an electrician received a lethal electri cal shock during work on a panel that had not been de-energized and locked out according to procedures. Yara works continuously and systematically to enforce strict operating procedures, conduct ing extensive employee training and audit programs, to prevent accidents from occuring.. 2004. 2010. 2011 *. 2013. Yara’s operations are subject to many environmental require ments under the laws and regulations of the various jurisdictions in which the company conducts its business. Such laws and regu.

(17) Yara Financial Report 2011 report of the board of directors / 13. lations govern, among other matters, air emissions, wastewater discharges, solid and hazardous waste management, product labeling, transportation of hazardous materials and remediation of past activities. Yara has successfully completed the registration of substances under the REACH Regulation (Registration, Evalu ation, Authorization and Restriction of Chemicals), and is now revising packaging and labeling for compliance with national and international requirements. In 2011, no material legal claim was made against Yara regarding environmental issues. Yara has a number of facilities that have been operated for long periods of time. They may require remediation or generate liabili ties under the laws of the jurisdictions in which the facilities are located. Yara examines such impacts where they are apparent and executes remediation or containment procedures, in coordination with the appropriate authorities. Provisions of NOK 209 million have been made for other clean-up activities of former activities in several locations, of which NOK 55 million were allocated in 2011. PEOPLE DEvELOPMENT. Yara recognizes that the company is only as good as the combina tion of its people and products. Yara is the world’s largest supplier of mineral fertilizers, the largest supplier and trader of ammonia, and the global leader in a wide range of chemical products – thanks to its talented employees.. In 2011, Yara upgraded the workforce planning processes and launched a global recruitment process that have a specific focus on monitoring and promoting diversity, including gender diversity, in the organization. An open and transparent job market where all vacancies are advertised internally is also part of our efforts to promote diversity and mobility in the organization. As part of a Key Talents program, Yara HR launched a High Poten tials program in August. Thirteen young professionals, between 27 and 34 years old and representing 11 nationalities, were selected based on merit and potential. This is a rolling program, with annual uptake and exits, where the High Potentials are followed closely over a period of 2–3 years and are expected to hold 1–2 development positions within that period. While employees are responsible for their own life and develop ment, managers have a critical role in ensuring that all Yara’s people can perform to the best of their abilities. Managers at all levels are the ultimate stewards of talent in Yara. Therefore special emphasis is placed on people management. Altogether, we believe that having efficient performance and talent management processes will enable us to identify, develop, deploy and recruit the talent we need across the world and, at the same time, meet individual employees’ expectations for reward ing work and personal development. CORPORATE GOvERNANCE. Yara is a workplace where people develop. For this to continue to happen, the talent management processes need to evolve and improve constantly, as described in the Talent Management Framework that was launched in 2010. In 2011, Yara provided nearly 3,000 employees around the world with access to the Human Resources Information System (HR IS), initiated a new Talent Development process, improved its Workforce Planning process, launched a High Potentials program, tested a new 360-degree feedback tool and rolled out an IS supported Perfor mance Management Process.. Proactive and transparent corporate governance is crucial for aligning the interests of shareholders, management, employees and other stakeholders. Yara believes that good corporate governance drives sustainable business conduct and long-term value creation.. In order to focus on the development of our employees, Yara has designed a new Talent Development Mid-Year Review process, supported by a new HR IS tool. Over 1,200 employees on all con tinents and in all business segments took part in the pilot project. They tested and evaluated the different components; the process, Yara’s competency model, the HR IS tool and the communica tions and training activities. Based on the valuable feedback and insights Yara will change and improve the various elements before the full global roll-out in 2012.. Yara’s Board of Directors has decided to comply with the Nor wegian Code of Practice for Corporate Governance, last updated 20 October 2011. The Code contains stricter requirements than mandated by Norwegian law. » Corporate governance / page 22. The Workforce Planning process ran globally on all levels for the second year in row. The outcome was a clearer view of the need for succession planning, competency development, and recruitment. This provided valuable input to short and longer term plans, with an increased focus on gender and diversity. The Yara GRI report (available on yara.com/GRI) provides some details about Yara’s performance on diversity metrics.. The Board of Directors and Executive Management of Yara Inter national ASA review its corporate governance principles annually, reporting in accordance with the Norwegian Accounting Act § 3–3b and the Norwegian Code of Practice for Corporate Govern ance dated 20 October 2011.. In April 2011, Yara decided to initiate an external investigation related to the establishment and follow-up of it’s interest in Libyan Norwegian Fertiliser Company (Lifeco). In parallel, Yara notified The Norwegian National Authority for Investigation and Prosecu tion of Economic and Environmental Crime (Økokrim) of the pos sibility that criminal offenses may have occurred before October 2008 in connection with the negotiations preceding the company’s investment in Libya. Yara subsequently widened its investigation to comprise other issues, including an earlier unrealized project aimed at establishing a joint venture in India, and an initial inves tigation uncovered a payment of USD 1 million to a third party..

(18) 14 / report of the board of directors Yara Financial Report 2011. Økokrim launched an investigation following these notifications from Yara, and subsequently charged the company with violation of the Norwegian penal code paragraph 276a, cf paragraph 276b.. in 2010). Net foreign exchange gain was NOK 85 million com pared to NOK 325 million in 2010. DIvIDEND AND BUYBACKS. During 2012 the investigation has uncovered unacceptable payments from the company’s former associated entity in Swit zerland. The Norwegian National Authority for Investigation and Prosecution of Economic and Environmental Crime (ØKOKRIM) has been notified of the new findings. Further investigations are now taking place to clarify how such payments have been carried out and authorized. The main findings will be published when the investigation report is finalized. In June 2011 the Yara Board of Directors created an Ad Hoc Committee to follow up the investigations described above. The committee will follow up and communicate with management, the externally appointed investigator and external legal counsel. The Ad Hoc Committee reports on its work at every Yara Board meeting, and all decisions are made by the full Board of Directors. BOARD OF DIRECTORS AND ExECUTIvE MANAGEMENT. Yara’s Board held twelve meetings in 2011. Three of the eight Board members are women. The Board is made up of five shareholderelected members and three employee-elected members. The five shareholder-elected members all have extensive line management experience from international industrial companies. Two of the three employee-elected Board members were re-elected in February 2011, and Kristine Haukalid was elected as a new board member. Yara has decided not to constitute a corporate assembly. Conse quently, the Board of Directors is directly responsible to the General Meeting and the shareholders. A Compensation Committee was established in April 2004 and an Audit Committee was established in December 2006.. Yara expects to return 40–45% of net income to its shareholders, measured as the sum of dividends and share buy-backs, averaged over the business cycle. As long as Yara can maintain profitability at the attractive level achieved since the IPO, a dividend level that restricts Yara’s growth will not be desirable. Yara’s dividend policy is to pay out a minimum 30% of net income as an average over the business cycle. Yara believes it will be beneficial for shareholders that the Company strives for a gradual increase and predictability in the absolute dividend level over time, independent of the business cycle. The Board proposes a dividend of NOK 7.00 per share, a 27% increase from 2010, totaling a payment of NOK 1,998 million based on outstanding shares at the date this financial statement was authorized for issue. Combined with the positive result in Yara International ASA and other effects, this results in a net reduction in equity of NOK 934 million. Distributable equity in the parent company as of 31 December 2011 was NOK 3,615 mil lion after proposed dividend. Yara will use share buy-back programs when certain conditions are met. Share buy-backs are more flexible than dividends. For most shareholders, buy-backs also provide tax advantages com pared to dividends. In 2011, Yara bought back and redeemed shares for a total of NOK 763 million. In total, Yara paid out NOK 2,347 million in 2011 in dividends and share buy-backs, representing 27% of net income in 2010. The proposed 2011 dividend represents 17% of net income and 20% of net income excluding net foreign exchange gains and special items.. YARA INTERNATIONAL ASA. DIVIDENDS NOK per share, 2007–2011. Graph text. The parent company Yara International ASA is primarily a holding company, with financial activities and non-material operations. Yara International ASA had net income of NOK 1,903 million in 2011, down from NOK 4,697 million in 2010, after dividends and group relief from subsidiaries of NOK 1,796 (NOK 3,799 million. Graph text. Global agricultural markets are strong. Although the FAO Food Price Index ended the year 7% lower than the average for 2011, the latter was still 6% higher than the average index for any other calendar year. The price index increases reflect tight markets for a broad range of agricultural products, and create strong incentives to increase agricultural productivity. Assuming continued growth in global food consumption, the world needs another record grain crop in 2012 in order to prevent a further inventory decline.. 8. 6. 4. Graph text. OUTLOOK. 2. 0. 2007. 2008. 2009. 2010. 2011. Improved agricultural prices in 2011 led to strong fertilizer demand during application season for all regions. However, the second half of the year saw lower Northern hemisphere prebuying activity for spring 2012 application, likely impacted by macroeconomic turbulence, modestly declining crop prices, and a higher fertilizer price level. Nitrogen fertilizer industry deliver ies in Western Europe for the first half of the 2011/2012 season were 18% behind a year earlier, following strong deliveries at the end of the 2010/2011 season and low pre-buying activity in the.

(19) Yara Financial Report 2011 report of the board of directors / 15. current season. European deliveries have picked up since Decem ber, and Yara expects normal European nitrogen consumption in 2012. The supply of nitrogen fertilizer is limited, and the global nitrogen fertilizer industry outside China is already running at full capacity as all producers have positive margins. Furthermore, new exportcapacity start-ups during 2011–2015 and are expected to be in line with historical trend consumption growth. China has implemented a 110% urea export tax, effective from 1 November 2011 through June 2012. Urea export volumes from China were halved in 2011 compared with a year earlier, following the introduction during the year of a stricter export tax system also for the low-season period 1 July – 31 October. A similar progressive export tax mechanism has been announced for the same period in 2012, which at February domestic urea price levels would indicate a swing export price around USD 400 per ton fob China from 1 July 2012. Nitrate fertilizer prices increased in 2011 compared with a year earlier, reflecting both stronger nitrogen prices and a continued healthy crop price level. Nitrates continue to command a price premium over urea due to their agronomic benefits, and the size of the premium is largely linked to the strength of farm margins and thereby crop price levels, particularly wheat prices for Yara. Based on the current strength of nitrogen prices, Yara aims to run its fertilizer production facilities at full capacity. On this basis the company will increase production in 2012, with the urea expansion in Sluiskil fully on-stream following start-up in third quarter 2011 and the Qafco 5 and Qafco 6 ammonia and urea expansions. ramping up during first and fourth quarter 2012 respectively. The Lifeco joint venture plant remains closed while preparations are made for a safe return to normal operation. Yara is targeting a third-quarter start-up, with full production by end 2012, contingent on natural gas supplies being available by the summer. There is significant potential for high price volatility in the markets for agricultural commodities where supply is limited and custom ers have a low sensitivity to price changes. Weather-related set backs in agricultural production could further increase fertilizer demand, while a significant drop in agricultural prices, e.g. in the event of improved harvest prospects, could lead to a temporary slow-down in fertilizer deliveries. However, a substantial harvest increase in the 2012/13 season will be required merely to avoid a decline in inventories. A majority of Yara’s dry raw material purchases are re-negotiated annually. While these costs are typically recouped in Yara’s finished fertilizer sale prices over time, the company expects to record a smaller negative impact in its 2012 results compared to 2011, partly as a result of rising phosphate rock prices during the year. Yara’s energy costs are projected to increase in first half of 2012, compared with a year earlier based on current (8 March) forward markets for oil products and natural gas. The necessary level of investment needed to maintain current capacity and productivity is estimated to be NOK 2 billion per year. In addition, Yara plans approximately NOK 1 billion of continuity and reliability investments per annum in the next 2–3 years.. The Board of Directors of Yara International ASA. Oslo, 22 March 2012. Øivind Lund Chairperson. Elisabeth Harstad Board member. Leiv L. Nergaard Board member. Hilde Merete Aasheim Board member. Bernt Reitan Board member. Geir O. Sundbø Board member. Kristine Haukalid Board member. Svein Flatebø Board member. Jørgen Ole Haslestad President and CEO.

(20) 16 / Governance Yara Financial Report 2011. Quick overview durInG 2011, Yara followed up on its business conduct. By continuously ensuring compliance with our strict guide lines for corporate governance, including our Code of Conduct, and improving our risk management process, we reduce risk, explore business opportunities and create value. International political as well as financial affairs, such as the Arab spring and the Eurozone turmoil, affect our business environment, adding elements of uncertainty to strategic assess ments of future scenarios. Throughout 2011, we intensified our focus on improving risk mitigation in our operations..

(21) Yara Financial Report 2011 Governance / 17. strengthening corporate governance, Yara drives long-term value creation. governance Core content in This seCTion: Board of Directors page 18 / Executive management page 20 / Corporate governance page 22 / Risk management page 28.

(22) 18 / Governance Yara Financial Report 2011. Board of Directors 2011. 1). 4). 2). Øivind lund. 1). 3). 3). Elisabeth Harstad. Chairman of the Board since 2004. Member of the Board since 2006. Chairman of the Compensation Committee. Member of the Compensation Committee. Member of the Ad Hoc Committee. Member of the Ad Hoc Committee. Dr. Lund (born 1945) has broad international industrial experience, having held the position of President and Country Manager of ABB Holding AS, Turkey 2003–06; Senior VP and Group Function Manager, ABB Asea Brown Boveri Ltd, Switzerland 2001–03; President of ABB AS, Norway 1998–2001. Previously, he held senior management posi tions with ABB National Transformer AS, Norway; ABB Transformers AB, Sweden; Tanelec Ltd., Tanzania, and National Industri AS, Norway. He holds an M.Sc and a Ph.D degree in Electrical Engineering from the Norwegian Institute of Technology (NTH) and a degree in Industrial Economy from BI Norwegian School of Management. Dr Lund is Chair man of the Board of Maracc ASA.. Ms. Harstad (born 1957) is EVP in DNV KEMA, based in Netherlands. From 2006-12, she was Managing Director of DNV Research & Innova tion, Norway, and from 2002–06 COO for the DNV business area Tech nology Services. She previously held several senior positions within DNV’s oil, gas and process industry activities, 1993–2006. She holds an M.Sc degree in Engineering from the Norwegian Institute of Technology (NTH). Ms. Harstad is a board member of TGS-NOPEC.. 4). Bernt reitan. Member of the Board since 2009. 2). Leiv L. nergaard. Member of the Board since 2004 Chairman of the Audit Committee Chairman of the Ad Hoc Committee Mr. Nergaard (born 1944) is a partner in the consulting company Norscan Partners AS, Norway. He has held several senior management positions within Norsk Hydro ASA, including CFO of Hydro, 1991–2002; CEO of Hydro, Germany 2002–03 and advisor to Hydro corporate management, 2003– 06. He holds a degree in Business Economics from the Norwegian School of Economics and Business Administration (NHH). He is a board member of Endeavour International Corporation, Houston, as well as Chairman of the Board for some smaller companies. Mr. Nergaard is vice-chairman of the board of the Norwegian-German Chamber of Commerce and Senior Advisor to Greenhill & Co.. Member of the Audit Committee Mr. Reitan (born 1948) was Executive Vice President (EVP) and member of Alcoa’s Executive Council until he retired in 2010. Reitan had manage ment responsibility for Alcoa’s Global Primary Products Group and Alcoa’s Materials Management (metal purchasing, trading and transportation). Prior to joining Alcoa, where he held several key management positions before being elected EVP in 2004, Mr. Reitan held a series of positions at Elkem ASA, Norway, including Corporate Management 1988–2000 and Managing Director of Elkem Aluminum ANS from 1988. He holds an M.Sc degree in Civil Engineering from the Norwegian Institute of Tech nology (NTH). Mr. Reitan serves on the board of Royal Caribbean Cruise Lines and REC ASA, and he is Co-Chair of the board of the American Scandinavian Foundation (ASF) in New York..

(23) Yara Financial Report 2011 Governance / 19. 6). 8). 5). 5). 7). Hilde Merete aasheim. Member of the Board since 2010 Member of the Audit Committee Mrs. Aasheim (born 1958) is Executive Vice President (EVP), Primary Metal in Hydro. Prior to that she served as EVP for the Aluminum Metal business area in the same company. Aasheim joined Hydro in October 2005 as EVP for Leadership and Culture (human resources, health, en vironment, safety and corporate social responsibility). When Hydro’s oil and gas activities were merged with Statoil in 2007, Aasheim headed the integration process. Between 1986 and 2005, she held several senior positions in Elkem. Aasheim holds a Master’s degree in Business Eco nomics from the Norwegian School of Economics and Business Admin istration (NHH) in Bergen and is also an accredited public accountant. Aasheim has also work experience with Arthur Andersen & Co.. 7). Geir O. sundbø. Member of the Board since 2010 Mr. Sundbø (born 1963) has been a Yara (Hydro) employee since 1987. He has been actively engaged in union matters in the Porsgrunn plant since 1989. He is Deputy Chairman of the local union chapter in Herøya Industripark Porsgrunn and union chairman of Yara Porsgrunn. He is also a member of the executive committee of the IndustriClusteret Grenland (ICG). Sundbø has been a certified TQM supervisor since 1990. Since 2009, he has been secretary of the European Works Council (EWC) of Yara. He is also secretary of the control committee in National Trade Union of Industrial Energy since 2010.. 8). Kristine Haukalid. Member of the board since 2011. 6). Svein Flatebø. Member of the Board since 2007 Member of the Compensation Committee Mr. Flatebø (born 1952) has been a Yara (Hydro) employee since 1981. Presently in Corporate Communication, he has also held leadership positions within strategy planning, global planning and optimization, R&D, purchasing and other areas. He holds an M.Sc degree in Chemical Engi neering from the Norwegian Institute of Technology (NTH). Flatebø has been a board member of The Norwegian Society of Chartered Scientific and Academic Professionals (Tekna) in Yara since 2006; Chairperson of Yara Tekna since 2007.. Mrs. Haukalid (born 1955) has been a Yara (Hydro) employee since 1980. She currently holds the position of Department Manager of Logistics at Yara’s site in Glomfjord, Norway. She is a chemical engineer with a degree from Oslo University College. She has been a board member in The Norwegian Engineers and Managers Association since 2002, and as of 2009 she is a board member of the service provider company Meløy BedriftsService AS..

(24) 20 / Governance Yara Financial Report 2011. executive management 2011. 1) 2). Jørgen Ole Haslestad. 1). President and Chief Executive Officer Mr. Haslestad (born 1951) has served as President and CEO since Octo ber 2008. Previously he held several senior management positions in Siemens AG, 1994–2008, most recently as CEO of the Group’s Industry Solutions Division, Germany. Before joining Siemens, he served as Mana ging Director of Kongsberg Offshore AS, Norway, 1986–94; Project Engi neer and Project Manager of the oil division, Kongsberg Vaapenfabrikk AS, Norway, 1980–86. He holds an M.Sc degree in Mechanical Engineering from the Norwegian Institute of Technology (NTH). Mr. Haslestad served as a board member of Yara, 2004–08.. 2). Hallgeir storvik. 3). 3). 4). Tor Holba. Head of Upstream Mr. Holba (born 1956) has served as Senior VP Head of Upstream since October 2006. His previous position in Yara was SVP Downstream, 2003– 06. Prior to that he held numerous positions in Hydro from 1981, including SVP of Global Supply Chain Management, 2001–03; President of Trevo, 2000–01; Head of Business Unit Latin America, 1998–2000; President of Hydro Agri Mexico 1993–97; Regional Marketing Director for Asia and Man aging Director of Hydro (Far East) Ltd., 1991–93. Mr. Holba holds an M.Sc in Mechanical Engineering from the Norwegian Institute of Technology (NTH).. 4). Egil Hogna. Head of Downstream. Chief Financial Officer and Head of Strategy Mr. Storvik (born 1958) has served as Senior VP Chief Financial Officer and Head of Strategy since August 2009. His previous positions in the company were: SVP and Head of Strategy, Supply & Trade 2008–09, SVP, Supply and Trade since 2006–08; CFO of Hydro Agri, 1998–2004, and CFO of Yara 2004–06, also acting as CFO of Hydro Agri International, 1995–98. He was employed by Hydro in 1984 and was responsible for the strategy that led Hydro Agri to undertake a major turnaround from 1999 to 2000. Mr. Storvik holds a Master’s degree from the Norwegian School of Eco nomics and Business Administration (NHH).. Mr. Hogna (born 1971) has served as Senior VP Head of Downstream since August 2009. His previous positions in the company are: Chief Financial Officer 2008–09, Business Unit Manager South Europe/Mediterranean, 2007–08; SVP Business Intelligence 2006–07; VP Investor Relations, 2004–06; VP of Hydro Aluminum Metal Products (responsible for Supply Chain & Performance Management), 2001–03; Corporate Controller Hydro Agri 1999–2001. Before joining Norsk Hydro, Mr. Hogna was a consultant with McKinsey, 1994–99. He holds an M.Sc in Industrial Management from the Norwegian Institute of Technology (NTH) and an MBA from INSEAD..

(25) Yara Financial Report 2011 Governance / 21. 8). 5). 9) 6). 5). Yves bonte. Head of Industrial Mr. Bonte (born 1961) has served as Senior VP Head of Industrial since January 2010. Before joining Yara, he worked for 17 years for the chemi cal company LyondellBasell and its predecessors, serving as Senior VP Polypropylene Business based in Germany and the Netherlands, 2007– 09; Senior VP Sales & Marketing for Asia, Middle East/Africa and Latin America based in Hong Kong, 2002–06; Head of Strategic Marketing, 2000–01; several marketing, supply chain and manufacturing positions, 1992–99. Prior to this he worked five years for Exxon Chemical in Brus sels. Mr. Bonte holds a post-graduate degree in Business Management and a Master’s degree in Civil Engineering from the University of Leuven in Belgium.. 6). Torgeir Kvidal. Head of Supply & Trade Mr. Kvidal (born 1965) has served as Senior VP Head of Supply & Trade since April 2011. His previous positions in the company include: Head of Investor Relations 2006–11. CFO Industrial 2005–06, Head of Business Unit CO2 /Industrial Central Europe 2000–05 and VP Finance Hydrogas 1997–99, Corporate Controller Hydro Agri 1993–97. He was employed by Hydro in 1991 as a trainee. Mr. Kvidal holds a Master’s degree from the Norwegian School of Economics and Business Administration (NHH).. 7). she was VP Corporate Communications. Before joining Yara, she was Presi dent of the Norwegian Nurses Organization, 1998–2007, and its Chief Ne gotiator and Director of the Department of Negotiation, 1995–98. Between 1984–95 she held various positions within the Norwegian Association of Lo cal and Regional Authorities. Mrs. Slaatten holds a Master’s degree in Busi ness Administration from the Norwegian School of Economics and Business Administration (NHH), a Bachelor’s degree in Nursing, a degree in Business Administration from the Norwegian School of Management and has studied organization and project management at the University of Oslo. Mrs. Slaatten has held numerous board positions and honorary posts.. 8). Håkan Hallén. Chief Human Resource Officer Mr. Hallén (born 1951) has served as Senior VP Chief Human Resource Officer since August 2009. Before joining Yara he served in various senior positions, including Group HR Director at Aibel Group Ltd, London 2008–09; Director HR with UBS, Zurich, 2006–08, EVP with Accenture, 2004– 06; SVP HR with Volvo, Brussels 1998–2004. He also has extensive international experience from leading HR positions at the World Bank, Washington DC and the OECD, Paris, 1987–98. Mr. Hallén holds a degree equivalent to an M.Sc in Behavioral Science and Personnel Management, from the University of Gothenburg.. 8). Trygve Faksvaag. Chief Legal Counsel. 7). Bente G. H. slaatten. Chief Communications and Branding Officer Mrs. Slaatten (born 1958) has served as Senior VP Chief Communications and Branding Officer since October 2009. From January 2008 until then. Mr. Faksvaag (born 1966) has served as Senior VP Chief Legal Counsel since May 2008. His previous positions in the company include: Manag ing Director of Yara Switzerland Ltd., 2006–08; VP and general counsel of Yara North America, Inc., 2004–06; legal counsel and VP of Norsk Hydro Americas, Inc., 2001–03. Mr. Faksvaag joined Hydro/Yara in 1996 from the Norwegian law firm Wikborg, Rein & Co..

(26) 22 / Governance Yara Financial Report 2011. GOvERNANCE 2011. Corporate governance. proactive and transparent corporate governance is crucial for aligning the interests of shareholders, management, employees and other stake holders. Yara believes that good corporate governance drives sustainable business conduct and long-term value creation.. Yara’s Board of Directors has decided to comply with the Nor wegian Code of Practice for Corporate Governance, last updated 20 October 2011. The Code contains stricter requirements than mandated by Norwegian law.. Yara’s compliance with the Code is detailed in this report and section numbers refer to the Code’s articles.. 1. Implementation and reporting of corporate governance / Compliant Following the approval of a new procedure for the Nomination Committee at the Yara annual general meeting on 10 May 2011, Yara complies. with all of the recommendations of the Norwe gian Code of Practice for Corporate Governance.. 2. business / Compliant Yara is a company that focuses on the produc tion, distribution and sale of nitrogen chemi cals. The scope of Yara’s business is defined in its Articles of Association, published in full. at the company’s website. Yara’s objectives and strategies are presented in the Report of the Board of Directors and Management discus sion and analysis.. » » ». yara.com / Articles of assosiation Report of the Board of Directors / page 8 Management discussion & analysis / page 40. 3. equity and dividends / Compliant Yara’s strong balance sheet is closely linked to the company’s overall strategy, goals and risk position. The Yara dividend policy aims to pro vide a predictable payout over the years. New equity will only be issued when quantum leap defined opportunities arise. No mandate. is granted to the Board of Directors to increase the company’s share capital. Yara expects to return 40–45% of net income to its shareholders, measured as the sum of dividends and share buy-backs, averaged over the business cycle. As long as Yara can main. tain profitability at the attractive level achieved since the IPO, a dividend level that restricts Yara’s growth will not be desirable. Yara’s dividend policy is to pay out a minimum 30% of net incomeas an average over the busi ness cycle. Yara believes it will be beneficial.

(27) Yara Financial Report 2011 Governance / 23. sHareHolders. nomInatIon CommIttee. annual General meetInG. external audItor. board oF dIreCtors. yara Internal rIsK and audIt. CompensatIon CommIttee audIt CommIttee. presIdent and Ceo. Reporting exeCutIve manaGement. for shareholders that the Company strives for a gradual increase and predictability in the ab solute dividend level over time, independent of the business cycle. Yara executes share buy-back programs as an integral part of its shareholder policy. Share buy-backs are more flexible than dividends, and for most shareholders provide tax advan. tages compared to dividends. Yara’s Board has every year since the IPO secured an authoriza tion from the Annual General Meeting to buy back up to 5% of total shares in the company during the next year, for subsequent cancella tion. A precondition for each annual programs is that an agreement is entered into with the Norwegian State where the State commits to sell a proportional share of its holdings to leave. Election/appointment. the State’s ownership (36.21%) unchanged. The mandates granted to the Board of Directors for the company to purchase its own shares are limited in time to the date of the next annual general meeting.. » Report of the Board of Directors / page 14 » The Yara Share / page 65. 4. equal treatment of shareholders and transactions with close associates / Compliant All Yara shareholders have equal rights and the company has one class of shares. Trans actions involving the company’s own shares, such as the share buy-back program, are nor mally executed via the stock exchange, or at prevailing stock exchange prices if carried out in any other way. Shares redeemed from the Norwegian State are also priced at market value.. In 2011, there were no significant transactions between closely related parties, except for ordi nary commercial transactions with subsidiaries and non-consolidated investees. In addition to the mandatory regulations in the Norwegian Public Limited Companies Act (§§ 3–8 and 3–9), Yara uses IFRS rules to define related parties. The members of the Board of. Directors and Management are required to disclose all entities that would be considered to be “related parties” under applicable laws and regulations. Transactions with such enti ties are subject to disclosure and special, inde pendent approval requirements.. ». Note 32 to the consolidated financial statements “Related parties” / page 122. ». Note 32 to the consolidated financial statements “Related parties” / page 122. 5. Freely negotiable shares / Compliant The company places no restrictions on the transferability of shares. There are no restric tions on the purchase or sale of shares by di rectors and executives, as long as insider reg ulations are adhered to. Certain management compensation programs, including the Yara. Long-Term Incentive scheme, mandate the use of a portion of the funds received by man agement for the purchase of Yara shares and restrict the sale of such shares for varying pe riods following such purchase..

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