Exhibit 1  2003 Financial Review  Consolidated
Six-Year Review  (MILLIONS OF U.S. DOLLARS, EXCEPT PER SHARE
  AMOUNTS, RATIOS AND MISCELLANEOUS DATA)(1)
  
  2003
  
  2002
  
  2001
  
  2000
  
  1999
  
  1998Operating ResultsRevenue
  
  $
  3,949
  
  3,091
  
  3,194
  
  3,916
  
  2,808
  
  2,075Operating income (loss)
  
  $
  (75
  )
  (71
  )
  (195
  )
  414
  
  305
  
  103Net income (loss)
  
  $
  28
  
  (81
  )
  (128
  )
  302
  
  253
  
  18Total assets
  
  $
  4,413
  
  4,154
  
  4,359
  
  4,754
  
  4,559
  
  3,580CapitalizationCurrent bank loans
  
  $
  
  
  3
  
  14
  
  28
  
  
  
  Long-term debt(2)
  
  1,101
  
  1,212
  
  1,508
  
  1,423
  
  1,525
  
  1,297Less: Cash and cash equivalents
  
  (212
  )
  (14
  )
  (10
  )
  (27
  )
  (59
  )
  (37
  )Net debt
  
  $
  889
  
  1,201
  
  1,512
  
  1,424
  
  1,466
  
  1,260Shareholders equity
  
  1,890
  
  1,561
  
  1,614
  
  1,926
  
  1,964
  
  1,512Total capitalization net of cash and cash
  equivalents(3)
  
  $
  2,779
  
  2,762
  
  3,126
  
  3,350
  
  3,430
  
  2,772Cash Flow DataPlant, property and equipment additions
  
  $
  130
  
  71
  
  168
  
  440
  
  620
  
  367Cash from operations
  
  $
  15
  
  359
  
  278
  
  351
  
  395
  
  198Net debt additions (repayments)(4)
  
  $
  (157
  )
  (307
  )
  68
  
  (72
  )
  219
  
  502Supplemental MeasuresNet income (loss) to common shareholders before
  unusual items(5)
  
  $
  (118
  )
  (148
  )
  (161
  )
  245
  
  93
  
  16Net income (loss) to common shareholders after
  unusual items
  
  $
  (1
  )
  (112
  )
  (161
  )
  266
  
  217
  
  16EBITDA(6)
  
  $
  223
  
  195
  
  35
  
  602
  
  460
  
  254Data per Common Share(7)Net income (loss) before unusual items(5) Basic
  
  $
  (1.36
  )
  (1.72
  )
  (1.88
  )
  2.76
  
  1.00
  
  0.17 Diluted
  
  $
  (1.36
  )
  (1.72
  )
  (1.88
  )
  2.49
  
  0.98
  
  0.17Net income (loss) after unusual items Basic
  
  $
  (0.02
  )
  (1.30
  )
  (1.88
  )
  3.00
  
  2.35
  
  0.17 Diluted
  
  $
  (0.02
  )
  (1.30
  )
  (1.88
  )
  2.84
  
  2.26
  
  0.17Common shareholders equity at year-end(8)
  
  $
  15.76
  
  12.40
  
  13.05
  
  16.52
  
  15.58
  
  12.96RatiosReturn (loss) on average common equity(9)
  
  (9.8
  )%
  (14.5
  )%
  (13.2
  )%
  18.1
  %
  7.4
  %
  1.3
  %Net debt to total capitalization(3)
  
  32.0
  %
  43.5
  %
  48.4
  %
  42.5
  %
  42.7
  %
  45.5
  %Funds flow coverage of financial charges(10)
  
  2.5
  x
  2.7
  x
  1.7
  x
  6.0
  x
  4.2
  x
  3.6
  xMiscellaneous DataEmployees at year-end(11)
  
  4,300
  
  4,300
  
  4,600
  
  4,700
  
  4,700
  
  4,200Closing share price
  TSX($Cdn)
  
  $
  35.04
  
  28.89
  
  30.75
  
  28.10
  
  28.25
  
  20.00NYSE($U.S.)
  
  $
  26.95
  
  18.30
  
  19.27
  
  18.81
  
  19.31
  
  13.06Dividends and DistributionsCommon shares
  
  $
  25
  
  23
  
  23
  
  23
  
  25
  
  12Preferred securities and shares
  
  $
  29
  
  31
  
  33
  
  36
  
  36
  
  2  1 
   
 (1)For all periods prior to July 2, 1998,
Canadian dollar amounts have been restated in U.S. dollars using an exchange of
$1.00 Canadian = U.S. $0.68.  (2)Includes current portion of long-term debt.  (3)Total capitalization reflects shareholders
equity and total debt net of cash and cash equivalents. See Supplemental
Measures on page 40 of Managements Discussion and Analysis.  (4)Includes current bank loans.  (5)Unusual items were $117 million in 2003, $36
million in 2002, $nil in 2001 (see page 41 of Managements Discussion and
Analysis for a complete listing). Unusual items were $21 million in 2000 (gain
on sale of Dynegy Inc. preferred shares), $124 million in 1999 ($(60) million 
loss on hedges and $184 million  gain on sale of Dynegy Inc. preferred
shares), $nil in 1998. Due to new U.S. SEC rules, certain items are no longer
excluded when presenting non-GAAP financial measures. Net income (loss) to
common shareholders before unusual items also does not exclude restructuring
charges and certain other items previously considered unusual in nature. Prior
periods have been restated to reflect these new determinations. See
Supplemental Measures on page 40 of Managements Discussion and Analysis.  (6)Net income (loss) before income taxes, other
gains and losses, equity in earnings (losses) of affiliate, interest expense
and depreciation and amortization. Periods prior to 2003 have been restated to
reflect U.S. SEC rules concerning non-GAAP financial measures, see page 41 of
Managements Discussion and Analysis.  (7)87 million weighted-average common shares
outstanding in 2003 (86 million in 2002, 85 million in 2001, 89 million in
2000, 93 million in 1999 and 92 million in 1998).  (8)All years assume the retractable preferred
shares were exchanged for 8.5 million common shares.  (9)Net income (loss) to common shareholders
before unusual items divided by average common equity (excluding preferred
securities and retractable preferred shares). All ratios prior to 2003 have
been restated to reflect U.S. SEC rules concerning non-GAAP financial measures,
see page 41 of Managements Discussion and Analysis.  (10)Funds from operations plus interest expense
(net) less interest income divided by gross interest expense.  (11)1999 includes the addition of Shell employees;
1998 includes the addition of Huntsman employees.    WHERE YOU CAN FIND MORE INFORMATION   We file additional
information relating toNOVA
Chemicals, including our Annual
Information Form (AIF), with Canadian securities administrators.
This information can be accessed through the System for Electronic Document
Analysis and Retrieval (SEDAR), at www.sedar.com.  2 
   Auditors Report  To the Shareholders of NOVA
Chemicals Corporation  We have audited the
consolidated balance sheets ofNOVA Chemicals Corporation
as at December 31, 2003, 2002, and 2001 and the consolidated statements of
income (loss) and reinvested earnings and cash flows for each of the years in
the three-year period ended December 31, 2003. These financial statements
are the responsibility of the Corporations management. Our responsibility is
to express an opinion on these financial statements based on our audits.  We conducted our audits in
accordance with Canadian and United States generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.  In our opinion, these
consolidated financial statements present fairly, in all material respects, the
financial position ofNOVA
Chemicals Corporation as at
December 31, 2003, 2002, and 2001 and the results of its operations and
its cash flows for each of the years in the three-year period ended
December 31, 2003 in accordance with Canadian generally accepted
accounting principles.   /s/ Ernst & Young LLPERNST
  & YOUNG LLPChartered AccountantsFebruary 12, 2004Calgary, Canada  3 
   Managements
Report  To the Shareholders of NOVA
Chemicals Corporation  The consolidated financial
statements and other financial information included in this annual report have
been prepared by management. It is managements responsibility to ensure that
sound judgment, appropriate accounting principles and methods and reasonable
estimates have been used in the preparation of this information. They also
ensure that all information presented is consistent.  Management is also
responsible for establishing and maintaining internal controls and procedures
over the financial reporting process. The internal control system includes an
internal audit function and an established business conduct policy that applies
to all employees. In addition, the company has adopted a code of ethics that
applies to its Chief Executive Officer, Chief Financial Officer and Corporate
Controller. The code of ethics can be viewed onNOVA Chemicals website (www.novachemicals.com). Management believes the
system of internal controls, review procedures and established policies provide
reasonable assurance as to the reliability and relevance of financial reports.
Management also believes that NOVA
Chemicals operations are
conducted in conformity with the law and with a high standard of business
conduct.  The Board of Directors is
responsible for ensuring that management fulfills its responsibilities for
financial reporting and internal control. The Board carries out this
responsibility principally through its Audit, Finance and Risk Committee. The
Committee, which consists solely of non-management directors, reviews the
financial statements and annual report and recommends them to the Board for
approval. The Committee meets with management, internal auditors and external
auditors to discuss internal controls, auditing matters, and financial reporting
issues. Internal and external auditors have full and unrestricted access to the
Audit, Finance and Risk Committee. The Committee also recommends a firm of
external auditors to be appointed by the shareholders.   /s/ Jeffrey M. Lipton
  
  /s/ Larry A. MacdonaldJEFFREY M.
  LIPTON
  LARRY A.
  MACDONALDPresident & Chief
  Executive Officer
  Senior Vice President &
  Chief Financial OfficerFebruary 12, 2004Calgary, Canada  4 
   Consolidated
Statements of Income (Loss) and Reinvested Earnings  (MILLIONS OF U.S. DOLLARS, EXCEPT NUMBER OF SHARES
  AND PER SHARE AMOUNTS)YEAR ENDED
  DECEMBER 31
  
  2003
  
  2002
  
  2001Revenue
  
  $
  3,949
  
  $
  3,091
  
  $
  3,194Feedstock and operating costs
  
  3,487
  
  2,668
  
  2,901Depreciation and amortization
  
  298
  
  266
  
  230Selling, general and administrative
  
  179
  
  169
  
  191Research and development
  
  45
  
  39
  
  40Restructuring charges (Note 15)
  
  15
  
  20
  
  274,024
  
  3,162
  
  3,389Operating loss
  
  (75
  )
  (71
  )
  (195
  )Interest expense (net) (Note 8)
  
  (89
  )
  (87
  )
  (88
  )Equity in earnings of affiliate (Note 5)
  
  39
  
  5
  
  14Other gains and (losses) (Note 16)
  
  92
  
  59
  
  5842
  
  (23
  )
  (16
  )Loss before income taxes
  
  (33
  )
  (94
  )
  (211
  )Income tax recovery (Note 17)
  
  61
  
  13
  
  83Net Income (Loss)
  
  $
  28
  
  $
  (81
  )
  $
  (128
  )Reinvested earnings, beginning of year
  
  605
  
  740
  
  924Change in accounting policy (Notes 2 and 20)
  
  5
  
  
  
  Common share dividends
  
  (25
  )
  (23
  )
  (23
  )Preferred securities dividends and distributions
  
  (29
  )
  (31
  )
  (33
  )Reinvested earnings, end of year
  
  $
  584
  
  $
  605
  
  $
  740Weighted-average number of common shares
  outstanding (millions)
  
  87
  
  86
  
  85Net loss per common share (Note 12) Basic and diluted
  
  $
  (0.02
  )
  $
  (1.30
  )
  $
  (1.88
  )  See accompanying Notes to Consolidated Financial Statements.  5 
   Consolidated
Balance Sheets  (MILLIONS OF U.S. DOLLARS)DECEMBER 31
  
  2003
  
  2002
  
  2001AssetsCurrent assetsCash and cash equivalents
  
  $
  212
  
  $
  14
  
  $
  10Accounts receivable (Note 3)
  
  316
  
  249
  
  362Inventories (Note 4)
  
  392
  
  321
  
  279920
  
  584
  
  651Investments and other assets (Note 5)
  
  157
  
  537
  
  549Plant, property and equipment, net (Note 6)
  
  3,336
  
  3,033
  
  3,159$
  4,413
  
  $
  4,154
  
  $
  4,359Liabilities and Shareholders
  EquityCurrent liabilitiesBank loans
  
  $
  
  
  $
  3
  
  $
  14Accounts payable and accrued liabilities (Note 7)
  
  587
  
  562
  
  437Long-term debt installments due within one year
  (Note 8)
  
  
  
  1
  
  186587
  
  566
  
  637Long-term debt (Note 8)
  
  1,101
  
  1,211
  
  1,322Deferred credits (Note 9)
  
  835
  
  816
  
  7862,523
  
  2,593
  
  2,745Shareholders EquityPreferred securities (Notes 10 and 25)
  
  383
  
  383
  
  383Retractable preferred shares (Note 11)
  
  198
  
  198
  
  198Common shares (Note 12)
  
  493
  
  484
  
  472Cumulative translation adjustment
  
  232
  
  (109
  )
  (179
  )Reinvested earnings
  
  584
  
  605
  
  7401,890
  
  1,561
  
  1,614$
  4,413
  
  $
  4,154
  
  $
  4,359Contingencies and commitments (Notes 8, 11, 21 and
  23)Subsequent events (Note 25)  See accompanying Notes to Consolidated Financial Statements.   On behalf of the board:/s/ Kerry L. Hawkins
  
  /s/ Jeffrey M. LiptonKerry L. Hawkins, Director
  Jeffrey M. Lipton, Director  6 
   Consolidated
Statements of Cash Flows  (MILLIONS OF U.S. DOLLARS)YEAR ENDED DECEMBER 31
  
  2003
  
  2002
  
  2001Operating ActivitiesNet income (loss)
  
  $
  28
  
  $
  (81
  )
  $
  (128
  )Depreciation and amortization
  
  298
  
  266
  
  230Future income tax (recovery) expense (Note 17)
  
  (78
  )
  8
  
  (4
  )Other gains (net of current tax) (Note 16)
  
  (92
  )
  (39
  )
  Equity in earnings of affiliate
  
  (39
  )
  (5
  )
  (14
  )Methanex dividends received
  
  14
  
  4
  
  Asset writedowns
  
  9
  
  
  
  10Funds from operations
  
  140
  
  153
  
  94Changes in non-cash working capital (Note 18)
  
  (125
  )
  206
  
  184Cash from operations
  
  15
  
  359
  
  278Investing ActivitiesProceeds on sales of assets and investments
  
  564
  
  82
  
  Plant, property and equipment additions
  
  (130
  )
  (71
  )
  (168
  )Turnaround costs, long-term investments and other
  assets
  
  (57
  )
  (18
  )
  (156
  )Change in non-cash working capital (Note 18)
  
  7
  
  
  
  (16
  )384
  
  (7
  )
  (340
  )Financing ActivitiesDecrease in current bank loans
  
  (3
  )
  (11
  )
  (14
  )Proceeds on liquidation of swap positions
  
  
  
  13
  
  27Long-term debt additions
  
  
  
  
  
  302Long-term debt repayments
  
  (152
  )
  (2
  )
  (61
  )Decrease in revolving debt
  
  (2
  )
  (294
  )
  (159
  )Preferred securities dividends and distributions
  
  (29
  )
  (31
  )
  (33
  )Common shares issued
  
  9
  
  11
  
  12Common share dividends
  
  (25
  )
  (23
  )
  (23
  )Project advances (Note 18)
  
  11
  
  1
  
  Changes in non-cash working capital (Note 18)
  
  (10
  )
  (12
  )
  (6
  )(201
  )
  (348
  )
  45Increase (decrease) in cash and cash equivalents
  
  198
  
  4
  
  (17
  )Cash and cash equivalents, beginning of year
  
  14
  
  10
  
  27Cash and cash equivalents, end of year
  
  $
  212
  
  $
  14
  
  $
  10  See accompanying Notes to Consolidated Financial Statements.  7 
   Notes to Consolidated Financial Statements  All amounts in U.S. dollars,
unless otherwise noted.  1 Basis of Presentation  NOVAChemicals is incorporated under the laws of
Alberta, Canada. Where used in these financial statements, NOVA Chemicals or the Corporation means NOVA Chemicals Corporation
alone or together with its subsidiaries and affiliate, depending on the context
in which such terms are used. The consolidated financial statements include the
accounts of the Corporation, its subsidiaries and the proportionate share of
the accounts of its joint ventures.  These consolidated financial
statements have been prepared by management on the historical cost basis in
accordance with Canadian generally accepted accounting principles (GAAP). These accounting principles are different in some respects from those
generally accepted in the United States and the significant differences are
described in Note 24, United States Generally Accepted Accounting Principles
(U.S. GAAP).  The Corporation measures and
reports its consolidated financial statements inU.S. dollars.  2 Summary of Significant Accounting Policies   CHANGE IN ACCOUNTING POLICIES   Asset
Retirement Obligations.  On
January 1, 2003, NOVA Chemicals adopted the new accounting standard
related to asset retirement obligations as prescribed by the Canadian Institute
of Chartered Accountants (CICA). The new recommendations change the method
for recognition of liabilities associated with the retirement of plant,
property and equipment. The liabilities are initially recorded at their
estimated fair value, based on a discounted value of the expected costs to be
paid when the assets are retired. The amount is added to the carrying values of
the assets and depreciated over the estimated remaining lives of the assets.
The liability increases each period as the amount of the discount decreases
over time. The resulting expense is referred to as accretion expense and is
included in operating expenses. The liability is also adjusted for any changes
in the estimated amount or timing of the underlying future cash flows.
Previously, asset retirement obligations were accrued over the estimated
remaining useful lives of the assets on a straight-line basis. The
Corporations asset retirement obligations are comprised of expected costs to
be incurred upon termination of operations and the closure of active manufacturing
plant facilities. These closures are expected to occur in 25 to 40 years,
depending on the plant. Costs will be incurred for activities such as
dismantling, demolition and disposal of facilities and equipment, and
remediation and restoration of sites. The Corporation chose early adoption for
the CICA recommendations to be consistent with U.S. GAAP. Under Canadian GAAP, a change in accounting policy generally
requires retroactive restatement of financial statements presented for prior
periods, however, as the effect of these new recommendations is less than $1
million for each prior period, opening reinvested earnings was adjusted for the
cumulative effect on adoption. The change in accounting policy did not have a
material effect on net income in 2003 (see Note 20).  8 
    COST OF SERVICE   Under the terms of certain
sales agreements, the Corporation sells ethylene on a take-or-pay basis, for a
price determined by a cost-of-service formula that includes the cost of fuel
and feedstock, operating expenses, depreciation, income taxes, return on
capital and realized foreign exchange gains or losses in respect of debt
service. The return on capital includes a 20% after-tax return on equity based
on a deemed debt to equity ratio.   CASH AND CASH EQUIVALENTS   Short-term investments with
initial maturities not greater than 90 days are considered to be cash
equivalents, and are recorded at cost, which approximates current market value.   FOREIGN CURRENCY TRANSLATION   The Corporations foreign
operations are considered self-sustaining and are translated intoU.S. dollars using the current rate method. Resulting translation gains or
losses are deferred in the cumulative translation adjustment account (CTA) until there is a realized reduction of the investment in the foreign
operations.   HEDGING ACTIVITIES   The Corporation sells
petrochemical products at prices denominated in various currencies, purchases
energy commodities, invests in foreign operations and issues short- and
long-term debt, including amounts in foreign currencies. These activities
result in exposures to fluctuations in foreign currency exchange rates,
commodity prices and interest rates.NOVA Chemicals may choose
to modify these exposures by entering into contractual arrangements
(derivatives), which reduce (hedge) the exposure by creating offsetting
positions. Derivative instruments are used only for economic hedges of exchange
rate, commodity prices and interest rate risk. These derivative instruments are
not utilized for trading or speculative purposes.  NOVAChemicals has U.S., Canadian and
European-based petrochemical operations. The Corporation has managed its
exposure to fluctuations in these exchange rates by using forward exchange
contracts. Gains or losses realized on settlement of the forward exchange
contracts are recognized in income in the same period as the related
expenditures.  NOVAChemicals may choose to use commodity-based
derivatives to manage its exposure to price fluctuations on crude oil, refined
products and natural gas transactions. The instruments are used to moderate
against adverse short-term price movements. Occasionally, longer-term positions
will be taken to manage price risk for anticipated supply requirements. Gains or
losses realized on the settlement of commodity-based instruments are recognized
in income in the same period as the related revenues or expenditures.  When considered appropriate,NOVA Chemicals enters into interest rate swaps in order to manage the fixed
and floating interest rate mix on its long-term debt portfolio. The interest
rate swap agreements generally involve the periodic exchange of payments
without the exchange of the notional principal amounts upon which the payments
are based. The amounts paid or received are recorded as an adjustment to
interest expense on the hedged debt instrument.  Gains or losses on
termination or liquidation of derivative instruments are deferred as current or
non-current assets or liabilities on the balance sheet, as appropriate, and are
amortized to income in the period in which the underlying hedged transaction is
recognized.   INVENTORIES   Inventories are carried at
the lower of cost and net realizable value. Cost is determined on a first-in,
first-out basis with no allocation of fixed production overhead.  9 
    INVESTMENTS   Investments in affiliate,
over which the Corporation exercises significant influence, but not control,
are accounted for by the equity method. Under this method, the investment is
carried at cost plus the related share of undistributed earnings, less
dividends received. Other investments, except investments in joint ventures,
are carried at cost.   JOINT VENTURES   NOVAChemicals applies the proportionate
consolidation method of accounting for its investments in joint venture
operations. Under this method, NOVA
Chemicals records, on a
line-by-line basis within its financial statements and related notes, its pro
rata share of the joint ventures assets, liabilities, revenues, expenses and
cash flows.   PLANT, PROPERTY AND EQUIPMENT (PP&E)   NOVAChemicals PP&E consists
primarily of manufacturing equipment, land and buildings for producing
petrochemicals. PP&E are valued at historical cost. Financing costs
incurred during major construction are capitalized as part of the cost of the
asset until the asset is available for use. Costs related to turnaround
activities are capitalized and amortized over the period remaining to the next
turnaround activity, while maintenance and repair costs are expensed as
incurred.  The Corporation periodically
reviews the carrying value ofPP&E for impairment
when circumstances indicate an assets value may not be recoverable. If it is
determined that an assets undiscounted cash flows are less than its carrying
value, the asset is written down to its net realizable value.   DEPRECIATION   Plant and equipment are
depreciated on a straight-line basis at annual rates ranging from 3% to 40%.
These rates are designed to writeoff the assets to their salvage values over
their estimated useful lives. The Alberta cost-of-service ethylene plants and
the hydrogen plant are depreciated over the lives of the related sales
agreements.   DEFERRED START-UP COSTS   Costs associated with
start-up activities on constructed plants are deferred from the date of
mechanical completion of the facilities until the date of commercial service.
Any revenues earned during this period are recorded as a reduction in deferred
start-up costs. These costs are amortized over a five-year period, commencing
on the date of commercial service.   INCOME TAXES   Cost-of-service activities
operate under billing structures that allowNOVA Chemicals to recover related income tax costs from customers based on
the taxes-payable method. NOVA Chemicals records income tax expense on these
operations equal to recoverable amounts.  For non-cost-of-service
operations, the liability method of tax allocation accounting is used. Under
the liability method, future tax assets and liabilities are determined based on
differences between the accounting and tax basis of assets and liabilities and
measured using the substantively enacted tax rates and laws that will be in
effect when the differences are expected to reverse.  Under the liability method,
future income taxes are also provided on the difference between the accounting
and tax basis of equity investments. One of these differences results from
recording equity earnings (losses) for accounting purposes. Accordingly, income
tax expense (recovery) is provided on equity earnings (losses).  10 
    EMPLOYEE FUTURE BENEFITS   Pension
Plans. NOVA Chemicals sponsors both defined benefit and
defined contribution pension arrangements covering substantially all employees.  The cost of defined benefit
pensions is determined using the projected benefit method prorated on
employment services and is expensed as the employees provide services.
Adjustments arising from plan amendments are amortized on a straight-line basis
over the estimated average remaining service lifetime (EARSL). Adjustments arising from changes in assumptions and experience gains
and losses are amortized over EARSL
when the cumulative unamortized
balance exceeds 10% of the greater of accrued obligations or plan assets. Gains
or losses arising from plan curtailments and settlements are recognized in the
year in which they occur. For purposes of calculating the expected return on
plan assets, pension assets are revalued at fair value. Liabilities are
measured at market discount rates.  The cost of defined
contribution benefits is expensed as earned by employees.NOVA Chemicals makes contributions in accordance with plan agreements.  Post-Retirement
Benefits Other Than Pensions. In North America, NOVA Chemicals provides medical care and life insurance benefits to eligible
retirees and their dependents. Post-retirement benefit costs are expensed as
the employees provide services.   STOCK-BASED COMPENSATION   The Corporation uses the
intrinsic-value method of accounting for stock-based compensation awards
granted to employees, where compensation expense, if any, is measured based on
the excess of the market price of the stock over the option exercise price on
the date of grant. As options are generally granted at the market price on the
date of grant, no compensation cost results.   DEFERRED SHARE UNIT PLANS   Units issued under these
Plans are calculated based on annual management incentive awards or director
fees. The cost of the units earned is expensed as employees and directors
provide services. Any adjustments to the value of the units as a result of
expected changes inNOVA Chemicals common stock value are amortized on
a straight-line basis over the estimated average remaining service lifetime of
individuals participating in the Plans.   EQUITY APPRECIATION PLAN   Units granted and vested
under this Plan are marked-to-market each period based on the value ofNOVA Chemicals common stock as reported on the Toronto Stock Exchange. Any
changes in value are recorded through earnings in the period.   EARNINGS PER SHARE   The treasury stock method is
used to calculate diluted earnings per share. Under this method, the
incremental number of common shares outstanding for the diluted earnings per
share calculation is determined assuming that the proceeds from exercise of
dilutive options are used to repurchase common shares at the average market
price during the period.   SECURITIZATIONS   Accounts receivable
securitization transactions are recorded as sales of assets based on the
transfer of control to the purchaser. Transactions recorded in this manner
result in the removal of the sold assets from the Corporations balance sheet.
Interest paid, net of servicing fees, on the portfolio of sold receivables is
recorded as interest expense.  11 
    REVENUE RECOGNITION   The Corporation recognizes
revenue when the earnings process is complete. This generally occurs when
products are shipped to the customer in accordance with the terms of the sales
agreement, title or risk of loss has been transferred, and pricing is fixed or
determinable. The Corporation accounts for sales incentives as a reduction in
revenue at the time revenue is recorded.   RESEARCH AND DEVELOPMENT   Expenditures associated with
research and development activities are expensed as incurred.   MEASUREMENT UNCERTAINTY   The preparation of these
consolidated financial statements in conformity with CanadianGAAP requires management to make estimates and assumptions that affect
amounts reported and disclosed in the financial statements and related notes.
Actual results could differ materially from those estimates due to factors such
as fluctuations in commodity prices, currency exchange rates, interest rates,
changes in economic conditions and regulatory changes.   COMPARATIVE FIGURES   Certain comparative figures
have been reclassified to conform to the current years presentation.  3 Accounts
Receivable  (MILLIONS OF DOLLARS)DECEMBER 31
  
  2003
  
  2002
  
  2001Trade
  
  $
  239
  
  $
  173
  
  $
  154Other
  
  73
  
  53
  
  74Allowance for doubtful accounts(1)
  
  (7
  )
  (8
  )
  (13
  )305
  
  218
  
  215Income taxes receivable
  
  11
  
  31
  
  147$
  316
  
  $
  249
  
  $
  362  
 (1)The Corporations special purpose entity
maintained an allowance for doubtful accounts of $5 million at
December 31, 2003 (2002$5 million and 2001$10 million) related to
securitized trade receivables.   ACCOUNTS RECEIVABLE SECURITIZATIONS   The Corporation sells
undivided interests in certain trade accounts receivable pursuant to revolving
securitization transactions in which the Corporation retains servicing
responsibilities. The receivables are sold at a discount approximating the
purchasers financing cost of issuing commercial paper backed by the accounts
receivable. The Corporation pays a fee on this same basis plus a margin that
varies with the Corporations credit rating. The sale of receivables is
reflected as a reduction of accounts receivable and in operating cash flows. As
collections reduce previously sold interests, new accounts receivable are sold,
to a maximum amount equal to the lesser of eligible receivables or$195
million. Recourse on sold receivables is limited to the receivables and certain
reserves provided to cover credit losses and dilution (such as discounts,
rebates, and other non-cash reductions). The current securitization agreements
expire July 12, 2004 and are renewable for a further one-year term.  12 
   Information
regarding the Corporations securitization programs is as follows:  (MILLIONS OF DOLLARS, UNLESS OTHERWISE NOTED)DECEMBER 31
  
  2003
  
  2002
  
  2001Amount sold at end of year(1)
  
  $
  177
  
  $
  163
  
  $
  154Loss, dilution and other reserves
  (as a % of eligible accounts receivable)
  
  18
  %
  17
  %
  16
  %Interest expense, net of servicing fees
  
  $
  3
  
  $
  4
  
  $
  7  
 (1)At December 31, 2003, $nil (2002$11
million and 2001$24 million) is reflected in accrued liabilities as an amount
repayable under the facility due to decreases in accounts receivable balances
(see Note 7).  One of the Corporations
securitization agreements involves the use of a special purpose entity (SPE). Information regarding the cash flows between the Corporation and the SPE are as follows:  (MILLIONS OF DOLLARS)DECEMBER 31
  
  2003
  
  2002
  
  2001Proceeds from (repayment of) new securitizations
  
  $
  14
  
  $
  (6
  )
  $
  (26
  )Proceeds from collections reinvested in revolving
  period securitizations(1)
  
  $
  1,406
  
  $
  1,289
  
  $
  1,410Servicing fees received
  
  $
  2
  
  $
  2
  
  $
  2Other cash flows received
  
  $
  306
  
  $
  74
  
  $
  48  
 (1)Collections received by the SPE on accounts
receivable previously sold are used to purchase interests in new accounts
receivable.   4 Inventories  (MILLIONS OF DOLLARS)DECEMBER 31
  
  2003
  
  2002
  
  2001Materials and supplies
  
  $
  46
  
  $
  39
  
  $
  38Raw materials
  
  170
  
  121
  
  93Finished goods
  
  176
  
  161
  
  148$
  392
  
  $
  321
  
  $
  279  5 Investments
and Other Assets  2003
  
  2002
  
  2001(MILLIONS OF DOLLARS)YEAR ENDED
  DECEMBER 31
  
  INVESTMENT
  
  EQUITY
  EARNINGS
  
  INVESTMENT
  
  EQUITY
  EARNINGS
  
  INVESTMENT
  
  EQUITY
  EARNINGSMethanex Corporation(1) (2)
  
  $
  
  
  $
  39
  
  $
  399
  
  $
  5
  
  $
  397
  
  $
  14Other investments(3)
  
  28
  
  
  
  27
  
  
  
  17
  
  Other assets(4)
  
  129
  
  
  
  111
  
  
  
  135
  
  $
  157
  
  $
  39
  
  $
  537
  
  $
  5
  
  $
  549
  
  $
  14  
 (1)Equity earnings include before-tax charges
(2002$33 million and 2001$3 million) representing NOVA Chemicals share of
Methanexs restructuring charges. (2)Dividends received of $14 million (2002$4
million and 2001$nil) were recorded as reductions in the Corporations
investment. (3)Includes an investment of $15 million
(2002$15 million and 2001$15 million) in a special purpose entity with
respect to the accounts receivable securitization program described in Note 3. (4)See schedule on next page.  13 
    METHANEX CORPORATION   The Corporations original
investment in Methanex was$265 million. In June 2003, the
Corporation sold its equity investment in Methanex Corporation for net proceeds
of $441 million. This resulted in a before-tax
gain of $29 million and an after-tax gain of $61
million. The sale was completed with no cash taxes payable and accordingly, a
previously recorded income tax provision of $32 million was taken into
income at the time of the sale. The Corporation has no remaining equity
interest in Methanex. The market value of the Corporations investment in
Methanex at December 31, 2002 was approximately $393
million (2001 $260 million).   OTHER
ASSETS   Other
assets are comprised of the following:  (MILLIONS OF DOLLARS)DECEMBER 31
  
  2003
  
  2002
  
  2001Restricted cash on retractable preferred shares
  (Note 11)
  
  $
  65
  
  $
  45
  
  $
  78Deferred debt issue costs(1)
  
  18
  
  17
  
  16Deferred start-up costs(2)
  
  12
  
  14
  
  18Other
  
  34
  
  35
  
  23$
  129
  
  $
  111
  
  $
  135  
 (1)Debt issue costs are amortized on a
straight-line basis over the terms of the related debt instruments. (2)Start-up costs consist of the unamortized
portion of operating costs, net of incidental revenues, incurred during the
pre-operating period on constructed assets, which were deferred until
commercial production levels were achieved in 2001.   PETROCHEMICAL JOINT VENTURES   NOVAChemicals owns a 50% interest in an ethylene
plant, and a 20% interest in a cogeneration facility located at Joffre,
Alberta, and a 33.3% interest in an ethane gathering system in Alberta.  The following is summarized
financial information forNOVA
Chemicals interests in these
joint ventures:  (MILLIONS OF DOLLARS)YEAR ENDED
  DECEMBER 31
  
  2003
  
  2002
  
  2001Revenue
  
  $
  216
  
  $
  171
  
  $
  144Operating expenses, depreciation and income taxes
  
  (204
  )
  (161
  )
  (138
  )Net income
  
  $
  12
  
  $
  10
  
  $
  6  (MILLIONS OF DOLLARS)DECEMBER 31
  
  2003
  
  2002
  
  2001Current assets
  
  $
  21
  
  $
  21
  
  $
  20Plant, property and equipment and other assets
  
  556
  
  489
  
  514Current liabilities
  
  (29
  )
  (22
  )
  (25
  )Long-term liabilities
  
  (33
  )
  (28
  )
  (28
  )Venturers equity
  
  $
  515
  
  $
  460
  
  $
  481  (MILLIONS OF DOLLARS)YEAR ENDED
  DECEMBER 31
  
  2003
  
  2002
  
  2001Cash inflows (outflows) from:Operating activities
  
  $
  51
  
  $
  34
  
  $
  31Financing activities
  
  $
  (5
  )
  $
  (1
  )
  $
  2Investing activities
  
  $
  (9
  )
  $
  (8
  )
  $
  (14
  )  14 
   NOVAChemicals also owned a 50% interest in the
Fort Saskatchewan Ethylene Storage Limited Partnership which was sold in
June 2003 for net cash proceeds of $123 million, resulting in
an after-tax gain of $64 million. The total before-tax gain on this
transaction was $114 million, of which $38
million has been deferred and will be recognized in earnings over the 20-year
storage contract with the new owners. The Corporations 20% interest in the
Cochin Pipeline was sold in January 2002 for cash proceeds of $64
million, resulting in an after-tax gain of $36 million.  6 Plant,
Property and Equipment  (MILLIONS OF DOLLARS)DECEMBER 31
  
  2003(1)
  
  2002
  
  2001Plant and equipment
  
  $
  5,638
  
  $
  4,847
  
  $
  4,818Land
  
  35
  
  32
  
  33Under construction
  
  169
  
  55
  
  855,842
  
  4,934
  
  4,936Accumulated depreciation
  
  (2,506
  )
  (1,901
  )
  (1,777
  )Net book value
  
  $
  3,336
  
  $
  3,033
  
  $
  3,159  
 (1)See Note 8 for discussion of security provided
on the committed credit facility.  During 2002, the Corporation
sold and leased back certain buildings for total proceeds of$13
million, resulting in an after-tax gain of $3 million. The gain
realized on the sale has been deferred and is being amortized to income over
the remaining term of the lease, which expires in 2020.  7 Accounts Payable and Accrued
Liabilities  (MILLIONS OF DOLLARS)DECEMBER 31
  
  2003
  
  2002
  
  2001Accounts payableTrade
  
  $
  406
  
  $
  350
  
  $
  241Other
  
  25
  
  25
  
  20431
  
  375
  
  261Accrued liabilitiesInterest
  
  18
  
  22
  
  21Accounts receivable securitization programs(1)
  
  
  
  11
  
  24Deferred credit on hedges of former economic
  exposures
  
  
  
  3
  
  16Site clean-up and restoration
  
  4
  
  3
  
  3Dividends
  
  6
  
  6
  
  7Deferred commodity hedging gains(2)
  
  9
  
  8
  
  Deferred gains on interest rate swaps(3)
  
  7
  
  
  
  Pension and post-retirement benefit obligations
  
  20
  
  
  
  Trade accruals and other
  
  92
  
  134
  
  105156
  
  187
  
  176$
  587
  
  $
  562
  
  $
  437  
 (1)Represents amounts repayable pursuant to the
Corporations accounts receivable securitization programs (see Note 3). (2)Represents the portion of deferred gains
realized on liquidation of natural gas option positions to be recognized within
one year (see Notes 9 and 23). (3)Represents the portion of deferred gains
realized on liquidation of floating-for-fixed interest rate swaps to be
recognized within one year (see Notes 9 and 23).  15 
   8 Long-Term
Debt  2003
  
  2002
  
  2001(MILLIONS OF DOLLARS, UNLESS OTHERWISE NOTED)DECEMBER 31
  
  MATURITY
  
  DEBT
  
  WEIGHTED-
  AVERAGE
  YEAR-END
  INTEREST
  RATE(1)
  
  DEBT
  
  WEIGHTED-
  AVERAGE
  YEAR-END
  INTEREST
  RATE(1)
  
  DEBT
  
  WEIGHTED-
  AVERAGE
  YEAR-END
  INTEREST
  RATE(1)Unsecured debentures and notes
  
  2005 to 2028
  
  $
  518
  
  7.5
  %
  $
  633
  
  7.3
  %
  $
  632
  
  7.3
  %Secured loan
  
  2006
  
  
  
  
  
  
  
  
  
  295
  
  2.9
  %Medium-Term Notes
  
  2006 to 2009
  
  550
  
  4.7
  %
  550
  
  6.0
  %
  550
  
  3.7
  %Other(2)
  
  2004 to 2020
  
  33
  
  6.0
  %
  29
  
  6.2
  %
  31
  
  6.3
  %1,101
  
  
  
  1,212
  
  
  
  1,508Less installments due within one year
  
  
  
  
  
  
  
  (1
  )
  
  
  (186
  )$
  1,101
  
  
  
  $
  1,211
  
  
  
  $
  1,322  
 (1)Weighted-average year-end interest rates
include the effects of interest rate swaps (see Note 23). (2)Comprised primarily of non-recourse joint
venture secured debt (2003  $33 million and 2002  $27 million and 2001  $28
million). Security is limited to NOVA Chemicals net investment in the Joffre
co-generation joint venture.   UNSECURED DEBENTURES AND NOTES   On August 15, 2003,NOVA Chemicals redeemed at par its $150 million of 7%
debenture maturing August 15, 2026 from available cash, in accordance with
the terms of the debenture.  The remaining debentures and
notes are unsecured borrowings which rank pari
passuin all respects with other unsecured and unsubordinated debt
of the Corporation. Terms of the outstanding unsecured debentures and notes are
as follows:  DECEMBER 31(MILLIONS OF DOLLARS, UNLESS OTHERWISE
  NOTED)
  
  
  
  2003
  
  2002
  
  2001MATURITY
  
  STATED
  INTEREST RATE%
  
  DEBT
  
  DEBT
  
  DEBT2005(1)
  
  7.0
  
  $
  100
  
  $
  100
  
  $
  1002010(2)
  
  7.85
  
  193
  
  158
  
  1572025(3)
  
  7.875
  
  100
  
  100
  
  1002026
  
  7.0
  
  
  
  150
  
  1502028(4)
  
  7.25
  
  125
  
  125
  
  125$
  518
  
  $
  633
  
  $
  632  
 (1)Not redeemable by the Corporation or the
holders prior to maturity. (2)$250 million Canadian; callable at the option
of the Corporation at any time. (3)Callable at the option of the Corporation on
or after September 15, 2005. (4)Redeemable at the option of the holders on
August 15, 2008.   SECURED LOAN   The Corporation has a
committed credit facility from a syndicate of Canadian andU.S. banks. The facility provides for a floating-rate revolving line of credit
and the issuance of letters of credit, to a maximum of $300
million. The facility expires in April 2007 and is secured by $1.2
billion in net book value of assets in Canada, including real estate.  At December 31, 2003,NOVA Chemicals was in compliance with all required financial covenants under
the credit facility.  16 
    MEDIUM-TERM NOTES   The notes are unsecured
borrowings ranking pari passuwith
all other unsecured and unsubordinated debt of the Corporation. The$300
million 7% notes are due in May 2006 and are not redeemable by the Corporation
or the holders prior to maturity. The $250 million 7.4% notes
are due in April 2009 and are redeemable by the Corporation at any time.
As described in Note 23, the Corporation has entered into floating-for-fixed
interest rate swaps on these notes.   REPAYMENT REQUIREMENTS   Repayment requirements in
respect of long-term debt are as follows:  (MILLIONS OF DOLLARS)2004
  
  $
  2005
  
  1032006
  
  3022007
  
  22008
  
  2Thereafter
  
  692$
  1,101   INTEREST
EXPENSE   (MILLIONS OF DOLLARS)YEAR ENDED
  DECEMBER 31
  
  2003
  
  2002
  
  2001Interest on long-term debt
  
  $
  84
  
  $
  80
  
  $
  96Interest on bank loans and securitizations
  
  4
  
  5
  
  8Other
  
  4
  
  5
  
  4Gross interest expense
  
  92
  
  90
  
  108Interest capitalized during plant construction
  
  
  
  
  
  (18
  )Interest income
  
  (3
  )
  (3
  )
  (2
  )Interest expense (net)
  
  $
  89
  
  $
  87
  
  $
  88   9 Deferred
Credits  (MILLIONS OF DOLLARS)DECEMBER 31
  
  2003
  
  2002
  
  2001Future income taxes (Note 17)
  
  $
  586
  
  $
  611
  
  $
  615Pension and post-retirement benefit obligations
  
  92
  
  91
  
  82Deferred commodity hedging gains(1)
  
  3
  
  9
  
  Deferred gains on interest rate swaps(2)
  
  16
  
  31
  
  24Deferred gain on sale of investment(3)
  
  37
  
  
  
  Site clean-up and restoration
  
  27
  
  27
  
  26Deferred share unit plan obligations
  
  20
  
  16
  
  13Equity appreciation plan obligations (Note 13)
  
  12
  
  1
  
  1Other
  
  42
  
  30
  
  25$
  835
  
  $
  816
  
  $
  786  
 (1)Represents the long-term portion of deferred
gains realized on liquidation of natural gas options (see Notes 7 and 23). (2)Represents the long-term portion of deferred
gains realized on liquidation of floating-for-fixed interest rate swaps (see
Notes 7 and 23). (3)Represents the long-term portion of a deferred
gain realized on the sale of a 50% interest in the Fort Saskatchewan Ethylene
Storage Limited Partnership (see Note 5).  17 
   10 Preferred Securities  On January 26, 1999 and
October 22, 1998,NOVA
Chemicals issued $172.5
million (9.04%) and $210 million (9.50%) of preferred securities
due March 31, 2048 and December 31, 2047, respectively. The
securities are redeemable by the Corporation at any time on or after
January 26, 2004 and October 22, 2003, respectively (see Note 25).  11 Retractable Preferred Shares  In connection with the
acquisition of styrenics assets from Huntsman Corporation in 1998, a subsidiary
of the Corporation issued retractable preferred shares with a liquidation
preference of$198 million as partial consideration. Holders
of the retractable preferred shares have the right to exchange the shares (a
retraction) for NOVA Chemicals common shares (plus preferred
shares if the market value of such common shares is less than $198
million).  During 2001, 2002, and 2003,
certain changes were made to the terms of the retractable preferred shares and
related stockholder agreements. These changes provide the Corporation with the
right to call the retractable preferred shares on or after December 15,
2001 and repurchase the retractable preferred shares prior to any retraction
intoNOVA Chemicals common shares. If the Corporation
does not exercise its repurchase rights prior to March 15, 2005, the
market-based exchange rate at which the retractable preferred shares may be
retracted into NOVA Chemicals common shares (and, accordingly, the
effective price at which the common shares would be issued) will be fixed on
that date. The number of NOVA Chemicals common shares issuable upon a
retraction remains limited to a maximum of 8.5 million shares with the balance
of the obligation, if any, met through the issuance of NOVA Chemicals preferred shares. The dividend rate on the retractable
preferred shares is 2% per year.  NOVAChemicals also entered into a total return
swap, which terminates on March 15, 2005, with respect to the retractable
preferred shares. Under the terms of the total return swap: (i) the
counter-party pays NOVA Chemicals an amount equal to the fixed
dividend on the retractable preferred shares; (ii) NOVA Chemicals pays the counterparty LIBOR plus a spread; (iii)
NOVA Chemicals is obligated under the swap to
provide initial margin (cash, government securities or a letter of credit) equal
to 20% of the original notional amount of $191 million, which is
currently satisfied by a letter of credit issued by a third-party for which we
pay a fee; (iv) NOVA Chemicals is also required to provide
maintenance margin in the form of restricted cash for any negative changes in
the equity value of the retractable preferred shares; and (v) the counterparty
pays NOVA Chemicals for any positive changes in the
equity value of the retractable preferred shares.  NOVAChemicals has provided $65
million of restricted cash to reduce the notional amount of the swap from $191
million to $126 million. As a result, prior to
March 15, 2005, NOVA Chemicals can redeem the potentially dilutive
security for an additional $126 million.  Beginning in 2004, changes in
the equity value of the retractable preferred shares during the term of the
swap will be determined based on changes in the average price of the
outstanding 7% Senior Notes due 2005 and 7% Medium-Term Notes due 2006 issued
byNOVA Chemicals (see Note 8).  IfNOVA Chemicals defaults on other debt with an aggregate principal amount of $25
million or more, or the closing price of the Corporations common shares is $12.00
U.S. or less, and upon certain other credit events,
the counterparty will have the right to sell the retractable preferred shares
to a third-party and terminate the swap. NOVA Chemicals would then
owe the counterparty the difference between the actual sale price received by
the counterparty and the most recent adjusted notional equity value of the
retractable preferred shares (in the event the difference was negative).  18 
   12 Common
Shares   AUTHORIZED   Unlimited
number of voting common shares without par value.   ISSUED AND
OUTSTANDING   (MILLIONS OF DOLLARS, EXCEPT NUMBER OF SHARES)
  
  2003
  
  2002
  
  2001Beginning of year
  
  86,527,812
  
  $
  484
  
  85,778,788
  
  $
  472
  
  84,884,333
  
  $
  460Issued for cash on exercise of stock options
  
  571,969
  
  9
  
  749,024
  
  12
  
  894,455
  
  12End of year(1)
  
  87,099,781
  
  $
  493
  
  86,527,812
  
  $
  484
  
  85,778,788
  
  $
  472  
 (1)Stated common share capital for legal purposes
at December 31, 2003 is $1,665 million.   SHARES
RESERVED FOR FUTURE ISSUE   (NUMBER OF SHARES)DECEMBER 31
  
  2003
  
  2002
  
  2001Under the employee incentive stock option plan(1) (2)
  
  10,672,994
  
  11,244,963
  
  11,993,987Under the director compensation plan
  
  47,800
  
  47,800
  
  47,800Under the terms of the retractable preferred share
  agreement (Note 11)
  
  8,500,000
  
  8,500,000
  
  8,500,00019,220,794
  
  19,792,763
  
  20,541,787  
 (1)Under the employee incentive stock option
plan, options are outstanding to officers and employees to purchase 8,822,440
shares at prices ranging from $15.279 to $34.32 (Canadian $) per share with
expiration dates between March 3, 2004, and July 15, 2013. A total of
1,850,554 common shares are reserved but unallocated. See Note 13 for further
details regarding the plan. (2)Shareholders have approved reserving 13
million common shares for issuance under the employee incentive stock option
plan.   EARNINGS
PER SHARE   The following table outlines the calculation of basic and diluted net
loss per common share:  (MILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
  
  2003
  
  2002
  
  2001YEAR ENDED DECEMBER 31
  
  BASIC AND
  DILUTED
  
  BASIC AND
  DILUTED
  
  BASIC AND
  DILUTEDNet income (loss)
  
  $
  28
  
  $
  (81
  )
  $
  (128
  )Preferred securities dividends and distributions
  
  (29
  )
  (31
  )
  (33
  )Net loss available to common shareholders
  
  $
  (1
  )
  $
  (112
  )
  $
  (161
  )Weighted-average common shares outstanding(1)
  
  86.8
  
  86.3
  
  85.4Net loss per common share
  
  $
  (0.02
  )
  $
  (1.30
  )
  $
  (1.88
  )  
 (1)Retractable preferred shares and stock options
representing 17 million common shares have been excluded from the computation
of diluted earnings per share for the year ended December 31, 2003 (2002 
17 million and 2001  17 million),
as their impact would not be
dilutive.   SHAREHOLDER RIGHTS PLAN   In May 1999,NOVA Chemicals shareholders approved a shareholder rights plan where one
right was issued for each outstanding common share. The rights remain attached
to the shares and are not exercisable until the commencement or announcement of
a takeover bid for NOVA Chemicals common shares or until a person
acquires 20% or more of NOVA Chemicals common shares. The plan expires in
May 2009, but is subject to shareholder re-confirmation at the sixth annual
meeting following the date of approval.  19 
   13 Stock-Based Compensation   EMPLOYEE INCENTIVE STOCK OPTION PLAN   The Corporation may grant
options to its employees for up to 13 million common shares. The exercise price
of each option equals the closing market price on the Toronto Stock Exchange of
the Corporations common stock on the date of grant. Options may be exercised
over a 10-year period and generally 25% of the options vest at the grant date
with further vesting of 25% in each of the next three years.  A summary of the status of
the Corporations employee incentive stock option plan as of December 31,
2003, 2002, and 2001, and changes during the years then ended is presented
below:  2003
  
  2002
  
  2001OPTIONS
  
  WEIGHTED-
  AVERAGE
  EXERCISE PRICE
  
  OPTIONS
  
  WEIGHTED-
  AVERAGE
  EXERCISE PRICE
  
  OPTIONS
  
  WEIGHTED-
  AVERAGE
  EXERCISE PRICE(CANADIAN
  $)
  
  
  
  (CANADIAN
  $)
  
  
  
  (CANADIAN
  $)Outstanding at beginning of year
  
  8,625,532
  
  $
  26.662
  
  8,558,109
  
  $
  25.648
  
  8,003,725
  
  $
  24.762Granted
  
  999,700
  
  $
  25.788
  
  855,900
  
  $
  34.319
  
  1,547,350
  
  $
  28.182Exercised
  
  (571,969
  )
  $
  23.525
  
  (749,024
  )
  $
  23.613
  
  (894,455
  )
  $
  21.813Cancelled
  
  (230,823
  )
  $
  25.723
  
  (39,453
  )
  $
  30.713
  
  (98,511
  )
  $
  28.267Outstanding at end of year
  
  8,822,440
  
  $
  26.791
  
  8,625,532
  
  $
  26.662
  
  8,558,109
  
  $
  25.648Exercisable at end of year
  
  7,414,052
  
  $
  26.448
  
  6,116,910
  
  $
  25.159
  
  5,404,057
  
  $
  24.193  The following table
summarizes information about employee incentive stock options outstanding at
December 31, 2003:  OPTIONS
  OUTSTANDING
  
  OPTIONS
  EXERCISABLERANGE OF EXERCISE PRICES
  (CANADIAN $)
  
  NUMBER
  OUTSTANDING
  
  WEIGHTED-
  AVERAGE
  REMAINING
  CONTRACTUAL
  LIFE (YEARS)
  
  WEIGHTED-
  AVERAGE
  EXERCISE PRICE
  
  NUMBER
  EXERCISABLE
  
  WEIGHTED-
  AVERAGE
  EXERCISE PRICE(CANADIAN
  $)
  
  
  
  (CANADIAN
  $)$15.279  $18.376
  
  336,382
  
  0.9
  
  $
  17.592
  
  336,382
  
  $
  17.592$20.234  $21.225
  
  915,809
  
  2.5
  
  $
  20.738
  
  915,809
  
  $
  20.738$24.950  $26.346
  
  4,184,100
  
  6.2
  
  $
  25.741
  
  3,469,325
  
  $
  25.733$28.050  $34.320
  
  3,386,149
  
  6.5
  
  $
  30.639
  
  2,692,536
  
  $
  30.4198,822,440
  
  
  
  
  
  7,414,052  20 
   Had compensation cost for
stock options been determined and expensed based on the fair-value method, the
following pro forma amounts would have resulted:  (MILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)DECEMBER 31
  
  2003
  
  2002
  
  2001Net income (loss)As reported
  
  $
  28
  
  $
  (81
  )
  $
  (128
  )Pro forma
  
  $
  21
  
  $
  (92
  )
  $
  (134
  )Loss per share  basic and dilutedAs reported
  
  $
  (0.02
  )
  $
  (1.30
  )
  $
  (1.88
  )Pro forma
  
  $
  (0.09
  )
  $
  (1.43
  )
  $
  (1.95
  )  The fair value of each stock
option grant is estimated on the date of grant using the Black-Scholes
option-pricing model with the following weighted-average assumptions used for
stock options granted in 2003, 2002, and 2001:  WEIGHTED-AVERAGE ASSUMPTIONS
  
  
  
  2003
  
  2002
  
  2001Expected dividend yield
  
  
  %
  1.4
  
  1.0
  
  1.0Expected volatility
  
  
  %
  36.7
  
  39.1
  
  39.6Risk-free interest rate
  
  
  %
  4.20
  
  3.38
  
  5.65Expected life
  
  years
  
  4
  
  2
  1/2
  2
  1/2Fair value of options granted during the year
  
  U.S.
  
  $
  5.34
  
  $
  5.57
  
  $
  5.16   EQUITY APPRECIATION PLAN   The Corporation has an equity
appreciation plan in which units are granted to key employees. The redemption
price of a unit is determined by the closing price of the Corporations common
shares on the date of grant. Units may be redeemed for cash over a 10-year
period and generally 25% of the units vest at the grant date with further
vesting of 25% in each of the next three years. The value of a unit on the
redemption date is the difference between the price of the Corporations common
shares on that date and the redemption price.  At December 31, 2003,
the mark-to-market value of the vested units was approximately$12
million (2002 and 2001  $1 million).  2003
  
  2002
  
  2001EQUITY APPRECIATION UNITS
  
  UNITS
  
  WEIGHTED-
  AVERAGE
  REDEMPTION
  
  UNITS
  
  WEIGHTED-
  AVERAGE
  REDEMPTION
  
  UNITS
  
  WEIGHTED-
  AVERAGE
  REDEMPTION(CANADIAN
  $)
  
  
  
  (CANADIAN
  $)
  
  
  
  (CANADIAN
  $)Cumulative amount at beginning of year
  
  1,836,841
  
  $
  31.22
  
  843,167
  
  $
  27.69
  
  288,000
  
  $
  26.25Granted
  
  1,499,400
  
  $
  25.78
  
  1,012,950
  
  $
  34.21
  
  555,167
  
  $
  28.44Redeemed
  
  (18,166
  )
  $
  27.77
  
  
  
  
  
  
  
  Cancelled
  
  (25,088
  )
  $
  31.60
  
  (19,276
  )
  
  
  
  
  Cumulative amount at end of year
  
  3,292,987
  
  $
  28.76
  
  1,836,841
  
  $
  31.22
  
  843,167
  
  $
  27.69  21 
   14 Deferred Share Unit Plans  Under the Corporations
Deferred Share Unit Plans (DSUP), key employees and non-employee directors
may elect on an annual basis, prior to the relevant performance period, to
receive all or a portion of their management incentive award or fees,
respectively, in deferred share units (DSUs).  The amount of the management
incentive award that a key employee elects to have participate in theDSUP will be converted to an equivalent number of DSUs based primarily on the average closing price, on the NYSE, of NOVA Chemicals common shares for the last five
consecutive trading days of the month of December prior to the performance
period.  The amount of fees that a
non-employee director elects to have participate in theDSUP will be converted to an equivalent number of DSUs based on the average closing price, on the TSX, of NOVA Chemicals common shares for the last five consecutive
trading days preceding the end of each fiscal quarter in which the fees are
earned.  The units are exercisable
upon retirement or termination from the Corporation. A summary of the status of
the Corporations deferred share unit plans as of December 31, 2003, 2002
and 2001, and changes during the years ended on those dates is presented below:  2003
  
  2002
  
  2001EMPLOYEE DEFERRED SHARE UNITS
  
  UNITS
  
  WEIGHTED-
  AVERAGE
  EXERCISE
  PRICE
  
  UNITS
  
  WEIGHTED-
  AVERAGE
  EXERCISE
  PRICE
  
  UNITS
  
  WEIGHTED-
  AVERAGE
  EXERCISE
  PRICE(U.S. $)
  
  
  
  (U.S. $)
  
  
  
  (U.S. $)Cumulative amount at beginning of year
  
  379,114
  
  $
  16.97
  
  352,393
  
  $
  16.52
  
  280,454
  
  $
  15.88Earned
  
  55,235
  
  $
  19.41
  
  65,622
  
  $
  19.14
  
  91,063
  
  $
  18.48Exercised
  
  
  
  $
  
  
  (38,901
  )
  $
  16.53
  
  (19,124
  )
  $
  16.52Cumulative amount at end of year
  
  434,349
  
  $
  17.28
  
  379,114
  
  $
  16.97
  
  352,393
  
  $
  16.52  2003
  
  2002
  
  2001NON-EMPLOYEE
  DEFERRED SHARE UNITS
  
  UNITS
  
  WEIGHTED-
  AVERAGE
  EXERCISE
  PRICE
  
  UNITS
  
  WEIGHTED-
  AVERAGE
  EXERCISE
  PRICE
  
  UNITS
  
  WEIGHTED-
  AVERAGE
  EXERCISE
  PRICE(CANADIAN
  $)
  
  
  
  (CANADIAN
  $)
  
  
  
  (CANADIAN
  $)Cumulative amount at beginning of year
  
  57,383
  
  $
  29.90
  
  44,040
  
  $
  28.91
  
  27,806
  
  $
  29.24Earned
  
  22,293
  
  $
  27.57
  
  13,343
  
  $
  33.16
  
  16,234
  
  $
  28.34Exercised
  
  
  
  $
  
  
  
  
  
  
  
  
  Cumulative amount at end of year
  
  79,676
  
  $
  29.24
  
  57,383
  
  $
  29.90
  
  44,040
  
  $
  28.91  The amount expensed in aggregate related to the award of units was
approximately$3 million(2002  $4
million and 2001  $5 million).  22 
   15 Restructuring Charges  During 2003,NOVA Chemicals took action to streamline its operations and reduce costs. The
Corporation announced plans for the closure of its oldest and highest-cost
polyethylene production line, at its St. Clair River site. As a result, NOVA Chemicals recognized $15 million before-tax ($10
million after-tax) in restructuring costs related to asset writedown,
severance, and other costs. The Corporation expects these restructuring actions
to be substantially complete in the first half of 2004.  Restructuring charges in 2002
and 2001 related to organizational changes involving plant closures and idling,
capital project cancellations, writedowns of certain non-productive assets and
severance activities. All actions related to these restructuring activities
have been substantially completed.  16 Other Gains
and Losses  2003
  
  2002
  
  2001(MILLIONS OF DOLLARS)YEAR ENDED
  DECEMBER 31
  
  BEFORE-TAX
  
  AFTER-TAX
  
  BEFORE-TAX
  
  AFTER-TAX
  
  BEFORE-TAX
  
  AFTER-TAXGain on sale of 50% interest in Fort Saskatchewan
  Ethylene Storage Limited Partnership (Note 5)
  
  $
  76
  
  $
  64
  
  $
  
  
  $
  
  
  $
  
  
  $
  Gain on sale of investment in Methanex Corporation
  (Note 5)
  
  29
  
  61
  
  
  
  
  
  
  
  Bayport charge(1)
  
  (13
  )
  (8
  )
  
  
  
  
  
  
  Gain on sale of 20% interest in Cochin Pipeline
  (Note 5)
  
  
  
  
  
  59
  
  36
  
  
  
  IRS settlement
  
  
  
  
  
  
  
  
  
  58
  
  44$
  92
  
  $
  117
  
  $
  59
  
  $
  36
  
  $
  58
  
  $
  44  
 (1)NOVA Chemicals had an explosion, which
resulted in a fire at its Bayport, Texas styrene monomer production facility
and as a result, incurred a charge primarily related to the amount of property
damage not covered by insurance.  23 
   17 Income Taxes  Income tax recovery varies
from amounts computed by applying the Canadian federal and provincial statutory
income tax rates to loss before income taxes as shown in the following table:  (MILLIONS OF DOLLARS)YEAR ENDED
  DECEMBER 31
  
  2003
  
  2002
  
  2001Loss before income taxes
  
  $
  (33
  )
  $
  (94
  )
  $
  (211
  )Statutory income tax rate
  
  36.74
  %
  39.24
  %
  42.12
  %Computed income tax recovery
  
  $
  (12
  )
  $
  (37
  )
  $
  (89
  )Increase (decrease) in taxes resulting from:Manufacturing and processing deduction
  
  (2
  )
  3
  
  4Lower effective foreign tax rates
  
  19
  
  8
  
  25Lower effective tax rate on equity in earnings of
  affiliate
  
  (12
  )
  (2
  )
  (3
  )Lower tax rates and higher recoveries on asset
  sales
  
  (56
  )
  
  
  Non-provision of future income taxes on
  cost-of-service operations(1)
  
  9
  
  8
  
  8Reduction in tax reserves(2)
  
  (20
  )
  
  
  Income tax rate adjustments(3)
  
  15
  
  
  
  (17
  )Lower tax rate on gain related to tax settlement(4)
  
  
  
  
  
  (10
  )Other
  
  (2
  )
  7
  
  (1
  )Income tax recovery
  
  $
  (61
  )
  $
  (13
  )
  $
  (83
  )Current income tax (recovery) expense
  
  $
  17
  
  $
  (21
  )
  $
  (79
  )Future income tax (recovery) expense
  
  (78
  )
  8
  
  (4
  )Income tax recovery
  
  $
  (61
  )
  $
  (13
  )
  $
  (83
  )  
 (1)Certain agreements for cost-of-service
operations provide for the recovery of income taxes from customers. The
Corporation records income tax expense on these operations equal to the amounts
recoverable under the agreements, resulting in no effect on net income. Some
agreements limit the recoverable amount to current taxes payable. Accordingly,
the provision for income taxes excludes future income tax recoveries relating
to these operations. Cumulative unrecorded future income taxes payable amounted
to $nil at December 31, 2003 (2002  $6 million and 2001  $13 million). (2)NOVA Chemicals has a tax reserve, which is
available to settle periodic tax disputes and ongoing tax adjustments. NOVA
Chemicals assesses this reserve from time to time for adequacy and in 2003,
determined that it was over-provided. (3)As a result of Canadian provincial tax rate
increases in 2003 and federal and provincial tax rate reductions in 2001,
income tax rates on future tax liabilities have been increased in 2003 and
reduced in 2001. (4)In 2001, NOVA Chemicals recorded a $58 million
gain ($44 million after-tax) related to a settlement with the IRS.  The principal temporary
difference in calculating future income taxes, for both cost-of-service and
non-cost-of-service operations, relates to deductions for tax purposes in
respect of plant, property and equipment in excess of depreciation provided for
in the accounts. Future tax liabilities resulting from these temporary
differences have been reduced by the tax benefits associated with unused tax
losses.  24 
   The following table outlines
the income tax (recovery) expense arising from Canadian and Foreign operations:  (MILLIONS OF DOLLARS)YEAR ENDED
  DECEMBER 31
  
  2003
  
  2002
  
  2001Income (loss) before income taxesCanadian
  
  $
  98
  
  $
  (35
  )
  $
  (19
  )Foreign
  
  (131
  )
  (59
  )
  (192
  )$
  (33
  )
  $
  (94
  )
  $
  (211
  )Current income tax (recovery) expenseCanadian
  
  $
  14
  
  $
  (17
  )
  $
  (46
  )Foreign
  
  3
  
  (4
  )
  (33
  )17
  
  (21
  )
  (79
  )Future income tax (recovery) expenseCanadian
  
  (41
  )
  19
  
  18Foreign
  
  (37
  )
  (11
  )
  (22
  )(78
  )
  8
  
  (4
  )Total income tax recovery
  
  $
  (61
  )
  $
  (13
  )
  $
  (83
  )   18 Changes in Non-Cash Working Capital  (MILLIONS OF DOLLARS)YEAR ENDED
  DECEMBER 31
  
  2003
  
  2002
  
  2001Accounts receivable
  
  $
  (67
  )
  $
  113
  
  $
  89Inventories
  
  (71
  )
  (42
  )
  254Accounts payable and accrued liabilities
  
  25
  
  125
  
  (180
  )Changes in non-cash working capital
  
  (113
  )
  196
  
  163Reclassification and other items not having a cash
  effect
  
  (4
  )
  (1
  )
  (1
  )Changes in non-cash working capital having a cash
  effect
  
  $
  (117
  )
  $
  195
  
  $
  162These changes relate to the following activities:Operating
  
  $
  (125
  )
  $
  206
  
  $
  184Investing
  
  7
  
  
  
  (16
  )Financing(1)
  
  1
  
  (11
  )
  (6
  )Decrease (increase) in working capital
  
  $
  (117
  )
  $
  195
  
  $
  162  
 (1)Changes in non-cash working capital related to
financing activities include project advances of $11 million (2002  $1
million) (see Note 6).   INTEREST AND INCOME TAX PAYMENTS   Third-party
interest payments were$100 million in 2003 (2002  $86
million and 2001  $108 million). Income tax receipts were $28
million in 2003 (2002  $176 million and 2001  $13
million).  25 
   19 Employee Future Benefits   PENSION PLANS   NOVAChemicals sponsors both defined benefit and
defined contribution pension arrangements.  Defined benefit pensions at
retirement are mainly related to years of service and remuneration during the
last years of employment and are partially indexed to inflation for some plans.
Actuarial reports are prepared regularly by independent actuaries for
accounting and funding purposes. The Corporation funds the plans using a
valuation based on the projected unit credit method and the plans assets
consist primarily of publicly traded equity and fixed income securities.  Plan assets are measured at
fair value while pension obligations are discounted using current yield rates
of bonds with terms to maturity that approximate the duration of the
Corporations pension liabilities. The Corporation uses a measurement date of
December 31 for its pension and post-retirement plans.  Pension and post-retirement
expense (included in operating and selling, general and administrative costs)
for all significant plans consisted of the following:  PENSION
  PLANS
  
  POST-RETIREMENT
  PLANS(MILLIONS OF DOLLARS)YEAR ENDED
  DECEMBER 31
  
  2003
  
  2002
  
  2001
  
  2003
  
  2002
  
  2001Current service cost
  
  $
  21
  
  $
  16
  
  $
  17
  
  $
  2
  
  $
  2
  
  $
  1Interest cost on projected benefit obligations
  
  30
  
  25
  
  26
  
  4
  
  3
  
  3Expected return on plan assets
  
  (26
  )
  (26
  )
  (25
  )
  
  
  
  
  Prior service cost
  
  2
  
  2
  
  2
  
  
  
  
  
  Actuarial (gain) loss
  
  4
  
  1
  
  
  
  1
  
  
  
  Amortization of transition obligation
  
  (4
  )
  (5
  )
  (4
  )
  
  
  
  
  Amortization of settlement/curtailment (gain) loss
  
  
  
  
  
  1
  
  
  
  
  
  Net total of other components
  
  
  
  
  
  1
  
  
  
  1
  
  2Net expense
  
  $
  27
  
  $
  13
  
  $
  18
  
  $
  7
  
  $
  6
  
  $
  6  26 
   The
status of all significant defined benefit pension and post-retirement plans is
as follows:  PENSION
  PLANS
  
  POST-RETIREMENT
  PLANS(MILLIONS OF DOLLARS)YEAR ENDED
  DECEMBER 31
  
  2003
  
  2002
  
  2001
  
  2003
  
  2002
  
  2001Change in benefit obligationsBenefit obligation at beginning of year
  
  $
  430
  
  $
  388
  
  $
  372
  
  $
  53
  
  $
  50
  
  $
  38Current service cost
  
  21
  
  16
  
  17
  
  2
  
  2
  
  1Interest cost
  
  30
  
  25
  
  26
  
  4
  
  3
  
  3Experience (gain) loss
  
  24
  
  (1
  )
  9
  
  10
  
  
  
  10Settlement/curtailment
  
  (2
  )
  (1
  )
  
  
  (1
  )
  
  
  Plan amendments
  
  
  
  1
  
  
  
  
  
  
  
  Business combination
  
  
  
  2
  
  
  
  
  
  
  
  Special termination benefits
  
  
  
  
  
  2
  
  
  
  
  
  1Employee contributions
  
  5
  
  9
  
  2
  
  
  
  
  
  Benefits paid
  
  (20
  )
  (19
  )
  (21
  )
  (2
  )
  (2
  )
  (2
  )Foreign currency exchange rate (gain) loss
  
  81
  
  10
  
  (19
  )
  3
  
  
  
  (1
  )Net benefit obligation at end of year
  
  $
  569
  
  $
  430
  
  $
  388
  
  $
  69
  
  $
  53
  
  $
  50Change in plan assetsFair value of plan assets at beginning of year
  
  $
  312
  
  $
  329
  
  $
  357
  
  $
  
  
  $
  
  
  $
  Actual return (loss) on plan assets
  
  50
  
  (28
  )
  3
  
  
  
  
  
  Employer and employee contributions
  
  20
  
  22
  
  10
  
  2
  
  
  
  Settlement/curtailment
  
  (2
  )
  (1
  )
  
  
  
  
  
  
  Benefits paid
  
  (20
  )
  (19
  )
  (21
  )
  (2
  )
  
  
  Foreign currency exchange rate gain (loss)
  
  65
  
  9
  
  (18
  )
  
  
  
  
  Net total of other components
  
  
  
  
  
  (2
  )
  
  
  
  
  Fair value of plan assets at end of year
  
  $
  425
  
  $
  312
  
  $
  329
  
  $
  
  
  $
  
  
  $
  Funded statusPlan assets in deficiency of benefit obligation
  
  $
  (144
  )
  $
  (118
  )
  $
  (59
  )
  $
  (69
  )
  $
  (53
  )
  $
  (50
  )Unrecognized net transitional (asset) obligation
  
  (49
  )
  (44
  )
  (48
  )
  10
  
  10
  
  10Unrecognized prior service cost
  
  7
  
  8
  
  9
  
  
  
  
  
  Unrecognized net actuarial loss
  
  118
  
  105
  
  49
  
  22
  
  13
  
  14Net amounts recognized in consolidated balance
  sheets
  
  $
  (68
  )
  $
  (49
  )
  $
  (49
  )
  $
  (37
  )
  $
  (30
  )
  $
  (26
  )Weighted-average assumptions as at
  December 31:Discount rate
  
  5.9
  %
  6.4
  %
  6.4
  %
  6.1
  %
  6.8
  %
  7.0
  %Assumed long-term rate of return on plan assets(1)
  
  7.3
  %
  7.7
  %
  7.8
  %
  
  
  
  
  Rate of increase in future compensation
  
  3.2
  %
  3.1
  %
  3.8
  %
  4.2
  %
  3.7
  %
  3.0
  %Long-term health care inflation(2)
  
  
  
  
  
  
  
  5.0
  %
  5.0
  %
  4.8
  %  
 (1)NOVA Chemicals establishes an appropriate
long-term rate of return for each plans assets, which reflects asset
allocations within each plan, as well as independent views of long-term rate of
return expectations for each asset class. (2)Ultimate trend rate, expected to be achieved
between 2010 and 2012, depending on the plan. The assumed health care cost
trend rate used to measure the 2003 expected cost of benefits covered by
the plan is 11% on average for the plans.  27 
   Virtually all ofNOVA Chemicals pension plans have accumulated benefit obligations which
exceed the fair value of assets. The accumulated benefit obligation and the
fair value of assets for these plans were $549 million and $425
million, respectively, at December 31, 2003 ($426
million and $308 million, respectively, at
December 31, 2002 and $305 million and $246 million,
respectively, at December 31, 2001).  In 2004,NOVA Chemicals expects to fund its defined benefit plans by $27
million.   PENSION ASSETS   The Corporations investment
strategy is set for each plan after taking into consideration the plan
structure, nature of the liabilities, the funded status and cash flow
requirements of the plan, the size of the assets, and the financial situation
of the Corporation and its ability to withstand fluctuations in pension
contributions. The assets of each plan are invested in a variety of traditional
financial instruments such as equities and fixed income securities using a
combination of active and passive strategies. Non-traditional assets such as
real estate and venture capital may also be considered in certain situations.
Although the Corporation does not consider derivatives a separate asset class,
they are permitted in order to manage the allocation of investments across
asset classes, markets and currencies. However, under no circumstances can they
be used for speculative purposes or have the effect of leveraging the assets.  While most of the benefits of
diversification are achieved by allocating across different asset classes, the
Corporation also believes it may be appropriate to further diversify by using
multiple investment managers employing different management styles within an
asset class.  In Europe, the Corporation
has pension plans in several countries that vary considerably in membership,
liability structure, pension arrangement, and asset size. Given these
differences, the asset allocation can vary significantly not only from the
North American plans, but also by country. In addition, some European plans are
re-insured with investment strategy and asset allocation determined or heavily
influenced by the re-insurer.  The Corporations Canadian
andU.S. plans are the most significant to the
Corporation with 80% of total pension assets and 87% of total plan members in
these plans. The asset allocation for these pension plans at the end of 2003,
2002 and 2001 and the target allocation for 2004, by asset category follows.
This information has been aggregated within a geographic segment as asset
allocations are similar for the Canadian and U.S. plans.  North American Plans  ASSET CATEGORY
  
  TARGET
  ALLOCATION
  
  PERCENTAGE
  OF PLAN ASSETS(MILLIONS OF DOLLARS)YEAR ENDED
  DECEMBER 31
  
  2004
  
  2003
  
  2002
  
  2001Equities
  
  60
  %
  61
  %
  57
  %
  60
  %Fixed income
  
  40
  %
  39
  %
  43
  %
  40
  %Real estate
  
  
  
  
  
  
  
  Other
  
  
  
  
  
  
  
  Total
  
  100
  %
  100
  %
  100
  %
  100
  %   POST-RETIREMENT BENEFITS OTHER THAN PENSIONS   The Corporation provides
medical care and life insurance benefits to eligible retirees and their
dependents in North America. The Corporation accrues the cost of providing
post-retirement benefits as the employees provide services. Post-retirement
costs are funded as they are incurred.  28 
   A 1% increase in the health
care inflation rate would have increased the accumulated post-retirement
benefit obligation by an additional$3 million at
December 31, 2003 for Canadian plans and $7 million for U.S. plans. A 1% decrease in the same health care inflation rate would have
decreased the post-retirement benefit obligation by $3
million and $5 million for Canadian and U.S. plans, respectively.   DEFINED CONTRIBUTION ARRANGEMENTS   NOVAChemicals has a number of defined contribution
arrangements providing pension benefits to certain groups of employees. The
total expense for the Corporations contribution to these plans in 2003 was $6
million (2002  $6 million and 2001  $6
million). In 2004, NOVA Chemicals expects to fund its defined contribution
plans by approximately $6 million.   20 Asset Retirement Obligations  The total undiscounted amount
of estimated cash flows expected to be incurred on closure of active plants in
25 to 40 years is between$225 million and $250 million. This amount
has been developed pursuant to provisions of the new CICA standard, and is based on third-party cost estimates obtained from
reputable sources after an in-depth review of active plant sites and required
clean-up and restoration activities. In arriving at the January 1, 2003
estimated asset retirement obligation, a credit-adjusted risk-free rate of
10.5% was used to discount the estimated future cash flows. The estimated asset
retirement obligation liability of $19 million at December 31, 2003 will
increase, or accrete, each year over the lives of active plants until it equals
the $225 million to $250 million expected to
be incurred on closure of the plants. In addition to the liability for active
sites, the Corporation also has an asset retirement obligation liability for
decommissioning and restoration costs associated with plant sites that have
been divested or are no longer in use. The accrued liability associated with
these sites is $12 million and is considered to be adequate at
this time. The effect of adopting the new CICA standard on
January 1, 2003 was an increase to plant, property and equipment (net) of $4
million, a reduction in the January 1, 2003 asset retirement obligation of
$3 million, and an increase in future income tax liabilities of $2
million, resulting in an increase in reinvested earnings of $5
million.  21 Contingencies and Commitments  Various lawsuits and claims
are pending by and against the Corporation. It is the opinion of management
that final determination of these claims will not materially affect the
financial position or operating results of the Corporation.  The Corporation leases office
space and transportation equipment under various operating leases. The minimum
lease payments are approximately$455 million in total with
annual amounts of $49 million in 2004, $46
million in 2005, $38 million in 2006, $35
million in 2007, $33 million in 2008, and $254
million thereafter. Rental expense under operating leases was $53
million in 2003 (2002  $55 million and 2001  $58
million).  The Corporation has entered
into agreements for the purchase of minimum amounts of feedstock and other raw
materials for short- and long-term supply. The resulting obligations, based on
year end market prices, are approximately$7,734 million in total
with annual amounts of $2,124 million in 2004, $1,129
million in 2005, $1,107 million in 2006, $897
million in 2007, $605 million in 2008, and $1,872
million thereafter.  29 
   22 Segmented Information The Corporation determines
its reportable segments based on the structure of its operations, which are
primarily focused in two principal business segments  Olefins/Polyolefins and
Styrene/Polystyrene (Styrenics). These operations involve the production and
marketing of ethylene and polyethylene resins; and styrene monomer and styrenic
polymers, respectively.   FINANCIAL INFORMATION BY BUSINESS SEGMENT   (MILLIONS OF DOLLARS)YEAR ENDED
  DECEMBER 31
  
  2003
  
  2002
  
  2001RevenueOlefins and polyolefins
  
  $
  2,559
  
  $
  1,930
  
  $
  2,014Styrenics
  
  1,579
  
  1,305
  
  1,314Intersegment eliminations
  
  (189
  )
  (144
  )
  (134
  )$
  3,949
  
  $
  3,091
  
  $
  3,194DepreciationOlefins and polyolefins
  
  $
  187
  
  $
  166
  
  $
  132Styrenics
  
  111
  
  100
  
  98$
  298
  
  $
  266
  
  $
  230Operating income (loss)Olefins and polyolefins
  
  $
  92
  
  $
  67
  
  $
  57Styrenics
  
  (152
  )
  (118
  )
  (225
  )Restructuring charges
  
  (15
  )
  (20
  )
  (27
  )$
  (75
  )
  $
  (71
  )
  $
  (195
  )Net income (loss)Olefins and polyolefins
  
  $
  14
  
  $
  (5
  )
  $
  (2
  )Styrenics
  
  (130
  )
  (102
  )
  (181
  )Equity investments
  
  37
  
  5
  
  11Other
  
  107
  
  21
  
  44$
  28
  
  $
  (81
  )
  $
  (128
  )Plant, property, and equipment additionsOlefins and polyolefins
  
  $
  74
  
  $
  43
  
  $
  125Styrenics
  
  56
  
  28
  
  43$
  130
  
  $
  71
  
  $
  168  DECEMBER 31(MILLIONS OF DOLLARS)
  
  2003
  
  2002
  
  2001AssetsOlefins and polyolefins
  
  $
  2,246
  
  $
  1,923
  
  $
  1,960Styrenics
  
  1,767
  
  1,643
  
  1,638Investment in Methanex
  
  
  
  399
  
  397Corporate and other(1)
  
  400
  
  189
  
  364$
  4,413
  
  $
  4,154
  
  $
  4,359  
 (1)Amounts include all cash and cash equivalents.  30 
    FINANCIAL
INFORMATION BY GEOGRAPHIC AREA   (MILLIONS OF DOLLARS)YEAR ENDED
  DECEMBER 31
  
  2003
  
  2002
  
  2001Revenue(1)Canada
  
  $
  1,414
  
  $
  1,081
  
  $
  1,236United States
  
  1,789
  
  1,410
  
  1,408Europe and other
  
  746
  
  600
  
  550$
  3,949
  
  $
  3,091
  
  $
  3,194Export sales from Canadian operationsUnited States
  
  $
  1,054
  
  $
  748
  
  $
  694Europe and other
  
  148
  
  113
  
  137$
  1,202
  
  $
  861
  
  $
  831Operating income (loss)Canada
  
  $
  4
  
  $
  11
  
  $
  (75
  )United States
  
  (66
  )
  (85
  )
  (31
  )Europe and other
  
  (13
  )
  3
  
  (89
  )$
  (75
  )
  $
  (71
  )
  $
  (195
  )Equity in earnings of affiliateCanada
  
  $
  39
  
  $
  5
  
  $
  14  (MILLIONS OF DOLLARS)DECEMBER 31
  
  2003
  
  2002
  
  2001Assets(2)Canada
  
  $
  2,600
  
  $
  2,055
  
  $
  2,237United States
  
  1,113
  
  1,090
  
  1,189Europe and other
  
  673
  
  583
  
  520Investments
  
  27
  
  426
  
  413$
  4,413
  
  $
  4,154
  
  $
  4,359  
 (1)Based on location of customer. (2)Based on location of the operating facility.  23 Financial Instruments   FINANCIAL INSTRUMENT FAIR VALUES   Financial instrument fair values
represent a reasonable approximation of amountsNOVA Chemicals would have received or paid to counterparties to unwind
positions prior to their maturity. NOVA
Chemicals has no plans to unwind
these positions prior to maturity and has no significant exposure to any
individual customer or counterparty.  The carrying amounts reported
on the balance sheets for cash and cash equivalents, accounts receivable, bank
loans, and accounts payable and accrued liabilities approximate their fair
value. Fair values and carrying amounts for long-term debt are as follows:  CARRYING
  AMOUNT
  
  ESTIMATED
  FAIR VALUE(1)(MILLIONS OF DOLLARS)DECEMBER 31
  
  2003
  
  2002
  
  2001
  
  2003
  
  2002
  
  2001Long-term debt(2)
  
  $
  1,101
  
  $
  1,212
  
  $
  1,508
  
  $
  1,163
  
  $
  1,134
  
  $
  1,410  
 (1)The fair value of long-term debt is based on
quoted market prices, where available. If market prices are not available, fair
values are estimated using discounted cash flow analysis, based on NOVA
Chemicals current incremental borrowing rates for similar borrowing
arrangements. (2)Includes debt installments due within one
year.  31 
    FOREIGN EXCHANGE RISK MANAGEMENT   NOVAChemicals has U.S., Canadian and
European-based petrochemical operations. As a result, a portion of the
Corporations expenditures are incurred in Canadian dollars and euros. Prior to
April 2003, NOVA Chemicals managed its exposure to fluctuations
in the Canadian/U.S. dollar exchange rate by using forward exchange
contracts. At December 31, 2003, NOVA Chemicals had no
foreign currency forward exchange contracts nor any plans to enter into any
such contracts.   COMMODITY PRICE RISK MANAGEMENT   NOVAChemicals uses commodity-based derivatives to
hedge a portion of its exposure to price fluctuations on crude oil, refined
products and natural gas transactions. The instruments are used to moderate the
risk of adverse short-term price movements. Occasionally, longer-term positions
will be taken to manage price risk for anticipated supply requirements.  At December 31, 2003,
2002 and 2001, the notional volume and estimated fair value of outstanding
derivative contracts for natural gas are as follows:  DECEMBER 31
  
  
  
  2003
  
  2002
  
  2001Pricing swapsNotional volume
  
  GJmillions
  
  
  
  3.2
  
  12.0Weighted-average price perGJ
  
  Cdn.
  
  $
  
  
  $
  5.92
  (2)
  $
  6.89
  (2)Estimated fair value(1)
  
  U.S.millions
  
  $
  
  
  $
  (2
  )
  $
  21Carrying value
  
  U.S.millions
  
  $
  
  
  $
  
  
  $
  Term to maturity
  
  Months
  
  
  
  110
  
  110Basis swapsNotional volume
  
  mcf
  millions
  
  76.0
  
  113.0
  
  3.0Weighted-average basis differential per mcf
  
  U.S.
  
  $
  0.52
  (4)
  $
  0.47
  (3)
  $
  0.02
  (3)Estimated fair value(1)
  
  U.S.millions
  
  $
  (18
  )(4)
  $
  (10
  )
  $
  (1
  )Carrying value
  
  U.S.millions
  
  $
  
  
  $
  
  
  $
  Term to maturity
  
  Months
  
  115
  
  134
  
  110OptionsNotional volume  calls
  
  mcf
  millions
  
  3.6
  
  1.1
  
  20.5Notional volume  puts
  
  mcf
  millions
  
  33.5
  
  68.1
  
  36.6Weighted-average price per mcf  calls
  
  U.S.
  
  $
  6.27
  
  $
  4.10
  
  $
  4.93Weighted-average price per mcf  puts
  
  U.S.
  
  $
  2.42
  (5)
  $
  2.32
  (5)
  $
  2.67Estimated fair value(1)
  
  U.S.millions
  
  $
  1
  
  $
  (1
  )
  $
  6Carrying value
  
  U.S.millions
  
  $
  
  
  $
  
  
  $
  Term to maturity
  
  Months
  
  122
  
  134
  
  122  
 (1)Unrealized before-tax gain (loss). (2)The Corporation pays floating prices and
receives a fixed price from the counterparty. (3)The Corporation will pay or receive the
difference between the NYMEX market price and the U.S. export market price,
plus a fixed differential established in the contract. (4)The Corporation has crystallized the losses on
substantially all of the basis swaps by placing offsetting positions with an
average basis differential of 75¢. The net effect of these positions will
result in an aggregate loss of $18 million before-tax, when all positions have
matured. (5)The Corporation will pay the difference
between the NYMEX market price and the contract price (if contract is higher
than market).  32 
   At December 31, 2003,
2002 and 2001, the notional volume and estimated fair value of outstanding
derivative contracts for crude oil, refined products, and alternative feedstock
are as follows:  DECEMBER 31
  
  
  
  2003
  
  2002
  
  2001Notional volume
  
  bbls
  millions
  
  6.4
  
  13.8
  
  10.8Weighted-average price per bbl(1)
  
  U.S.
  
  $
  29.96
  
  $
  29.84
  
  $
  29.05Estimated fair value(2)
  
  U.S.millions
  
  $
  9
  
  $
  8
  
  $
  (4
  )Carrying value
  
  U.S.millions
  
  $
  
  
  $
  
  
  $
  Term to maturity
  
  Months
  
  136
  
  148
  
  160  
 (1)Crude oil swaps, options, collars. (2)Unrealized gain (loss).  In addition to the outstanding contracts described above,NOVAChemicals has
liquidated certain natural gas and crude oil option positions, realizing a gain
of $3 million in 2003 (2002  $17 million and 2001 $nil). Gains and losses on
liquidated positions are deferred on the balance sheet and recognized in income
over the periods in which the cost of the related feedstock purchases will be
recognized. The unamortized portion of liquidated gains was $12 million at
December 31, 2003 (see Notes 7 and 9). The net fair value of NOVAChemicals outstanding and
liquidated positions is $4 million at December 31, 2003 (2002  $12
million and 2001 $22 million).   INTEREST RATE RISK MANAGEMENT   When deemed appropriate,NOVA Chemicals enters into interest rate swap agreements to manage its
interest rate price risk exposure on certain fixed-rate debt. The agreements
generally involve the receipt of fixed-rate amounts in exchange for
floating-rate LIBOR-based payments over the terms of the related
debt. In 2003, the Corporation entered into floating-for-fixed interest rate
swaps on $550 million of Medium-Term Notes. These
positions had an estimated fair-market value of $4 million at
December 31, 2003.  In 2002 and 2001, a series of interest rate swaps on $550 million
(2001 $650 million) of fixed-rate debt were liquidated, resulting in a
before-tax gain of $13 million (2001 $27 million) (see Notes 7 and 9). The gains
have been deferred and will be recognized in income as a reduction of interest
expense over the terms of the related debt instruments, which mature in 2005,
2006 and 2009.   CREDIT RISK MANAGEMENT   Credit exposure on financial instruments arises from the possibility
that a counterparty to an instrument in whichNOVAChemicals is entitled
to receive payment of an unrealized gain fails to perform. NOVAChemicals has established a limit on
contingent exposure for each counterparty based on the counterpartys credit
rating. Credit exposure is managed through credit approval and monitoring
procedures. NOVAChemicals
does not anticipate any counterparties that it currently transacts with will
fail to meet their obligations. At December 31, 2003, 2002 and 2001, NOVAChemicals credit
exposure was $nil for foreign currency instruments, $4 million (2002 $nil and
2001 $nil) for interest rate instruments, and $3 million (2002 $4 million and
2001 $27 million) for commodity-based instruments.  Concentration of credit risk relates primarily to the Corporations
receivables, as certain customer groups are located in the same geographic area
and operate in the same industry. The Corporation manages its credit risk
relating to these receivables through credit approval and monitoring
procedures.  33 
   24 United States Generally Accepted Accounting Principles   RECONCILIATION
TO ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES   The Corporation prepares its
consolidated financial statements in accordance with CanadianGAAP, which, in some respects, are different from GAAP used in the United States. The effect of these differences on the
Corporations consolidated net income (loss) and balance sheet are as follows:  (MILLIONS OF DOLLARS EXCEPT PER SHARE AMOUNTS)YEAR ENDED
  DECEMBER 31
  
  2003
  
  2002
  
  2001Net income (loss) in accordance with CanadianGAAP
  
  $
  28
  
  $
  (81
  )
  $
  (128
  )Add (deduct) adjustments for:Start-up costs(1)
  
  4
  
  3
  
  (11
  )Foreign exchange derivative instruments and hedging
  activity(2)
  
  3
  
  15
  
  14Other derivative instruments and hedging activity(2)
  
  (7
  )
  5
  
  10Future income taxes(3)
  
  
  
  
  
  29Inventory costing(4)
  
  (1
  )
  1
  
  (2
  )Preferred securities distributions(5)
  
  (23
  )
  (23
  )
  (23
  )Equity in earnings (losses) of affiliate(6)
  
  (1
  )
  (4
  )
  1Change in accounting policy(7)
  
  5
  
  
  
  Other gains(8)
  
  42
  
  
  
  Other
  
  1
  
  1
  
  1Net income (loss) in accordance withU.S. GAAP
  
  $
  51
  
  $
  (83
  )
  $
  (109
  )Earnings (loss) per share usingU.S. GAAP Basic
  
  $
  0.52
  
  $
  (1.05
  )
  $
  (1.39
  ) Diluted
  
  $
  0.51
  
  $
  (1.05
  )
  $
  (1.39
  )Comprehensive income (loss) (net of tax)(9)Net income (loss) in accordance withU.S. GAAP
  
  $
  51
  
  $
  (83
  )
  $
  (109
  )Cumulative translation adjustment (less tax of$nil, $nil, and $nil)(10)
  
  395
  
  70
  
  (140
  )Less: reclassification of amounts included in net
  income
  
  (54
  )
  
  
  Unrealized gain (loss) on cash flow hedging
  instruments (less tax of$(2), $(15) and $17)(2)
  
  4
  
  26
  
  (30
  )Equity in comprehensive income (loss) of affiliate
  (less tax of$nil, $(1) and $1)(6)
  
  (3
  )
  7
  
  (4
  )Minimum pension liability adjustments (less tax of$2, $1, and $nil)(11)
  
  (3
  )
  (1
  )
  Comprehensive income (loss) in accordance withU.S. GAAP
  
  $
  390
  
  $
  19
  
  $
  (283
  )Accumulated other comprehensive income (loss)(9)Cumulative translation adjustment(10)
  
  $
  211
  
  $
  (130
  )
  $
  (200
  )Unrealized loss on cash flow hedging instruments(2)
  
  
  
  (4
  )
  (30
  )Equity in comprehensive income (loss) of affiliate(6)
  
  
  
  3
  
  (4
  )Minimum pension liability(11)
  
  (4
  )
  (1
  )
  Accumulated other comprehensive income (loss)
  
  $
  207
  
  $
  (132
  )
  $
  (234
  )  34 
   (MILLIONS OF DOLLARS)DECEMBER 31
  
  2003
  
  2002
  
  2001Balance sheet items in accordance withU.S. GAAPCurrent assets(2) (4)
  
  $
  959
  
  $
  626
  
  $
  716Investment and other assets(1) (2)
  (6) (11)
  
  157
  
  492
  
  496Plant, property, and equipment (net)(1) (7)
  
  3,311
  
  3,007
  
  3,131Current liabilities(2)
  
  (585
  )
  (577
  )
  (725
  )Long-term debt:Preferred securities(5)
  
  (383
  )
  (383
  )
  (383
  )Other long-term debt(2)
  
  (1,122
  )
  (1,234
  )
  (1,323
  )Deferred credits(2) (3)
  (11)
  
  (829
  )
  (790
  )
  (771
  )Retractable preferred shares
  
  (198
  )
  (198
  )
  (198
  )Common shareholders equity
  
  $
  1,310
  
  $
  943
  
  $
  943  
 (1)Start-Up Costs. Canadian GAAP provides that when an entity starts up a new facility,
expenditures incurred during the pre-operating period may be deferred when
certain criteria are met. Under U.S. GAAP, all costs (except interest on
constructed assets) associated with start-up activities must be expensed as
incurred. See Note 5 for information on the Corporations startup costs.  (2)Derivative Instruments and
Hedging Activities. Canadian
GAAP does not require the recognition of derivative instruments on the
consolidated balance sheet at fair values. Under U.S. GAAP, entities must
follow the recommendations of Statement of Financial Accounting Standards
(SFAS) No. 133, Accounting for Derivative Instruments and Hedging Activities,
which requires the recognition of all derivatives on the balance sheet at fair
value. Derivatives that are not hedges must be adjusted to fair value through
income. If the derivative is a hedge, depending on the nature of the hedge,
changes in the fair value of derivatives will either be offset against the
change in fair value of the hedged assets, liabilities, or firm commitments
through earnings or recognized in other comprehensive income until the hedged
item is recognized in earnings. For derivatives that are designated and qualify
as hedging instruments, the Corporation documents the hedging strategy,
including hedging instrument and hedged item, based on the risk exposure being
hedged. Based upon the designated hedging strategy, effectiveness of the hedge
in offsetting the hedged risk is assessed at inception and on an ongoing basis
during the term of the hedge. The ineffective portion of a derivatives change
in fair value is immediately recognized in earnings.  The application of SFAS No. 133 for U.S. GAAP
reporting results in differences related to foreign exchange, commodity-based
and other derivative instruments used by the Corporation. For information
regarding the Corporations use of derivatives and hedging activities, see Note
23.  (3)Future Income Taxes. Canadian GAAP permits recognition of the
impact of changes in tax laws and rates on the measurement of future income tax
assets and liabilities in the period in which the tax laws and rates are
considered to be substantively enacted. Under U.S. GAAP rules the impact of tax
rate changes on future income tax assets and liabilities is only recognized on
enactment of the change in tax law and rates.  (4)Inventory Costing. Canadian GAAP allows fixed overhead costs
associated with production activities to be expensed during the period whereas
U.S. GAAP requires an allocation of fixed production overhead to inventory.  (5)Compound Financial
Instruments. Canadian GAAP
requires the classification and recording of a financial instrument, or its
component parts, as a liability or equity in accordance with the substance of
the contractual arrangements governing the instrument. U.S. GAAP requires that
no portion of the proceeds from issuance of convertible debt securities be
attributed to the conversion feature and classified as equity. Accordingly, the
Corporations preferred securities discussed in Note 10 are accounted for as
debt under U.S. GAAP and the related distributions as interest expense.  (6)Equity in Earnings (Losses)
of Affiliate. NOVA Chemicals
share of adjustments to financial information and results of operations of
equity investments to comply with U.S. accounting principles.  (7)Change in Accounting Policy. On January 1, 2003, the Corporation
adopted SFAS No. 143, Accounting for Asset Retirement Obligations. This
standard and the CICA standard, also adopted on January 1, 2003, and
discussed in Notes 2 and 20, are essentially the same. However, under U.S.
GAAP, the cumulative effect of adopting a new standard is reflected in net
income in the period of adoption, whereas under Canadian GAAP, it is reflected
as a charge or credit to reinvested earnings.  (8)Other Gains. Difference in gain on disposition of
investment in Methanex resulting from different cost basis under U.S. GAAP.  (9)Comprehensive Income. U.S. GAAP SFAS No. 130, Reporting
Comprehensive Income, requires the presentation of a statement containing the
components of comprehensive income and the accumulated balance of other
comprehensive income. Comprehensive income includes all changes in equity
during the period including items that are not in net income. This statement is
not required under Canadian GAAP.  (10)Cumulative Translation
Adjustment. Unrealized gains
(losses) resulting from translation of self-sustaining foreign operations are
recorded in other comprehensive income until there is a realized reduction in
the investment.  (11)Minimum Pension Liability. SFAS No. 87, Employers Accounting for
Pensions, requires an employer to record an additional minimum liability (AML)
if the unfunded accumulated benefit obligation exceeds the accrued pension
liability or if there is a prepaid pension asset with respect to the plan. If
an AML is recognized, an intangible asset, in an amount not exceeding the
unrecognized prior service cost, is also recognized. The excess of the AML,
over the intangible asset, if any, is charged to other comprehensive income,
net of income tax effects. At December 31, 2003, an AML and an intangible
asset, in the amount of $10 million and $4 million, respectively, have been
recognized, resulting in a charge of $4 million (net of tax) to other
comprehensive income.  35 
    OTHER DISCLOSURES   Stock-based
Compensation. SFAS No. 123, Accounting for Stock-Based
Compensation, defines a fair-value based method of accounting for employee
stock options and encourages the use of this method to account for stock
compensation plans. It does, however, permit an entity to continue to measure
compensation cost using the intrinsic-value based method of accounting
prescribed by Accounting Principles Board Opinion No. 25, Accounting for Stock
Issued to Employees (APB 25). Entities using the intrinsic method must
disclose pro forma net income (loss) and net income (loss) per share assuming
the fair-value method had been applied. NOVA Chemicals has elected
to follow APB 25 and related interpretations in accounting for
employee stock options. Options are issued at the market price on date of grant
and therefore, under APB 25, no compensation expense has been recorded.  The following table outlines
the impact on the CorporationsU.S. GAAP results, had
compensation expense for the stock option plan been determined based on the
fair-value method as prescribed under SFAS No. 123:  (MILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)YEAR ENDED
  DECEMBER 31
  
  2003
  
  2002
  
  2001Net income (loss) in accordance withU.S. GAAPAs reported
  
  $
  51
  
  $
  (83
  )
  $
  (109
  )Pro forma
  
  $
  44
  
  $
  (94
  )
  $
  (115
  )Earnings (loss) per share  basicAs reported
  
  $
  0.52
  
  $
  (1.05
  )
  $
  (1.39
  )Pro forma
  
  $
  0.44
  
  $
  (1.18
  )
  $
  (1.46
  )Earnings (loss) per share  dilutedAs reported
  
  $
  0.51
  
  $
  (1.05
  )
  $
  (1.39
  )Pro forma
  
  $
  0.44
  
  $
  (1.18
  )
  $
  (1.46
  )  36 
    U.S. ACCOUNTING DEVELOPMENTS   FASBStatement No. 123, Accounting for Stock-Based
Compensation, issued in December 2002, provides alternative methods of
transition for a voluntary change to the fair-value based method of accounting
for stock-based employee compensation. As the Corporation intends to adopt the
fair-value method as required for Canadian GAAP reporting in 2004,
the implications of FASB Statement No. 123 are expected to be minimal.  FASBStatement No. 132, Employers Disclosures
about Pensions and Other Post-Retirement Benefits, was revised in
December 2003 and requires additional disclosures about pension plans and
other post-retirement benefit plans. Certain disclosures are required for 2003
financial statements and others for 2004 financial statements. Canadian GAAP disclosure requirements for pension and post-retirement plans have also
been amended and as such, the Corporation does not anticipate this Statement
will have an impact on the Corporations disclosure requirements.  FASBStatement No. 150, Accounting for Certain
Financial Instruments with the Characteristics of both Liabilities and Equity,
issued in May 2003, requires the classification of certain financial
instruments, previously classified as equity, as liabilities. While Statement
No. 150 has not had an impact on the current classification of the
Corporations financial instruments, the FASB intends to continue
deliberations on this topic. Future recommendations by the FASB may have an impact on the Corporations financial position and are not
determinable at this time.  25 Subsequent Events  In January 2004,NOVA Chemicals issued $400 million of 6.5% Senior Notes due 2012. The
net proceeds of the offering will be used to redeem, in March 2004, the
9.04% preferred securities due 2048 and 9.50% preferred securities due 2047.
The two issues of preferred securities total $383 million. The balance
of the proceeds will be used for general corporate purposes.  37