UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549



FORM 20-F

o

REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934ORý

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2011ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period
from                                    toORo

SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934Date of event requiring this shell company report


Commission file number 1-3064



NOVA Chemicals Corporation(Exact name of Registrant as specified in its charter)

New Brunswick, Canada(Jurisdiction of incorporation or organization)

1000 7th Avenue S.W.
Calgary, Alberta
Canada, T2P 5L5(Address of principal executive offices)

Contact Person: Todd D. Karran
Senior Vice President and Chief Financial Officer
1000 7th Avenue S.W.
Calgary, Alberta
Canada, T2P 5L5
Telephone: 403-750-3600
Fax: 403-269-7410(Name, telephone, e-mail and/or facsimile number and address of company contact person)



Securities registered or to be registered pursuant to Section 12(b) of the Act.None

Securities
registered or to be registered pursuant to Section 12(g) of the Act:None

Securities
for which there is a reporting obligation pursuant to Section 15(d) of the Act:None

As
of December 31, 2011, there were 141,494,222 shares of the registrant's common stock outstanding.

Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
o Yes    ý No

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934. ý Yes    o No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. o
Yes    ý No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to
be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such files). o Yes    o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of
"accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act (check one):

o Large accelerated filer

o Accelerated filer

ý Non-accelerated filer


Indicate by check mark which basis for accounting the registrant has used to prepare the financing statements included in this filing:

U.S. GAAP o

International Financial Reporting Standards as issued by
the International Accounting Standards Board ý

Other o


If "Other" has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected
to follow.

o
Item 17            o Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).

o
Yes    ý No



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TABLE OF CONTENTS

PageEXPLANATORY NOTES

3DISCLOSURE REGARDING FORWARD-LOOKING INFORMATION

4PART I

5Item 1.  Identity of Directors, Senior Management and Advisors

5Item 2.  Offer Statistics and Expected Timetable

5Item 3.  Key Information

53.A.  SELECTED FINANCIAL DATA

53.B.  CAPITALIZATION AND INDEBTEDNESS

103.C.  REASONS FOR THE OFFER AND USE OF PROCEEDS

103.D.  RISK FACTORS

10Item 4.  Information on the Company

204.A.  HISTORY AND DEVELOPMENT OF THE COMPANY

204.B.  BUSINESS OVERVIEW

234.C.  ORGANIZATIONAL STRUCTURE

354.D.  PROPERTY, PLANTS AND EQUIPMENT

35Item 4A.  Unresolved Staff Comments

35Item 5.  Operating and Financial Review and Prospects

35Item 6.  Directors, Senior Management and Employees

676.A.  DIRECTORS AND SENIOR MANAGEMENT

676.B.  COMPENSATION

686.C.  BOARD PRACTICES

846.D.  EMPLOYEES

856.E.  SHARE OWNERSHIP

86Item 7.  Major Shareholders and Related Party Transactions

867.A.  MAJOR SHAREHOLDERS

867.B.  RELATED PARTY TRANSACTIONS

867.C.  INTERESTS OF EXPERTS AND COUNSEL

86Item 8.  Financial Information

868.A.  CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION

868.B.  SIGNIFICANT CHANGES

87Item 9.  The Offer and Listing

879.A.  OFFER AND LISTING DETAILS

879.B.  PLAN OF DISTRIBUTION

879.C.  MARKETS

879.D.  SELLING SHAREHOLDERS

879.E.  DILUTION

879.F.  EXPENSES OF THE ISSUE

87Item 10.  Additional Information

8710.A.  SHARE CAPITAL

8710.B.  MEMORANDUM AND ARTICLES OF ASSOCIATION

8710.C.  MATERIAL CONTRACTS

9010.D.  EXCHANGE CONTROLS

9010.E.  TAXATION

9010.F.  DIVIDENDS AND PAYING AGENTS

9010.G.  STATEMENT BY EXPERTS

9010.H.  DOCUMENTS ON DISPLAY

9010.I.  SUBSIDIARY INFORMATION

90Item 11.  Quantitative and Qualitative Disclosures About Market Risk

90Item 12.  Description of Securities Other than Equity Securities

9112.A.  DEBT SECURITIES

9112.B.  WARRANTS AND RIGHTS

9112.C.  OTHER SECURITIES

9112.D.  AMERICAN DEPOSITARY SHARES

91PART II

91Item 13.  Defaults, Dividend Arrearages and Delinquencies

91Item 14.  Material Modifications to the Rights of Security Holders and Use of Proceeds

91Item 15.  Controls and Procedures

91Item 16A.  Audit Committee Financial Expert

92Item 16B.  Code of Ethics

92Item 16C.  Principal Accountant Fees and Services

92Item 16D.  Exemptions from the Listing Standards for Audit Committees

93Item 16E.  Purchases of Equity Securities by the Issuer and Affiliated Purchasers

93Item 16F.  Change of Registrant's Certifying Accountant

93Item 16G.  Corporate Governance

93PART III

93Item 17.  Financial Statements

93Item 18.  Financial Statements

93Item 19.  Exhibits

94Index to Financial Statements

F-i


2

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EXPLANATORY NOTES

The Corporation

We are a global company continued under the laws of the province of New Brunswick, Canada, with our head office located at
1000-7th Avenue S.W., Calgary, Alberta, Canada T2P 5L5, and our United States commercial center located at 1555 Coraopolis Heights Road, Moon
Township, PA 15108. Our telephone number is (403) 750-3600. We maintain a website at www.novachemicals.com. The information on our website is not a part of this annual report on
Form 20-F.

Unless
otherwise indicated or required by the context, as used in this Form 20-F, the terms "NOVA Chemicals," the "Corporation," "we," "our" and "us" refer to NOVA
Chemicals Corporation and all of its consolidated subsidiaries.

Presentation of Financial Information

The annual audited consolidated financial statements contained in this annual report on Form 20-F are reported in
U.S. dollars. For all periods up to and including the year ended December 31, 2010, we prepared our consolidated financial statements in accordance with Canadian generally accepted
accounting principles ("Canadian GAAP"). The annual audited consolidated financial statements for the year ended December 31, 2011 are our first annual consolidated financial statements that
have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") and IFRS 1, First Time Adoption of International Financial
Reporting Standards. SeeInternational Financial Reporting
Standards  Transition from Canadian GAAP to IFRSin our "Management's Discussion and Analysis of Financial Condition and Results of
Operations" included in this annual report on Form 20-F under "Item 5  Operating and Financial Review and Prospects."

We
have prepared the annual audited consolidated financial statements that comply with IFRS as described in the accounting policies in Note 2 of our annual audited consolidated
financial statements. In preparing the annual audited consolidated financial statements, our opening statement of financial position was prepared at January 1, 2010, our date of transition to
IFRS. Note 26 of our annual audited consolidated financial statements explains the principal adjustments we made in restating our Canadian GAAP statements of financial position as at
January 1, 2010 and December 31, 2010 and our previously published Canadian GAAP consolidated statements of income and comprehensive income for the year ended
December 31, 2010.

Market and Industry Data

We obtained the market and competitive position data used throughout this annual report on Form 20-F from our own research and
surveys, or studies conducted by third parties and industry or general publications, including data from Chemical Market Associates, Inc., Nexant ChemSystems, the American Chemistry Council,
IHS Global Insight and other petrochemical industry and economic consultants. Industry publications and surveys generally state that they have obtained information from sources believed to be
reliable. We have not independently verified such data. Similarly, our internal research has not been verified by any independent sources.

TRADEMARKS

Advanced SCLAIRTECH and SCLAIRTECH are trademarks of NOVA Chemicals.

ARCEL®,
Elemix®, DYLARK®, DYLITE®, and NOVACAT® are registered trademarks of NOVA Chemicals Inc.

SCLAIR®
and SURPASS® are registered trademarks of NOVA Chemicals Corporation in Canada and of NOVA Chemicals (International) S.A. elsewhere; authorized
use/utilisation autorisée.

Responsible
Care® is a registered trademark of the Chemistry Industry Association of Canada in Canada ("CIAC") and is a registered service mark of the American Chemistry
Council ("ACC") in the United States.

3

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DISCLOSURE REGARDING FORWARD-LOOKING INFORMATION

This annual report contains forward-looking information. The words "believe," "expect," "plan," "intend," "estimate," or "anticipate"
and similar expressions, as well as future or conditional verbs such as "should," "would," and "could" often identify forward-looking information. Forward-looking information appears in a number of
places and includes statements with respect to, among other things:



The
forward-looking information is based on our current expectations and is subject to a number of risks, uncertainties and assumptions. There is significant risk that predictions,
forecasts, conclusions and projections that constitute forward-looking information will not prove to be accurate, that our assumptions may not be correct and that actual results may vary from the
forward-looking information. We caution readers not to place undue reliance on our forward-looking information as a number of factors could cause actual results, conditions, actions or events to
differ materially from the targets, expectations, estimates or intentions expressed in the forward-looking information.

With
respect to forward-looking information contained in this annual report, we have made material assumptions regarding, among other things: future oil, natural gas and natural gas
liquids prices; our ability to obtain raw materials; our ability to market products successfully to our anticipated customers; the impact of increasing competition; and our ability to meet time and
budget targets for significant capital expenditures. Some of our assumptions are based upon internal estimates and analyses of current market conditions and trends, management plans and strategies,
economic conditions and other factors and are necessarily subject to risks and uncertainties inherent in projecting future conditions and results.

Some
of the risks that could affect our future results and could cause results to differ materially from those expressed in our forward-looking information
include:



The
information contained in this annual report, including the information provided under the heading "Risk Factors," identifies these and additional risks that could affect our
operating results and performance.

The
forward-looking information in this annual report is expressly qualified in its entirety by this cautionary statement. In addition, the forward-looking information is made only as of
the date of this annual report, and except as required by applicable law, we undertake no obligation to update publicly this forward-looking information to reflect new information, subsequent events
or otherwise.

4

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PART I

Item 1.    Identity of Directors, Senior Management and Advisors

Not
Applicable

Item 2.    Offer Statistics and Expected Timetable

Not
Applicable

Item 3.    Key Information

3.A.    SELECTED FINANCIAL DATA

The selected historical consolidated financial information set forth below has been derived from our annual audited consolidated
financial statements for each of the years in the five-year period ended December 31, 2011, which statements have been audited by Ernst & Young LLP, Chartered
Accountants.

For
the years ended December 31, 2011 and 2010, we have prepared our consolidated financial statements in accordance with IFRS, as issued by the IASB. Our December 31, 2010
consolidated financial statements were initially prepared in accordance with Canadian GAAP, consistent with the prior years and the periods ended December 31, 2009, July 5, 2009 and
December 31, 2008 and 2007. We have adjusted our consolidated financial information at and for the year ended December 31, 2010, in accordance with IFRS 1, and therefore the
financial information set forth in this annual report on Form 20-F for the year ended December 31, 2010 may differ from information previously published. We adopted IFRS with
a transition date of January 1, 2010. For details regarding the adjustments made with respect to the comparative data refer to Note 26 to our annual audited consolidated financial
statements contained in this annual report on Form 20-F.

The
selected historical consolidated financial information presented below is condensed and may not contain all of the information that you should consider. This selected financial data
should be read in conjunction
with our annual audited consolidated financial statements, the notes thereto and the section entitled "Item 5  Operating and Financial Review
and Prospects."

5

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In accordance with IFRS

The tables below set forth selected consolidated financial data under IFRS for the years ended December 31, 2011 and 2010. The
information has been derived from our annual audited consolidated financial statements set forth in "Item 17  Financial Statements."

Year ended December 31 (millions of U.S. dollars, unless otherwise noted)

2011

2010Consolidated Income Statement Data:Revenue

$
5,241

$
4,576Feedstock and operating costs


4,026


3,737Research and development


41


37Sales and marketing


29


27General and administrative


138


178Total operating expenses


4,234


3,979Operating profit from continuing operations


1,007


597Finance costs, net


(166
)

(186
)Other (losses) gains, net(a)


(18
)

(50
)Profit before income taxes from continuing operations


823


361Income tax expense


(215
)

(124
)Profit from continuing operations


608


237Profit from discontinued operations, net of tax


7


26Profit

$
615

$
263Selected Financial Data:Revenue from continuing operationsOlefins/Polyolefins

$
4,957

$
4,308Performance Styrenics


327


304Intersegment eliminations(b)


(43
)

(36
)Total revenue from continuing operations

$
5,241

$
4,576Operating profit (loss) from continuing operationsOlefins/Polyolefins

$
1,125

$
786Performance Styrenics


7


3Corporate


(125
)

(192
)Total operating profit from continuing operations

$
1,007

$
597Other Consolidated Financial Data:Capital expenditures for continuing operations

$
158

$
126Cash provided by operating activities

$
950

$
655Ratio of earnings to fixed charges(c)


5.5


2.8


6

---





(millions of U.S. dollars)

December 31
2011

December 31
2010

January 1
2010Consolidated Statement of Financial Position Data:Cash and cash equivalents

$
960

$
306

$
238Working capital(d)


528


501


428Property, plant and equipment


3,446


3,456


3,560Total assets


6,208


5,575


5,474Total debt(e)


1,741


1,695


1,946Equity


2,380


1,971


1,770


Notes: (a)Other
(losses) gains, net include:


Year ended December 31 (millions of U.S. dollars)

2011

2010Patent litigation

$
(20
)
$
(95
)Insurance claim





45Other


2


$
(18
)
$
(50
)


(b)Intersegment
eliminations relate to feedstock requirements for our long-term styrene monomer processing agreement.(c)For
purposes of computing the ratio of earnings to fixed charges, earnings consist of earnings from continuing operations before income taxes plus fixed
charges (excluding capitalized interest during the period). Fixed charges consist of interest expense, capitalized interest and amortization of bond discount and issue costs.(d)Working
capital equals trade and other receivables, plus income taxes receivable, inventories, and other current assets; less trade and other payables,
income taxes payable, other current liabilities and the current portion of provisions.(e)Total
debt equals long-term debt plus installments on long-term debt due within one year.


In accordance with Canadian GAAP

The tables below for the periods from July 6, 2009 to December 31, 2009 and from January 1, 2009 to July 5,
2009 and for the years ended December 31, 2008 and 2007 contain selected
financial data prepared in accordance with Canadian GAAP, which have been derived from our previously published audited consolidated financial statements for the periods ending on such dates.

IPIC Transaction

On February 23, 2009, we entered into an arrangement agreement with International Petroleum Investment Company ("IPIC"), which
is wholly owned by the government of the Emirate of Abu Dhabi, providing for the acquisition by IPIC of all of our outstanding common shares for cash consideration of $6.00 per share. On
July 6, 2009, IPIC completed the acquisition of NOVA Chemicals and, through a wholly owned subsidiary, acquired all of our issued and outstanding common shares (the "Acquisition"). Our
common shares were delisted from the New York Stock Exchange and the Toronto Stock Exchange on July 6, 2009.

We
elected to use push-down accounting under the Canadian Institute of Chartered Accountants ("CICA")1625, Comprehensive revaluation of assets and
liabilities, which resulted in our assets and liabilities being comprehensively revalued to be consistent with the values recorded by IPIC in accordance with business
combination accounting standards. In this respect, we applied, for the first time and prospectively, the principles of CICA 1582,Business combinations,
in connection with the push-down accounting. As a result, the carrying values of all identifiable assets and liabilities were adjusted to their respective estimated fair values on
July 6, 2009.

Although
we continued as the same legal entity after the Acquisition, our selected financial data for 2009 is presented for two periods: Predecessor and Successor, which relate to the
periods preceding and succeeding the Acquisition on July 6, 2009. These separate periods are presented to reflect the new accounting basis established for our company as of July 6, 2009,
and highlight the fact that the financial information for these periods has

7

---



been
prepared under two different historical-cost bases of accounting. The Successor portion of the financial information also reflects the additional equity contributions
from IPIC.

Year ended
December 31July 6-
Dec. 31
2009

Jan. 1-
July 5
2009(millions of U.S. dollars, unless otherwise noted)

2008

2007Successor

PredecessorConsolidated Statement of Income (Loss) Data:Revenue

$
1,612

$
1,345

$
5,645

$
4,893Feedstock and operating costs


1,157


1,167


5,055


3,766Depreciation and amortization


131


117


235


215Selling, general and administrative


82


175


212


218Research and development


17


17


44


45Foreign exchange losses (gains)


104


39


(117
)

Restructuring charges(a)


22


41


32


13Total operating expenses


1,513


1,556


5,461


4,257Operating income (loss) from continuing operations


99


(211
)

184


636Interest expense, net


(83
)

(92
)

(149
)

(171
)Other gains (losses), net(b)





6


(1
)

18Income (loss) from continuing operations before income taxes


16


(297
)

34


483Income tax (expense) recovery from continuing operations


(7
)

62


71


(48
)Income (loss) from continuing operations


9


(235
)

105


435Loss from discontinued operations, net of tax


(11
)

(4
)

(145
)

(87
)Net (loss) income

$
(2
)
$
(239
)
$
(40
)
$
348Selected Financial Data:Revenue from continuing operationsOlefins/Polyolefins

$
1,482

$
1,258

$
5,301

$
4,533Performance Styrenics


143


93


388


371Intersegment eliminations(c)


(13
)

(6
)

(44
)

(11
)Total revenue from continuing operations

$
1,612

$
1,345

$
5,645

$
4,893Operating income (loss) from continuing operationsOlefins/Polyolefins

$
223

$
43

$
371

$
792Performance Styrenics


5


(19
)

(49
)

(28
)Corporate


(129
)

(235
)

(138
)

(128
)Total operating income (loss) from continuing operations

$
99

$
(211
)
$
184

$
636Other Consolidated Financial Data:Capital expenditures for continuing operations

$
55

$
35

$
144

$
126Cash (used in) provided by operating activities

$
(20
)
$
(258
)
$
272

$
329Ratio of earnings to fixed charges(d)


1.2


N/A


1.3


3.5U.S. GAAP Financial Data:Revenue

$
1,612

$
1,345

$
5,645

$
4,893Net (loss) income


(2
)

(240
)

(24
)

363


8

---





(millions of U.S. dollars)

December 31
2009

December 31
2008

December 31
2007Consolidated Balance Sheet Data:Cash and cash equivalents

$
232

$
40

$
67Working capital(e)


256


(28
)

238Property, plant and equipment


3,553


2,486


2,734Total assets


5,596


4,082


5,143Total debt(f)


1,824


1,650


1,795Shareholders' equity


1,793


895


1,072U.S. GAAP Financial Data:Total assets


5,596


4,081


5,177Total debt(g)


1,824


1,650


1,794Shareholders' equity


1,800


746


987


Notes: (a)Restructuring
charges include:


Year ended December 31July 6-
Dec. 31
2009

Jan. 1-
July 5
2009(millions of U.S. dollars)

2008

2007Successor

PredecessorAsset impairments

$


$
17

$
17

$
Severance costs


21


13


6


7Other


1


11


9


6$
22

$
41

$
32

$
13




Year ended December 31July 6-
Dec. 31
2009

Jan. 1-
July 5
2009(millions of U.S. dollars)

2008

2007Successor

PredecessorGain on sale of Chesapeake

$


$


$


$
17Gain on sale of Cambridge











1Other





6


(1
)$


$
6

$
(1
)
$
18


(c)Intersegment
eliminations relate to feedstock requirements for our long-term styrene monomer processing agreement.(d)For
purposes of computing the ratio of earnings to fixed charges, earnings consist of earnings from continuing operations before income taxes plus fixed
charges (excluding capitalized interest during the period). Fixed charges consist of interest expense, capitalized interest and amortization of bond discount and issue costs. For the period
January 1, 2009 through July 5, 2009, earnings were insufficient to cover fixed charges, and the ratio is not meaningful.(e)Working
capital equals accounts receivable plus prepaid expenses plus inventories less accounts payable and accrued liabilities.(f)Total
debt equals long-term debt plus installments on long-term debt due within one year and bank loans.(g)Total
debt includes long-term debt, installments on long-term debt due within one year and bank loans, all under U.S. GAAP.


9

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3.B.    CAPITALIZATION AND INDEBTEDNESS



3.C.    REASONS FOR THE OFFER AND USE OF PROCEEDS



3.D.    RISK FACTORS

Risks Related to Our Business

The cyclicality of plastics and chemical businesses may cause significant fluctuation in our income and cash flow.

Our historical operating results reflect the cyclical and volatile nature of plastics and chemical businesses. Our businesses
historically experience alternating periods of inadequate capacity and tight supply, causing prices and profit margins to increase, followed by periods of excess capacity and loose supply that lead to
declining capacity utilization, prices and profit margins. The markets for ethylene, co-products and polyethylene, are also highly cyclical, resulting in volatile profits and cash flow
over the business cycle. Because we derive nearly all of our revenue from sales of these products, our operating results are more sensitive to this cyclical nature than many of our competitors who
have more diversified businesses. This cyclicality is exacerbated by volatility in feedstock prices. We cannot provide assurance that pricing or profitability in the future will be comparable to any
particular historical period, including the most recent period shown in our operating results.

Excess
industry capacity, especially at times when demand is weak, has in the past and may in the future cause us and other industry participants to lower production rates, which can
reduce our margins, income and cash flow.

Volatility in costs of energy and raw materials may result in increased operating expenses and reduced results of operations.

We purchase large amounts of energy and raw materials, including natural gas, for our businesses, representing a substantial portion of
our operating expenses. The prices of energy and raw materials have historically been highly volatile and cyclical. Although certain of our customer contracts are tied to changes in feedstock costs or
provide for surcharges if feedstock costs change, many contracts are tied to market prices. Currently, the price of crude oil is disproportionately higher than the price of natural gas resulting in a
higher than historical average ratio between the two, potentially giving natural gas-based producers an advantage over oil-based producers. We cannot predict whether and to
what extent energy and/or raw materials prices will rise or fall in the future or whether and to what extent we will be able to pass on cost increases to our customers or to what extent our existing
inventory may have a cost basis greater than the current market value due to price decreases. Any significant change in energy and/or raw materials costs could have a material adverse effect on our
business, results of operations, financial condition or cash flow.

Interruptions in our supply of raw materials and feedstock could adversely affect our business.

We purchase large amounts of raw materials, including natural gas, for our businesses. Some of our long-term ethane supply
contracts are expiring in the near to mid-term. We cannot provide any assurance that when these contracts expire we will be able to renew them on terms as favorable as our current terms,
or at all. In addition, if temporary shortages due to disruptions in supply caused by weather, transportation, production delays, regulatory changes or other factors require us to procure our raw
materials from sources other than our current suppliers, we cannot provide any assurance that we will be able to do so on terms as favorable as our current terms, or at all. Currently, the amount of
ethane available as feedstock in Alberta is largely dependent on volumes of natural gas available to be processed at the ethane extraction plants ("Straddle Plants") on the mainline of the TransCanada
Alberta pipeline system, as well as the ethane content in that natural gas. Weather and economic conditions drive demand for and the price of natural gas and could lead to short-term
supply dislocations. In 2012, due primarily to low selling prices for natural gas in North America, we expect the export flows of natural gas from Alberta to be lower than flows experienced in 2011,
which were lower than the average flows experienced in the previous five years. This will likely lead to less than historical levels of natural gas

10

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flowing
through the Straddle Plants and therefore less ethane available as feedstock for our ethylene plants in Western Canada. If we are unable to renew existing ethane supply contracts on terms as
favorable as our current terms, or at all, or unable to secure additional feedstock supply, our operating results could be negatively impacted.

Unanticipated problems or delays with projects to source additional feedstock may adversely affect our business.

We have recently executed agreements to secure additional feedstock. We continue to work with suppliers, relevant governments and
pipeline companies to source additional supply for our feedstock needs. Some of the agreements contemplate other parties investing in, designing and constructing pipelines, fractionation facilities,
and/or installing or modifying complex equipment. These projects may suffer significant delays as a result of a variety of factors, such as shortages of workers, key equipment, parts and materials,
lack of financing, transportation constraints, adverse weather, equipment failures, fires, damage to or destruction of property and equipment, environmental damage, regulatory requirements, unforeseen
difficulties or labor issues, any of which could prevent the projects from commencing operations as expected, which could adversely affect our business.

Our NOVA 2020 growth strategy subjects us to risks.

NOVA 2020, our strategic plan to take advantage of emerging feedstock supply from a diverse portfolio of new feedstock sources to
enhance our market position by expanding our ethylene and polyethylene footprint, includes, in addition to converting our Corunna cracker to utilize up to 100% natural gas liquids ("NGLs"), plans for
a potential further expansion of our Corunna cracker, the construction of two new world-scale polyethylene facilities to be built in Alberta and Ontario, and a further debottleneck of our
low-density polyethylene asset in Ontario. Feasibility and engineering studies should be completed by the middle of 2012 and start-up of the debottleneck project and polymer
expansions are targeted to be completed between late 2014 and 2017. The conversion of the Corunna cracker is expected to cost approximately $250 million and be completed prior to the other
projects in early 2014. The remaining projects in the NOVA 2020 plan are forecasted to cost more than $1.5 billion over the next seven years.

The
development and construction of these projects involves numerous regulatory, environmental, governmental and legal uncertainties beyond our control and will require the expenditure
of significant amounts of capital, and financing may not be available on economically acceptable terms, or at all. Any limitations on our access to capital or increase in the cost of that capital
could significantly impair our NOVA 2020 growth strategy. When we undertake these projects, they may not be completed on schedule, at the budgeted cost or at all. These projects may suffer significant
delays as a result of a variety of factors, such as shortages of workers, key equipment, parts and materials, transportation constraints, adverse weather, equipment failures, fires, damage to or
destruction of property and equipment, environmental damage, regulatory requirements, unforeseen difficulties or labor issues, any of which could prevent the projects from commencing operations as
expected, which could harm our business. Moreover, our revenues may not increase immediately upon the expenditure of funds on a particular project. For instance, if we build new polyethylene
facilities, the construction will occur over an extended period of time, and we will not receive material increases in revenues until the facilities are placed in service. Moreover, we may construct
facilities to capture anticipated future growth in production and/or demand in a region in which such growth does not materialize. As a result, new facilities may not be able to attract enough
throughput to achieve our expected investment return, which could adversely affect our business, financial condition, results of
operations and cash flows. Certain of our growth projects must receive regulatory approval prior to construction. The regulatory approval process is challenging, and we cannot guarantee such
authorization will be granted or, if granted, that such authorization will be free of burdensome or expensive conditions.

Our NOVA 2020 growth projects that we complete may not perform as anticipated.

Even if we complete our NOVA 2020 growth projects, such projects may not perform as anticipated and could adversely affect our business
due to, among other things, the following:



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We sell our products in highly competitive markets and face significant price pressure.

We sell our products in highly competitive markets. Due to the commodity nature of a majority of our products, competition in these
markets is based primarily on price and to a lesser extent on product performance, product quality, product deliverability and customer service. As a result, we may not be able to protect our market
position by product differentiation or pass on cost increases to our customers. Accordingly, increases in raw material costs and other costs may not necessarily correlate with changes in product
prices, either in the direction of the price change or in magnitude. Although we strive to maintain or increase our profitability by reducing costs through improving production efficiency, emphasizing
higher margin products and controlling selling and administration expenses, we cannot provide any assurance that these efforts will be sufficient to offset fully the effect of any pricing changes on
our operating results.

Among
our competitors are some of the world's largest chemical companies and major integrated petroleum companies that have their own raw material resources. Some of these companies may
be able to produce products more economically than we can. In addition, most of our competitors are larger and have greater financial resources, which may enable them to invest significant capital
into their businesses, including expenditures for research and development. If any of our current or future competitors develop proprietary technology that enables them to produce products that
compete with our products at a significantly lower cost, segments of our technology could be rendered over time uneconomical or obsolete. The entrance of new competitors into the industry may reduce
our ability to capture profit margins in circumstances where capacity utilization in the industry is decreasing. Further, production from low-cost producers in petroleum-rich
countries is increasing in the chemical industry and may continue to expand in the future. Any of these developments could affect our ability to enjoy higher profit margins during periods of increased
demand. In North America, the emergence of cost-effective raw materials based on shale gas and oil development has resulted in announced production capacity increases which could affect
the supply/demand balance in North America.

External factors beyond our control can cause fluctuations in demand for our products and in our prices and margins, which may negatively affect our income and
cash flow.

External factors can cause significant fluctuations in demand for our products and volatility in the price of raw materials and other
operating costs. Examples of external factors include general economic conditions, competitor actions, technological developments, unplanned facility shutdowns, international events and circumstances,
and governmental regulation.

Demand
for our products is influenced by general economic conditions. A number of our products are highly dependent on durable goods markets, which are themselves particularly cyclical.
If the global economy does
not continue to improve, demand for our products and our income and cash flow could be adversely affected.

We
may reduce production, idle a facility for an extended period of time, or discontinue certain products because of high raw material prices, an oversupply of a particular product,
feedstock unavailability and/or lack of demand for that particular product. When we decide to reduce or idle production, reduced operating rates are often necessary for several quarters or, in certain
cases, longer and cause us to incur costs, including the expenses of the outages and the restart of these facilities.

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Unfavorable global economic conditions could adversely affect our business, financial condition or results of operations.

Our results of operations could be adversely affected by general conditions in the global economy and in the global financial markets.
The recent global financial crisis caused extreme volatility and disruptions in the capital and credit markets. Our business, financial condition and result of operations were negatively affected in
prior periods as a result of the recent downturn. While credit markets have improved, global economic growth declined in 2011. A further slowing of growth or global recession could result in a variety
of risks to our business, including deferrals or reductions of customer orders, potential deterioration of customers' ability to pay us or our suppliers' ability to meet their obligations, losses or
impairment charges, reduced revenue, reduced demand for our products, deterioration in our cash balances and liquidity, and increased volatility in energy and raw material prices. Any of the foregoing
could adversely affect our business.

Operating problems in our business may adversely affect our income and cash flow.

The occurrence of significant operating problems at our facilities may have a material adverse effect on the productivity and
profitability of a particular manufacturing facility or on our operations as a whole. Our income and cash flow are dependent on the continued operation of our various production facilities. Our
operations are subject to the usual hazards associated with chemical manufacturing and the related storage and transportation of raw materials, products and wastes, including pipeline, storage tank
and other leaks and ruptures; integrity issues associated with storage caverns; fires; mechanical failure; critical equipment breakdown; labor difficulties; remediation complications; discharges or
releases of pollutants, contaminants or toxic or hazardous substances or gases and other environmental risks; explosions; chemical spills; unscheduled downtime; transportation interruptions; and
inclement weather and natural disasters.

Some
of these hazards may cause personal injury and loss of life, severe damage to or destruction of property and equipment and environmental damage, and may result in suspension of
operations and the imposition of civil, regulatory or criminal penalties. Furthermore, we are also subject to present and future claims with respect to workplace exposure, workers' compensation and
other matters. We carry insurance against potential operating hazards which is consistent with industry norms. If we were to incur a significant liability that was not covered by insurance, it could
significantly affect our productivity, profitability and financial position.

We are subject to intellectual property and other litigation from time to time in the ordinary course of business.

We are currently involved in patent litigation.

In
2005, The Dow Chemical Company ("Dow Chemical") filed a complaint against us for alleged patent infringement. The complaint, filed in the Federal District Court in Delaware,
alleged that certain grades of our SURPASS® polyethylene film resins infringe two Dow Chemical patents. In June 2010, a jury trial took place resulting in a June 15, 2010,
verdict against us which awarded damages in the amount of $61.8 million based on sales of SURPASS resin in the United States through the end of 2009. On July 30, 2010, the court
awarded Dow Chemical pre-judgment interest in the amount of $14.3 million. In a subsequent bench trial, the judge ruled that Dow Chemical had standing to bring the suit, holding
that Dow Chemical continuously owned the patents in suit.

Following
the jury verdict, both parties filed certain motions with the District Court in Delaware, including a motion by Dow Chemical seeking a permanent injunction to require us to
stop importing and selling certain sLLDPE grades of SURPASS resin in the United States. Given the substantial issues for appeal, including the question of Dow Chemical's standing in the case,
the short unexpired term of the patents and the possibility that we would prevail on appeal, the court was not persuaded that entry of a permanent injunction would serve the parties or the public
interest and the judge denied Dow Chemical's motion for a permanent injunction. Accordingly, the court's order allowed us to continue to sell the alleged infringing grades of the SURPASS resin to
existing customers in the United States pending expiration of the patents in October 2011.

We
appealed the verdict to the Court of Appeals for the Federal Circuit ("CAFC") on several grounds. To stay execution (i.e., collection) of the money judgment pending the outcome
of the appeal, we posted a bond in

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the
amount of the jury verdict plus pre-judgment interest as awarded by the court, post-judgment interest at a prescribed statutory rate and costs as determined by the court.
The bond is secured with cash collateral in the amount of $85 million, which is reported as restricted cash on the consolidated statements of financial position. Oral arguments for the appeal
were heard on October 4, 2011. In January 2012, a panel of three CAFC judges affirmed the District Court ruling in a 2-1 non-precedential disposition. In
February 2012, we petitioned the CAFC for anen banc(all members of the CAFC) review of the panel decision and have not yet received
a response.

In
December 2010, Dow Chemical filed a Statement of Claim against us in Federal Court in Canada alleging that certain grades of our SURPASS polyethylene film resins infringe a Dow
Chemical Canadian patent that is related to the U.S. patents subject to the suit in the United States. We filed our statement of defense and counterclaim in March 2011. In
April 2011, the Court ordered the trial to commence in January 2013.

Although
we believe that we do not infringe Dow Chemical's patents and have meritorious defenses and intend to vigorously defend these patent suits, we can give no assurance that we will
be able to achieve a satisfactory outcome.

We
are involved in other litigation from time-to-time in the ordinary course of business. Among these items is a claim filed against us in the Court of Queen's
Bench of Alberta by Dow Chemical Canada ULC and its European affiliate concerning our third ethylene plant at our Joffre site ("E3"). The amount of the claim was initially $120 million,
but, on August 12, 2010, the court granted an application to amend the amended statement of claim to update the damage claims and add new claims. Accordingly, the amount of the claim is now
approximately $300 million. We initially counterclaimed in the same action for approximately $300 million. We have filed an amended statement of defense and counterclaim. The amount of
our counterclaim is now approximately $700 million.

Because
of the inherent uncertainties of litigation, there can be no assurance on the outcome of any litigation. Any litigation or claims brought by or against us, whether with or
without merit, or whether successful or not, could be time consuming, result in substantial costs, require significant amounts of management time, and result in the diversion of significant
operational resources, which could have a material adverse effect on our business, financial condition, results of operations or cash flows.

We are exposed to costs arising from environmental compliance, cleanup and adverse litigation, which may have a substantial adverse effect on our business, financial
condition, operating results and cash flow.

We are subject to extensive foreign, federal, provincial, state and local environmental laws and regulations concerning the
manufacturing, processing and importation of certain
chemical substances, air emissions, water discharges and the generation, handling, storage, transportation, treatment, disposal and cleanup of regulated substances. Our operations involve the risk of
accidental discharges or releases of hazardous materials, personal injury, property and environmental damage. Furthermore, applicable environmental laws and regulations are complex, change frequently
and provide for substantial fines, regulatory penalties and criminal sanctions in the event of non-compliance. We cannot provide assurance that we will not incur substantial costs or
liabilities as a result of such occurrences or the enforcement of environmental laws.

From
time to time, we have entered into consent agreements or been subject to administrative orders for pollution abatement or remedial action. Under some environmental laws, we may be
subject to strict and under certain circumstances, joint and several liabilities for the costs of environmental contamination on or from our properties, and at off-site locations where we
disposed of or arranged for disposal or treatment of hazardous substances, and may also incur liability for related damages to natural resources. We have been named as a potentially responsible party
under the U.S. Comprehensive Environmental Response, Compensation and Liability Act of 1980, or its state equivalents, at several third-party sites. We have a provision in our consolidated
financial statements to cover the estimated costs of remediation of discontinued sites and future environmental liabilities. Nevertheless, we cannot provide assurance that we will not incur
substantial costs and liabilities resulting from future events or unknown circumstances, which exceed our reserves or will be material.

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We could incur significant costs to comply with greenhouse gas emission reduction requirements, which in turn could reduce our operating results and cash flow.

In 2002, Canada ratified the Kyoto Protocol, and agreed to regulate reductions in air emissions that contribute to climate change. In
2007, the Canadian federal government released its plan for reducing industrial air emissions, including an ultimate goal of reducing greenhouse gas ("GHG") emissions by 20% from the 2006 levels by
2020 and by 60 to 70% by 2050. In December 2010, Canada signed the Copenhagen Accord committing to reduce national GHG emissions by 17% from 2005 levels by 2020. In December 2011, Canada
formally withdrew from the Kyoto Protocol indicating a focus on future international agreements.

The
Canadian federal government, recognizing the recent global economic recession and Canada's approximate 2% contribution of global GHGs, has indicated an intent to balance national
environmental and energy policies between economic renewal and sustainable development. In addition, the Canadian federal government has stated that GHG reduction objectives require a systemic
approach of regulating emissions sector by sector and, where appropriate, alignment with the United States. We anticipate legally binding federal GHG emission reduction requirements to be
imposed on our operations in Canada, although the scope and timing for such requirements and the related impacts are uncertain.

Many
Canadian provinces are also considering or implementing GHG emissions reduction legislation. In Alberta, theSpecified Gas Emitters
Regulationunder theClimate Change and Emissions Management Actcame into effect in 2007, imposing annual reductions
requirements. In compliance with the Alberta regulations, we filed annual emission submissions and have satisfied the 12% emission intensity reduction requirements. Recently, the Ontario legislature
passed Bill 185, theEnvironmental Protection Amendment Act (Greenhouse Gas Emissions Trading), providing the foundation for the province's cap and
trade program to reduce GHG emissions. On December 1, 2009, Ontario filed its Greenhouse Gas Emissions Reporting Regulation under the Environmental Protection Act. This regulation came into
force on January 1, 2010 and provides for the annual reporting of GHGs by prescribed facilities that emit 25,000 tons of carbon dioxide equivalent or more per year.

Although
the United States has not ratified the Kyoto Protocol, it is a signatory to the Copenhagen Accord. Additionally, a number of federal laws and regulations related to GHG
emissions are being considered by the U.S. Environmental Protection Agency ("EPA") and in Congress.

In
September 2009, the EPA issued the Final Mandatory Reporting of Greenhouse Gases Rule requiring facilities that emit more than 25,000 tons of GHGs per year to collect
data beginning January 1, 2010 with the first annual reports due March 31, 2011. In May 2010, the EPA released thePrevention of Significant Deterioration
and Title V Greenhouse Gas Tailoring Ruleimposing requirements upon new and modified major stationary sources emitting more than 75,000 tons of GHGs per year. The
emissions from NOVA Chemicals' U.S.-based facilities are significantly below the threshold and are not subject to this rule.

Due
to the uncertainty of long term regulatory requirements, we cannot provide assurance that we will not incur substantial costs to meet GHG emission reduction requirements or whether
they will be material.

We are dependent upon certain key members of management.

Our success depends to a significant degree on the abilities and efforts of our senior management. Moreover, our success depends on our
ability to attract, retain and motivate qualified management, technical and sales personnel. These people are in high demand and often have competing employment opportunities. The labor market for
skilled employees in the plastics and chemical industry is competitive, and we may lose key employees or be forced to increase compensation to retain these people. Employee turnover could
significantly increase our employee costs. The loss of key personnel, or the failure to attract qualified personnel, could have a material adverse effect on our business, financial condition or
results of operations.

We may be subject to losses that are not covered by insurance.

We carry comprehensive liability and property (including fire and extended perils) insurance on all of our facilities, with deductibles
and other policy specifications and insured limits customarily carried in the petrochemical industry for similar properties. In addition, some types of losses, such as losses resulting from war are
not insured. We determine coverage limits based on what we believe to be a reasonable maximum

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foreseeable
loss scenario for our operations. In the event that an uninsured loss or a loss in excess of insured limits occurs, we will not be reimbursed for the cost to replace capital invested in
that property, nor insured for the anticipated future revenues derived from the manufacturing activities conducted at that property, while we could remain obligated for any indebtedness or other
financial obligations related to the property. Any such loss could adversely affect our business, results of operations or financial condition.

We have made and may continue to make investments in entities that we do not control.

We have established joint ventures and made minority interest investments designed to, among other things, increase our vertical
integration, enhance customer service and increase efficiencies in our marketing and distribution. Our principal jointly controlled asset is the E3 facility. There is a significant risk that,
as a result of differing views and priorities, there will be occasions when the joint venture parties do not agree on various matters and any such disagreements may result in delayed decisions,
disputes or litigation (such as the litigation concerning the E3 facility discussed earlier in these risk factors), which could adversely affect our business.

Labor disputes could have an adverse effect on our business.

As of December 31, 2011, we had approximately 2,450 employees globally. Approximately 300, or 12%, of our North American
employees are represented by unions under two separate collective bargaining agreements that expire on March 15, 2012 and March 31, 2013. We expect to renew the contract that is due to
expire on March 15, 2012. However, if we are unable to negotiate acceptable contracts with these unions upon expiration of an existing contract or other employees were to
become unionized, we could experience work stoppages, a disruption in operations or higher labor costs, which could have an adverse effect on our business, financial condition, results of operations
or cash flow.

Our business is dependent on its intellectual property. If our patents are declared invalid or our trade secrets become known to our competitors, our ability to compete may
be adversely affected.

Proprietary protection of our processes, apparatuses and other technology is important to our business. Consequently, we rely on
judicial enforcement for protection of our patents. While a presumption of validity exists with respect to patents issued to us in the United States and Canada, there can be no assurance that
any of our patents will not be challenged, invalidated or circumvented. Furthermore, if any pending patent application filed by us does not result in an issued patent, then the use of any such
intellectual property by our competitors could have an adverse effect on our businesses, financial condition, results of operations or cash flow. Additionally, our competitors or other third parties
may obtain patents that restrict or preclude our ability to produce or sell our products lawfully in a competitive manner, which could have an adverse effect on our business, financial condition,
results of operations or cash flow.

There
are numerous recent changes to the U.S. patent laws and proposed changes to the rules of the U.S. Patent and Trademark Office ("USPTO"), which may have a significant
impact on our ability to protect our technology and enforce our intellectual property rights. For example, on September 16, 2011, President Obama signed the America Invents Act which codifies
several significant changes to the U.S. patent laws, including, among other things, changing from a "first to invent" to a "first inventor to file" system, limiting where a patentee may
file a patent suit, requiring the apportionment of patent damages, replacing interference proceedings with derivation actions, and creating a post-grant opposition process to
challenge patents after they have issued. The effects of these changes are currently unclear as the USPTO must still implement various regulations, the courts have yet to address any of these
provisions and the applicability of the act and new regulations on our patents have not been determined and would need to be reviewed.

We
also rely upon unpatented proprietary know-how and continuing technological innovation and other trade secrets to develop and maintain our competitive position. While it
is our policy to enter into confidentiality agreements with our employees and third parties to protect our intellectual property, these confidentiality agreements may be breached and, consequently,
may not provide meaningful protection for our trade secrets or proprietary know-how, or adequate remedies may not be available in the event of an unauthorized use or disclosure of such
trade secrets and know-how. In addition, others could obtain knowledge of such trade secrets through independent development or other access by legal means. Although we do not regard any
single patent

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or
trademark as being material to our operations as a whole, the failure of our patents or confidentiality agreements to protect our processes, apparatuses, technology, trade secrets or proprietary
know-how could have an adverse effect on our business, financial condition, results of operations or cash flow.

Litigation
may be necessary to enforce our intellectual property rights and protect our proprietary information, or to defend against claims by third parties alleging that we infringe
third-party intellectual property rights (such as the litigation concerning Dow Chemical's patents discussed earlier in these risk factors). Any intellectual property litigation or claims against us
could result in the loss or compromise of our intellectual property and proprietary rights, could subject us to significant liabilities, require us to seek licenses on unfavorable terms, if available
at all, prevent us from manufacturing or selling products and require us to redesign, relabel or, in the case of trademark claims, rename our products, any of which could have a material adverse
effect on our business, financial condition, results of operations or cash flows.

Failure to adequately protect critical data and technology systems could materially affect our operations.

Information technology system failures, network disruptions and breaches of our data security or information technology systems,
including our distributed controls systems, could disrupt our operations by causing delays or cancellation of customer orders or impeding the manufacture or shipment of products, processing
transactions and reporting financial results. Such failures, disruptions or breaches could result in the unintentional disclosure of customer or our information, or damage to our reputation. While
management has taken steps to address these concerns by implementing network security and internal control measures, there can be no assurance that a system failure or data security or information
technology system breach will not have a material adverse effect on our financial condition and results of operations.

Our future required level of pension contributions could be unfavorably impacted by market volatility.

We currently maintain four defined benefit plans in North America covering various categories of employees and retirees. Funding
obligations are determined using actuarial valuations that are based on certain assumptions about the long-term operation of the plans, including future salary increases, mortality rates,
future pension increases, termination and retirement rates and the performance of the financial markets and interest rates. If future events differ from the assumptions, the amount we are obligated to
contribute to the plans may increase or decrease. If assets underperform our assumptions or if interest rates are lower than assumed, we may have to make larger contributions to the plans than we
would otherwise have to make.

In
2008 and early 2009, we experienced significant declines in the value of our pension plan assets due to the adverse conditions in the equity markets globally. In response to the
financial pressures and adverse market conditions placed on plan sponsors, U.S. federal and the Canadian provincial legislators enacted temporary funding relief measures. In 2010, our Canadian
plans were funded based on these temporary measures. In
2011, some of these measures expired resulting in our funding obligations increasing significantly over 2010. Valuations for funding purposes are required for all defined benefit plans as of
December 31, 2011 and these will determine the funding requirements for 2012. It is anticipated the valuations will show further deterioration in the funding status of the plans due to a
combination of weak asset growth and significant increases in liabilities as a result of further decreases in interest rates. In 2012, we expect another significant increase in employer contributions
as the remaining funding relief measures have expired and larger special payments are required to address the increased shortfall between pension assets and liabilities. In addition, if economic
conditions deteriorate further, we will be required to make larger contributions in future years than we would otherwise have to make. Reported results could be materially and adversely affected, and
our cash flow available for other uses could be significantly reduced.

Our business may be adversely affected by fluctuations in currency exchange rates and other risks associated with international operations.

Although we report our financial results in U.S. dollars, we conduct a significant portion of our business outside the
United States, and we are subject to risks normally associated with international operations.

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Our
financial results are impacted by transaction currency effects resulting from changes in currency exchange rates. Transaction currency effects occur when one of our subsidiaries
incurs costs or earns revenue in a currency different from its functional currency. This can impact our financial results in two ways:



Fluctuations
in exchange rates may also affect the relative competitive position of a particular manufacturing facility, as well as our ability to market our products successfully in
other markets.

Other
risks of international operations include trade barriers, tariffs, exchange controls, national and regional labor strikes, social and political risks, general economic risks,
required compliance with a variety of foreign laws, including tax laws, and the difficulty of enforcing agreements and collecting receivables through foreign legal systems.

Risks Relating to Our Indebtedness

We have a significant amount of debt, which could adversely affect our financial condition.

We have a significant amount of indebtedness. As of December 31, 2011, we had (a) total indebtedness of approximately
$1,741 million and (b) additional amounts of $565 million available for borrowing under our credit facilities (less $17 million utilized as of December 31, 2011),
subject to customary conditions. In addition, subject to the restrictions in our credit facilities and our indentures, we may incur significant additional indebtedness from time to time, including
debt to finance our NOVA 2020 growth projects.

The
level of our indebtedness could have important consequences, including:



If
new debt is added to current debt levels, the related risks described above would intensify. If financing is not available when required or is not available on acceptable terms, we
may be unable to grow our business, take advantage of business opportunities, respond to competitive pressures or refinance maturing debt, any of which could have a material adverse effect on our
operating results and financial condition.

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We will require a significant amount of cash to service our indebtedness and our ability to generate cash depends on many factors beyond our control.

Our ability to make payments on and to refinance our indebtedness will depend on our ability to generate cash. Our ability to fund
working capital and planned capital expenditures will also depend on our ability to generate cash in the future. We have a significant amount of indebtedness, of which as of December 31, 2011,
$760 million is scheduled to mature between 2013 and 2016. We cannot provide any assurance that:



Factors
beyond our control will affect our ability to make these payments and refinancings. These factors could include those discussed elsewhere in this annual report on
Form 20-F, including under this "Risk Factors" section and under "Disclosure Regarding Forward-Looking Information."

If
we cannot generate sufficient cash from our operations to meet our debt service obligations, we may need to reduce or delay capital expenditures or curtail research and development
efforts. In addition, we may need to refinance our debt, obtain additional financing or sell assets, which we may not be able to do on commercially reasonable terms, if at all. We cannot provide any
assurance that our business will generate sufficient cash flow, or that we will be able to obtain funding, sufficient to satisfy our debt service obligations.

Our debt agreements restrict our ability to take certain actions.

The agreements governing our indebtedness impose significant operating and financial restrictions on us and our subsidiaries. These
restrictions may restrict our ability to pursue our business strategies, such as acquisitions or joint ventures, or engage in other favorable business activities.



Our indentures governing our public debt contain various covenants that limit our ability to engage in certain transactions, including
the ability to create liens or engage in sale and leaseback transactions and could reduce the available capacity under our revolving credit facilities.



We currently have three revolving credit facilities aggregating $565 million of borrowing capacity. As of December 31,
2011, $17 million of the available $565 million borrowing capacity was utilized. While each of the credit facilities contains typical affirmative and negative covenants, which are
substantially the same, our senior secured revolving credit facility, as well as our accounts receivable securitization programs, contain financial covenants, which require quarterly compliance. Our
ability to meet the financial covenants may be impacted by events beyond our control, and we may not be able to satisfy these covenants in the future.

Our
credit facilities also contain restrictive covenants that limit our ability, and the ability of our restricted subsidiaries to, among other things: incur additional liens; sell
certain assets; make distributions on or repurchase equity; incur additional debt; enter into hedging agreements; enter into operating leases; engage in reorganizations or mergers; and change the
character of our business.

A
breach of any of these provisions could permit the lenders to declare all amounts outstanding under the credit facilities to be immediately due and payable and to terminate all
commitments to extend further credit. If we were unable to repay those amounts, the lenders under our senior secured revolving credit facility could proceed against the collateral granted to them to
secure that debt.

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A downgrade in the ratings of our debt securities could result in increased interest and other financial expenses related to future borrowings and could restrict our access
to additional capital or trade credit.

Standard & Poor's Corporation, Moody's Investor Service, Inc., Dominion Bond Rating Service Limited ("DBRS") and Fitch
Ratings Ltd. maintain credit ratings for our debt securities. Except for the DBRS rating, each of these ratings is currently below investment grade. Any decision by these or other ratings
agencies to downgrade such ratings in the future could result in increased interest and other financial expenses relating to our future borrowings and could restrict our ability to obtain additional
financing on satisfactory terms, if at all. In addition, any downgrade could restrict our access to, and negatively impact the terms of, trade credit extended by our suppliers of raw materials.

We are controlled by IPIC, whose interests may not be aligned with the interests of our debt holders.

A holding company controlled by IPIC currently owns all of our equity and, therefore, IPIC has the power to control our affairs and
policies. It also controls the election of directors, the appointment of management, the entering into mergers, sales of substantially all of our assets and other
extraordinary transactions. The directors have authority, subject to the terms of our debt, to issue additional stock, declare dividends and make other decisions.

The
interests of IPIC and its affiliates could conflict with the interests of the holders of our debt. For example, if we encounter financial difficulties or are unable to pay our debts
as they mature, the interests of IPIC, as equity holders, might conflict with the interests of our debt holders. IPIC and its affiliates may also have an interest in pursuing acquisitions,
divestitures, financings or other transactions (including integrating us with another IPIC-controlled petrochemical company) that, in its judgment, could enhance its equity investments,
even though such transactions might involve risks. Additionally, IPIC and its affiliates are in the business of making investments in companies, and may from time to time in the future acquire
interests in businesses that directly or indirectly compete with certain portions of our business or are suppliers or customers of ours.

Item 4.    Information on the Company

4.A.    HISTORY AND DEVELOPMENT OF THE COMPANY

NOVA Chemicals Corporation

NOVA Chemicals' predecessor, NOVA Corporation of Alberta, was incorporated in 1954 by Special Act of the Legislative Assembly of the
Province of Alberta. On May 10, 1994, NOVA Corporation of Alberta filed articles of arrangement under the Business Corporations Act of Alberta (the "Act") to complete a reorganization
pursuant to which it became a wholly owned subsidiary of NOVA Corporation ("NOVA"), changed its name to NOVA Gas Transmission Ltd. and its common shareholders became the common shareholders of
NOVA. At the same time, NOVA also became the parent corporation of Novacor Chemicals Ltd. and NOVA Gas International Ltd. Novacor Chemicals Ltd.'s name was changed to NOVA
Chemicals Ltd. in March 1996.

On
July 2, 1998, NOVA and TransCanada PipeLines Limited ("TransCanada") completed a merger of equals by way of a plan of arrangement (the "TransCanada Arrangement") under
the Act. Under the terms of the TransCanada Arrangement, shareholders of NOVA exchanged each NOVA common share for 0.52 of a
TransCanada common share. As part of the TransCanada Arrangement, TransCanada distributed to its common shareholders, including all of the former common shareholders of NOVA, all of the common shares
of NOVA on the basis of 0.2 of a NOVA common share for each TransCanada common share. At the time of the distribution of NOVA common shares, the only material asset of NOVA was all of the common
shares of NOVA Chemicals Ltd.

As
a result of the TransCanada Arrangement, NOVA continued to conduct the commodity plastics and chemical businesses through NOVA Chemicals Ltd., and TransCanada began to conduct
the energy services businesses formerly carried on by NOVA, through NOVA's former subsidiaries, NOVA Gas Transmission Ltd. and NOVA Gas International Ltd.

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On
December 31, 1998, NOVA Chemicals Ltd. changed its name to NOVA Chemicals Corporation. Effective January 1, 1999, NOVA Chemicals Corporation amalgamated with NOVA
under the Act and the resulting corporation adopted the name NOVA Chemicals Corporation.

On
April 14, 2004, NOVA Chemicals Corporation was continued under the Canada Business Corporations Act.

On
July 6, 2009, IPIC, which is wholly owned by the government of the Emirate of Abu Dhabi, completed the acquisition of NOVA Chemicals Corporation by way of a plan of arrangement
(the "Arrangement") under the Canada Business Corporations Act. Pursuant to the Arrangement, a wholly owned subsidiary of IPIC, acquired all of our issued and outstanding common shares. On that
same day, NOVA Chemicals was continued under theBusiness Corporations Act(New Brunswick), and our common shares were delisted from the
New York Stock Exchange and the Toronto Stock Exchange.

We
are a corporation continued under the laws of the Province of New Brunswick, Canada, with our principal place of business located at
1000-7th Avenue S.W., Calgary, Alberta, Canada T2P 5L5. Our telephone number is (403) 750-3600.

Development of NOVA Chemicals Corporation



21

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Developments since January 1, 2011



22

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Events Subsequent to December 31, 2011



For
a description, including the amount invested, of our principal capital expenditures since the beginning of our last two fiscal years, see the "Liquidity and Capital Resources"
section in our "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in this annual report under
"Item 5  Operating and Financial Review and Prospects."

4.B.    BUSINESS OVERVIEW

General

Our principal business is the production and marketing of plastics and chemicals. We operate an Olefins/Polyolefins business unit that
produces and markets ethylene, polyethylene, higher-value polyethylene manufactured using our Advanced SCLAIRTECH technology, and a variety of chemical and energy products (commonly known as
co-products). We also operate a Performance Styrenics business that produces and markets EPS and ARCEL® resin.

Our
polyethylene and styrenic polymer resins are used in a wide range of applications including rigid and flexible packaging, containers, plastic bags, plastic pipe, consumer
electronics, building and construction materials, housewares and other industrial and consumer goods.

Ethylene
is a basic chemical used to manufacture a wide variety of polymers and other chemical products. Ethylene production in excess of our internal consumption requirements is sold to
third parties.

We
produce polyethylene primarily from our internal ethylene production. We produce the following varieties of polyethylene: high-density polyethylene ("HDPE"),
low-density polyethylene ("LDPE") and linear low-density polyethylene ("LLDPE"). In addition, we develop and market higher value LLDPE and HDPE manufactured using our Advanced
SCLAIRTECH technology, including SURPASS and some SCLAIR® polyethylene resins.

Styrene
monomer is a basic chemical used to manufacture a wide variety of polymers and other chemical products. We have a minority interest in LyondellBasell Industries'
("LyondellBasell") propylene oxide/styrene monomer ("PO/SM") facility in Channelview, Texas and an associated long-term styrene monomer processing agreement to acquire styrene monomer that
provides sufficient styrene monomer supply for the operation of our Performance Styrenics business.

In
addition to our principal business of producing and marketing plastics and chemicals, we have a licensing business. For example, we offer for license our proprietary polyethylene
SCLAIRTECH process technology and catalyst technology. We also license our Performance Styrenics business's technology such as its cup and container bead technology.

23

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2011 Financial Highlights

(millions of U.S. dollars)

Revenue from
continuing operations

Operating profit from
continuing operations(1)Olefins/Polyolefins(2)

$
4,957

$
1,125Performance Styrenics

$
327

$
7


(1)Profit
from continuing operations before finance costs, net, income taxes, and other losses, net. See "Supplemental Measures."(2)Olefins/Polyolefins
consists of the Joffre Olefins, Corunna Olefins, and Polyethylene segments.


Properties and Production Facilities

Our products are manufactured at seven sites in North America. All production facilities are owned by us (except LyondellBasell's PO/SM
facility in Channelview, Texas, in which we have a minority interest, and the E3 manufacturing plant at Joffre, Alberta, in respect of which we and Dow each own 50%). With the exception of the
Channelview facility, we own the land on which our production facilities are located.

In
addition to our production facilities, we lease or own office space in numerous locations, mostly in North America. Our head office is located in Calgary, Alberta. Our
United States commercial center is located in Moon Township, Pennsylvania.

The
following chart and tables show our plastics and chemical product flow and production facilities.

NOVA Chemicals Product Flow Chart

GRAPHIC

---

Notes:

24

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Facility Profile (Olefins/Polyolefins)

Rated CapacitySite

Feedstocks

Main Products

(mmlbs/year)

(kilotonnes/year)1.Joffre, Alberta

Ethane/Propane

Ethylene (E1)


1,600


730Ethane/Propane

Ethylene (E2)


1,800


820Ethane

Ethylene (E3)(1)


1,400


640Co-products(2)


830


380Ethylene

LLDPE (PE1)


1,480


670LLDPE & HDPE (PE2)


950


4302.Corunna, Ontario

Ethane, Butane, Propane, Crude Oil, Naphtha, Condensates

Ethylene(3)


1,800


820Co-products(3)


4,700


2,1303.St. Clair River, Corunna, Ontario

Ethylene

HDPE


450


2054.Mooretown, Ontario

Ethylene

HDPE


465


210LDPE


375


170TOTAL ETHYLENE PRODUCTION CAPACITY (Design Production)


6,600


2,990
*TOTAL POLYETHYLENE PRODUCTION CAPACITY


3,720


1,685
*


Notes: (1)The
annual design production capacity of E3 totals 2.8 billion pounds and is divided between Dow and us. Our share of the production capacity
is 50%.(2)Production
capacity is variable and depends on the feedstock used.(3)Ethylene
design capacity is 1.8 billion pounds per year and propylene design capacity is 900 million pounds per year, resulting in
4.7 billion pounds per year of co-product capacity. In both cases, capacity is dependent on feedstock mix.*Difference
between total and individual plant values attributable to rounding.


Facility Profile (Performance Styrenics)

Rated CapacitySite

Feedstocks

Main Products

(mmlbs/year)

(kilotonnes/year)Styrene Monomer1.Channelview, Texas(1)

Benzene, Ethylene

Styrene Monomer


400


180TOTAL STYRENE MONOMER PRODUCTION CAPACITY


400


180Styrenic Polymers1.Monaca, Pennsylvania

Styrene Monomer

ARCEL and EPS


250


1152.Painesville, Ohio

Styrene Monomer

EPS


100


45TOTAL STYRENIC POLYMERS PRODUCTION CAPACITY


350


160


Note: (1)This
represents a minority interest in the LyondellBasell Channelview, Texas PO/SM facility and the long-term styrene monomer processing
agreement associated with that interest.


Our Business Segments

OLEFINS/POLYOLEFINS

Our Olefins/Polyolefins business unit produces ethylene and polyethylene. As part of the ethylene production process, and in the
preparation of feedstocks for this process, we also produce a number of co-products.

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Our
Joffre, Alberta, site is integrated with the AEGS pipeline system, which connects large-scale ethane extraction plants and ethane storage facilities to our ethylene plants.

We
have contracts for ethylene and ethane storage for our Joffre facility. During 2011, we agreed to additional new long-term storage arrangements to supplement our current
storage capacity.

The
Joffre Feedstock Pipeline ("JFP"), which began operations in 2005, is also integrated with the Joffre site and connects NGLs production and storage facilities in Fort Saskatchewan,
Alberta to the Joffre site. JFP is currently used to transport propane feedstock to Joffre, and we are the sole shipper on the pipeline. Ethylene produced at Joffre is fed directly to onsite
polyethylene production at Joffre, as well as to customers at Joffre, Prentiss, Edmonton and Scotford, Alberta, and to storage and customers at Fort Saskatchewan, Alberta through the ethylene delivery
system ("EDS") that is integrated with our Joffre site. Both JFP and EDS are owned by AltaGas, but we operate both assets.

Our
Corunna, Ontario, ethylene facility is connected to multiple pipeline and rail systems that, in conjunction with the facility's flexible feedstock capabilities, enable us to optimize
our feedstock slate. The Corunna facility provides ethylene by pipeline to our polyethylene production facilities in Mooretown, Ontario, and our St. Clair River site in Corunna, Ontario. The
Corunna facility also sells ethylene into the Sarnia, Ontario area.

We
have onsite storage for our feedstock and products which we supplement with some short-term storage contacts at nearby third-party facilities. During 2011, we agreed to additional new
long-term storage arrangements to supplement our current storage capacity. We expect this new storage to be available to us by the middle of 2012.

For
financial reporting purposes, we have three reportable segments as part of our Olefins/Polyolefins business unit: Joffre Olefins, Corunna Olefins and Polyethylene.



We have annual production capacity of approximately 6.6 billion pounds of ethylene (excluding Dow's share of E3). Ethylene is a
commodity chemical that we produce through thermal cracking, or pyrolysis, of various feedstocks, a process that uses high temperatures to break down the carbon chains. The feedstocks used to produce
ethylene are NGLs, including ethane, propane and butane, and crude oil derived feedstocks, including naphtha and gas oils. The most common feedstocks used by us are ethane and, to a lesser extent
other NGLs, crude oil and naphtha. Ethylene is used in the manufacture of polyethylene, styrene monomer, styrenic polymers and polyvinyl chloride, as well as chemical intermediates such as ethylene
oxide, ethylene glycol, ethylene dichloride and vinyl acetate.



Co-products are produced in the ethylene manufacturing process and can be grouped into two categories: chemical
co-products and energy co-products. Chemical co-products include propylene, benzene, and butadiene  building blocks that are
used to make items such as tires, carpet and clothing fibers, or various household goods. Energy co-products include gasoline additives and fuel oil. The profitability of
co-products depends on energy prices and the supply and demand balance for each co-product. Co-product production depends on the feedstock mix. Total
co-product production capacity is approximately 5.5 billion pounds per year and depends on the feedstock mix used in the facilities. The majority of the co-products
produced at our Joffre, Alberta, and Corunna, Ontario, facilities are sold to third parties in markets in Alberta, Ontario and the U.S. However, some co-products are consumed
internally by us either as fuel or for the production of other products.

We
produce ethylene and co-products at two locations, Joffre, Alberta, and Corunna, Ontario. At Joffre, Alberta, we have three production units, E1, E2, and E3. In Corunna,
Ontario, we have one production unit.

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We have annual production capacity of approximately 3.7 billion pounds of polyethylene. Polyethylene is produced through the
polymerization of ethylene. We produce polyethylene from ethylene supplied from our Joffre, Alberta, and Corunna, Ontario, facilities at three locations in Canada: Joffre, Alberta; St. Clair
River, Corunna, Ontario; and Mooretown, Ontario.

We
have two polyethylene plants located at Joffre, Alberta, PE1 and PE2. PE1 has annual production capacity of approximately 1.48 billion pounds and produces LLDPE from
ethylene supplied from E1, E2 and E3. PE1 currently utilizes the NOVACAT® family of catalysts that was developed by us and our catalyst development partner, INEOS, as well as our
proprietary gas-phase process technology originally licensed from Union Carbide Corporation ("UCC"). The licenses from UCC are fully paid and the obligations of confidence and
non-use pursuant to these licenses have expired. Accordingly, we pay no royalties for the use of this technology and independently sustain and develop this technology as used in our
facilities. PE2 has annual production capacity of approximately 950 million pounds. PE2 uses Advanced SCLAIRTECH technology to produce our SURPASS and some SCLAIR polyethylene
resins from ethylene supplied from E1, E2 and E3.

We
have a polyethylene plant located at the St. Clair River site in Corunna, Ontario, which has annual production capacity of approximately 450 million pounds. The
St. Clair plant utilizes our proprietary SCLAIRTECH technology and typically manufactures HDPE at this plant, but can also manufacture LLDPE. Ethylene feedstock is supplied from the Corunna,
Ontario, olefins facility.

We
have a polyethylene site located near Mooretown, Ontario, that has an annual production capacity of approximately 840 million pounds. Ethylene feedstock is supplied from our
Corunna, Ontario olefins facility. One of the lines at the site currently uses our proprietary gas-phase process technology originally licensed from UCC to produce HDPE and the other line
at the site currently uses our proprietary high pressure process technology, also originally licensed from UCC, to produce LDPE. These licenses from UCC are fully paid and the obligations to UCC of
confidence and non-use pursuant to these licenses have expired. In 2010, we completed a modernization and expansion project on our LDPE line. In late 2011, our Mooretown LDPE facility
suffered an unplanned shutdown. We will need to perform extensive repairs to return the facility to full operations, which we expect will be completed in the second quarter of 2013. In the interim, we
have modified the facility and are in the process of recommissioning to test the
capability of the modified facility. It is our intent to operate the modified facility with lower production rates and a reduced product slate until the final repairs are completed.



After acquiring SCLAIRTECH technology in 1994, we further developed the technology and, in December 1996, announced that we had
developed Advanced SCLAIRTECH technology. Advanced SCLAIRTECH solution-phase technology yields higher value polyethylene resins that we believe provide several advantages over standard polyethylene
resins, such as clarity and toughness in end-use products manufactured by our customers.

Advanced
SCLAIRTECH technology used at PE2 includes two proprietary catalyst systems. The Ziegler-Natta ("Z-N") catalyst introduced in 2001 is used to make our line of
SCLAIR polyethylene products. These are octene-based polyethylene grades used primarily for film applications. In 2003, we commercialized a single-site catalyst using Advanced SCLAIRTECH
technology and introduced a series of new polyethylene products under the trademark SURPASS. SURPASS resins have been commercialized for film, rotational molding and thin wall injection molding
applications.



We have three ethylene production facilities at Joffre, Alberta: E1, E2 and E3 (E3 is 50% owned by Dow). These three plants have
an annual production capacity of approximately 1.6, 1.8 and 2.8 billion pounds of ethylene (including Dow's share of E3 production capacity), respectively, for a total annual combined
capacity of 6.2 billion pounds. The combined co-product production capacity of E1, E2 and E3 is approximately 830 million pounds per year, depending on the
feedstock used.

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Approximately
half of the ethylene production capacity at these facilities (excluding Dow's share of E3 production capacity) is used internally to support our Joffre polyethylene
production and the rest is sold to third parties. Third-party sales are facilitated through a variety of medium to long-term contracts. These contracts typically contain pricing mechanisms
that include a cost recovery component and a market-based component.

All
of the ethylene plants at the Joffre site use ethane as their primary feedstock. Ethane is typically supplied under contracts with the owners of NGLs extraction and fractionation
plants located in Alberta. While some of these arrangements are expiring in the next few years, most of these supply agreements have five to 10 years remaining on their terms with the
possibility of renewal by the parties. The price we pay under these agreements typically consists of two components: (1) the cost to replace the energy content of the ethane extracted from the
gas stream (this component varies with the price of natural gas; we may pay the owner for replacement natural gas or purchase or swap natural gas to physically replace the energy content of the
ethane) and (2) a fee to cover an agreed upon portion of the costs of plant operation and return on invested capital (this component may be fixed or vary with production). We supplement our
ethane supplies through spot purchases. Virtually all of the ethane requirements for the Joffre site are transported via AEGS. Under a transportation agreement, we have the right to ship ethane on
AEGS. We have also entered into an operating agreement with Veresen, the owner of AEGS, under which we are responsible for the physical operation of AEGS, while Veresen has responsibility for all
commercial aspects of AEGS operations. We have the flexibility to use propane, via JFP, in addition to ethane for a portion of the Joffre feedstock requirements.

We
continuously look for opportunities to expand and diversify our feedstock flexibility and supply to enhance our operational flexibility and support longer-term growth
opportunities. In July 2007, the Alberta government released details of its "incremental ethane extraction policy" that provides incentives for value-added production and use of ethane in the
province, and in 2011 the policy was modified to include ethane/ethylene mix from oil sands off-gas. During 2011, we took advantage of this program and entered into a long-term
agreement with Williams for a feedstock supply of an ethane/ethylene mix (also called "olefinic ethane") to be extracted from off-gas produced at oil sands upgrading facilities located at
Fort McMurray, Alberta. We plan to continue to explore opportunities to take advantage of this policy in an effort to enhance and diversify the feedstock supplies for the ethylene crackers at our
Joffre manufacturing facility. We cannot provide any assurance that we will be successful in this endeavor or that the policy will not be amended or modified to our detriment or discontinued.

We
continue work with suppliers, the Alberta government and pipeline companies to source additional supply for our feedstock needs. These sources could include, among others: additional
supplies of ethane recovered from natural gas production that is associated with rapidly increasing shale based crude oil production in North Dakota; ethane from off-gas produced at
Alberta's oil sands; the streaming of natural gas with low ethane content for industrial consumption in Alberta, with the expected result that high ethane content natural gas will flow through the
Straddle Plants; and ethane from large new gas finds in Alberta, British Columbia and northern sources. There can be no assurances on the timing, volume or ethane content from any of
these sources.

During
2011, we made significant progress in both sourcing additional ethane and diversifying our feedstock supply from ethane based on natural gas flows exported from Alberta, which
support our efforts to increase the utilization of our Joffre based facilities. In 2012 and 2013, we will work to operationalize these new sources.

Two
examples of new sources of feedstock that we secured in 2011 in an effort to reduce our reliance on ethane derived from natural gas exports from Alberta,
Canada, are:



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In
addition to the new diverse sources of feedstock discussed above, on March 1, 2011, we entered into a definitive agreement with AltaGas for incremental long-term
supply of ethane and other NGLs from AltaGas' Alberta-based Harmattan-Elkton Gas Plant. We expect to begin receiving these volumes starting in the second quarter of 2012.

As
part of the ethylene production process at Joffre, we produce approximately 830 million pounds of co-products per year, depending on the feedstock used.
Co-products, other than hydrogen and carbon dioxide, are shipped by railcar to markets in Alberta, Ontario and the U.S. Gulf Coast.



Our Corunna, Ontario olefins facility, located near Sarnia, Ontario, has an annual production capacity of approximately
1.8 billion pounds of ethylene and 900 million pounds of propylene. In both cases, capacity is dependent on feedstock mix. The Corunna olefins facility has the flexibility to process a
wide range of hydrocarbon feedstocks including ethane, propane, butane, crude oil, naphtha and condensates, to produce ethylene and co-products for use by our downstream operations and for
sale to third parties. The feedstock chosen depends on market conditions and is determined by using a linear program that calculates the optimal feedstock mix to produce the most
profitable mix of products. The majority of ethylene production from the Corunna olefins facility is used internally by us to produce polyethylene.

The
blend of feedstocks processed in the Corunna, Ontario olefins facility determines the range of co-products obtained, with heavier feedstocks such as naphtha producing
more co-products. The facility has a production capacity of approximately 4.7 billion pounds of co-products per year.

Feedstocks
for the Corunna, Ontario olefins facility are obtained from a wide variety of sources. Crude oil, condensate and naphtha are the main heavy feedstocks processed at the
facility. Propane and butane are the main NGL feedstocks processed at the Corunna facility. Our feedstocks are sourced from western Canadian and local producers, as well as United States
sources, principally by pipeline and rail. During 2012, we expect to utilize ethane/propane mix (also called "EP") from Conway, Kansas as part of our strategy to shift towards lighter feedstocks.

In
2011, we signed definitive agreements for the long-term supply of ethane from the Marcellus Shale Basin with Caiman and Range. We also signed a transportation services
agreement with Sunoco to transport the ethane from Pennsylvania to the Sarnia, Ontario, region. Between these two ethane supply agreements and a third memorandum of understanding with Statoil for a
long-term supply of ethane from the Marcellus Shale Basin, we have secured substantially all of the ethane we require to support the conversion of our Corunna cracker to utilize up to 100%
NGLs. The conversion, which is expected to cost approximately $250 million, is currently underway with an expected completion date in the first quarter of 2014. We expect to begin to use ethane
supplied from the Marcellus Shale Basin to supplement our other sources of feedstock beginning before the end of 2013.

After
the completion of this project we will utilize NGLs as our primary feedstocks and while we will retain the flexibility to use heavier feedstocks such as naphtha when market
conditions are favorable, the use of heavy feedstocks is expected to be minimal, if at all. This change to lighter feedstocks will reduce the total volume of co-products produced at
the facility.



In June 2000, we, ATCO Power Canada Ltd. ("ATCO"), and Capital Power (Alberta) Limited Partnership ("Capital Power")
opened a natural gas-fired cogeneration power plant with a nominal installed peak capacity of 480 megawatts at our production site at Joffre, Alberta. The power plant supplies the
electrical needs for the

29

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entire
Joffre site, with excess power sold to Alberta's provincial power grid. The facility also provides steam to certain production facilities within the site. We jointly own the cogeneration
facility with ATCO and Capital Power, with ATCO serving as the facility operator. Our interest is 20% while ATCO and Capital Power each have a 40% interest.

PERFORMANCE STYRENICS

Our Performance Styrenics segment includes our EPS and ARCEL resin assets and our minority interest in LyondellBasell's PO/SM facility
in Channelview, Texas.

The
long-term styrene monomer processing agreement associated with our interest in LyondellBasell's PO/SM facility provides sufficient styrene monomer supply for the
operation of our Performance Styrenics business. We sell our excess styrene to third-party customers.



We produce EPS at our Beaver Valley site at Monaca, Pennsylvania, and at our Painesville, Ohio, facility. EPS resins are used in
applications such as foam cups, noodle bowls, takeout and ice cream containers, insulation board and foam packaging. Our EPS cup and container resin is sold under the trademark DYLITE®.

Our
Beaver Valley site in Monaca, Pennsylvania, also produces ARCEL resin, which contains polystyrene and polyethylene. This expandable bead is sold into the protective packaging market.
In addition to producing ARCEL resins at our Beaver Valley site, ARCEL resin is also produced near Shanghai, China under an agreement with Ningbo Chang-Qiao Engineering
Plastics Co., Ltd., an affiliate of Loyal Chemical Industrial Corporation.

Distribution of Products

Our products are marketed primarily through our sales force, with support from established distributors, agents and traders. Canadian
products are sold into the United States primarily through our subsidiary, NOVA Chemicals Inc., for resale through distribution arrangements. Our subsidiary, NOVA Chemicals
(International) S.A., sells in Europe, Asia, Africa, Australia, and Latin America either directly or through distribution arrangements. Distribution agreements among our affiliates provide for
arm's length pricing.

The
following table summarizes, for the years ended December 31, 2011 and 2010, the geographic segments in which we sell our products and the percentage of sales from continuing
operations in each segment.

Percentage of Sales,
Year ended Dec. 31Geographic Segment

2011

2010Canada


46%


43%United States


49%


52%Europe and Others


5%


5%


No
significant portion of our business is dependent upon a single customer. Sales to Canadian and United States federal, state, provincial and local governmental bodies account
for less than 1% of annual sales.

As
of December 31, 2011, we leased or owned approximately 6,350 rail hopper and tank cars for use in transportation and delivery of our polyethylene,
co-products and styrenic polymer products to customers in North America. Trucks are used for distributing products sold in bags and boxes and smaller loads of bulk products. Marine vessels
are used to transport bulk product and products sold in bags and boxes, mostly to Asia. We do not own or lease trucks or ships, but do pay transportation fees under short-term
arrangements.

Competition

We compete with other chemical producers on the basis of price, service, product quality, performance and deliverability. Among our
competitors are some of the world's largest plastics and chemical companies and major integrated oil companies that are larger and have greater financial resources. Some also have their own

30

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raw
material resources. The keys to competing successfully in this industry are scale of facilities, low-cost feedstocks and differentiated product and process technologies.

Prices
for our standard chemical and polymer products are determined in part by market factors, such as supply/demand balances and feedstock costs that are beyond our control. We
generally sell these products at prevailing market prices but, on occasion, products are sold based on negotiated prices.

Cyclicality

Our historical operating results reflect the cyclical and volatile nature of the plastics and chemical businesses. The markets for
ethylene, polyethylene, co-products and styrenic polymers historically experience alternating periods of inadequate capacity and tight supply, causing prices and profit margins to
increase, followed by periods of oversupply resulting from capacity additions. Prolonged oversupply leads to declining capacity utilization rates, prices and profit margins. Because we derive nearly
all of our revenue from sales of these products, our operating results are more sensitive to this cyclicality than many of our competitors that have more diversified businesses. The primary driver of
cyclical upswings in the ethylene and styrenics sectors is the combination of limited supply growth and improved demand growth, which is driven by sustained gross domestic product and industrial
production growth.

Cyclicality
is exacerbated by volatility in feedstock prices. In response to higher feedstock prices and other market factors, plastics and chemical producers will generally announce
price increases. However, the implementation of announced price increases depends on many factors, including market conditions, the supply/demand balance for a particular product and feedstock costs
that may be beyond our control.

Seasonality

We sell primarily into non-durable markets such as flexible packaging, containers, plastic bags, and housewares. As a
result, the effect of seasonality is minimal.

Intellectual Property



We own directly, or license from affiliates, a large number of patents in Canada, the United States and other countries. We also
own or license a number of trademarks, which are used to identify various chemical and plastic products. While these patents and trademarks constitute valuable assets, we do not regard any single
patent or trademark as being material to our operations as a whole.

We
actively support all of our technologies to maintain our competitive position.

We
were initially a licensee of the technology used in our manufacturing operations. However, over time, we have acquired a variety of business units with associated technology assets in
areas including process and catalyst technology, as well as polymer technologies. In addition, since 1994 we have expanded our research and development activities. The result is a technology portfolio
with approximately 600 patents, leading-edge solution polyethylene process technologies such as Advanced SCLAIRTECH technology, proprietary single-site catalyst
positions, and proprietary cracking technology and advanced oligomerization technology.

We
own two key technologies for the production of solution polyethylene  SCLAIRTECH technology and Advanced SCLAIRTECH technology. In addition to
these technologies, we conduct research and development on other polyethylene technologies including gas-phase and high-pressure technology.

We
acquired our proprietary SCLAIRTECH technology and a global SCLAIRTECH technology licensing business from DuPont Canada Inc. in 1994. Our St. Clair River site utilizes
SCLAIRTECH technology to produce SCLAIR HDPE resins. In addition, our SCLAIRTECH technology is currently licensed for use worldwide.

In
2001, we began commercial operation of our new, proprietary Advanced SCLAIRTECH technology for the production of polyethylene. The first step in the introduction of this technology
was to utilize a proprietary

31

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Z-N
catalyst to manufacture new polyethylene products. In 2002, a line of new, Z-N catalyzed, octene-based SCLAIR resins was launched intended for higher-value polyethylene
film applications.

In
April 2003, we announced the commercial introduction of our first polyethylene resins produced with Advanced SCLAIRTECH technology and utilizing our new proprietary
single-site catalyst. We manufacture and sell these polyethylene resins under the trademark SURPASS. SURPASS resins have been commercialized for film, rotational molding and thin wall
injection molding applications.

We
continue to focus on developing and commercializing higher value polyethylene manufactured using Advanced SCLAIRTECH technology, including those used in film, injection molding and
rotational molding.



We have developed three key proprietary families of catalyst technologies for polyethylene production. The first is a family of
proprietary single-site catalysts for Advanced SCLAIRTECH technology and other polymer technologies including gas-phase polyethylene. These single-site catalysts
impart unique properties and create products that compete with many metallocene-based polyethylene products. The second family of catalysts includes proprietary Z-N catalysts used for
SCLAIRTECH technology and Advanced SCLAIRTECH technology. Finally, the NOVACAT family of catalysts was developed by us and our catalyst development partner, INEOS, for use in gas-phase
polyethylene. NOVACAT catalysts provide enhanced throughput, product range and properties when compared to traditional Z-N catalysts in commercial gas-phase polyethylene
production facilities. Variants of the catalyst are available for the manufacture of conventional and higher value LLDPE and narrow molecular weight HDPE. The NOVACAT family of catalysts is currently
being run on several different gas-phase technologies by us and licensees.



We have developed a world class furnace tube technology for use in the production of olefins via steam cracking. The technology permits
extremely long run times between decoking steps.



We own or have the rights to a significant portfolio of styrenics technology, in the fields of both polymer production and styrenic
polymer applications.

Examples
of styrenic polymer technologies are ARCEL resins that are sold into the protective packaging market and DYLITE premium cup and container grade resins used for EPS cups.

Research and Development

The following table summarizes, for the years ended December 31, 2011, and 2010, the amount we spent on research and development
activities and technical support from continuing operations, including activities to improve our existing products.

Year ended December 31 (millions of U.S. dollars)

2011

2010Research and Development

$
33

$
31Technical Support

$
8

$
6




Our Olefins/Polyolefins business unit conducts research at the NOVA Chemicals Research & Technology Center and the NOVA
Chemicals Technical Center, both located in Calgary, Alberta. Both centers are equipped with state of the art facilities for the development of new catalysts, olefin and polyolefin processes as well
as full scale testing of new products. The demonstration plant for Advanced SCLAIRTECH technology is located at the St. Clair River site in Corunna, Ontario, and is capable of testing new
catalysts, new polyethylene products and reactor processes.

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The Performance Styrenics business operates a technical center and a pilot plant at the Beaver Valley site in Monaca, Pennsylvania.

Responsible Care® and Environmental Regulations

In 1985, we adopted the Responsible Care initiative as the basis for our overall safety, health, environment, security and risk
program. Responsible Care is a global chemical industry performance initiative created by the Chemistry Industry Association of Canada in 1985 and adopted by the American Chemistry Council in the
United States in 1988. Responsible Care is currently practiced by chemical industry associations in over 50 countries worldwide. Responsible Care requires participants to commit to the
responsible management of the total life cycle of their products.

Since
1990, we have utilized an internal environment, health and safety audit program to manage regulatory compliance at our operating facilities. Our Responsible Care Audit Program was
evaluated by a leading international environment, health and safety consulting firm in 1997, 2001, 2003, 2007 and 2011. Based on
the 2011 assessment, the consulting firm concluded that the Responsible Care Audit Program is a top quartile program that has all of the hallmarks of an industry leading program.

Like
other companies in our industry, we are subject to extensive environmental laws and regulations at all levels of government. These laws and regulations concern the manufacture,
processing and importation of certain chemical substances, discharges or releases to air, land or water and the generation, handling, storage, transportation, treatment, disposal and
clean-up of regulated materials.

Although
we believe that our businesses, operations and facilities are being operated in material compliance with applicable environmental laws and regulations, the operation of any
petrochemical facility and the distribution of chemical products involve the risks of accidental discharges of hazardous materials, personal injury and property and environmental damage.

IFRS
requires companies to record liabilities associated with future plant decommissioning and site restoration costs on both active and inactive plants at their fair value based on a
discounted value of the expected costs to be paid when the assets are retired. On December 31, 2011, we had $101 million of accumulated reserve for activities anticipated to be required
for the decommissioning and site restoration of currently active plant sites.

We
review our accumulated reserves for decommissioning and site restoration at the end of each reporting period to determine if adjustments are required. Because these plants may be in
operation in excess of 40 years, significant uncertainty exists concerning the nature of the decommissioning and site restoration activities that may be required. Furthermore, significant
judgment is involved in the estimation process because the degree of natural attenuation, evolution of new technologies and potential future land uses may mitigate future environmental liabilities and
potential costs.

Our
environmental capital expenditures, including pollution abatement and remedial programs, were approximately $7 million in 2011
(2010  $3 million). Operating expenses relating to environmental protection were approximately $9 million in 2011
(2010  $8 million). Total remedial expenditures to dismantle and remediate discontinued facilities and sites totaled approximately $1 million in
2011 (2010  $1 million).

Foreign Operations

Foreign operations are subject to various risks differing from those in Canada and the United States including political events,
tax changes, labor difficulties, price controls and other governmental actions. We actively address these risks as part of our risk management system.

We
sell our products worldwide. We have established our international commercial headquarters in Switzerland to coordinate commercial activities outside of North America and maintain
sales support operations globally.

33

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Legal Proceedings

We are currently involved in patent litigation.

In
2005, Dow Chemical filed a complaint against us for alleged patent infringement. The complaint, filed in the Federal District Court in Delaware, alleged that certain grades of our
SURPASS polyethylene film resins infringe two Dow Chemical patents. In June 2010, a jury trial took place resulting in a June 15, 2010, verdict against us which awarded damages in the
amount of $61.8 million based on sales of SURPASS resin in the United States through the end of 2009. On July 30, 2010, the court awarded Dow Chemical pre-judgment
interest in the amount of $14.3 million. In a subsequent bench trial, the judge ruled that Dow Chemical had standing to bring the suit, holding that Dow Chemical continuously owned the patents
in suit.

Following
the jury verdict, both parties filed certain motions with the District Court in Delaware, including a motion by Dow Chemical seeking a permanent injunction to require us to
stop importing and selling certain sLLDPE grades of SURPASS resin in the United States. Given the substantial issues for appeal, including the question of Dow Chemical's standing in the case,
the short unexpired term of the patents and the possibility that we would prevail on appeal, the court was not persuaded that entry of a permanent injunction would serve the parties or the public
interest and the judge denied Dow Chemical's motion for a permanent injunction. Accordingly, the court's order allowed us to continue to sell the alleged infringing grades of the SURPASS resin to
existing customers in the United States pending expiration of the patents in October 2011.

We
appealed the verdict to the Court of Appeals for the Federal Circuit ("CAFC") on several grounds. To stay execution (i.e., collection) of the money judgment pending the outcome
of the appeal, we posted a bond in the amount of the jury verdict plus pre-judgment interest as awarded by the court, post-judgment interest at a prescribed statutory rate and
costs as determined by the court. The bond is secured with cash collateral in the amount of $85 million, which is reported as restricted cash on the consolidated statements of financial
position. Oral arguments for the appeal were heard on October 4, 2011. In January 2012, a panel of three CAFC judges affirmed the District Court ruling in a
2-1 non-precedential disposition. In February 2012, we petitioned the CAFC for anen banc(all members of
the CAFC) review of the panel decision and have not yet received a response.

The
patents at issue in the U.S. patent litigation expired on October 15, 2011. No accruals have been made beyond that date on the sales of the alleged infringing grades of
SURPASS resin in the United States. As of December 31, 2011, $107 million (December 31, 2010  $92 million; January 1,
2010  $0 million) has been accrued with respect to this claim, which represents the $76 million award plus $31 million based on sales and
interest though December 31, 2011 (December 31, 2010  $16 million; January 1,
2010  $0 million). As of December 31, 2011 and 2010, both the provision and restricted cash are reported as current and non-current,
respectively, on the consolidated statements of financial position.

In
December 2010, Dow Chemical filed a Statement of Claim against us in Federal Court in Canada alleging that certain grades of our SURPASS polyethylene film resins infringe a Dow
Chemical Canadian patent that is related to the U.S. patents subject to the suit in the United States. We filed our statement of defense and counterclaim in March 2011. In
April 2011, the Court ordered the trial to commence in January 2013. As this litigation is still in its early stages, and we believe it is not probable that Dow Chemical's action will
succeed, no amount has been accrued as of December 31, 2011 with respect to this claim.

Although
we believe that we do not infringe Dow Chemical's patents and have meritorious defenses and intend to vigorously defend these patent suits, we can give no assurance that we will
be able to achieve a satisfactory outcome.

We
are involved in other litigation from time-to-time in the ordinary course of business. Among these items is a claim filed against us in the Court of the
Queen's Bench of Alberta by Dow Chemical Canada ULC and its European affiliate concerning our third ethylene plant at our Joffre site. The amount of the claim was initially $120 million,
but, on August 12, 2010, the court granted an application to amend the amended statement of claim to update the damage claims and add new claims. Accordingly, the amount of the claim is now
approximately $300 million. We initially counterclaimed in the same action for approximately $300 million. We have filed an amended statement of defense and counterclaim. The amount of
our counterclaim is now approximately $700 million.

34

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4.C.    ORGANIZATIONAL STRUCTURE

IPIC is the ultimate parent of the NOVA Chemicals group of companies. The following list includes all significant subsidiaries of NOVA
Chemicals and indicates their respective jurisdictions of incorporation, continuance or organization. All of the voting securities of each significant subsidiary are held directly or indirectly by
NOVA Chemicals:

Name

JurisdictionNOVA Chemicals (Canada) Ltd./NOVA Chimie (Canada) Ltée.

CanadaNOVA Chemicals Inc.

Delaware, USANOVA Petrochemicals Ltd.

Alberta, CanadaNC Holdings USA Inc.

Delaware, USA


4.D.    PROPERTY, PLANTS AND EQUIPMENT

We own a number of plants and facilities for the production of chemicals and plastics. For a detailed discussion regarding the use,
capacity and products of these facilities, see "Item 4.B.  Business Overview." In addition to our production facilities, we lease or own approximately
500,000 square feet of office space in numerous locations, mostly in North America. Our head office is located in Calgary, Alberta. Our United States commercial center is located
in Moon Township, Pennsylvania. For further information on environmental issues that may affect our utilization of our assets, see "Item 3.D.  Risk
Factors" and "Item 4.B.  Business Overview  Responsible Care and Environmental Regulations."

Item 4A.    Unresolved Staff Comments

Not
Applicable

Item 5.    Operating and Financial Review and Prospects

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") should be read in
conjunction with the information contained in the annual audited consolidated financial statements and the notes thereto included in this annual report on Form 20-F. This MD&A is
based upon our annual audited consolidated financial statements prepared in accordance with International Financial Reporting Standards ("IFRS"). Throughout this MD&A, references are made to certain
measures that do not have any standardized meaning prescribed by IFRS. These measures are discussed in "Supplemental Measures." Unless otherwise indicated or required by the context, as used in this
MD&A, the terms "NOVA Chemicals," the "Corporation," "we," "our" and "us" refer to NOVA Chemicals Corporation and all of its consolidated subsidiaries. All amounts are presented in U.S. dollars
unless otherwise noted.

For
all periods up to and including the year ended December 31, 2010, we prepared our consolidated financial statements in accordance with Canadian generally accepted accounting
principles ("Canadian GAAP"). The annual audited consolidated financial statements for the year ended December 31, 2011 are our first annual consolidated financial statements that have been
prepared in accordance with IFRS as issued by the International Accounting Standards Board ("IASB") and IFRS 1,First Time Adoption of International Financial Reporting
Standards.

We
have prepared the annual audited consolidated financial statements that comply with IFRS as described in the accounting policies in Note 2 of our annual audited consolidated
financial statements. In preparing the annual audited consolidated financial statements, our opening statement of financial position was prepared as of January 1, 2010, our date of transition
to IFRS. Note 26 in the annual audited consolidated financial statements explains the principal adjustments we made in restating our Canadian GAAP statements of financial position as of
January 1, 2010 and December 31, 2010 and our previously published Canadian GAAP consolidated statements income and comprehensive income for the year ended
December 31, 2010.

35

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NOVA Chemicals Corporation

We are a plastics and chemical company whose products are used in a wide variety of applications, including food and electronics
packaging, industrial materials, appliances and a variety of consumer goods. We operate two business units: Olefins/Polyolefins and Performance Styrenics.

Business Units



IPIC Transaction

On February 23, 2009, we entered into an arrangement agreement with International Petroleum Investment Company ("IPIC"), which
is wholly owned by the government of the Emirate of Abu Dhabi, providing for the acquisition by IPIC of all of our outstanding common shares for cash consideration of $6.00 per share. On
July 6, 2009, IPIC completed the acquisition of NOVA Chemicals and, through a wholly owned subsidiary, acquired all of our issued and outstanding common shares.

Sale of Interest in INEOS NOVA Joint Venture

We held a 50% interest in a joint venture with INEOS Group Limited ("INEOS"), called INEOS NOVA that manufactured and sold styrene,
solid polystyrene and EPS. On October 31, 2010, we entered into an agreement with an affiliate of INEOS providing for the sale of our 50% interest in the INEOS NOVA joint venture. The sale
closed on February 28, 2011. Associated results of operations and cash flows are separately reported as discontinued operations for all periods presented and the associated financial position
is separately reported as assets and liabilities held for sale as of December 31, 2010. See Note 5 in the annual audited consolidated financial statements for further disclosure of the
discontinued operations.

Key Drivers of Financial Performance

Our earnings and cash flow are influenced primarily by the margins earned on the products we manufacture. Margin is the difference
between the selling price of products and the direct cost to produce and distribute them. Margins for companies in the plastics and chemical industry are driven by the supply/demand balance and tend
to be cyclical.

Supply/Demand Balance  The Key Driver of Profitability

The supply/demand balance, as measured by industry operating rates, is generally the best indicator of profitability in the plastics
and chemical industry. During peak conditions, when operating rates tend to be high, prices and margins generally increase as customers attempt to secure scarce supply to meet their production needs.
Conversely, during trough conditions, which tend to occur when operating rates are low, margins generally decrease since there is ample supply to meet customer demand.

Plastics and Chemical Industry Earnings are Cyclical

By its nature, profitability in the plastics and chemical industry is cyclical. Demand growth is driven by economic growth, which tends
to be relatively consistent over time. In contrast, new product supply grows in large increments through the construction of large, complex new plants, which generally require significant capital and
lead-time of four to six years to complete.

As
industry operating rates increase, prices and producers' margins tend to increase. Extended periods of profitability encourage new investment in plants to serve growing demand. New
supply added in excess of demand growth causes industry operating rates and profitability to decline. Periods of reduced profitability deter investment in new plants and force high-cost,
unprofitable producers to rationalize capacity. Continued demand growth and lack of new investment lead to tightening capacity utilization and a return to increased profitability.

36

---



This
alternating pattern of supply surplus and shortage creates the earnings cycles that are typical in commodity industries.

Price, Volume and Cost Influence Profitability



Pricing for our polymer and chemical products is based on the amount our customers are willing to pay for these products compared to
similar available or competing products. Prices can rapidly change as a result of feedstock costs and fluctuations in the supply/demand balance. While feedstock costs heavily influence the price of
our products, margins drive profitability.



Sales volumes for plastics and chemical products are most heavily influenced by economic growth, a key driver of demand. In general,
demand increases when the economy is expanding, but may decline or experience slower growth when the economy contracts. Sales volumes also may be influenced by short-term changes in
customer buying patterns which primarily are driven by expectations of price volatility. Anticipation of higher prices or limited product availability can motivate customers to purchase beyond
short-term needs and build inventories. Conversely, expectations of lower prices can motivate customers to delay purchases and consume inventories. These short-term
buying patterns can create quarterly earnings volatility for plastics and chemical producers and are not necessarily representative of longer-term profitability.



Feedstock costs are the single largest component of our costs and account for 70-80% of the total cost of our products. Our
primary feedstocks include ethane, other natural gas liquids ("NGLs"), crude oil, naphtha and condensates. Feedstock costs heavily influence the price of our products. Because feedstock costs
represent the most significant portion of total production costs, a feedstock cost advantage can lead to enhanced profitability relative to industry peers and is the key to our profitability
throughout the cycle.

The
remaining 20-30% of the total cost of our products consists of variable conversion costs and fixed costs such as: plant operating and distribution costs; sales and
marketing costs, general and administrative costs; and research and development costs ("R&D"). Sales and marketing and general and administrative costs represent all direct and most indirect expenses
incurred in directing and managing the company. R&D costs relate to technical activities that support the development and commercialization of new products, technologies and applications.

The
following table illustrates how changes in various feedstock costs could affect our after-tax profit assuming all other factors are held constant. The sensitivity is
based on 2011 actual consumption volumes (excluding hedged items and respective hedging instruments, if any) and the periodic effects are determined by relating a reasonably possible change in the
risk variables.

(millions of U.S. dollars, except as noted)

Change(1)

Decrease in
after-tax profitCrude oil


+10%

$
77Natural gas


+10%

$
15Propane


+10%

$
20Butane


+10%

$
40


(1)A
10% decrease in feedstock costs would have the opposite effect.




Our investing, financing and operating activities are exposed to currency risks. Foreign currency risk is the risk that the fair value
of future cash flow of a financial instrument will fluctuate because of changes in foreign exchange rates. Our exposure to the risk of changes in foreign exchange rates relates primarily to our
operating activities (when revenue or expenses are denominated in a different currency from our functional currency).

37

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The
following table demonstrates the sensitivity to a 10% strengthening of the Canadian dollar against the U.S. dollar, with all other variables held constant, of our
after-tax profit and other comprehensive income. The impact of translating the net assets of foreign operations into our reporting currency is excluded from the sensitivity analysis. Any
change in the Euro would not be material.

(millions of U.S. dollars, except as noted)

Change(1)

Decrease in
after-tax profit

Decrease in other
comprehensive
income2011


+10%

$
64

$
282010


+10%

$
62

$
19


(1)A
10% weakening of the Canadian dollar against the U.S. dollar would have the opposite effect.


Research and Development

The following table summarizes, for the years ended December 31, 2011, and 2010, the amount we spent on research and development
activities and technical support from continuing operations, including activities to improve our existing products.

Year ended December 31 (millions of U.S. dollars)

2011

2010Research and Development

$
33

$
31Technical Support

$
8

$
6


NOVA Chemicals' Highlights

(millions of U.S. dollars)

2011

2010Total assets

$
6,208

$
5,575Total long-term liabilities

$
2,569

$
3,059Revenue

$
5,241

$
4,576Operating profit (loss) from continuing operations(1)Olefins/PolyolefinsJoffre Olefins

$
902

$
383Corunna Olefins


227


137Polyethylene


33


298Eliminations


(37
)

(32
)Total Olefins/Polyolefins


1,125


786Performance Styrenics


7


3Corporate


(125
)

(192
)Operating profit from continuing operations(1)

$
1,007

$
597Profit from continuing operations

$
608

$
237


(1)See
"Supplemental Measures."


38

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Changes in Our Profit

Year ended December 31 (millions of U.S. dollars)

2011 vs. 2010Higher operating margin from continuing operations(1)

$
376Higher research and development


(4
)Higher sales and marketing


(2
)Lower general and administrative


40Lower finance costs, net


20Lower other losses, net


32Higher income tax expense


(91
)Higher profit from continuing operations


371Lower profit from discontinued operations, net of tax


(19
)Increase in profit

$
352


(1)Operating
margin equals Revenue less Feedstock and operating costs (includes impact of realized and unrealized gains and losses on
mark-to-market feedstock derivatives).


Discussion of Consolidated Financial Results of Continuing Operations

2011 Versus 2010

Profit from continuing operationsin 2011 was $608 million compared to
$237 million in 2010. The improvement was primarily the result of improved margins for our products.

Revenuein 2011 was $5,241 million, an increase from $4,576 million in 2010 primarily due to higher sales prices in all
segments together with higher PE sales volumes.

Feedstock and operating costsin 2011 were $4,026 million compared to $3,737 million in 2010. The increase in feedstock and
operating costs was due to higher average prices for feedstocks.

General and administrativeexpenses in 2011 decreased as compared to 2010 primarily due to an impairment charge of
$8 million in 2010 relating to a note receivable (seeImpairment Charges), year-end pension adjustments, the classification of profit
sharing expense as a general and administrative cost, prior to the plan being terminated in January 2011 (seeCorporate Operating Costs),
and reductions in consulting expenses and miscellaneous other general and administrative costs.

Finance costs, net,decreased in 2011 as compared to 2010 due the termination and repayment of the $75 million total return swap in
March 2010, the maturity and repayment of the Cdn$250 million 7.85% notes in August 2010, and a decrease in finance costs on our revolving credit facilities.

Other losses, net,decreased in 2011 as compared to 2010 primarily due to losses recognized related to a jury verdict which resulted in
awarded damages, offset by an arbitration award in 2010 which resulted from an insurance claim involving our Corunna facility that dated back to 2005 (see "Other
Losses, Net").

Income tax expensewas higher in 2011 as compared to 2010 due to the increase in profit before income taxes from continuing operations.



Our Olefins/Polyolefins business unit produces and sells ethylene, PE and co-products from its two manufacturing centers
located in Alberta and Ontario, Canada. The business is built on its cost competitive feedstock (ethane prices in Alberta are primarily based on natural gas prices, compared to the U.S. Gulf
Coast ("USGC") where ethane tends to trade in a more correlated relationship with the crude oil price), world-scale and energy-efficient manufacturing facilities in Alberta and proprietary technology
such as Advanced SCLAIRTECH and gas-phase PE process technology, as well as PE catalyst technology.

Our
Olefins/Polyolefins business unit contains three operating segments:



39

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Reporting Segment

Primary Products

Capacity

Manufacturing Sites

Primary FeedstockJoffre Olefins

Ethylene
Co-Products(1)

4.8 Blbs
0.8 Blbs

Joffre, Alberta

EthaneCorunna Olefins

Ethylene
Co-Products(1)

1.8 Blbs
4.7 Blbs

Corunna, Ontario

Ethane, Propane, Butane, Crude oil, Naphtha and Condensates(2)Polyethylene

Linear low-density PE
Low-density PE
High-density PE

3.7 Blbs

Joffre, Alberta
Mooretown, Ontario
St. Clair River, Ontario

Ethylene
(Internally supplied)




Ethyleneis the most widely produced petrochemical in the world and is the primary
feedstock used in the production of PE. It is a key building block for a variety of polymers and other chemicals used to manufacture products such as packaging, containers, films and construction
products. Ethylene is primarily transported via pipeline and is regionally traded. Ethylene margins typically expand when operating rates are at or above 90% of nameplate capacity.

Polyethyleneis used to produce every day, consumer staple oriented items such as food packaging, packaging for personal care items, toys
and bottles, and is the most widely used plastic material in the world. Industrial applications include storage drums, industrial wrap, retail packaging and building products. PE resin is globally
traded in established merchant markets. PE margins typically expand when operating rates are at or above 90% of nameplate capacity.

Co-productsare produced in the ethylene manufacturing process and can be grouped into two categories: chemical
co-products and energy co-products. Chemical co-products include propylene, benzene and butadiene and are the building blocks that are used to make items such as
tires, carpet and clothing fibers, and household goods. Energy co-products include gasoline blending components and fuel oil. The profitability of co-products depends on energy
prices and the supply/demand balance for each co-product. The choice of ethylene feedstock mix determines the type and volume of co-products manufactured.



Our largest volume product is ethylene, which is the key feedstock for the production of PE. We produce ethylene and
co-products at our Joffre, Alberta, and Corunna, Ontario, manufacturing facilities.



Joffre Olefins produces and sells ethylene and co-products and includes three world-scale ethylene crackers in Joffre,
Alberta. Our share of production capacity from the Joffre crackers, which excludes Dow Chemical Canada ULC's ("Dow's") 50% interest in the Ethylene 3 cracker, is 4.8 billion
pounds per year and represents approximately 75% of our total nameplate ethylene production capacity. Approximately half of our production capacity at Joffre supports internal PE
production, while the remainder is sold to third parties. The Joffre crackers have the capacity to produce approximately 830 million pounds per year of co-products such as hydrogen,
propylene and other hydrocarbons.

The
primary feedstock of the Joffre ethylene crackers is ethane, which is typically extracted from natural gas by third-party field and straddle plant operators and delivered to the
Joffre site via pipeline. The majority of ethane used at the Joffre site is extracted and delivered under medium- to long-term contracts. While some of these arrangements are
expiring in the next few years, most of these supply agreements have five to ten years remaining on their terms with the possibility of renewal by the parties. We can also directly purchase ethane and

40

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have
the flexibility to use propane to meet a portion of our feedstock requirements when the economics are favorable.

The
only major use for ethane is as a feedstock for production of ethylene. In Alberta, we typically acquire ethane by purchasing natural gas to replace the energy content of the ethane
removed from the gas stream plus pay a fee for extraction and delivery. Therefore, our feedstock costs are directly linked to the natural gas price in Alberta. Alberta has historically had lower cost
of natural gas, due to structural transportation differentials, and more efficient ethane extraction plant infrastructure compared to the USGC. In comparison, USGC ethane prices are influenced by the
prices of alternative ethylene feedstocks such as propane and naphtha, which typically track crude oil prices. Ethane prices are also affected by more traditional supply and demand dynamics. As a
result, the price for ethane on the USGC can be at a substantial premium to the underlying natural gas value.



Corunna Olefins produces and sells ethylene and co-products that result from the manufacture of ethylene and processing of
crude oil and other feedstocks. The Corunna ethylene flexi-cracker has annual production capacity of 1.8 billion pounds of ethylene and 4.7 billion pounds of co-products,
depending on the feedstock mix used. Most of Corunna's ethylene production is consumed by our PE plants while the majority of its co-products are sold to third parties.

Corunna's
flexi-cracker can process a large range of feedstocks and produce a diverse range of chemical and energy co-products. We are able to adjust Corunna's feedstock
slate among NGLs, crude oil and crude oil derivatives, as market conditions fluctuate. Corunna's crude oil processing unit allows us to purchase crude oil and produce our own naphtha when it is
economically favorable to do so. The Corunna facility can access NGLs, such as propane and butane from local producers, Western Canada or the
United States. The Corunna facility can also access crude oil, condensates and naphtha from various North American supply sources. In 2011, we began a project to convert the Corunna
flexi-cracker to use up to 100% NGL feedstock, with ethane as the primary feedstock. The project is expected to be completed in early 2014. After the completion of this project, we will utilize NGLs
as our primary feedstocks. While we will maintain the flexibility to use heavier feedstocks such as naphtha when market conditions are favorable, it is expected that the use of heavy feedstocks will
be minimal, if at all. This change to lighter feedstocks will reduce the total volume of co-products produced at the facility.



The Polyethylene segment produces and sells linear low-density polyethylene ("LLDPE"), low-density polyethylene
("LDPE") and high-density polyethylene.

We
have approximately 3.7 billion pounds of annual PE production capacity from our two units in Joffre, Alberta, and our Mooretown and St. Clair River sites
in Ontario.



One of the Joffre PE plants, PE2, utilizes Advanced SCLAIRTECH technology to manufacture and sell higher value SURPASS® and
SCLAIR® PE resins. SURPASS resins deliver a unique combination of properties not found in traditional PE resins and are used in film applications, such as food packaging; injection molding
applications, such as ice cream containers and packaging lids; and rotational molding applications, such as dumpsters and industrial storage containers. SCLAIR resins are used in a variety of flexible
packaging applications.

We
are one of only three PE companies worldwide with independent, patented process and single-site catalyst technologies which enable us to produce differentiated higher
value PE resins on a commercial scale.



Our PE is primarily sold into North American markets. We also sell a small portion of our production outside North America to China,
Southeast Asia, Central and Latin America and Europe.

41

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We license our proprietary SCLAIRTECH technology and NOVACAT® family of catalysts. Our SCLAIRTECH technology
is licensed for use around the world.

NOVACAT
catalysts are a series of advanced Ziegler-Natta catalysts designed specifically for gas-phase PE reactors that can produce butene and hexene LLDPE with
improved performance characteristics and manufacturing economics.

Outlook for Olefins/Polyolefins Business Unit

We believe that there are several factors that affect the long-term earnings potential of our Olefins/Polyolefins
business unit.





42

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43

---



Olefins/Polyolefins Financial Highlights From Continuing Operations

Year ended December 31 (millions of U.S. dollars, except as noted)

2011

2010RevenueJoffre Olefins(1)

$
2,002

$
1,520Corunna Olefins(1)


2,309


2,005Polyethylene(1)


2,182


1,947Eliminations(2)


(1,536
)

(1,164
)$
4,957

$
4,308Operating Profit (Loss)(3)Joffre Olefins

$
902

$
383Corunna Olefins


227


137Polyethylene


33


298Eliminations(2)


(37
)

(32
)$
1,125

$
786Polyethylene Sales Volumes(millions of pounds)


3,156


3,096


Notes: (1)Before
intersegment eliminations within the Olefins/Polyolefins business unit.(2)Represents
intersegment eliminations.(3)See
"Supplemental Measures." Olefins/Polyolefins Average Benchmark Prices


2011Annual
2011

Annual
2010(U.S. dollars per pound, except where noted)

Q1

Q2

Q3

Q4Benchmark Principal Product Prices:(1)Ethylene(2)

$
0.49

$
0.58

$
0.56

$
0.55

$
0.54

$
0.46PE  linear low-density butene liner(3)

$
0.70

$
0.77

$
0.71

$
0.68

$
0.71

$
0.65PE  weighted-average benchmark(3)

$
0.72

$
0.78

$
0.73

$
0.70

$
0.73

$
0.67Benchmark Raw Material Prices:(1)AECO natural gas (dollars per mmBTU)(4)

$
3.81

$
4.00

$
3.74

$
3.10

$
3.66

$
3.88NYMEX natural gas (dollars per mmBTU)(4)

$
4.14

$
4.36

$
4.19

$
3.61

$
4.07

$
4.42WTI crude oil (dollars per barrel)(5)

$
94.10

$
102.56

$
89.76

$
94.06

$
95.12

$
79.53


Notes: (1)Average
benchmark prices do not necessarily reflect actual prices realized by us or any other petrochemical company.(2)Source:
Chemical Market Associates, Inc. ("CMAI")  USGC Net Transaction Price.(3)Source:
Townsend Polymer Services Information; Benchmark prices weighted according to our sales volume mix in North America.(4)Source:
Canadian Gas Price Reporter. AECO gas is weighted-average daily spot gas price. NYMEX gas is Henry Hub 3-Day Average Close.(5)Source:
Platt's. NYMEX WTI daily spot-settled price average for calendar month.


Discussion of Financial Results of Olefins/Polyolefins Business Unit

Beginning on January 1, 2011, we changed our method of calculating the intercompany transfer price on sales of ethylene from our
Joffre Olefins segment to our Polyethylene segment to be consistent with our method of calculating the intercompany transfer price on sales of ethylene from our Corunna Olefins segment to our
Polyethylene segment.

44

---



While
the application of our new intercompany transfer pricing policy did not change the revenue or operating performance of our Olefins/Polyolefins business unit, it impacted the
allocation of operating profit between the Joffre Olefins and Polyethylene segments. We accounted for the change on a prospective basis.

If
we had accounted for the change on a retrospective basis, for 2010, operating profit would have been approximately $180 million higher for the Joffre Olefins segment,
approximately $165 million lower for the Polyethylene segment and eliminations would have been approximately $15 million higher than reported. If we had accounted for the change on a
retrospective basis by revaluing inventory as of January 1, 2011, operating profit for the Polyethylene segment and eliminations would have been approximately $30 million lower
for 2011.



2011 Versus 2010

Revenuewas $2,002 million in 2011, up from $1,520 million in 2010,
primarily due to higher ethylene and co-product sales prices. Revenue was also higher due to the prospective change in transfer pricing described above. During 2011, ethylene supply
remained balanced to tight, while demand increased. This resulted in industry average prices for ethylene that were 18% higher in 2011 compared to 2010.

Feedstock and operating costswere $1,090 million in 2011, down from $1,122 million in 2010. Costs decreased in 2011
primarily due to lower natural gas and ethane costs in Alberta. Average AECO natural gas prices decreased by approximately 5% in 2011 compared to 2010.

Operating profitwas $902 million in 2011, up from $383 million in 2010. Margins in 2011 were higher than 2010 as sales
prices of ethylene and co-products increased while feedstock costs fell. This was due to steady demand for ethylene and co-products with balanced to tight ethylene supply, and
very tight propylene and butadiene supply/demand balances. Operating profit was also higher in 2011 due to the prospective change in transfer pricing described above.



2011 Versus 2010

Revenuewas $2,309 million in 2011, up from $2,005 million in 2010. The
change was due primarily to an increase in ethylene and co-product sales prices, offset slightly by lower sales volume. Co-product pricing increased due to tight supply as the
industry used a lighter feedstock mix that resulted in less co-product production. The lower sales volume was due to a planned major maintenance turnaround in 2011.

Feedstock and operating costswere $2,072 million in 2011, up from $1,858 million in 2010. Feedstock prices increased along
with the average WTI crude oil price, which was almost 20% higher in 2011 than in 2010.

Operating profitwas $227 million in 2011 up from $137 million in 2010. The improvement was primarily due to higher margins
during 2011 that resulted from selling prices that increased more than feedstock costs. Unusually high differentials between Brent and WTI crude oil resulted in higher than expected margins for energy
co-products produced at Corunna.



2011 Versus 2010

Revenuewas $2,182 million in 2011, up from $1,947 million in 2010. The
increase was due to higher PE prices and increased sales volumes. The industry average PE sales price was approximately 9% higher during 2011 compared to 2010, as feedstock costs increased and demand
improved.

Feedstocks and operating costswere $2,094 million in 2011, up from $1,591 million in 2010. Feedstock and operating costs
were higher in 2011 primarily due to higher sales volumes and industry average ethylene costs that were approximately 18% higher than in 2010.

Operating profitin 2011 was $33 million, down from $298 million in 2010. The decrease was primarily due to average
feedstock costs rising more than selling prices. In the second half of 2011, ethylene costs declined much

45

---



less
than PE prices, resulting in lower PE margins. In 2011, each of our PE facilities was shut down for some period of time for planned maintenance turnaround work. In addition, operating profit was
lower in 2011 due to the prospective change in transfer pricing described above.

Performance Styrenics Segment



Our Performance Styrenics segment produces EPS and ARCEL resins in North America. The segment markets EPS resins in North and South
America and Asia and ARCEL globally via direct sales and various distribution and agency agreements.

EPS
resins are used in packaging for food and consumer products and in insulation for the building and construction industry. Currently, sales of our EPS resins account for the majority
of Performance Styrenics' revenue. As a result, profitability of this business unit is dependent on the cyclical supply/demand balance for EPS.

ARCEL
resins apply proprietary technology to enable customers to reduce their costs and environmental impact in high performance protective packaging applications. ARCEL resin is used
for protective packaging of damage sensitive goods such as computers, printers, electronics, appliances and furniture. Due to its unique properties, ARCEL resin can earn higher margins over standard,
non-differentiated products.

We
have the capacity to produce 350 million pounds per year of standard EPS and ARCEL resins at our production facilities in Monaca (Beaver Valley), Pennsylvania, and
Painesville, Ohio.



Styrene is the primary feedstock for the production in this business. Our minority interest in LyondellBasell Industries' Channelview,
Texas, propylene oxide/styrene monomer facility supplies 400 million pounds per year of cost-based styrene to our Performance Styrenics business, which is sufficient to meet our
anticipated styrene requirements. We sell our excess styrene to third-party customers.

Outlook for Performance Styrenics Segment

In 2011, demand for EPS increased versus 2010. In 2012, we expect EPS demand to be flat to 2011.

We
are continuing to evaluate this business unit and are exploring strategic options.

Performance Styrenics Financial Highlights From Continuing Operations

Year ended December 31 (millions of U.S. dollars, except as noted)

2011

2010Revenue

$
327

$
304Operating profit(1)

$
7

$
3Sales Volumes(2) (millions of pounds)


255


260


Notes: (1)See
"Supplemental Measures."(2)Third-party
sales.


46

---





Performance Styrenics Average Benchmark Prices

2011Annual
2011

Annual
2010(U.S. dollars per pound)

Q1

Q2

Q3

Q4Benchmark Principal Product Prices:(1)Styrene(2)

$
0.74

$
0.76

$
0.73

$
0.64

$
0.72

$
0.63EPS(2)

$
0.99

$
1.05

$
1.04

$
1.00

$
1.02

$
0.91


Notes: (1)Average
benchmark prices do not necessarily reflect actual prices realized by us or any other petrochemical company.(2)Source:
CMAI Contract Market.


Discussion of Financial Results of Performance Styrenics Segment

2011 Versus 2010

Revenuewas $327 million in 2011 sales, up from $304 million in 2010. The
increase was due to higher average selling prices, offset by slightly lower volumes.

Feedstock and operating costswere $307 million in 2011, up from $288 million in 2010. Costs were higher in 2011 primarily
due to higher styrene monomer costs resulting from higher benzene costs.

Operating profitin 2011 was $7 million, up from $3 million in 2010, primarily due to slightly increased margins and lower
depreciation and amortization expense as a result of a 2010 impairment charge.

Corporate Operating Loss and Other Items from Continuing Operations

A listing of before-tax corporate and other items for the periods presented is as follows:

Year ended December 31 (millions of U.S. dollars)

2011

2010Corporate operating costs

$
(112
)
$
(143
)Mark-to-market feedstock derivatives


2


(15
)Impairment charges


(6
)

(28
)Foreign exchange gain





2Insurance credit





1Depreciation and amortization


(9
)

(9
)Operating loss

$
(125
)
$
(192
)




2011 Versus 2010

Corporate operating costs were lower in 2011 compared to 2010, primarily due to additional costs incurred during 2010 triggered by the
change in control of NOVA Chemicals, year-end pension and other liability adjustments, and the classification of profit sharing expense as a corporate cost. We had a profit sharing program
that was available to most employees. Profit sharing expense in 2010 was $13 million and is included in corporate operating costs. We terminated the profit sharing program effective
January 1, 2011, and therefore there was no profit sharing expense in 2011. Since terminating the profit sharing program, our incentive compensation program was restructured resulting in a
higher allocation of incentive compensation expenses to the business segments.



We maintain a derivative program to manage risk associated with feedstock purchases. We lock in a portion of our propane and butane
feedstock requirements as a percentage of crude oil using forward contracts that

47

---



extend
to 2012. In 2011 and 2010, our portfolio also included trades to re-price excess feedstock inventory, and a small volume of our winter natural gas requirements was locked in at a
fixed price. The gain or loss resulting from changes in the market value of these derivatives is recorded through profit and loss each period. We classify mark-to-market
adjustments on feedstock derivative positions as Corporate items, as they are non-cash items and are not relevant in measuring business performance. Once positions are realized, any income
effects are recorded in business results.

Changes
in forward propane and butane prices as a percentage of forward crude oil prices and a decrease in the notional volumes drove the mark-to-market change in
2011 as compared to 2010.



In 2011, impairment charges of $6 million related to assets within our Performance Styrenics segment. In 2010, impairment
charges consisted of a $20 million charge related to assets within our Performance Styrenics segment and an impairment charge of $8 million on a note receivable.



In January 2010, we entered into a series of foreign currency forwards to hedge the foreign currency exposure on the
Cdn$250 million 7.85% notes which were due in August 2010 (the "Canadian Notes"). The foreign currency forwards locked in repayment of the Canadian Notes at
U.S.$237 million. The forward contracts substantially offset the foreign exchange exposure during 2010 on the Canadian Notes. On August 30, 2010, we repaid the Canadian Notes for
U.S.$237 million and the related foreign currency forwards were settled.

Net
foreign exchange gain and losses included in the Corporate segment were not significant in 2011 and 2010.



We are one of many participants in OIL, an insurance pool for property and liability risks. We were one of many participants in
sEnergy, an insurance pool for business interruption. sEnergy wound up its operations in February 2011. During 2010, we received $7 million for a portion of our investment in sEnergy.
Upon dissolution of sEnergy in February 2011, we received an additional $5 million, which represented the remaining amount of our investment.

We
believe our reserves are adequate to cover any outstanding claims.

In
2010, we recorded a $1 million credit due to the reduction of estimated future claims payments during 2010.

Other Losses, Net

In 2011 and 2010, we recognized a loss of $20 million and $95 million, respectively, related to a jury verdict that we
infringed The Dow Chemical Company's ("Dow Chemical") patents, resulting in awarded damages in the amount of $61.8 million, plus interest of $14.3 million in 2010, as well as
amounts based on sales of alleged infringing grades of SURPASS polyethylene film resins plus interest of $15 million during 2011
(2010  $16 million) and other related costs of $5 million during 2011 (2010  $3 million).

Also
during 2010, we recognized a $45 million gain related to an arbitration award which resulted from an insurance claim involving our Corunna facility that dated back
to 2005.

Discontinued Operations



INEOS NOVA manufactured and sold styrene and solid polystyrene ("SPS") in North America and SPS and EPS in Europe.

48

---



We
sold our 50% interest in the INEOS NOVA joint venture on February 28, 2011 to INEOS. The negotiated sale price was subject to several deductions. Some of these deductions were
fixed as of October 31, 2010, such as our 50% share of the joint venture's net indebtedness and some were estimated on the closing date, such as indemnified and unindemnified pension
liabilities. The anticipated windup of certain indemnified pension liabilities resulted in us increasing the estimated amount of our liabilities by $11 million in December 2010.

At
closing, we received approximately $65 million (€47 million). During 2011, we finalized estimates for all but one of the remaining pension liabilities
and paid INEOS a net of $10 million, resulting in net proceeds on the sale totaling $55 million. This amount does not represent our final net proceeds from the sale, because one of the
pension liabilities which was estimated as of closing has not been finalized. The final determination of this liability is not expected to be completed until necessary regulatory approval is received,
at which time the proceeds will again be adjusted. We do not expect the adjustment to be material. We recognized a loss on the sale of $1 million during 2011. Associated results of operations
and cash flows are separately reported as discontinued operations for all periods presented and the associated financial position is separately reported as assets and liabilities held for sale as of
December 31, 2010.

We
had a Euro denominated, unsecured note receivable bearing interest at 4.5% per annum issued by the INEOS NOVA joint venture, which was assumed by INEOS at closing of the sale of our
interest in the joint venture. The balance of the note at December 31, 2011 was $46 million (December 31, 2010  $47 million;
January 1, 2010  $58 million). The note is scheduled to mature and be repaid in November 2012.



During the second quarter of 2010, our Board of Directors approved the sale, subject to certain conditions, of our building and
construction businesses, collectively known as SYNTHEON. The SYNTHEON portfolio of businesses, which was part of our Performance Styrenics segment, includes SYNTHEON Inc.; Accelerated Building
Technologies LLC; NCE Inc.; NOVA Chemicals Chile Limitada; our 50% interest in both Novidesa S.A. de C.V. and Reliance Innovative Building Solutions Pvt. Ltd (both joint
ventures); and intellectual property relating to both the building and construction products and the Elemix® concrete additive. We initially anticipated that this sale would be completed
in 2010; however, negotiations with the intended acquirer ended without a sale being completed. Management has since developed a formal plan for the sale of SYNTHEON assets. Associated results of
operations, financial position and cash flows are separately reported as discontinued operations and assets and liabilities held for sale as of and for the years ended December 31, 2011
and 2010.

Summarized
financial information for our 50% share of the INEOS NOVA joint venture ("INJV") and SYNTHEON are shown below:

Year ended December 31 (millions of U.S. dollars)

2011

2010INJV

SYNTHEON

TOTAL

INJV

SYNTHEON

TOTALTotal revenues

$


$
20

$
20

$


$
14

$
14Profit (loss) from discontinued operations, before tax

$
22

$
(13
)
$
9

$
39

$
(14
)
$
25Loss on disposal, before tax


(1
)




(1
)







Income tax (expense) recovery


(4
)

3


(1
)




1


1Profit (loss) from discontinued operations, net of tax

$
17

$
(10
)
$
7

$
39

$
(13
)
$
26


Liquidity and Capital Resources

Our principal sources of liquidity are cash flows from operations, cash-on-hand, borrowings under our revolving
credit facilities and accessing capital markets. We use our accounts receivable securitization programs as additional sources of financing. Our principal uses of cash are operating expenditures,
capital expenditures, debt service and funding our defined benefit pension obligations.

49

---





The following is a summary of cash flow:

Year ended December 31 (millions of U.S. dollars)

2011

2010Funds from continuing operations

$
1,233

$
890Interest received


3


6Income tax paid, net of refunds


(145
)

(16
)Operating working capital and other


(128
)

(209
)Cash provided by operating activities from continuing operations


963


671Cash used in operating activities from discontinued operations


(13
)

(16
)Proceeds on sales of assets, investments and other capital transactions


56


1Capital expenditures and turnaround costs


(238
)

(149
)Proceeds from dissolution of other investments


5


7Intangible asset additions


(2
)

(5
)Cash used in investing activities from continuing operations


(179
)

(146
)Cash using in investing activities from discontinued operations


(1
)

Long-term debt repayments


(10
)

(315
)Increase in accounts receivable securitization funding


28


32Interest paid


(134
)

(158
)Cash used in financing activities


(116
)

(441
)Increase in cash and cash equivalents


654


68Cash and cash equivalents, beginning of year


306


238Cash and cash equivalents, end of year

$
960

$
306




We expect our working capital will be sufficient for our requirements for at least the next 12 months.

In
2011, we generated $1,233 million in funds from continuing operations. During the year, working capital increased by $128 million primarily due to increases in accounts
receivable and inventory. The increase in inventory was primarily due to higher raw material and finished goods prices, and a higher volume of raw materials. The increase in accounts receivable was
primarily due to higher sales volumes. During 2011, we sold our investment in the INEOS NOVA joint venture and received net proceeds from the sale of $55 million. Capital expenditures for 2011
were $158 million and turnaround costs were $80 million. Capital expenditures increased in 2011 due to increased spending to sustain our manufacturing facilities and increased spending
on our Corunna cracker revamp project. Turnaround costs increased in 2011 due to a major planned turnaround at our Corunna cracker. In 2011, we increased our accounts receivable securitization funding
by $28 million. The net increase in cash and cash equivalents in 2011 was $654 million.

In
2010, we generated $890 million in funds from continuing operations. During the year, working capital increased by $209 million primarily due to an increase in accounts
receivable and a decrease in accounts payable, offset somewhat by lower inventory. The increase in accounts receivable was primarily due to higher sales prices for our products. The decrease in
accounts payable was primarily due to lower purchased crude volumes, somewhat offset by higher costs for raw materials, and the reduction in inventory was primarily due to a reduction in crude oil
inventory as we moved from an overseas supply source to regional supply sources (which significantly shortened our supply chain), somewhat offset by an increase in PE inventory to allow us to better
serve our customers. This change in working capital includes $85 million of cash collateral posted to secure a bond pending the outcome of our appeal of the Dow Chemical patent litigation,
which is reported as restricted cash on the consolidated statement of financial position. Capital expenditures for 2010 were $126 million and turnaround costs were $23 million. In 2010,
we repaid our $75 million total return swap and our Cdn$250 million 7.85% notes using cash-on-hand and increased our accounts receivable securitization funding by $32 million.

50

---



There
were no dividend payments during 2010. The net increase in cash and cash equivalents in 2010 was $68 million.



We have various contractual cash obligations, including long-term debt repayments and associated interest, contributions to
pension plans, operating leases for office space and railcars and unconditional purchase obligations related to minimum amounts of feedstock and other raw material purchases pursuant to agreements
entered into to secure short- and long-term supply. On January 17, 2012, we repaid our $400 million 6.5% notes using cash-on-hand. The remaining obligations due
in 2012 are expected to be paid for using cash-on-hand and cash flow from continuing operations.



In the fourth quarter of 2011, our Board of Directors approved a $75 million distribution to our shareholder, which is scheduled
to be paid at the end of March 2012.



Payments Due By PeriodAs of December 31, 2011 (millions of U.S. dollars)

Total

2012

2013 to
2014

2015 to
2016

After
2017Long-term debt(1)

$
1,811

$
582

$
405

$
355

$
469Interest payments(2)


638


122


194


154


168Contributions to defined benefit plans(3)


110


110








Contributions to defined contribution plans(3)


14


14








Operating leases(4)


334


45


79


68


142Unconditional purchase obligations(5)


11,670


1,406


1,900


1,793


6,571Total contractual cash obligations

$
14,577

$
2,279

$
2,578

$
2,370

$
7,350


Notes: (1)Includes
current portion. Our accounts receivable securitization programs included in the 2012 year were extended, and in January 2012, we
repaid our $400 million 6.5% notes using cash-on-hand. SeeLiquiditybelow for further details.(2)Interest
payments were calculated using interest rates that were in effect as of December 31, 2011.(3)Estimated
for 2012.(4)Includes
property, railcar and other equipment leasing commitments. Certain railcar lease agreements contain financial covenants for our subsidiary, NOVA
Chemicals Inc.(5)Raw
material agreements are typically market-based. Obligations have been calculated using current pricing.




We define liquidity as total available revolving credit facilities, less utilization (including letters of credit), plus cash and cash
equivalents. As of December 31, 2011, our total liquidity was $1,508 million. Our future liquidity is dependent on many factors such as cash generated from ongoing operations and the
availability of existing credit facilities and of other potential sources of financing.

A
significant portion of our operations is conducted by our subsidiaries, and we are dependent to a large extent upon cash dividends and distributions or other transfers from our
subsidiaries. Accordingly, our ability to service indebtedness and fund operations is dependent upon the results of operations of our subsidiaries and their ability to provide cash to us. Payments of
any dividends, loans or other distributions from our subsidiaries are not currently subject to material contractual, restrictive governmental regulations or other restrictions.

51

---



In
October 2009, we issued $350 million of 8.375% senior notes due 2016 ("unregistered 2016 Notes") and $350 million of 8.625% senior notes due 2019 ("unregistered
2019 Notes") in a transaction exempt from registration under the Securities Act of 1933, as amended. On May 12, 2010, we completed an exchange offer, which resulted in $345 million of
the unregistered 2016 Notes and $344.7 million of the unregistered 2019 Notes being exchanged for the same amount of registered and freely tradable 2016 and 2019 notes.

On
March 20, 2010, $95 million of our undrawn unsecured bilateral credit facilities expired and were not extended.

We
had entered into a total return swap with respect to the Series A preferred shares of our subsidiary, NOVA Chemicals Inc. The equity notional amount of the total return
swap was $75 million. We allowed the
total return swap to terminate in accordance with its terms on March 31, 2010 and repaid the equity notional amount of $75 million. The associated Series A preferred shares were
returned to NOVA Chemicals Inc. and cancelled.

On
August 30, 2010, we repaid our Cdn$250 million 7.85% notes using cash-on-hand. Foreign currency forwards, entered into in January 2010, to
lock in this payment at U.S.$237 million also settled on August 30, 2010.

On
September 8, 2010, we entered into a new unsecured bilateral credit facility for $100 million with a maturity date of September 20, 2015.

On
March 20, 2011, one of our $100 million unsecured bilateral credit facilities expired undrawn and was not extended, and on September 20, 2011, a
$30 million tranche of one of our unsecured bilateral credit facilities expired undrawn and was not extended.

On
January 17, 2012, we repaid our $400 million 6.5% notes using cash-on-hand.



During 2011, we amended our senior secured revolving credit facility to extend the maturity date two years to December 17, 2015.
Accordingly, as of December 31, 2011, we had the following three revolving credit facilities totaling $565 million (of which $17 million
is utilized):



On November 19, 2010, we entered into an uncommitted revolving standby letter of credit and/or guarantee facility with one of
the banks in the syndicate of lenders for our senior secured revolving credit facility. During 2011, we increased the size from $60 million to $125 million. The facility is supported by
an account performance security guarantee issued by Export Development Canada. The facility is only available for issuance of standby letters of credit (and/or guarantees) by the bank on our behalf.
As of December 31, 2011, we utilized $43 million (December 31, 2010  $26 million) of this facility. This facility is not included in
our liquidity calculation.



We engage in accounts receivable securitization programs to obtain lower financing rates than those available from other sources. In
February 2010, we entered into two new accounts receivable securitization programs (one in the U.S. and one in Canada) to replace our prior programs before they expired. In
January 2012, we amended our Canadian accounts receivable securitization program to extend the term for three years to February 11, 2015. The Canadian program allows for maximum funding
of $100 million. In February 2012, we amended our U.S. accounts receivable securitization program to extend the term for two years to January 30, 2014 and to increase the
maximum funding from $100 million to $125 million. We do not

52

---



include
any undrawn amounts under the accounts receivable securitization programs as part of liquidity. As of December 31, 2011 and 2010, the maximum availability of the programs was
$200 million. At December 31, 2011 and December 31, 2010, $182 million and $154 million, respectively, were funded under the programs. Of the total amount,
$100 million and $98 million, respectively, were funded via a special purpose entity ("SPE") that is 100% owned by us and consolidated in our consolidated financial statements. No other
business is conducted through SPE's.

Under
International Accounting Standard ("IAS") 39,Financial Instruments, the receivables transferred to financial counterparties do not
meet the derecognition criteria, therefore the funded amounts under the programs are recognized as a secured financing and included in long-term debt on the consolidated statement of
financial position.



In June 2009, our subsidiary, NOVA Chemicals (Canada) Ltd., entered into a loan agreement for a loan in the principal
amount of Cdn$10 million made available under the Province of Ontario's Advanced Manufacturing Investment Strategy. We were permitted to use the loan proceeds only to finance certain eligible
costs associated with the modernization and expansion of our LDPE capability at our Mooretown facility that was completed in 2010. We drew down the full Cdn$10 million in the fourth quarter of
2009. The maturity date of the loan is December 1, 2019.



At December 31, 2011 and 2010, our senior secured revolving credit facility and our accounts receivable securitization programs
were governed by the following financial covenants, which require quarterly compliance:



The
table below shows our actual financial covenant ratios as of the end of each quarter during 2011.

March 31
2011

June 30
2011

September 30
2011

December 31
2011Senior debt-to-cash flow ratio


0.19


0.17


0.16


0.16Debt-to-capitalization ratio


39.0


34.5


26.8


25.2


See
"Supplemental Measures" for a discussion of the computations used to calculate these financial ratios.

We
expect to be in compliance with the financial covenants over the next 12 month period.



As of December 31, 2011, we had $582 million of debt scheduled to mature in 2012. On January 17, 2012, we repaid
our $400 million 6.5% senior notes using cash-on-hand. Our next notes due are our $400 million floating rate senior notes due in November 2013.

As
of December 31, 2011, $182 million is included in current debt maturities for our accounts receivable securitization programs. In January 2012, we amended our
Canadian accounts receivable securitization program to extend the term for three years to February 11, 2015, and in February 2012, we amended our
U.S. accounts receivable securitization program to extend the term for two years to January 30, 2014 and to increase the maximum funding from $100 million to $125 million.

Off-Balance Sheet Arrangements

Our off-balance sheet arrangements consist of letters of credit and other guarantees entered into in the ordinary course of
business. In addition, we previously had guarantees related to our interest in the INEOS

53

---



NOVA
joint venture, which were terminated when we sold our interest in that joint venture on February 28, 2011 (December 31,
2010  $25 million; January 1, 2010  $44 million). See Note 22 of our annual audited
consolidated financial statements for additional information.

We
have no unconsolidated special purpose financing or other entities that are likely to create material contingent obligations.

Supplemental Measures

We present certain supplemental measures below, which do not have any standardized meaning prescribed by IFRS and are therefore
unlikely to be comparable to similar measures presented by other companies. We believe that certain non-GAAP financial measures, when presented in conjunction with comparable IFRS
financial measures, are useful to readers because the information is an appropriate measure for evaluating our operating performance. Internally, we use this non-GAAP financial information
as an indicator of business performance, with specific reference to these indicators. These measures should be considered in addition to, and not as a substitute for or superior to, measures of
financial performance prepared in accordance with IFRS.

Operating
profit from continuing operations  equals profit from continuing operations before finance costs net, other gains and losses, net and
income taxes. This measure assists readers in analyzing our profit from continuing operations.

Reconciliation of operating profit from continuing operations to profit from continuing operations

Year ended December 31 (millions of U.S. dollars)

2011

2010Operating profit from continuing operations

$
1,007

$
597Finance costs, net


(166
)

(186
)Other losses, net


(18
)

(50
)Income tax expense


(215
)

(124
)Profit from continuing operations

$
608

$
237


Senior
Debt-to-Cash Flow  equals the drawn amount on any secured credit facilities of the Corporation (including letters of
credit), plus the funded amount of our accounts receivable securitization programs, divided by Consolidated Cash Flow. The Consolidated Cash Flow calculation is performed on a rolling
12 months. This measure is provided to assist readers in calculating our financial covenant.

Consolidated
Cash Flow  equals consolidated profit (loss) plus finance costs, income taxes and depreciation amortization, less all
non-cash items. This measure excludes any extraordinary gains and losses (including gains and losses resulting from the sale of assets) and excludes certain subsidiaries. This measure is
provided to assist readers in calculating our Senior Debt-to-Cash Flow financial covenant.

Debt-to-Capitalization  equals
Net Consolidated Debt, divided by the aggregate of Consolidated Shareholder's Equity, Net
Consolidated Debt and Subordinated Shareholder Debt. This measure is provided to assist readers in calculating our financial covenant.

Net
Consolidated Debt  equals long-term debt due within one year and long-term debt as reflected on the most recent
quarterly consolidated statement of financial position of the Corporation (excluding debt of certain subsidiaries and any non-recourse debt), less cash and cash equivalents as reflected on
the consolidated statement of financial position of the Corporation (excluding cash and cash equivalents of certain subsidiaries). This measure is provided to assist readers in calculating our
Debt-to-Capitalization financial covenant.

Consolidated
Shareholder's Equity  equals consolidated equity as reflected on the most recent quarterly consolidated statement of financial
position of the Corporation (excluding equity allocable to certain subsidiaries or equity allocable to assets that secure non-recourse debt). This measure is provided to assist readers in
calculating our Debt-to-Capitalization financial covenant.

54

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Critical Accounting Policies and Estimates



For all periods up to and including the year ended December 31, 2010, we prepared our consolidated financial statements in
accordance with Canadian GAAP. On January 1, 2011, we changed our financial reporting principles from Canadian GAAP to IFRS. The annual audited consolidated financial statements for the year
ended December 31, 2011 are our first annual consolidated financial statements that have been prepared in accordance with IFRS as issued by the IASB and IFRS 1, First Time Adoption of International Financial
Reporting Standards.

While
IFRS uses a framework similar to Canadian GAAP, there are significant differences in recognition, measurement and disclosures. We have prepared our annual audited consolidated
financial statements that comply with IFRS as described in the accounting policies in Note 2 of our annual audited consolidated financial statements. In preparing the annual audited
consolidated financial statements, our opening statement of financial position was prepared at January 1, 2010, our date of transition to IFRS. Note 26 in the annual audited consolidated
financial statements explains the principal adjustments we made in restating our Canadian GAAP statements of financial position as at January 1, 2010 and December 31, 2010 and our
previously published Canadian GAAP consolidated statements income and comprehensive income for the year ended December 31, 2010.

IFRS 1
allows first-time adopters of IFRS certain optional exemptions from retrospective application of certain IFRS standards. In Note 26 of our annual audited
consolidated financial statements, we disclose the optional exemptions available under IFRS 1 that we elected on transition to IFRS.



The preparation of our consolidated financial statements requires management to make judgments, estimates and assumptions that affect
the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities at the end of the reporting periods. Uncertainty about these assumptions and estimates
could result in outcomes that require a material adjustment to the carrying amount of the asset or liability affected in future periods. The following represents the estimates and judgments most
critical to the application of our accounting policies. For a summary of our significant accounting policies, see Note 2 in the annual audited consolidated financial statements.

Property, Plant and Equipment ("PP&E").Judgmental aspects of accounting for PP&E involves selection of an appropriate method of
depreciation,
estimates of the life of assets and determining whether an impairment of our assets exists and measuring such impairment. We are able to choose from alternative methods of depreciation. The
straight-line method was chosen rather than other methods, such as units of production, because the straight-line method is consistent with the pattern of economic benefits
that are expected from the use of our plants and equipment, requires less estimation and judgment, and is a systematic and rational basis for allocating the depreciable cost over the period in which
the assets' benefit is realized. We review the estimated useful lives and the depreciation method of PP&E at each financial year end and make adjustment prospectively when appropriate. This review is
completed by NOVA Chemicals' engineers familiar with the plant sites and requires management's assessment of economic utility. We made no changes to the estimated useful lives or depreciation methods
for PP&E during 2011.

Intangibles.Judgmental aspects of accounting for intangibles involves selection of an appropriate method of amortization, estimates of
the life of
assets and determining whether an impairment of our assets exists and measuring such impairment. The amortization period and the amortization method for intangible assets with a finite useful life are
reviewed each financial year end. We made no changes to the amortization periods or methods for intangible assets during 2011 and 2010, and have no intangible assets with indefinite use lives.

Impairment of non-financial assets.Impairment exists when the carrying value of an asset or cash generating unit ("CGU") exceeds its
recoverable amount, which is the higher of its fair value less costs to sell and its value in use. The fair value less costs to sell calculation is based on available data from binding sales

55

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transactions
in an arm's length transaction of similar assets or observable market prices less incremental costs for disposing of the asset. The value in use calculation is based on a discounted cash
flow model. The cash flows are derived from the budget for the next five years and do not include restructuring activities that we have not yet committed to or significant future investments that will
enhance the performance of the asset or CGU being tested. The recoverable amount is most sensitive to the discount rate used for the discounted cash flow model as well as the expected future
cash-inflows and the growth rate used for extrapolation purposes. Other factors that management must estimate include: industry and market conditions, sales volumes and prices, costs to
produce, inflation, etc. We use reasonable, supportable and where available third-party, industry expert assumptions when performing impairment reviews.

We
assessed all of our non-financial assets for indicators of impairment and determined that certain impairment indicators exist in our Performance Styrenics segment during
the fourth quarter of 2011. In accordance with IFRS 1 (see Note 26 of our annual audited consolidated financial statements), we elected to use the fair values of assets and
liabilities, as determined in connection with the IPIC acquisition of us on July 6, 2009, as "deemed cost" for the assets and liabilities that could be recognized under IFRS, which included
PP&E of our Performance Styrenics segment. Since July 6, 2009, the market for certain products has not improved significantly, but we continue to spend a significant amount on capital
expenditures for the business and other common facilities at our manufacturing sites, resulting in a carrying value of these assets at December 31, 2011, of $10 million prior to any
impairment charge. The carrying value of these assets at December 31, 2011 was written down to their estimated fair value of $4 million, resulting in an impairment charge of
$6 million. The impairment charge is included in feedstock and operating costs on the consolidated income statements.

We
also assessed impairment indicators at the end of 2010 and determined that although the Performance Styrenics segment continued to add new packaging applications for items such as
televisions and computer equipment, demand had not materialized as expected due to poor economic conditions and competitive pressure, which resulted in lower sales volumes during 2010. Accordingly,
during the fourth quarter of 2010, management determined that the carrying value of certain assets within the Performance Styrenics segment were greater than the estimated future cash flows. These
assets' carrying value at December 31, 2010 prior to write-down was $26 million. The fair value was estimated to be $6 million. Thus, the assets were written down to
their estimated fair value, resulting in an impairment charge of $20 million during 2010. The impairment charge is included in feedstock and operating costs on the consolidated income
statements.

The
write-downs will reduce future depreciation charges in the Performance Sytrenics segment by approximately $3 million per year from 2012 to approximately 2019.

Fair value of financial instruments.Where the fair value of financial assets and financial liabilities recorded in the consolidated
statement of
financial position cannot be derived from active markets, their fair value is determined using quoted prices in active markets adjusted for factors specific to the asset or liability, such as basis
and location differentials. This includes over-the-counter derivatives with values based upon observable commodity futures curves and derivatives with input validated by broker
quotes or other publicly available market data providers. This also includes fair values determined using
valuation techniques, such as regression or extrapolation formulas, where the inputs are readily observable, including commodity prices for similar assets or liabilities in active markets. The key
inputs to valuation models and regression or extrapolation formulas include interest rate yield curves, currency rates, credit spreads, implied volatilities, and commodity prices for similar assets or
liabilities in active markets, as applicable. Changes in assumptions about these factors could affect the reported fair value of financial instruments.

Provision for decommissioning.Provisions for decommissioning costs are recognized at the time of acquisition or construction of
manufacturing
facilities. Decommissioning liabilities are provided at the present value of the expected costs to settle the obligation and are recognized as part of the cost of the particular asset. The expected
costs are discounted at a current pre-tax rate that reflects the risks specific to the decommissioning liability (which we interpret to be a risk-free rate). The unwinding of
the discount is recognized in the consolidated income statement in finance costs, net as it occurs. The estimated future costs of decommissioning are reviewed annually and adjusted as appropriate.
Changes in the estimated future costs or in the discount rate applied are added to or deducted from the cost of the asset.

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We
have recognized a provision for decommissioning obligations associated with our manufacturing facilities. In determining the amount of the provision, assumptions and estimates are
made in relation to discount rates, the expected cost to dismantle and remove the plant, restore the site, and the expected timing of those obligations. The carrying amount of the provision as at
December 31, 2011 was $101 million (December 31, 2010  $99 million; January 1,
2010  $86 million).

Pension Plans.We sponsor both defined benefit and defined contribution pension arrangements covering substantially all of our
employees. The cost
and obligations for the defined benefit pension plans and other post-employment medical benefits and the present value of the pension obligation are determined using actuarial valuations.
An actuarial valuation involves making various economic and demographic assumptions to estimate future liabilities and which are discounted back to today's value using interest rates as of the
valuation date. Some of the assumptions used in the valuations include future salary increases, mortality rates, future pension increases, and termination and retirement rates. Given the long term
nature of the obligations and the fact that assumed rates can vary from short term actual experience, the liabilities are subject to volatility and are particularly sensitive to changes in interest
rates. In addition, given the assets are allocated to equities and bonds, the market value of the plans' assets are sensitive to changes in capital markets. All significant assumptions and asset
values are reviewed at each reporting date.

In
determining the appropriate discount rate, management considers the yields of high quality corporate bonds, in the respective country, with terms to maturity that approximate the
duration or projected cash flows of our pension obligations. The mortality rate is based on publicly available mortality tables for each country. Future salary increases are based on our long term
view of compensation trends and pension
indexation, which is only applicable to the Canadian defined benefit plans, is based on expected future inflation rates. Retirement and termination rates are based on actual experience or standardized
tables which are reflective of our experience.

Given
the decline in interest rates during 2011, management decreased the discount rates used in determining pension and post retirement obligations and applied actual asset values,
which reflected weak investment returns, as of December 31, 2011 as compared to December 31, 2010. These changes increased our employee benefit plan liability and decreased other
comprehensive income and retained earnings by approximately $125 million at December 31, 2011.

A
total of $58 million and $33 million was contributed in 2011 and 2010, respectively, to all of our defined benefit pension plans. The contributions were based on the most
recently filed valuations with pension regulators in each country. We contributed $11 million and $10 million in 2011 and 2010, respectively, to our defined contribution plans.

For
2012, funding for the defined benefit plans is expected to be approximately $110 million as employees accrue additional pension benefits and special payments are made to cover
the shortfall between assets and liabilities. Special payments are expected to increase significantly in 2012 due to the expiration of funding relief for one of the Canadian plans at the end of 2011
and due to a deterioration of the funded position of the plans as a result of further declines in interest rates and weak asset growth in 2011. Contributions to defined contribution plans for 2012 are
expected to be $14 million. The increase in defined contribution plan contributions in 2012 largely reflects an increase in the employer contribution rate for our Canadian plans.

Taxes.Uncertainties exist with respect to the interpretation of complex tax regulations, changes in tax laws, and the amount and
timing of future
taxable income. Given the wide range of international business relationships and the long-term nature and complexity of existing contractual agreements, differences arising between the
actual results and the assumptions made, or future changes to such assumptions, could necessitate future adjustments to tax income and expense already recorded. We establish provisions, based on
reasonable estimates, for possible consequences of audits by the tax authorities of the respective countries in which we operate, if it is probable that an outflow of resources will be required to
settle the obligation. The amount of such provisions is based on various factors, such as experience of previous tax audits and differing interpretations of tax regulations by the taxable entity and
the responsible tax authority. Such differences of interpretation may arise on a wide variety of issues depending on the conditions prevailing in the respective company's domicile. We

57

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review
the adequacy of these provisions at the end of each reporting period and include any required liability in deferred tax liabilities.

Deferred
tax assets are recognized for all unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilized. Significant
management judgment is required to determine the amount of deferred tax assets that can be recognized, based upon the likely timing and the level of future taxable profits together with future tax
planning strategies.

We
have tax loss carry forwards, in the United States, amounting to $117 million at December 31, 2011 (December 31,
2010  $131 million; January 1, 2010  $141 million). In addition, at December 31, 2011, we have
$205 million of unrecognized losses in Switzerland (December 31, 2010  $256 million; January 1,
2010  $319 million). These relate to subsidiaries that have had a history of losses and expire in 2028.

If
we were able to recognize all unrecognized deferred tax assets, profit would have increased by $65 million for the year ended December 31, 2011.

Legal claims.When assessing the possible outcomes of legal claims that are filed against us, we rely on the opinions of our legal
counsel. The
opinions of our legal counsel are based on the best of their professional judgment, and take into consideration the current stage of the proceedings and the legal experience accumulated with respect
to the various matters. As the results of the claims may ultimately be determined by the courts or otherwise settled, they may be different from such estimates

New feedstock, transportation and storage agreements.The "NOVA 2020 Project" includes plans for growth of our proprietary polyethylene
technology to
serve North American markets. As a part of our strategy to capitalize on emerging feedstock opportunities and growing North American demand, we have begun feasibility and engineering work for the
construction of two new polyethylene assets to be located at our sites in Alberta and Ontario. We will also complete studies for a further debottleneck of our LDPE line located at our Mooretown,
Ontario facility.

Throughout
2011, we entered into a number of key agreements, including agreements for additional sources of ethane supply and related pipeline transportation services for our Joffre
complex which should provide sufficient ethane for us to move towards full utilization of our Joffre PE assets; and agreements to support the revamp of our Corunna cracker to utilize up to 100% NGL
feedstock, including definitive agreements for long-term ethane supply from the Marcellus Shale Basin, a transportation service agreement for the transportation of ethane feedstock from
the Marcellus Shale Basin into the Sarnia, Ontario region and related storage agreements.

These
agreements have been evaluated in relation to various IFRS principles, the most significant of which was International Financial Reporting Interpretations Committee ("IFRIC") 4, Determining Whether an Arrangement Contains a
Lease. IFRIC 4 requires that determining whether an arrangement is, or contains, a
lease shall be based on the substance of the arrangement and requires an assessment of whether:



Management
has determined that based on evaluation of the terms and conditions of the arrangements that the feedstock and pipeline arrangements do not meet both criteria under IFRIC 4 and
therefore do not contain leases, but that a material storage cavern arrangement contains a lease. Currently, there is only one material storage agreement that has been signed and management has
determined this to be an operating lease.

Discontinued operations.On October 31, 2010, we entered into an agreement with an affiliate of INEOS providing for the sale of our
50%
interest in the INEOS NOVA joint venture. The sale closed on February 28, 2011. Associated results of operations and cash flows are separately reported as discontinued operations for all
periods presented and the associated financial position is separately reported as assets and liabilities held for sale as of December 31, 2010.

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During
the second quarter of 2010, our Board of Directors approved the sale, subject to certain conditions, of our building and construction business, collectively known as SYNTHEON. The
SYNTHEON portfolio of businesses, which was part of our Performance Styrenics segment, includes SYNTHEON Inc.; Accelerated Building Technologies LLC; NCE Inc.; NOVA Chemicals
Chile Limitada; our 50% interest in both Novidesa S.A. de C.V. and Reliance Innovative Building Solutions Pvt. Ltd (both joint ventures); and intellectual property relating to both the
building and construction products and the Elemix concrete additive. We initially anticipated that the sale would be completed in 2010; however, negotiations with the intended acquirer ended without a
sale being completed. Management has since developed a formal plan for the sale of SYNTHEON assets. Associated results of operations, financial position and cash flows are separately reported as
discontinued operations and assets and liabilities held for sale as of and for the years ended December 31, 2011 and 2010. SYNTHEON assets are available for immediate sale and can be sold to a
potential buyer(s) in their current condition. Management has initiated an active plan to locate a buyer(s) and expects any potential disposal to be completed within the next 12 months.
Accordingly, management considers that SYNTHEON meets the criteria to be classified as held for sale as of December 31, 2011.

For
more details on discontinued operations, refer to Note 5 in the annual audited consolidated financial statements.

Changes in Accounting Policies and Disclosures

New and amended standards and interpretations

Our accounting policies adopted are consistent with those of the prior period, except for the following amended IFRIC interpretations
effective as of January 1, 2011 and described below:

IFRIC 14, Prepayments of a Minimum Funding Requirement (Amendment), is effective for annual periods beginning on or after
January 1, 2011 with retrospective application. This amendment permits entities to treat the benefit of prepayments of minimum funding requirements as an asset and provides guidance on
assessing the recoverable amount of a net pension asset. This amendment was adopted as of January 1, 2011 and did not have an impact on our consolidated financial statements.

IFRIC 24,Related Party Disclosures (Amendment), is effective for annual periods beginning on or after January 1, 2011, with
retrospective application. Among other things, this amendment clarifies the definition of a related party to simplify the identification of such relationships and to eliminate inconsistencies in its
application. This amendment was adopted as of January 1, 2011 and did not have an impact on our consolidated financial statements.

Standards issued but not yet effective

Standards issued up to the date of issuance of our consolidated financial statements but not effective as of December 31, 2011
are listed below. We intend to adopt these standards when they become effective.

Amendments to IAS 12: Deferred Tax  Recovery of Underlying Assets, amends IAS 12, Income Taxes, by creating an exception to the principle that
the measurement of deferred tax liabilities and deferred tax assets should reflect the tax
consequences that would follow from the manner in which the entity expects to recover or settle the carrying amount of its assets and liabilities. In specified circumstances, such as when the deferred
tax liability or asset arises from investment property or property, plant and equipment or intangible assets, the measurement of deferred tax liabilities and assets should reflect a rebuttable
presumption that the carrying amount of the underlying asset will be recovered entirely by sale. Standing Interpretations Committee ("SIC") 21, Income
Taxes  Recovery of Revalued Non-Depreciable Assets, is no longer applicable to investment properties carried at fair value.
The remaining guidance from SIC 21 was added to IAS 12, which requires businesses to measure the deferred tax relating to an asset to be measured based upon the expectation that the
carrying amount of the asset will be recovered by selling the asset or using it. The amendments are effective January 1, 2012. We do not expect the application of the revised standard to have
an impact on our consolidated financial statements.

In
January 2011, the IASB amended IFRS 7,Financial Instruments: Disclosures. The amendment is effective for annual periods
beginning on or after July 1, 2011, with earlier adoption permitted. The amendment relates to

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required
disclosures for transfers of financial assets to help users of the financial statements evaluate the risk exposures relating to such transfers and the effect of those risks on an entity's
financial position. We are currently evaluating the impact of adopting this amended standard.

IFRS 9,Financial Instruments: Classification and Measurement, as issued, reflects the first phase of the IASB work on the
replacement of IAS 39,Financial Instruments. In subsequent phases, the IASB will address hedge accounting and derecognition. IFRS 9
introduces new requirements for the classification and measurement of financial assets and is effective for annual periods beginning on or after January 1, 2015, with early adoption permitted.
The adoption of this standard will have an effect on the classification and measurement of our financial assets and financial liabilities. We are currently evaluating the impact and will quantify the
effect in conjunction with the other phases, when issued, to present a comprehensive picture.

In
May 2011, the IASB issued several standards, all of which are effective for annual periods beginning on or after January 1, 2013 with earlier application permitted:

IFRS 10,Consolidated Financial Statements, establishes principles for the presentation and preparation of consolidated financial
statements when an entity controls one or more other entities and replaces the consolidation requirements in SIC 12, Consolidation  Special Purpose Entitiesand IAS 27,Consolidated and Separate
Financial Statements. IFRS 10 builds on existing principles by identifying the concept of control as the determining factor in whether an entity should be included
within the consolidated financial statements of the parent company. This standard also provides additional guidance to assist in the determination of control where this is difficult to assess. We are
currently evaluating the impact of adopting this standard.

IFRS 11,Joint Arrangements, provides for a more realistic reflection of joint arrangements by focusing on the rights and
obligations of the arrangement, rather than its legal form (as is currently the case). IFRS 11 addresses inconsistencies in the reporting of joint arrangements by requiring a single
method (the equity method) to account for interests in joint ventures. In conjunction with the issuance of IFRS 11, IAS 28,Investments in Associates and
Joint Ventures,was amended. An entity should apply IFRS 11 to determine the type of joint arrangement in which it is involved. Once it has determined that it has an
interest in a joint venture, the entity should recognize an investment and account for it using the equity method in accordance with IAS 28 (as amended in 2011), unless the entity is
exempt from applying the equity method as specified in the standard. We are currently evaluating the impact of adopting this standard and amendment.

IFRS 12, Disclosure of Interests in Other Entities, is a new and comprehensive standard on disclosure requirements for all forms of
interests in other entities, including subsidiaries, joint arrangements, associates and unconsolidated structured entities. IFRS 12 will require an entity to disclose information that enables
users of financial statements to evaluate the nature of, and risks associated with, its interests in other entities, and the effects of those interests on its financial position, financial performance
and cash flows. We are currently evaluating the impact of adopting this standard.

IFRS 13,Fair Value Measurement, provides new guidance on fair value measurement and disclosure requirements. IFRS 13 will
improve consistency and reduce complexity by providing a precise definition of fair value and a single source of fair value measurement and disclosure requirements. We are currently evaluating the
impact of adopting this standard.

In
June 2011, the IASB issued the following amended standards:

IAS 19,Employee Benefits,provides the accounting and disclosure requirements by employers for employee benefits. The amendments
to IAS 19 will provide investors and other users of financial statements with a better understanding of an entity's obligations resulting from the provision of defined benefit plans and how
those obligations will affect its financial position, financial performance and cash flow. Among other things, the amendment eliminates the option to defer the recognition of gains and losses, known
as the 'corridor method', and further aligns IFRS with Generally Accepted Accounting Principles in the United States ("US GAAP"). The amendments to IAS 19 are effective for annual
periods beginning on or after January 1, 2013, with earlier application permitted. We are currently evaluating the impact of adopting this amended standard.

IAS 1,Presentation of Financial Statements, was amended to improve the quality of the presentation of other comprehensive income
("OCI") and align the presentation of OCI in financial statements prepared in

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accordance
with IFRS with those prepared in accordance with US GAAP. The amendments require companies preparing financial statements in accordance with IFRS to group together items within OCI that may
be reclassified to the profit or loss section of the income statement. The amendments also reaffirm existing requirements that items in OCI and profit or loss should be presented as either a single
statement or two consecutive statements. The amendments to IAS 1 are effective for annual periods beginning on or after July 1, 2012. We are currently evaluating the impact of adopting
this amended standard.

In
December 2011, the IASB amended IAS 32,Financial Instruments Presentation, for disclosure requirements for the
offsetting of assets and liabilities on the statement of financial position. The amended standard requires entities to disclose both gross information and net information about both instruments and
transactions eligible for offset in the statement of financial position and instruments and transactions subject to an agreement similar to a master netting arrangement. The scope includes
derivatives, sale and repurchase
agreements and reverse sale and repurchase agreements and securities borrowing and securities lending agreements. The amendments to IAS 32 are effective for annual periods beginning on or after
January 1, 2014 and require retrospective application. We are currently evaluating the impact of adopting this amended standard.

Anticipated Changes to IFRS  Leases

In August 2010, as part of the global convergence project, the IASB and the Financial Accounting Standards Board ("FASB") issued
a joint exposure draft proposing that lessees would be required to recognize all leases on the statement of financial position. Such standard, if adopted as proposed, would result in a significant
increase in total assets and liabilities on our statement of financial position. The IASB and FASB currently expect to issue a final standard in 2012.

Market and Regulatory Risk

The Audit Committee of our Board of Directors regularly reviews foreign exchange, interest rate and commodity hedging activity and
monitors compliance with the our hedging policy. Our policy prohibits the use of financial instruments for speculative purposes and limits hedging activity to the underlying net economic exposure. See
Note 24 in our annual audited consolidated financial statements for additional information.



Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in
market interest rates. Changes in the market interest rates of long-term debt with fixed interest rates only affects our profit if such debt is measured at fair value. All of our
fixed-rate long-term debt is carried at amortized cost and therefore is not subject to interest rate risk. Our exposure to the risk of changes in market interest rates relates
primarily to our long-term debt obligations with floating interest rates.

We
manage our interest rate risk by balancing our exposure to fixed and variable rates while attempting to minimize our interest costs. When deemed appropriate, we enter into interest
rate swap agreements to manage our 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 2011 and 2010, we had no floating-for-fixed interest rate swaps outstanding.

For
the disclosure of market risks, management has prepared a sensitivity analysis that shows the effects of reasonably possible changes in relevant risk variables on
after-tax income and equity. The periodic effects are determined by relating the reasonably possible changes in the risk variables to the balance of financial instruments at the reporting
date. For purposes of this analysis, long-term debt balances as of December 31, 2011 and 2010, were used.

Changes
in market interest rates would affect interest expense on our variable rate, long-term debt which is included in the sensitivity analysis calculation.

At
December 31, 2011 and 2010 if interest rates at that date had been 0.5% higher, with all other variables held constant, after-tax profit and equity for each year
would have been $2 million lower, arising mainly as a result of higher interest expense on variable rate borrowings.

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Foreign currency risk is the risk that the fair value of future cash flow of a financial instrument will fluctuate because of changes
in foreign exchange rates. Our exposure to the risk of changes in foreign exchange rates relates primarily to our operating activities (when revenue or expenses are denominated in a different currency
from our functional currency). We have established a policy that provides a framework for foreign currency management, hedging strategies and approved hedging instruments. Hedging instruments may be
used to minimize the gains and losses due to short-term foreign currency exchange rate fluctuations. The exposure that may be hedged in accordance with our foreign exchange policy is
limited to operational transaction exposure and is generally used only to balance out our cash positions. Foreign currency risks resulting from the translation of assets and liabilities of foreign
operations into our functional currency are generally not hedged; however, we may hedge this risk under certain circumstances.

To
address the risks associated with having the U.S. dollar as our functional currency we entered into a series of foreign currency forwards in January 2010, to effectively
hedge the foreign currency exposure on the Cdn$250 million 7.85% notes that were due and settled in August 2010. The foreign currency forwards locked in repayment of the
Cdn$250 million 7.85% notes at U.S.$237 million.

Translation
currency effects occur when we or one of our subsidiaries incurs monetary assets or liabilities in a currency different from its functional currency. These translation gains
and losses are recorded in feedstock
and operating costs on the consolidated income statement, except for employee benefit plan liabilities for which the resulting gains or losses are reported in other comprehensive income.

Foreign
currency risks may also result from certain investing activities such as the acquisition and disposal of investments in foreign companies, and may be caused by financial
liabilities in foreign currencies and loans in foreign currencies that are extended to affiliated entities for financing purposes. In recent years, these risks generally have not been hedged.

Our
subsidiaries and affiliated entities generally execute their operating activities in their respective local currencies. We historically have not used currency derivatives to hedge
such payments.



Our investing, financing and operating activities are exposed to currency risks. The following table demonstrates the sensitivity to a
10% strengthening of the Canadian dollar against the U.S. dollar, with all other variables held constant, of our after-tax profit and OCI. The impact of translating the net assets
of foreign operations into our reporting currency is excluded from the sensitivity analysis. Any change in the Euro would not be material.

(millions of U.S. dollars, except as noted)

Change(1)

Decrease
in after-tax
profit

Decrease in other
comprehensive
income2011


+10%

$
64

$
282010


+10%

$
62

$
19


(1)A
10% weakening of the Canadian dollar against the U.S. dollar would have the opposite effect.




We use commodity-based derivatives to manage our 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. The extent to which commodity-based derivatives are used depends on market conditions and requires adherence to our hedging policy. We limit our positions in futures
markets to proprietary feedstock requirements and do not use derivative instruments for speculative purposes.

Commodity
swaps are sometimes used and designated as fair value hedges intended to hedge the fair value of our feedstock inventory against changes in the market price. At inception of a
hedging relationship, we

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document
the relationship between the hedging instrument and the hedged item, our risk management objective and our strategy for undertaking the hedge. We also require a documented assessment, both at
hedge inception and on an ongoing basis, of whether or not the derivatives that are used in hedging transactions are highly effective in offsetting the changes in the fair value of the hedged items.
Unrealized gains and losses on derivative instruments designated and qualifying as fair value hedging instruments, as well as the offsetting unrealized gains and losses on the hedged items, are
included in income in the same accounting period within feedstock and operating costs in the consolidated income statement. At December 31, 2011 and 2010 and as of January 1, 2010, we
had no outstanding commodity-based derivatives designated as fair value hedges.

In
addition, we utilize options, swaps and futures instruments as economic hedges of commodity price exposures, but they either do not meet the hedge accounting criteria of IAS 39
or are not designated as qualifying hedges. Gains and losses on commodity-based derivatives are included in feedstock and operating costs in the consolidated income statement.

The
notional volume and fair value of outstanding derivative contracts for crude oil and refined products that are not designated or do not qualify for hedge accounting are
as follows:

December 31, 2011

December 31, 2010

January 1, 2010(millions of U.S. dollars, except as noted)Crude oil

Propane

Butane

Crude oil

Propane

Butane

Crude oil

Propane

ButaneNotional volume  mm bbls


0.4


0.1


0.3


1.5


0.9


0.9


2.9


2.7


1.9Weighted-average price per bbl

$
107.84

$
55.45

$
68.02

$
94.75

$
48.46

$
72.67

$
88.61

$
45.75

$
72.25Fair value

$
3

$


$
2

$
2

$
4

$
(4
)
$
16

$
17

$
(15
)Term to maturity  months


1-12


10-12


10-12


1-24


1-24


1-24


1-36


1-36


4-36


The notional volume and fair value of outstanding derivative contracts for natural gas that are not designated or do not qualify for hedge
accounting are as follows:

(millions of U.S. dollars, except as noted)

December 31, 2011

December 31, 2010

January 1, 2010Notional volume  mm gjs


1.2


1.8


Weighted-average price per gj

$
3.43

$
3.75

$
Fair value

$
(1
)
$


$
Term to maturity  months


1-2


1-3





We
lock in a portion of our propane and butane feedstock requirements as a percentage of crude oil using forward contracts that extend to 2012. In 2011 and 2010, our portfolio also
included trades to re-price excess feedstock inventory, and a small volume of our winter natural gas requirements was locked in at a fixed price. Changes in forward propane and butane
prices as a percentage of forward crude oil prices and a decrease in the notional volumes drove the mark-to-market change in 2011 as compared to 2010. At December 31,
2011, each 10% change in the price of crude oil, propane and butane would have impacted the value of our derivative contracts and changed our after-tax profit by approximately
$1 million, $2 million and $3 million, respectively. At December 31, 2010, each 10% change in the price of crude oil, propane and butane would have impacted the value of
our derivative contracts and changed our after-tax profit by approximately $11 million, $4 million and $4 million, respectively. At December 31, 2011 and 2010,
each 10% change in the natural gas price would not have materially impacted the value of our derivative contracts. The sensitivity analysis of our commodity derivative contracts does not consider any
adjustments for credit risk. There are no other items except as noted, that are excluded or partially excluded from this analysis. At December 31, 2011, we remain exposed to price risk on open
commodity derivatives until their maturity. There have been no other changes in our market risk exposure or how this risk is managed.



Liquidity risk is the risk that we will not have sufficient funds available to meet our liabilities. We seek to maintain liquidity
within a targeted range in the form of cash and cash equivalents and undrawn revolving credit facilities to position us to make scheduled cash payments, pay down debt, ensure ready access to capital,
and assist in the solvency and financial flexibility of our operations. Adjustments to the liquidity reserve are made

63

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upon
changes to economic conditions, anticipated future debt maturities and funding of our defined benefit pension obligations, underlying risks inherent in our operations and capital requirements to
maintain and grow operations. Liquidity totaled $1,508 million at December 31, 2011, $982 million at December 31, 2010 and $802 million at January 1, 2010.
Repayment of amounts due within one year may be funded by cash flows from operations, cash-on-hand, undrawn revolving credit facilities and accounts receivable securitization programs.
Capital markets transactions may also be used in managing the balance between maturing obligations and available liquidity. Our future liquidity is dependent on factors such as cash generated from
ongoing operations and other potential sources of financing. For further discussion about our liquidity, seeLiquidity and Capital Resources.



Counterparty credit risk on financial instruments arises from the possibility that a counterparty to an instrument in which we are
entitled to receive payment fails to perform on its obligations under the contract. This includes any cash amounts owed to us by those counterparties, less any amounts owed to the counterparty by us
where a legal right of offset exists and also includes the fair value of contracts with individual counterparties which are recorded in the annual audited consolidated financial statements.

For
derivative financial instruments, we have 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. We do not anticipate that any counterparties we currently transact with will fail to meet their obligations. At December 31, 2011 and 2010 and
at January 1, 2010, we had no credit exposure for foreign currency or interest rate instruments. At December 31, 2011, we had $5 million credit exposure for commodity-based
instruments (December 31, 2010  $7 million; January 1, 2010  $17 million).

In
order to manage credit and liquidity risk, we invest only in highly rated instruments that have maturities of nine months or less. Limits on the term of an investment, the type of
investment and concentration limits per institution are established. Typically we invest only in overnight bank term deposits.

Trade
credit risk includes an unexpected loss in cash and earnings if a customer is unable to pay its obligations or the value of security provided declines. Trade receivables over
30 days were approximately 1% of total trade receivables at December 31, 2011 and 2010. There is no indication as of December 31, 2011, that the debtors will not meet their
obligations. Historically, trade receivable credit losses (bad debt write-offs) have been immaterial and bad debt expense continued to be immaterial in 2011.



We are committed to the Responsible Care® initiative as the basis for our overall safety, health, environment, security and
risk program. Responsible Care is a global industry initiative that is currently practiced by the chemical industry in over 50 countries worldwide. Responsible Care was created by the Chemistry
Industry Association of Canada in 1985 and adopted by the American Chemistry Council in the United States in 1988. As a participant in Responsible Care, we are committed to the responsible
management of our products through their life cycle, the safety of our operations, the continuous reduction of the emissions and wastes from our facilities and sustainability.

Similar
to other companies that manufacture and sell plastics and chemicals, we are subject to extensive environmental laws and regulations. These laws and regulations concern the
manufacturing, processing and importation of certain substances, discharges or releases to air, land or water and the generation, handling, storage, transportation, treatment, disposal and
clean-up of regulated materials.

Although
we believe that our businesses, operations and facilities are being operated in material compliance with applicable environmental laws and regulations, the operation of any
petrochemical facility and the distribution of petrochemical products involve the risk of accidental discharges of hazardous materials, personal injury and property and environmental damage.

From
time to time, we have entered into consent agreements or have been subject to administrative orders for pollution abatement or remedial action. Under some environmental laws, we may
be subject to strict and, under certain circumstances, joint and several liability for the costs of environmental contamination on or from

64

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our
properties and at off-site locations where we disposed of or arranged for disposal or treatment of hazardous substances and may also incur liability for related damages to natural
resources. We have been named as a potentially responsible party under the U.S. Comprehensive Environmental Response, Compensation and Liability Act of 1980, or its state equivalents, at
several third-party sites. Provision has been made in our financial statements to cover the estimated costs. Nevertheless, we cannot provide any assurance that we will not incur substantial costs and
liabilities resulting from future events or unknown circumstances which exceed our reserves or will be material.

In
2002, Canada ratified the Kyoto Protocol, and agreed to regulate reductions in air emissions that contribute to climate change. In 2007, the Canadian federal government released its
plan for reducing industrial air emissions, including an ultimate goal of reducing greenhouse gas ("GHG") emissions by 20% from the 2006 levels by 2020 and by 60 to 70% by 2050. In
December 2010, Canada signed the Copenhagen Accord committing to reduce national GHG emissions by 17% from 2005 levels by 2020. In December 2011, Canada formally withdrew from the Kyoto
Protocol indicating a focus on future international agreements.

The
Canadian federal government, recognizing the recent global economic recession and Canada's approximate 2% contribution of global GHGs, has indicated an intent to balance national
environmental and energy policies between economic renewal and sustainable development. In addition, the Canadian federal government has stated that GHG reduction objectives require a systemic
approach of regulating emissions sector by sector and, where appropriate, alignment with the United States. We anticipate legally binding federal GHG emission reduction requirements to be
imposed on our operations in Canada, although the scope and timing for such requirements and the related impacts are uncertain.

Many
Canadian provinces are also considering or implementing GHG emissions reduction legislation. In Alberta, theSpecified Gas Emitters
Regulationunder theClimate Change and Emissions Management Actcame into effect in 2007, imposing annual reductions
requirements. In compliance with the Alberta regulations, we filed the annual emission submissions and have satisfied the 12% emission intensity reduction requirements. Recently, the Ontario
legislature passed Bill 185, theEnvironmental Protection Amendment Act (Greenhouse Gas Emissions Trading), providing the foundation for the province's
cap and trade program to reduce GHG emissions. On December 1, 2009, Ontario filed its Greenhouse Gas Emissions Reporting Regulation under the Environmental Protection Act. This regulation came
into force on January 1, 2010 and provides for the annual reporting of GHGs by prescribed facilities that emit 25,000 tons of carbon dioxide equivalent or more per year.

Although
the United States has not ratified the Kyoto Protocol, it is a signatory to the Copenhagen Accord. Additionally, a number of federal laws and regulations related to GHG
emissions are being considered by the U.S. Environmental Protection Agency ("EPA") and in Congress.

In
September 2009, the EPA issued the Final Mandatory Reporting of Greenhouse Gases Rule requiring facilities that emit more than 25,000 tons of GHGs per year to collect
data beginning January 1, 2010 with the first annual reports due March 31, 2011. In May 2010, the EPA released thePrevention of Significant Deterioration
and Title V Greenhouse Gas Tailoring Ruleimposing requirements upon new and modified major stationary sources emitting more than 75,000 tons of GHGs per year. The
emissions from NOVA Chemicals' U.S.-based facilities are significantly below the threshold and are not subject to this rule.

Due
to the uncertainty of long term regulatory requirements, we cannot provide assurance that we will not incur substantial costs to meet GHG emission reduction requirements or whether
they will be material.

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Summarized Quarterly Financial Information

2011

2010(millions of U.S. dollars)

Oct. 1 to
Dec. 31

July 1 to
Sept. 30

Apr. 1 to
June 30

Jan. 1 to
Mar. 31

Oct. 1 to
Dec. 31

July 1 to
Sept. 30

Apr. 1 to
June 30

Jan. 1 to
Mar. 31Revenue

$
1,102

$
1,448

$
1,392

$
1,299

$
1,170

$
1,072

$
1,244

$
1,090Operating profit from continuing operations

$
144

$
254

$
348

$
261

$
132

$
118

$
207

$
140Profit from continuing operations

$
78

$
150

$
231

$
149

$
51

$
48

$
52

$
86Profit

$
77

$
150

$
225

$
163

$
63

$
58

$
46

$
96


Fourth Quarter 2011 Overview

Profit from continuing operations in the fourth quarter of 2011 was $78 million compared to $51 million in the fourth
quarter of 2010. In the fourth quarter of 2011, margins in Olefins/Polyolefins were higher than in the fourth quarter of 2010, but were offset by lower olefins and co-product sales
resulting from the planned maintenance turnaround at our Corunna cracker and lower margins in PE.

Three Months Ended(millions of U.S. dollars)

Dec. 31, 2011

Dec. 31, 2010Revenue

$
1,102

$
1,170Operating profit (loss) from continuing operations(1)Olefins/Polyolefins(2)

$
190

$
210Performance Styrenics


1


1Corporate


(47
)

(79
)Operating profit from continuing operations


144

$
132Profit from continuing operations


78

$
51Profit


77

$
63


Notes: (1)See
"Supplemental Measures."(2)Olefins/Polyolefins
consists of Joffre Olefins, Corunna Olefins, and Polyethylene segments. Amounts net of intersegment eliminations within the
business unit.


The
Olefins/Polyolefins business unit reported operating profit from continuing operations of $190 million in the fourth quarter of 2011, which was down from $210 million
in the fourth quarter of 2010. This difference was due to an increase in margins in the Joffre Olefins segment, offset by a decrease of margins in PE.

The
Joffre Olefins segment reported operating profit from continuing operations of $235 million in the fourth quarter of 2011 compared to operating profit of $97 million in
the fourth quarter of 2010. Operating profit was higher quarter-over-quarter due to sales prices that increased more than feedstock costs.

The
Corunna Olefins segment reported operating profit from continuing operations of $5 million in the fourth quarter of 2011, which was a decrease from an operating profit of
$16 million in the fourth quarter of 2010. Operating profit was primarily lower quarter-over-quarter due to lower sales volumes resulting from the planned maintenance
turnaround of the Corunna cracker.

The
Polyethylene segment reported an operating loss from continuing operations of $77 million in the fourth quarter of 2011, a decrease from operating profit of
$122 million in the fourth quarter of 2010. The decrease was primarily due to increased feedstock costs, offset somewhat by higher sales volumes.

The
Performance Styrenics segment reported operating profit from continuing operations of $1 million in the fourth quarter of both 2011 and 2010. In the fourth quarter of 2011,
feedstock prices increased more than sales prices resulting in lower margins, which were offset by lower operating costs.

Corporate
operating cost from continuing operations were $47 million in the fourth quarter of 2011 compared to $79 million in the fourth quarter of 2010. The lower
quarter-over-quarter costs were primarily due to the lower impairment charges and year-end pension and other liability adjustments.

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Item 6.    Directors, Senior Management and Employees

6.A.    DIRECTORS AND SENIOR MANAGEMENT

Directors

The following table sets forth, as of December 31, 2011, the name of each of our directors, his age, residence, principal
occupation(s) during the five preceding years and the period during which he has served as a director. The terms of office of the directors continue until their successors are elected
or appointed.

Name and Residence

Age

Period During Which a
Director of NOVA Chemicals

Principal Occupation During the Preceding Five YearsHis Excellency Khadem
Al Qubaisi, Chairman
Abu Dhabi, United Arab Emirates


40

Since January 1, 2011

Managing Director, IPIC; prior to 2007, Investment Management Division Manager, IPICMohamed Al Mehairi,
Abu Dhabi, United Arab Emirates


36

Since July 6, 2009

Director, Investment Department, IPICMark Garrett
Vienna, Austria


49

Since November 10, 2009

Chief Executive Officer, Borealis AG; prior to April 2007, Global Segment Head, Water and Paper Treatment, Ciba Specialty Chemicals Inc.Stephen B. Soules
Calgary, Alberta, Canada


59

Since December 1, 2010

Director, President and CEO, Synchronicity Energy; prior to November 2011, Advisor to organizations in the Canadian energy and technology sectors; prior to 2009, Executive Vice President and Director Canbriam
Energy Inc.; prior to January 2008, Executive Vice President, Director and Trustee, Esprit Energy TrustGeorg F. Thoma
Neuss, Germany


67

Since July 6, 2009

Attorney, Shearman & Sterling LLPRandy G. Woelfel
Pennsylvania, U.S.A.


56

Since November 10, 2009

Chief Executive Officer, NOVA Chemicals; prior to November 16, 2009, Chief Executive Officer, Designate, NOVA Chemicals; prior to October 2009, President, Cereplast, Inc.; prior to March 2008, Managing
Director, Houston Technology Center


Executive Officers

The following table sets forth, as of December 31, 2011, the name of each of our executive officers, his residence, present
positions within the Corporation and principal occupations during the five preceding years.

Name and Residence

Age

Present Principal Occupation

Principal Occupation During the Preceding Five YearsRandy G. Woelfel
Pennsylvania, U.S.A.


56

Chief Executive Officer

Chief Executive Officer, NOVA Chemicals; prior to November 16, 2009, Chief Executive Officer Designate, NOVA Chemicals; prior to October 2009, President, Cereplast, Inc.; prior to March 2008, Managing
Director, Houston Technology Center


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Name and Residence

Age

Present Principal Occupation

Principal Occupation During the Preceding Five YearsTodd D. Karran
Pennsylvania, U.S.A.


47

Senior Vice President and Chief Financial Officer

Senior Vice President and Chief Financial Officer, NOVA Chemicals; prior to June 2010, Senior Vice President, Chief Financial Officer and Treasurer, NOVA Chemicals; prior to November 2009, Vice President,
Corporate Development and Treasurer, NOVA Chemicals; prior to November 2007, Vice President, Treasury and Corporate Development, NOVA Chemicals; prior to September 2007, Vice President and Chief Information Officer, NOVA
ChemicalsChris Bezaire
Pennsylvania, U.S.A.


46

Senior Vice President, Polyethylene

Senior Vice President, Polyethylene, NOVA Chemicals; prior to January 2011, Vice President, Corporate Planning, NOVA Chemicals; prior to December 2009, Vice President, Technology and Business
Integration, NOVA Chemicals; prior to October 2009, Vice President, AST and Licensing, NOVA Chemicals; prior to November 2007, Vice President, Olefins/Polyolefins Finance and Controller, NOVA Chemicals; prior to
September 2007, Vice President, Investor RelationsWilliam G. Greene
Pennsylvania, U.S.A.


57

Senior Vice President, Operations

Senior Vice President, Operations, NOVA Chemicals; prior to December 2009, Vice President, Manufacturing and Corporate Engineering, NOVA Chemicals; prior to November 2007, Vice President, Manufacturing,
 NOVA ChemicalsGrant Thomson
Alberta, Canada


57

Senior Vice President and President, Olefins and Feedstock

Senior Vice President and President, Olefins and Feedstock, NOVA Chemicals; prior to December 2009, Vice President, President Feedstock and Olefins, NOVA Chemicals; prior to April 2008, Senior
Vice President, Olefins and Feedstocks, NOVA Chemicals


There
are no family relationships among any of our directors or executive officers. There are no material arrangements or understandings between any two or more directors or executive
officers pursuant to which any person was selected as a director or officer.

Each
of the officers is appointed by the Board of Directors to serve, subject to the discretion of the Board of Directors, until their successors are appointed or they resign.

6.B.    COMPENSATION

For purposes of this annual report on Form 20-F, Named Executive Officer ("NEO") means each of the following
individuals:



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Based
on the foregoing, NOVA Chemicals' NEOs for 2011 are:



The
NEOs also comprise the NOVA Management Board ("NMB"), which is the managing body composed of NOVA Chemicals' most senior officers who are responsible for the
day-to-day management of the Corporation. The members of the NMB report to the Corporation's Board of Directors (the "Board").

Unless
otherwise noted, all compensation amounts paid in Canadian dollars are expressed in U.S. dollars using the average exchange rates over the full year for each of the
following financial years:



EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

Composition of the Remuneration Committee

The Remuneration Committee of the Board is responsible for overseeing key compensation and human resources policies including the
overall executive compensation strategy of NOVA Chemicals and the on-going monitoring of the strategy's implementation. The Remuneration Committee is governed by a Board-approved charter
stating its responsibilities in more detail, a copy of which is available on the Corporation's website.

The
Remuneration Committee is composed of Mohamed Al Mehairi (Chairman), Georg Thoma and Mark Garrett. All of the members of the Remuneration Committee are independent of management and
the other prescriptive relationships identified in applicable securities legislation as they relate directly to NOVA Chemicals. All of the members of the Remuneration Committee have significant
executive compensation experience by virtue of senior level executive positions, service on other boards of directors, education and/or financial and business experience.

Governance

The Remuneration Committee recognizes the importance of maintaining sound governance practices for the development and administration
of executive compensation and compensation programs, and has instituted processes that enhance the Remuneration Committee's ability to effectively carry out its responsibilities. Examples
include:



The
Remuneration Committee directs management to gather executive compensation information and provide initial analyses and commentary. The Remuneration Committee reviews this material
along with other information received from external consultants when making executive compensation related decisions. All matters considered, approved or recommended by the Remuneration Committee are
reported to the Board.

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External Advice

The Remuneration Committee has direct access to independent external compensation consultants on executive compensation and human
resources matters. These consultants provide objective and expert analysis, advice and information on executive compensation trends, regulatory changes and evolving best practices. They also provide
advice on compensation program design and compensation recommendations to assist the Remuneration Committee in making informed, fair and reasonable decisions.

In
October 2010, Pay Governance LLC ("Pay Governance"), an independent executive compensation firm, was retained to provide executive compensation consulting
services. For several years prior to that, Towers Watson (or its predecessors) provided such executive compensation consulting services. Towers Watson continues to provide actuarial services
for NOVA Chemicals' North American defined benefit pension plans, and retirement and benefits consulting services, as required.

Executive Compensation-Related Fees and All Other Fees

The following table lists the aggregate fees billed to NOVA Chemicals by Pay Governance and Towers Watson for each of the two most
recently completed financial years.

Pay Governance

Towers Watson(amounts in U.S. dollars)

2010

2011

2010

2011Services related to determining executive officer compensation


26,456


80,558


13,000


1,600All other fees


N/A


N/A


1,019,100
(1)

1,727,100
(1)Total


26,456


80,558


1,032,100


1,728,700


(1)Represents
ongoing and ad hoc human resources consulting work related to pension and post-retirement benefits such as actuarial valuations,
accounting disclosures and periodic plan reviews.


Compensation Philosophy

NOVA Chemicals' executive compensation policies and programs are designed to attract, retain and motivate the NEOs and other key
executives through competitive and cost effective approaches that reinforce executive accountability and reward the achievement of business results.

Executive
compensation consists of four main elements: (a) base salary, (b) annual incentive compensation awarded under NOVA Chemicals' Incentive Compensation Plan,
(c) long-term incentive compensation, and (d) retirement, benefit and perquisite programs. The relative weighting of each element is aligned with the Corporation's philosophy
of linking pay to performance. A substantial percentage of executives' compensation is provided in the form of performance-based variable compensation, with a greater emphasis on variable components
for NOVA Chemicals' senior executives. The NEOs' incentive compensation is directly linked to corporate and business results and many of the performance measures are aligned with the interest of NOVA
Chemicals' owner, International Petroleum Investment Corporation ("IPIC"), and other key stakeholders, including financial and non-financial goals (see "Incentive Compensation Plan"
and "Long-Term Incentive Program"). Executive retirement and benefits programs are generally consistent with broader employee programs. Where certain programs, such as perquisites, are
only provided to executives or senior management, they reflect competitive practice and particular business needs and objectives.

The
compensation level for all executives, including the NEOs, is reviewed annually by the Remuneration Committee. A benchmarking process that assesses the policy or target levels of
base salary, annual incentive compensation and long-term incentive compensation is conducted each year by the external compensation consultant (see "Benchmark Review"). In addition,
the Remuneration Committee seeks and obtains input from the CEO on base salary, targeted annual incentive compensation and targeted long-term incentive compensation for the other members
of the NMB.

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The
overall objective in setting executive compensation is to ensure that the total targeted value and mix of compensation for each executive compares to the median
(50th percentile) of the comparator group (see "Benchmark Review") for the same or similar role. In setting target total compensation, the Remuneration Committee does not
consider compensation previously awarded to an individual. In the case of the NEOs, the Remuneration Committee determines the value and mix of compensation with input from the external compensation
consultant and considers other factors such as each individual's experience and expertise before making its recommendation to the Board for approval.

Benefits,
retirement programs and perquisites are reviewed periodically by the Remuneration Committee to ensure these programs continue to offer competitive benefits that are cost
effective and valued by the organization.

Benchmark Review

The Remuneration Committee annually monitors comparative total compensation information, using data prepared by the external
compensation consultant, to ensure that target levels of overall compensation are competitive with similar North American peer companies. Comparator group information is also used in determining base
salaries, annual incentive compensation targets and assessing the competitiveness of NOVA Chemicals' long-term incentive compensation targets for all executives, including the NEOs.

NOVA
Chemicals benchmarks against North American peer companies with whom it competes for talent. Many positions are similar across the industry, and the comparator group effectively
represents competitive pay levels for comparable positions. In certain cases, the comparator group is expanded to include general industry participants to ensure sufficient data is considered and to
reflect the broader market for staff positions.

The
Remuneration Committee reviews the composition of the comparator group periodically for continued relevance. During 2010, management and the Remuneration Committee conducted a review
of the comparator group and, as a result of that review, additional companies were added to the comparator group. In determining 2011 compensation, NOVA Chemicals' comparator group included the
following companies:

Air Products and Chemicals, Inc.

Lanxess CorporationAshland Inc.

The Lubrizol CorporationBASF AG

LyondellBasell Industries N.V.Bayer Corporation

Momentive Specialty Chemicals Inc.BP Corporation North America

National Starch PolymersCabot Corporation

Occidental Chemical Holding CorporationChevron Phillips Chemical Company LLC

PPG Industries, Inc.The Dow Chemical Company

Praxair, Inc.Dow Corning Corporation

Rohm and Haas CompanyEastman Chemical Company

Solutia Inc.E.I. du Pont de Nemours and Company

Solvay North America, LLCFMC Corporation

Sunoco, Inc.Georgia Gulf Corporation

TPC Group Inc.Huntsman Corporation

Total Petrochemicals USA, Inc.


Key Elements of Compensation

The major elements of the executive compensation program are base salary, annual incentive compensation and long-term
incentive compensation. In addition, the NEOs participate in group benefit and retirement plans. In any particular year, NOVA Chemicals' NEOs and other executives may be paid more or less than
executives at comparable companies depending on corporate and individual performance, as well as their relative experience.

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The
following table summarizes each component of the total direct compensation(1) ("TDC") for the NEOs and other executives:

Base Salary

Incentive Compensation

Long-Term IncentivesThe fixed portion of compensation tied to market competitiveness, level of responsibility and demonstrated experience

Annual variable compensation which provides awards contingent on achievement of financial and non-financial metrics that support NOVA Chemicals' corporate and business/functional/individual performance

Long-term variable compensation where grants are awarded to align the interests of management with the long term interests of IPIC and other key stakeholders


(1)NOVA
Chemicals does not consider retirement benefits, benefits programs or perquisites to be direct compensation.


The targeted mix of TDC  base salary, targeted annual incentive compensation and targeted annual value of
long-term incentive compensation  for 2011 for each Named Executive Officer was as follows:

R.G. Woelfel

T.D. Karran

C.P. Bezaire

W.G. Greene

G.C. ThomsonGRAPHIC

GRAPHIC

GRAPHIC

GRAPHIC

GRAPHIC


Based
on the benchmark review for 2011, the Remuneration Committee and the Board determined that the targeted mix of the NEOs' TDC should be modified slightly to increase the targeted
long-term incentives for 2011.



Base salaries for all executives, including the NEOs, are individually benchmarked for each position on the basis of responsibility
relative to similar positions in the comparator group. Individual salaries are also determined by each executive's experience, expertise and contribution to NOVA Chemicals. For 2011, based on the
benchmark analysis, the NEOs' base salaries were increased to maintain competitive position. See "Summary Compensation Table" below.



Annual incentive compensation is awarded to executives, including the NEOs, under the Incentive Compensation Plan, which is designed to
align incentive compensation awards to business results and motivate participants. This plan provides cash awards based on corporate and business/functional/individual performance, measured against
objectives that are determined at the beginning of each performance period.

Incentive
Compensation Plan awards are based on two categories:



The
2011 targeted awards for all Incentive Compensation Plan participants, including the NEOs, were weighted 30% on corporate performance and 70% on business/functional/individual
performance.

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For
2011, the Remuneration Committee evaluated corporate performance based on the three corporate objectives identified above that NOVA Chemicals' management believed were important to
successfully drive the 2011 operating plan. The Remuneration Committee determined the significance of the objectives and weighted each accordingly as follows:

Weighting

Performance Objective

Reason for Objective15%

Net Profit

  Measures the profitability in the context of operating performance. The emphasis is on delivering strong, recurring profits, and defining and delivering a clear path for profitability growth10%

Net Operational Cash Flow

  Measures how well the Corporation manages its cash flow. NOVA Chemicals consistently aims to manage its working capital efficiently and demonstrate prudent cash management5%

Responsible Care includes two objectives, each weighted equally

  Measures NOVA Chemicals' commitment to providing a safe working environment  Total Recordable Case Rate

  Measures the number of recordable employee and/or contractor injuries or illnesses relative to hours worked  Process fires

  Measures any fire or evidence of a flame  reducing process fires reduces the risk of serious injury, or major equipment or environmental damage


Business/functional/individual
performance is measured using financial, operational and strategic objectives specific to each participant's role. These objectives are a mix of applicable
quantitative and qualitative measures relating to:



The
Remuneration Committee sets a performance range for all corporate objectives. Threshold performance is meant to be a minimum level of performance, above which a payout for that
objective may be made. If threshold performance is not achieved, no payout is awarded. Target performance is meant to be challenging yet achievable and, if met, the payout for that objective is 100%.
Maximum performance is meant to be a stretch objective resulting in exceptional results. If maximum performance is met or exceeded, the payout is 250% of target for that objective.

For
2011, performance with respect to the corporate objectives was determined to be 222.6% of target: 250% for net profit, 250% for net operational cash flow and 86% for
Responsible Care.

Similar
to the corporate objectives, the payout range for each business/functional/individual performance objective is from 0% to 250%.

The
actual incentive compensation paid each year is determined with reference to achievement of the various objectives in the performance categories described above. Following the
performance period, actual performance is assessed against the performance range (threshold, target and maximum performance) for each objective. The performance rating by which the incentive
compensation award is calculated is pro-rated between threshold and maximum performance depending on actual performance under each objective.

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A significant portion of an executive's compensation is awarded as long-term incentives. This supports the compensation
objective of linking pay to long-term corporate performance by putting compensation at risk. As an executive's responsibility level increases, long-term incentives represent an
increasing portion of TDC.

Prior
to the acquisition by IPIC of all issued and outstanding shares of the Corporation's common stock on July 6, 2009, NOVA Chemicals sponsored equity-based,
long-term compensation plans. After the acquisition by IPIC, the Remuneration Committee adopted a cash-based, performance driven long-term incentive plan to replace
the former equity-based, long-term incentive compensation plans. As an interim measure, the Remuneration Committee decided to grant 2010 long-term incentive awards at target as
time based awards without a performance measure.
The vesting schedule for the 2010 long-term incentive awards is as follows: 40% vested on February 10, 2011 (and was paid at the end of February 2011); 30% vested on
February 10, 2012 (and was paid at the end of February 2012) and the remaining 30% will vest on February 10, 2013.

During
2011, the Remuneration Committee modified the cash-based, performance driven long term incentive plan (the "LTIP") to include a performance measure of return on
average capital employed ("ROCE"). ROCE measures the efficiency and profitability of the Corporation's capital investments. Incentive awards under the LTIP vest as to one-third per year
commencing one year from the date of grant and are paid as soon as practicable after vesting but no later than December 31 of the year of vesting. The 2011 LTIP awards were granted on
February 17, 2011 and the 2012 LTIP awards were granted on February 20, 2012.

The
Remuneration Committee set a performance range for the ROCE performance measure. Threshold performance is meant to be a minimum level of performance at which a payout for that
objective may be made. If threshold performance is achieved, the payout is 50% but if threshold performance is not met, no payout is awarded. Target performance is meant to be challenging yet
achievable and, if met, the payout is 100%. Maximum performance is meant to be a stretch resulting in exceptional ROCE. If maximum performance is met or exceeded, the payout is 250% of target.
Following the end of each year, actual ROCE performance is assessed against the performance range (threshold, target and maximum performance). The performance rating by which the long-term
incentive award is calculated is pro-rated between threshold and maximum performance depending on actual ROCE performance.

For
2011, ROCE performance was determined to be "maximum" and the payout under the LTIP was determined to be 250% of target.

See
the table entitled "Long-term Incentive Plan Awards" below for a summary of the long-term incentives vested for each NEO during the 2011
financial year.



The NEOs and other executives participate, on a contributory and non-contributory basis, in the retirement plans offered to
NOVA Chemicals' salaried employees. Canadian employees hired prior to January 1, 2000 participate in registered plans that offer either defined contribution or defined benefit provisions.
Canadian employees hired on or after January 1, 2000 participate in the defined contribution component of the Canadian plans. U.S. salaried employees who were hired prior to
January 1, 2008 have accrued pension benefits under NOVA Chemicals' U.S. salaried defined benefit plan and participate in the U.S. salaried defined contribution plan.
U.S. salaried employees hired on or after January 1, 2008 participate only in the U.S. salaried defined contribution plan.

Certain
of NOVA Chemicals' salaried employees, including the NEOs, also participate in supplemental executive retirement plans ("SERPs"), which are non-registered, unfunded
supplemental retirement plans. The primary purpose of the SERPs is to provide retirement benefits that cannot be paid from registered plans due to tax limits. The SERPs also provide retirement
benefits to NEOs and other key employees who have relocation arrangements. In addition, U.S. executives may participate in the U.S. Savings Restoration Plan (the "Restoration
Plan"), the purpose of which is to continue defined contributions for executives who exceed legislated maximums.

74

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Non-cash compensation includes employee benefits and perquisites. All NEOs receive an annual perquisite allowance and
certain NEOs have been provided with other limited perquisites, including annual tax planning services, club memberships, and parking. Retirement benefits for the NEOs are described under
"Supplemental Executive Retirement Plans and Supplemental Pension Agreements". Other than these perquisites and retirement benefits, the NEOs do not receive any non-cash compensation that
is different from that received by other employees.

Managing Compensation Risk

NOVA Chemicals takes a conservative approach to risk management and focuses on compensation risk to ensure its compensation programs
are appropriately structured, encourage the right management behaviors, and avoid excessive risk-taking or extreme payouts.



75

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Summary Compensation Table

The following table sets forth the compensation the Named Executive Officers earned in the fiscal years ended December 31, 2009,
2010 and 2011:

Compensatory Changes to Pension Value(4)Non-Equity Incentive Plan CompensationDefined
Contribution
Employer
Contributions(6)
(US$)Name and Principal
Position

Year

Salary(1)
(US$)

Annual
Incentive
Compensation
Plan Awards(2) (US$)

Long-Term
Incentive
Compensation(3)
(US$)

Defined
Benefit
Value(5)
(US$)

All Other
Compensation(7)
(US$)

Total
Compensation
(US$)R.G. Woelfel
Chief Executive Officer


2011
2010
2009


530,000
425,000
86,164
(8)

696,818
428,700
51,700


1,987,500
467,500
N/A


N/A
N/A
N/A


88,578
42,903
8,091


6,498
104,628
50,424


3,309,394
1,468,731
196,379T.D. Karran
Senior Vice President and Chief Financial Officer


2011
2010
2009


345,000
312,000
276,167


356,040
261,950
228,400


1,078,125
312,000
189,700


0
0
0


56,310
48,636
39,362


3,623
22,000
252,888


1,839,098
956,586
986,517C.P. Bezaire
Senior Vice President,
Polyethylene Business


2011
2010
2009


280,800
243,900
229,000


230,826
188,900
135,600


702,000
170,730
114,500


3,000
91,000
0


40,570
26,085
28,652


2,893
17,179
1,589


1,260,089
737,794
509,341W.G. Greene
Senior Vice President, Operations


2011
2010
2009


330,000
312,000
312,000


335,957
264,300
216,700


948,750
312,000
312,000


(89,000
(4,000
(18,000
)))

85,823
74,018
71,774


4,849
21,232
2,962


1,616,379
979,550
897,436G.C. Thomson
Senior Vice President, President, Olefins and Feedstock


2011
2010
2009


379,787
328,558
281,090


379,540
287,090
206,268


1,091,887
318,323
336,302


140,000
118,000
60,000


N/A
N/A
N/A


1,130
20,694
2,272


1,992,344
1,072,665
885,932


Notes: (1)See
"Compensation Discussion and Analysis  Base Salaries."(2)Awards
under the Incentive Compensation Plan are earned in the year reported and paid prior to March 15 the following year unless the NEO elected to
defer all or a portion of the award to the Restoration Plan. For further information, see "Compensation Discussion and Analysis  Retirement Plans." The portions
of the awards that each NEO elected to defer are listed below:


2011

2010

2009R.G. Woelfel


7%


7%


N/AT. D. Karran


6%


6%


6%C.P. Bezaire


10%


0%


0%W.G. Greene


10%


7%


6%G.C. Thomson


N/A


N/A


N/A


The Restoration Plan is a U.S. plan and only certain employees resident in the U.S. can
participate in this plan. Mr. Thomson resides in Canada and does not participate in the Restoration Plan. Mr. Woelfel's employment commenced on October 19, 2009, and he was not
eligible to elect to defer any of his 2009 incentive compensation award to the Restoration Plan.

Where an election was made to defer a portion of an incentive compensation award to the Restoration Plan,
the dollar value reported in this column represents the pre-tax value of the incentive compensation award at the time of the award.

For further details on 2011 Incentive Compensation Plan objectives, see "Compensation Discussion and
Analysis  Incentive Compensation Plan".

76

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Mr. Thomson resides in Canada and is an active participant in NOVA Chemicals' Canadian defined
benefit program. Messrs. Bezaire and Greene, who previously resided in Canada, continue to be participants in the Canadian defined benefit program but are no longer accruing credited service
for the purposes of the pension formula following their relocation to the U.S.

For further information on defined benefit pension values, see "Defined Benefit Pension Obligations"
below.

This column also includes: (i) for 2011, 2010 and 2009, the dollar value of insurance premiums paid
by NOVA Chemicals with respect to term life insurance for the benefit of each NEO, (ii) for 2011, certain tax gross-up payments for Messrs. Woelfel and Greene related to
cross-border business travel, (iii) for 2010, awards for each NEOs under the Corporation's former profit sharing program that was terminated effective January 1, 2011 and, for
Mr. Woelfel, a $75,000 bonus, and (iv) for 2009, a $50,000 bonus for Mr. Woelfel and a $225,000 bonus for Mr. Karran.

Long-Term Incentive Plan Awards

The following table sets forth the LTIP value vested for each NEO during the 2011 financial year.

Name (amounts in U.S. dollars)

Non-equity incentive plan compensation 
value vested during the year(1)R.G. Woelfel

$
802,750T.D. Karran

$
452,975C.P. Bezaire

$
285,219W.G. Greene

$
409,850G.C. Thomson

$
464,814


(1)Represents
the amount for each NEO of the portion of the 2010 and the 2011 LTIP incentive awards vested during 2011 and paid in
February and March 2012 (i.e., 30% of the 2010 award that vested on February 10, 2012 and one-third of the 2011 award that vested on
February 17, 2012).


Retirement Plans

Defined Benefit Programs

NOVA Chemicals sponsors defined benefit programs in Canada and the United States.



The defined benefit pension component under NOVA Chemicals' Canadian pension plans for salaried employees provides retirement income
based on the employee's years of service and the average base salary of the highest 36 consecutive months of the employee's final 10 years of service ("Highest Average Earnings")
adjusted to reflect benefits payable under government sponsored plans.

The
defined benefit pension component provides a benefit formula that is integrated with the Canada Pension Plan. The non-contributory annual benefit is equal to the sum of
(a) plus (b) where:



Average
Maximum Pensionable Earnings is the three year average of the year's maximum pensionable earnings as determined in accordance with theCanada Pension
Plan Act.

The
normal form of pension for married retirees is a 60% joint and survivor pension benefit, and the normal form of pension for single retirees is an annuity for life guaranteed for five
years after the pension

77

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benefits
commence. Pension benefits are indexed, as applicable, after retirement based on a formula of 75% of the increase in the national Canadian consumer price index minus 1% up to a maximum
of 5%.

Normal
retirement age is 65, however, a member can retire with full benefits at age 62. Members may also elect early retirement and receive a reduced pension if they are between ages 55
and 62.

On
December 31, 1999, NOVA Chemicals introduced a defined contribution component to its Canadian pension plans for salaried employees. Employees were required to make a
one-time irrevocable election to convert their accrued defined benefits to the defined contribution component or remain with their defined benefit pension. Mr. Thomson currently
resides in Canada and is an active participant in the defined benefit pension component. Messrs. Bezaire and Greene, who currently reside in the U.S. but previously resided in Canada,
continue to be participants in the Canadian defined benefit program but are no longer accruing credited service for the purposes of the pension formula following their relocation to the
U.S. Mr. Karran currently resides in the U.S. but was a Canadian resident at the time of the election and elected to convert his defined benefit to the defined contribution
component.



All U.S. salaried employees hired prior to December 31, 2007 participate in a defined benefit pension plan. Effective
December 31, 2007, NOVA Chemicals froze this defined benefit plan and amended the defined contribution plan (see "Defined Contribution Programs") to provide certain enhancements.
Employees who had attained the age of 50 with at least one year of service as of December 31, 2007 ("Transition Employees") qualified for transition benefits, including earnings
escalation for purposes of calculating defined benefits, for up to five years.

Mr. Woelfel
was hired subsequent to the freeze date and is not eligible to participate in NOVA Chemicals' defined benefit programs. Mr. Greene was eligible for these
transition benefits. Messrs. Karran and Bezaire
did not qualify for transition benefits. Mr. Thomson currently resides in Canada but resided in the U.S. prior to the freeze date and maintains an accrued benefit in the
U.S. defined benefit programs.

The
benefit formula for the U.S. defined benefit plan is 1.2% of the Final Average Earnings multiplied by credited service. Final Average Earnings is the average of the highest
36 consecutive months of base salary in the 10 years prior to December 31, 2007 or, for Transition Employees, the earlier of December 31, 2012 and the Transition Employee's
termination date. The pension benefit for a single retiree is a single life benefit while a married retiree's benefit is a 100% joint and survivor benefit. Such benefit is provided by reducing the
single life benefit during the life of the retiree in order to provide 100% of that reduced benefit to the surviving spouse.

Normal
retirement age is 65, however, a member can retire with full benefits at age 62. Members may also elect early retirement and receive a reduced pension if they are between the ages
of 55 and 62 and have at least five years' service.



NOVA Chemicals' defined benefit pension programs are subject to theIncome
Tax Actor the Internal Revenue Code ("IRC") maximum annual benefit accrual limits. NOVA Chemicals adopted supplemental executive retirement plans to provide
supplementary pension payments, computed with reference to the earned pension under NOVA Chemicals' defined benefit pension programs. These supplementary payments are above the maximum annual benefit
accrual permitted by theIncome Tax Actor the IRC and, therefore, are not deductible for income tax purposes by NOVA Chemicals until paid to the
respective executive or employee. The aggregate supplementary pension benefits are generally equivalent to the benefit which would be earned under NOVA Chemicals' pension plans without the maximum
annual benefit accrual limit described above.

Consistent
with the redesign of the U.S. defined benefit pension plan, the U.S. SERP was frozen as of December 31, 2007 other than for transition benefits, and
relocation pension arrangements as detailed below. For participants in the U.S. SERP, including Messrs. Karran, Bezaire, and Greene, Final Average Earnings are determined using base
salary plus incentive compensation awards as of the freeze date taking into account transition benefits for Mr. Greene, if any. In the case of Mr. Thomson, Final Average Earnings are
determined

78

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using
base salary plus incentive compensation awards through the earlier of his date of termination or December 31, 2012.

The
SERPs also provide supplementary pension payments to executives who have relocation arrangements. Messrs. Bezaire and Greene relocated from Canada to the U.S., and
Mr. Thomson relocated from Canada to the U.S. and then back to Canada. These NEOs have service in Canada and the U.S., and are entitled to receive the greater of (i) the total of their
accrued benefits under each defined benefit program in which they have participated or (ii) the accrued benefit under the defined benefit program from which they retire calculated on the basis
that all of the executive's service with the Corporation was credited service under that program.



The following table summarizes the defined benefit pensions as of December 31, 2011 for each NEO, other than Mr. Woelfel
who does not participate in NOVA Chemicals' defined benefit programs.

Years of Credited Service(1)





Accrued (Projected)
Annual Pension Benefit(2)

Estimated Annual
Pension Benefit at Age 65(3)(4)Under the
U.S. Defined
Benefit
Pension
Plan
(#)















Canadian
Defined
Benefit
Pension
Plan
(US$)Under the
Canadian
Defined
Benefit
Component (#)

Final Average Earnings

U.S. Defined
Benefit
Pension
Plan
(US$)

Canadian
Defined
Benefit
Component
(US$)



U.S. Defined
Benefit
Pension
Plan
(US$)Name

U.S.
(US$)

Canada
(US$)

SERP(5)
(US$)

SERP(5)
(US$)T.D. Karran


4.7


N/A


311,500


N/A


11,800


N/A


33,600


11,800


N/A


33,600C.P. Bezaire(6)


9.3


10.5


233,200


264,700


19,100


27,300


21,600


19,100


27,300


21,600W.G. Greene(6)


8.3


14.6


535,500


349,300


24,500


37,900


69,400


24,500


37,900


69,400G.C. Thomson(6)


10.8


11.7


536,200


351,500


25,900


30,300


76,500


25,900


49,700


97,000


Notes: (1)Years
of credited service is the service used to calculate the defined benefit pension benefit. Service under the U.S. defined benefit program
includes service while resident in the U.S. prior to December 31, 2007, the date the U.S. defined benefit pension program was frozen. Credited service under the Canadian defined
benefit component includes service while resident in Canada.(2)These
values represent the single life annuity payable at age 65 for the U.S. program and a 60% joint and survivor annuity for the Canadian
defined benefit pension component reflecting pay and service as of December 31, 2011.(3)Age
62 is the earliest age an individual can receive full retirement benefits.(4)Assuming
each NEO remains with NOVA Chemicals until his normal retirement date reflecting projected service, if applicable, and pay as of
December 31, 2011.(5)Represents
the sum of the U.S. and Canadian SERP benefits.(6)Messrs. Bezaire,
Greene and Thomson are entitled to receive the greater of: the sum of their Canadian and U.S. pension benefits, and their
U.S. or Canadian pension benefit assuming all of their service was in the U.S. or Canada depending on the country from which they retire.


The change in the defined benefit pension for each NEO participating in a defined benefit program for 2011 is as follows. These values are based
on the same actuarial assumptions, methods and measurement date used by NOVA Chemicals for financial statement reporting purposes, which may be different than the assumptions used to calculate pension
benefits payable to an NEO. The values reflect service as of the

79

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measurement
date and future increases in salaries, as applicable. These values do not represent the value of the pension benefit that an NEO would receive on retirement

Annual Benefits Payable
(US$)





Non-Compensatory
Changes Related to
Financing Costs and
Non-Compensation
Assumption Changes
(US$)(2)Accrued
(Projected)
Obligation at
Dec. 31, 2010
(US$)

Compensatory
Changes Related to
Current Service Cost
and Earnings
Increases (US$)

Change in
Obligation
since
Dec. 31, 2010
(US$)

Accrued
(Projected)
Obligation at
Dec. 31, 2011
(US$)Number of
Years
Credited
Service(1)Name

At Year
End

At Age 65T.D. Karran(3)


4.7


N/A
(4)

45,400


269,000


0


83,000


83,000


352,000C.P. Bezaire(3)


19.8


N/A
(4)

68,000


649,000


3,000


204,000


207,000


856,000W.G. Greene(3)


22.9


115,100
(5)

131,800


1,545,000


(89,000
)

410,000


321,000


1,866,000G.C. Thomson


22.5


114,800
(5)

172,600


1,322,000


140,000


483,000


623,000


1,945,000


Notes: (1)Years
of credited service is the service used to calculate the defined pension benefit. Service under the U.S. defined benefit pension program was
frozen as of December 31, 2007. Years of credited service under the Canadian defined benefit pension component represents credited service as of date of transfer to the U.S.(2)Reflects
the impact of interest on prior year's obligations, changes in discount rates used to measure the obligations and the impact of assumption and
employee demographic changes.(3)The
assumptions used to calculate pension values for accounting purposes assume future salary increases. These NEOs do not qualify for transition benefits.(4)Messrs. Karran
and Bezaire were not early retirement eligible and not eligible to receive an annual benefit as at December 31, 2011.(5)These
values represent Messrs. Greene and Thomson's early retirement annuity immediately payable as at December 31, 2011.(6)The
key actuarial assumptions used in calculating these values are as follows:


U.S. Defined Benefit Program

December 31, 2011

December 31, 2010Discount Rate

3.70%

4.60%Salary Increase

4.00%

4.00%Percent Electing a Lump Sum

100%

100%Lump sum interest rate

3.70%

4.60%Mortality

IRS Prescribed Table for 2012 Lump Sum Distributions

IRS Prescribed Table for 2011 Lump Sum DistributionsRetirement

Age-related table with an average retirement age of 63

Age-related table with an average retirement age of 63Canadian Defined Benefit ProgramsDiscount Rate

4.20%

5.10%Salary Increase

4.00%

4.00%Indexing

0.5%

0.50%Escalation of ITA Maximum Pension for Registered Plan

2.75%
($2,552 in 2011 per year of service)

2.75%
($2,494 in 2010 per year of service)Lump sum interest rate

Non-indexed: 2.60% for 10 years, 4.10% thereafter
Indexed: 2.60% for 10 years, 3.20% thereafter

Non-indexed: 3.30% for 10 years, 5.00% thereafter
Indexed: 3.10% for 10 years, 4.00% thereafterMortality

UP 1994 projected generationally

UP 1994 projected to 2020 using Scale AAPercent of Retiring Members Electing a Lump Sum

Eastern Region Plan  45%
Western Region Plan  60%

Eastern Region Plan  20%
Western Region Plan  40%Retirement

Age-related table with an average retirement age of 62

Age-related table with an average retirement age of 62


The method used to determine estimated pension benefits may not be identical to the method used by other companies. Therefore, the estimated
pension benefits may not be directly comparable to other companies' estimated pension benefits.

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Defined Contribution Programs

NOVA Chemicals sponsors defined contribution programs in Canada and the United States.



Canadian employees who joined NOVA Chemicals after December 31, 1999, and employees who elected to convert their defined
benefits to the defined contribution component of the Canadian pension plans as explained above, participate in the Canadian defined contribution program. NOVA Chemicals currently contributes 9% of a
Canadian employee's base salary to a defined contribution account and the employee may elect to make voluntary contributions up to the legislated maximum amount for employee contributions.
Contributions are locked in until the employee ceases employment with NOVA Chemicals. Mr. Karran was an active participant until he relocated to the U.S. in 2000. He continues to
maintain an account in the Canadian program.



U.S. salaried employees participate in the U.S. Savings Plan, which was redesigned when the U.S. defined benefit
pension plan was frozen. Effective January 1, 2008, NOVA Chemicals makes contributions to each U.S. employee's account of 3% of total pay and matching contributions of up to 6% of total
pay for a contribution of up to 9% of total pay. Transition Employees receive, until the earlier of December 31, 2012 and the Transition Employee's termination date, an additional transition
contribution of 5% of total pay. Total pay includes base salary, incentive compensation awards, shift differential and overtime. In addition, employees may make voluntary employee contributions to the
plan up to the legislated maximum amount for employee contributions. All of the NEOs, other than Mr. Thomson who resides in Canada, participated in the U.S. Savings Plan in 2011.



NOVA Chemicals' defined contribution programs are also subject to maximum annual contributions under theIncome
Tax Actand the IRC. NOVA Chemicals has adopted a SERP in Canada and the Restoration Plan in the U.S. to provide a mechanism to continue defined contributions for
employees who exceed the legislated maximums.

The
Canadian SERP provides a notional account for contributions or conversion amounts that exceed the legislated maximums. The accounts are credited with earnings equivalent to the
earnings of the balanced fund that is offered as an investment under the Canadian defined contribution program. Mr. Karran has a notional defined contribution account under the
Canadian SERP.

In
the U.S., when legislated maximums are exceeded, excess Corporation basic contributions are made to the Restoration Plan. In addition, participants may elect, prior to each
performance year, to make voluntary employee contributions to the Restoration Plan of up to 50% of their base salary and/or incentive compensation award. If an eligible employee elects to make
voluntary contributions, NOVA Chemicals matching contributions are made to the Restoration Plan after legislated maximums are exceeded. All of the NEOs, other than Mr. Thomson who resides in
Canada, participated in the Restoration Plan in 2011.

81

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The following table summarizes each NEO's defined contribution account for 2011:

COMPENSATORYAccount Balance
Jan. 1, 2011

2011 Corporation Contributions

Account Balance
Dec. 31, 2011U.S.
Savings
Plan /
Canadian
DC (US$)

Restoration
Plan /
Canadian
SERP (US$)

U.S.
Savings
Plan /
Canadian
DC (US$)

Restoration
Plan /
Canadian
SERP (US$)

U.S.
Savings
Plan /
Canadian
DC (US$)

Restoration
Plan /
Canadian
SERP (US$)R.G. Woelfel


75,190


55,175


22,050


66,528


127,020


193,948T.D. Karran(1)


514,095


224,544


22,050


34,260


532,533


280,226C.P. Bezaire


253,579


146,261


22,050


18,520


294,171


164,124W.G. Greene(2)


257,664


252,400


34,300


51,523


339,095


353,725G.C. Thomson(3)


216,268


6,787


N/A


N/A


225,338


7,071


Notes: (1)Mr. Karran
is the only NEO who participates in the Canadian Defined Contribution program and Canadian Defined Contribution SERP.(2)Includes
for Mr. Greene transition contributions made to the U.S. Savings Plan and the Restoration Plan.(3)Mr. Thomson
is not an active participant of any defined contribution programs. These values represent Mr. Thomson's defined contribution
accounts earned when he resided in the U.S. together with earnings thereon.


NEO Agreements

Change of Control Agreements

NOVA Chemicals entered into Key Employee Termination Benefit Agreements (the "COC Agreements") with certain executives,
including Messrs. Greene and Thomson, to induce them to remain with NOVA Chemicals in the event of a change of control. IPIC's acquisition of NOVA Chemicals constituted a change of control and
the COC Agreements were triggered on July 6, 2009. The COC Agreements provide that in the event of a termination without cause or constructive dismissal of such NEO within three years following
the change of control, the NEO is entitled to receive a lump sum severance payment (based on base salary, incentive compensation and other compensation) and continuation of certain benefits during the
severance period, which is 21 months for Mr. Greene and 18 months for Mr. Thomson. Mr. Greene is also entitled to receive an additional $100,000 upon termination of
employment for any reason or retirement on or after July 6, 2012. Mr. Thomson is entitled to receive Cdn. $330,600 within 30 days after July 6, 2012 if he has not resigned
or retired prior to such date. If NOVA Chemicals terminates Mr. Thomson for any reason before July 6, 2012, Mr. Thomson will receive an additional $330,600 in severance.

Employment Contracts

NOVA Chemicals and its subsidiaries have entered into employment contracts with certain NOVA Chemicals' executives, including the NEOs.
The employment contracts provide for a three year term of service for Mr. Woelfel and an indefinite term of service for the other NEOs.

In
the event of termination of the NEOs' employment other than for cause (as defined in the employment contracts), resignation or retirement, the NEOs are entitled to be paid a
lump sum payment equal to 18 months' severance (21 months for Mr. Greene), conditional upon execution and delivery of a release. Mr. Woelfel is entitled to an additional
6 months' severance if his employment is terminated without cause between January 1 and December 31, 2012. The lump sum payments are based on: a) base salary in effect at
the time of termination; b) Incentive Compensation Plan award calculated at target; c) U.S. Savings Plan
contributions; and d) perquisite allowance. In addition, the NEOs are entitled to continued medical, dental and life insurance coverage, financial counseling and outplacement support if they
are terminated without cause.

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Payments on Separation of Service

The following tables set forth the circumstances that trigger payments or provision of benefits under the NEO Agreements and the
estimated value of the payments assuming the triggering event occurred on December 31, 2011.

SEVERANCE AMOUNTR.G. Woelfel

Severance
Period
(# of months)

Base
Salary
(US$)

Incentive
Compensation
Amount
(US$)

Other
Employee
Benefits
(US$)(1)

Additional Lump
Sum Value
of Pension
(US$)(2)

Total
Incremental
Obligation
(US$)Involuntary Termination
without Cause


18


795,000


596,250


243,327

N/A


1,634,577




SEVERANCE AMOUNTT.D. Karran

Severance
Period
(# of months)

Base
Salary
(US$)

Incentive
Compensation
Amount
(US$)

Other
Employee
Benefits
(US$)(1)

Additional Lump
Sum Value
of Pension
(US$)(2)

Total
Incremental
Obligation
(US$)Involuntary Termination
without Cause


18


517,500


310,500


179,535

21,400


1,028,935




SEVERANCE AMOUNTC.P. Bezaire

Severance
Period
(# of months)

Base
Salary
(US$)

Incentive
Compensation
Amount
(US$)

Other
Employee
Benefits
(US$)(1)

Additional Lump
Sum Value
of Pension
(US$)(2)

Total
Incremental
Obligation
(US$)Involuntary Termination
without Cause


18


421,200


223,236


160,923

11,600


816,959




SEVERANCE AMOUNTW.G. Greene

Severance
Period
(# of months)

Base
Salary
(US$)

Incentive
Compensation
Amount
(US$)

Other
Employee
Benefits
(US$)(1)

Additional Lump
Sum Value
of Pension
(US$)(2)

Total
Incremental
Obligation
(US$)Involuntary Termination
without Cause


21


577,500


317,625


289,136

42,600


1,226,861Termination Following
Change of Control


21


577,500


339,180


288,286

42,600


1,247,566




SEVERANCE AMOUNTG.C. Thomson

Severance
Period
(# of months)

Base
Salary
(US$)

Incentive
Compensation
Amount
(US$)

Other
Employee
Benefits
(US$)(1)

Additional Lump
Sum Value
of Pension
(US$)(2)

Total
Incremental
Obligation
(US$)Involuntary Termination
without Cause


18


569,681


313,325


371,325

341,700


1,596,031Termination Following
Change of Control


18


569,681


262,899


371,325

341,700


1,545,605


Notes: (1)NOVA
Chemicals pays annual premiums for post-retirement benefits up to an annual maximum of $6,000 for single retirees and $12,000 for married
retirees for U.S. employees hired prior to January 1, 2008, who are age 55 or older with five years' service at the time of separation or who meet these requirements during their
severance period. Canadian employees who are age 55 or older with five years of service at the time of separation or who meet these requirements during their severance period receive lifetime retiree
medical to a maximum amount of $30,000.(2)Does
not include pension values accrued under the Retirement Plans, see "Retirement Plans  Defined Benefit Pension
Obligations."(3)Messrs. Greene
and Thomson's termination of employment is governed by their COC Agreements until July 6, 2012. See "NEO
Agreements  Change of Control Agreements."


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(4)Mr. Greene
is entitled to receive $100,000 in addition to his 21 months' severance payment if the Corporation terminates his employment for
any reason.(5)Mr. Thomson
is entitled to receive Cdn. $330,600 in addition to his 18 months' severance payment if the Corporation terminates his employment
for any reason before July 6, 2012.


COMPENSATION OF DIRECTORS

Directors who are not full time employees of NOVA Chemicals receive compensation for their service as directors.
Non-employee director compensation is composed of: (i) an annual retainer; (ii) an annual committee membership retainer, as applicable; and (iii) an annual committee
chair retainer, as applicable.

Non-employee
directors, other than the Chairman of the Board, are paid an annual retainer of $168,000. The Chairman of the Board is paid an annual retainer of $238,000.
Committee members who are not the Chair of the Committee(s) on which they serve receive an additional $27,000 retainer. Committee Chairs receive an additional $40,000 retainer. The compensation for
non-employee directors during 2011 is as follows:

Name

Annual Retainer Fee
(US$)

Annual Committee
Retainer Fee (US$)

Annual Committee
Chair Fee (US$)

Total
(US$)H. E. Khadem Al Qubaisi(1)


238,000








238,000Mohamed Al Mehairi(2)(3)


168,000


27,000


40,000


235,000Philip J. Brown(4)


84,000








84,000Mark Garrett(3)(5)


168,000


24,750





192,750Georg F. Thoma(6)


168,000


54,000





222,000Stephen Soules(7)


168,000





40,000


208,000


Notes: (1)His
Excellency Khadem Al Qubaisi is Chairman of the Board.(2)Mr. Al
Mehairi is a member of the Audit Committee and Chairman of the Remuneration Committee.(3)Messrs. Al
Mehairi and Garrett each received an additional $25,000 for work done to support the Chairman of the Board.(4)Mr. Brown
resigned on June 30, 2011 and his compensation was pro-rated.(5)Mr. Garrett
was appointed as a member of the Remuneration Committee effective February 1, 2011 and his committee retainer fee
was pro-rated.(6)Mr. Thoma
is a member of the Audit and Remuneration Committees.(7)Mr. Soules
is Chairman of the Audit Committee.


Indebtedness of Directors and Executives

As at March 12, 2012 and during fiscal 2011, none of the current or former directors and executives of NOVA Chemicals or any
associate of any such director or executive was indebted to NOVA Chemicals.

6.C.    BOARD PRACTICES



The Board of Directors ("Board") currently consists of six members. Directors are elected annually and serve until their successors are
elected or appointed, they resign, they are removed from office or their office is earlier vacated in accordance with the by-laws of the Corporation or with the provisions of the Business Corporations Act(New Brunswick). Each of the directors has served in his respective capacity since his election; see the tables above
in Item 6.A. for the period during which each director has served in that office.



There are no director service contracts between us and our directors providing for benefits upon termination of employment, other than
an employment agreement with Randy Woelfel.

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The Board has established two standing committees (the "Committees") and has delegated certain of its responsibilities to each
of the Committees. In this regard, each Committee has been mandated to perform certain advisory functions, and to make recommendations and report to the Board. The two standing committees of the Board
are the Audit Committee and the Remuneration Committee.

Each
of the Committees has the authority to retain outside advisors to assist in the discharge of its respective responsibilities. Each of the Committees reviews its respective charter
at least annually and, as required, recommends changes to the Board. Each of the Committees has a charter; a brief summary of the Committee charters follows, together with current Committee
membership.



Chairman:
Stephen Soules

Other
Members: Mohamed Al Mehairi and Georg Thoma

The
Audit Committee of the Board reviews and enquires into matters affecting our financial reporting, our system of internal accounting and financial controls and procedures and our
financial audit procedures and plans; oversees the policies and practices relating to corporate compliance and risk management strategies; reviews and approves the external auditor's proposed audit
scope and approach and the performance of the external auditors; reviews with management the mandate and appointment of internal auditors; oversees the funding, administration and investment of the
trust funds associated with our retirement plans; and reviews with management and reports to the Board of Directors on our financing plans and objectives.

The
Audit Committee approves all fees paid to the external auditors in respect of audit services. In addition, in accordance with applicable rules regarding audit committees, the Audit
Committee reviews and approves (in advance) the scope and related fees for all non-audit services that are to be provided by the external auditors. In doing so, the Audit Committee
considers whether the provision of these non-audit services may impact the objectivity and independence of the external auditor.

All
members of the Audit Committee are financially literate, and Mr. Soules is an audit committee financial expert as defined by the U.S. Securities and Exchange Commission
rules.



Chairman:
Mohamed Al Mehairi

Other
Members: Mark Garrett and Georg Thoma

The
Remuneration Committee of the Board is responsible for overseeing our policies and practices with respect to human resources. In this regard, the Remuneration Committee reviews
recommendations for the appointment of persons to senior executive positions, and considers terms of employment including succession planning and matters of compensation. This Committee recommends to
the Board the goals and objectives used to determine executive leadership compensation, and evaluates the NOVA Management Board's performance. For additional information relating to the compensation
of our senior executives in 2011, see "Item 6.B.  Compensation."

6.D.    EMPLOYEES

As of December 31, 2011, we employed approximately 2,450 full-time employees globally.

Collective
bargaining agreements with various unions, covering approximately 300, or 12%, of the approximately 2,435 North American employees, are in place at certain plants
located in Ontario and Pennsylvania. A collective bargaining agreement involving approximately 200 employees at our olefins plant in Corunna, Ontario, was re-negotiated in 2010 with
an expiration date of March 31, 2013. A collective bargaining agreement involving approximately 100 employees at the polystyrene plant at the Beaver Valley site in Monaca, Pennsylvania,
was re-negotiated in 2009 with an expiration date of March 15, 2012. We engage in continuous dialogue with the unions to address current issues and proactively address potential
bargaining items. We expect to renew the contract that expires on March 15, 2012.

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We
provide medical, health, life insurance, retirement plans and other benefits to our employees, which are comparable with other companies in the chemical industry where our operations
are located.

6.E.    SHARE OWNERSHIP

IPIC's subsidiary, NOVA Chemicals Holding GmbH, holds all of our issued and outstanding Common Shares, which are our only class
of shares issued and outstanding.

Item 7.    Major Shareholders and Related Party Transactions

7.A.    MAJOR SHAREHOLDERS

IPIC's subsidiary, NOVA Chemicals Holding GmbH, holds all of our issued and outstanding Common Shares.

7.B.    RELATED PARTY TRANSACTIONS

Our Agreements with Executive Officers

For a description of the change of control agreements and employment agreements with the NEOs, see "Item 6.B.
Compensation  NEO Agreements."

Directors' and Officers' Insurance

We maintain directors' and officers' liability insurance with policy limits of $100 million in the aggregate, subject to a
deductible in respect of corporate reimbursement of $1 million for each loss. We are generally to be reimbursed for payments made under corporate indemnity provisions on behalf of our directors
and officers, and individual directors and officers (or their heirs and legal representatives) are generally covered for losses arising during the performance of their duties for which they are
not indemnified by us. Major exclusions from coverage include claims arising from illegal acts, those acts which result in illegal personal profit, violation of any fiduciary duty under the
U.S. Employee Retirement Income Security Act of 1974, pollution damage (except for resultant shareholder actions), claims for financial impairment or while such director or officer is no longer
acting in an insured capacity and claims brought by us against a director or officer, except for derivative actions.

Director Indemnity Agreements

We have indemnity agreements with each of our current directors containing provisions that may require us and from time to time,
certain of our affiliates, to, among other things, indemnify such directors against certain liabilities that may arise by reason of their status or service as our directors, and obtain the approval of
a court, if required, to meet such indemnity obligations. The directors are entitled to reimbursement for time spent responding to or testifying in connection with any proceedings involving us, tax
gross-up payments to the extent such directors are not entitled to certain tax deductions related to the indemnification payments, and reimbursement of their expenses incurred as a result
of any proceeding against them as to which they could be indemnified, provided that any expenses not actually incurred shall be repaid. The right to indemnification will only apply where the director
acted honestly and in good faith with a view to our best interest and, in the case of a criminal or administrative action, had reasonable grounds for believing that his conduct was lawful. The
indemnity agreements further provide that we shall be the indemnitor of first resort and that we are required to advance the full amount of expenses incurred by the directors.

7.C.    INTERESTS OF EXPERTS AND COUNSEL

Not Applicable

Item 8.    Financial Information

8.A.    CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION

See "Item 17. Financial Statements" for our Annual Audited Consolidated Financial Statements, related notes and other financial
information filed with this annual report on Form 20-F.

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8.B.    SIGNIFICANT CHANGES

Except as otherwise disclosed in this annual report, there have been no material changes in our financial position, operations or cash
flows since December 31, 2011.

Item 9.    The Offer and Listing

9.A.    OFFER AND LISTING DETAILS

Not Applicable

9.B.    PLAN OF DISTRIBUTION

Not Applicable

9.C.    MARKETS

Not Applicable

9.D.    SELLING SHAREHOLDERS

Not Applicable

9.E.    DILUTION

Not Applicable

9.F.    EXPENSES OF THE ISSUE

Not Applicable

Item 10.    Additional Information

10.A.    SHARE CAPITAL

Not Applicable

10.B.    MEMORANDUM AND ARTICLES OF ASSOCIATION

REGISTOR

NOVA Chemicals was continued under the provisions of theBusiness Corporations Act(New Brunswick) (the "Act") on July 6, 2009, with a corporation number of 645481. Our Articles of Continuance ("Articles") do not restrict the business which we may
carry on.

ARTICLES AND BY-LAWS

The following brief description of provisions of the Act, our Articles and General By-Law No. 3
("By-Laws") does not purport to be complete and is subject in all respects to the provisions of the Act and our Articles and By-Laws.



Our By-Laws provide that a director who is a party to a material transaction or material contract, or proposed material
transaction or material contract with us, is a director of, or acts in a capacity similar to a director of, or has a material interest in any person who is a party to a material transaction or
material contract or proposed material transaction or material contract with us shall disclose the nature and extent of his interest at the time and in the manner provided in the Act. Except as
provided in the Act and explained in the following paragraph, no such director shall vote on any resolution to approve any such transaction. If a material transaction or material contract is made
between us and one or more of our directors, or between us and another person of which a director of NOVA Chemicals is a director or in which he has a material interest, the

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transaction
is neither void nor voidable by reason only of that relationship, or by reason only that a director with an interest in the transaction or contract is present at or is counted to determine
the presence of a quorum at a meeting of directors or committee of directors that authorized the transaction, if the director disclosed his interest in accordance with the provisions of the Act and
the transaction or contract was approved by the directors or the shareholder and it was reasonable and fair to us at the time it was approved.

The
Act provides that a director who is materially interested in a contract may not vote on any resolution to approve the contract unless the contract is (i) an arrangement by way
of security for money lent to or obligations undertaken by the director for the benefit of us or an affiliate, (ii) relates primarily to the director's remuneration as a director, officer,
employee or agent of the Corporation or an affiliate, (iii) is for indemnity or insurance for the director against liability incurred by the director acting in his or her capacity as director,
or (iv) is with an affiliate.



Our By-Laws provide that the directors may from time to time: (i) borrow money on our credit, (ii) issue,
re-issue, sell or pledge debt obligations or guarantee of NOVA Chemicals, (iii) to the extent permitted by the Act, give, directly or indirectly, financial assistance to any person
by means of a loan, a guarantee to secure the performance of an obligation or otherwise, and (iv) mortgage, hypothecate, pledge or otherwise create a security interest in or other interest in
or charge upon all or any property (including the undertaking and rights) of NOVA Chemicals, owned or subsequently acquired, to secure any obligation of NOVA Chemicals.



A holding company controlled by IPIC currently owns all of our equity. Our By-Laws provide that a resolution in writing
signed by all the shareholders or signed counterparts of such resolution by all the shareholders entitled to vote on that resolution at a meeting of shareholders is as valid as if it had been passed
at a meeting of the shareholders duly called, constituted and held.

Our
By-Laws provide that, subject to the Act, an annual meeting of shareholders shall be held on such day and at such time in each year as the Board may from time to time
determine, for the purpose of considering the financial statements and reports required by the Act to be placed before the annual meeting, electing directors, appointing auditors and for the
transaction of such other business as may properly be brought before the meeting. The Act requires that, subject to certain exceptions, the directors must call a special meeting of shareholders upon
the requisition of at least ten percent of our issued shares entitled to vote at the meeting being requisitioned.

The
Act provides that for purposes of determining shareholders entitled to receive notice of a meeting of shareholders, the directors may fix a record date in advance so long as the date
is not more than 50 or less than 21 days before the date of the meeting. Where no record date is fixed, the record date is the close of business on the day immediately preceding the day notice
is given or the day of the meeting itself if no notice is given. The Act and our By-Laws provide that notice of the time and place of each shareholder meeting shall be sent not less than
21 nor more than 50 days before the meeting to (i) each shareholder entitled to vote, (ii) each director, and (iii) our auditor. If special business is to be
transacted, the notice must state or be accompanied by a statement of the nature of that business in sufficient detail to
permit the shareholder to form a reasoned judgment on the proposal. All business transacted at a special meeting of shareholders and all business transacted at an annual shareholder meeting,
except consideration of the financial statements and auditor's report, election of directors and reappointment of the auditor constitutes special business.

Our
By-Laws provide that a quorum for the transaction of business at any meeting of shareholders shall be met if the holders of not less than 10% of the shares entitled to
vote at the meeting are present in person or represented by proxy.

Our
By-laws also state that the only persons entitled to be present at a meeting of shareholders shall be those persons entitled to vote thereat, the directors and our
auditors and others who, although not entitled to vote, are entitled or required under any provision of the Act or our Articles or By-Laws to be present at the

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meeting.
Any other person may be admitted only on the invitation of the Chairman of the meeting or with the consent of the meeting.



We are authorized to issue an unlimited number of Common Shares, first preferred shares and second preferred shares. Currently, only
Common Shares are issued and outstanding.



Each Common Share has one vote and our directors stand for election on an annual basis. The holders of the Common Shares are entitled
to attend and vote at all meetings of shareholders except meetings of only the holders of another class or series of our shares. In addition, subject to the preferential rights attaching to any of our
shares ranking in priority to the Common Shares, the holders of the Common Shares are entitled to receive any dividends that may be declared by the Board of Directors on the Common Shares. Subject to
the rights of the holders of shares of the Corporation ranking in priority to the Common Shares, the holders of the Common Shares are entitled to participate rateably amongst themselves and rateably
with the holders of any shares ranking on a parity with the Common Shares in any distribution of the remaining property of the Corporation in the event of the dissolution, liquidation
or winding-up of NOVA Chemicals or any other distribution of its property amongst its shareholders for the purposes of winding-up its affairs.



Subject to the following and to applicable law, the first preferred shares as a class are not entitled to receive notice of, attend or
vote at meetings of the shareholders of the Corporation. The first preferred shares may from time to time be issued in one or more series, and the Board of Directors may fix from time to time before
such issue the number of first preferred shares that is to comprise each series and the designation, rights, privileges, restrictions and conditions attaching to each series of first preferred shares,
including any voting rights, the rate or amount of dividends or the method of calculating dividends, the dates of payment thereof, the terms and conditions of redemption, purchase and conversion, if
any, and any sinking fund or other provisions. If issued, the first preferred shares of each series will, with respect to the payment of dividends and the distribution of assets on return of capital
in the event of liquidation, dissolution or winding-up of NOVA Chemicals, whether voluntary or involuntary, or any other return of capital or distribution of the assets of the Corporation
amongst its shareholders for the purpose of winding-up its affairs, have preference over the Common Shares, the second preferred shares and over any other shares of the Corporation ranking
by their terms junior to the first preferred shares of the series. The first preferred shares of any series may also be given such other preferences over the Common Shares, the second preferred shares
and any other shares ranking junior to such first preferred shares as may be established by the Board of Directors.



Subject to the following and to applicable law, the second preferred shares as a class are not entitled to receive notice of, attend or
vote at meetings of the shareholders of the Corporation. The second preferred shares may from time to time be issued in one or more series, and the Board of Directors may fix from time to time before
such issue the number of second preferred shares that is to comprise each series and the designation, rights, privileges, restrictions and conditions attaching to each series of second preferred
shares, including any voting rights, the rate or amount of dividends or the method of calculating dividends, the dates of payment thereof, the terms and conditions of redemption, purchase and
conversion, if any, and any sinking fund or other provisions. If issued, the second preferred shares of each series will, with respect to the payment of dividends and the distribution of assets on
return of capital in the event of liquidation, dissolution or winding-up of NOVA Chemicals, whether voluntary or involuntary, or any other return of capital or distribution of the assets
of the Corporation amongst its shareholders for the purpose of winding-up its affairs, have preference over the Common Shares and over any other shares of the Corporation ranking by their
terms junior to the second preferred shares of the series. The second preferred shares of any series may also be given such other preferences over the Common Shares and any other shares ranking junior
to such second preferred shares as may be established by the Board of Directors.

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Our Articles provide that the number of directors comprising the entire Board is a minimum of one and a maximum of 15. We currently
have a fixed number of six directors. All of our directors have been elected to serve until the next annual meeting or until his successor is elected or appointed.

Under
the Act and provided that a quorum of directors remains in office, vacancies may be filled by the directors. If less than a quorum of directors remains in office, or if there has
been a failure to elect the required fixed number of directors, any vacancy must be filled by the shareholders and the directors are required to call a special meeting of the shareholders to fill the
vacancy. No person is required to hold any equity of the Corporation to qualify as a director.

10.C.    MATERIAL CONTRACTS

On October 18, 2011, we executed a Second Amending Agreement to our $425 million senior secured revolving credit facility
to, among other things, extend the maturity date from November 17, 2013 to December 17, 2015, and increase the permitted maximum amount of outstanding letters of credit.

10.D.    EXCHANGE CONTROLS

There are currently no limitations imposed by Canadian federal or provincial laws on the rights of non-resident or foreign
owners of our securities to hold or vote the securities held. There are also no such limitations imposed by our Articles and By-Laws with respect to our Common Shares.

10.E.    TAXATION

Not Applicable

10.F.    DIVIDENDS AND PAYING AGENTS

Not Applicable

10.G.    STATEMENT BY EXPERTS

Not Applicable

10.H.    DOCUMENTS ON DISPLAY

We file periodic reports and other information with the SEC. These reports include certain financial and statistical information about
us and may be accompanied by exhibits. You may read and copy this information at the SEC's Public Reference Room at 100 F Street, N.E., Room 1580, Washington, D.C. 20549,
or obtain copies of this information by mail from the public reference room at the prescribed rates. You may call the SEC at 1-800-SEC-0330 for
further information on the SEC's Public Reference Room. The SEC also maintains an Internet website that contains reports and other information about companies like us who file electronically with the
SEC. The URL of that website is http://www.sec.gov.

10.I.    SUBSIDIARY INFORMATION

Not Applicable

Item 11.    Quantitative and Qualitative Disclosures About Market Risk

The Audit Committee of our Board regularly reviews foreign exchange, interest rate and commodity hedging activity and monitors
compliance with the our hedging policy. Our policy prohibits the use of financial instruments for speculative purposes and limits hedging activity to the underlying net economic exposure. See
"Item 5  Operating and Financial Review and Prospects" and Note 24 in our annual audited consolidated Financial Statements contained in this
annual report on Form 20-F for quantitative and qualitative disclosure of market risk.

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Item 12.    Description of Securities Other than Equity Securities

12.A.    DEBT SECURITIES

Not Applicable

12.B.    WARRANTS AND RIGHTS

Not Applicable

12.C.    OTHER SECURITIES

Not Applicable

12.D.    AMERICAN DEPOSITARY SHARES

Not Applicable

PART II

Item 13.    Defaults, Dividend Arrearages and Delinquencies

Not Applicable

Item 14.    Material Modifications to the Rights of Security Holders and Use of Proceeds

Not Applicable

Item 15.    Controls and Procedures

(a)   Disclosure Controls and Procedures

Based on our management's evaluation (with the participation of our principal executive officer and principal financial officer), as of December 31, 2011,
our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e)
and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) are effective to ensure that information required to be disclosed by us in reports
that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and is accumulated
and communicated to our management, including our principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions
regarding required disclosure.

(b)   Management's Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting for NOVA Chemicals.

Management
has used the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") framework to evaluate the effectiveness of our internal control over financial
reporting. Management believes that the COSO framework is a suitable framework for its evaluation of our internal control over financial reporting because it is free from bias, permits reasonably
consistent qualitative and quantitative measurements of our internal controls, is sufficiently complete so that those relevant factors that would alter a conclusion about the effectiveness of our
internal controls are not omitted and is relevant to an evaluation of internal control over financial reporting.

Management
has assessed the effectiveness of our internal control over financial reporting, as at December 31, 2011, and has concluded that such internal control over financial
reporting is effective. There are no material weaknesses in our internal control over financial reporting that have been identified by management.

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(c)   Attestation Report of the Registered Public Accounting Firm

Not Applicable

(d)   Changes in Internal Control Over Financial Reporting

During the period covered by this annual report, there have been no changes in our internal control over financial reporting that have materially affected, or are
reasonably likely to materially affect, our internal control over financial reporting. However, with the transition to IFRS on January 1, 2011, additional internal controls over financial
reporting were developed and implemented to ensure completeness over the identification of all IFRS differences.

Item 16A.    Audit Committee Financial Expert

Our Board of Directors has determined that Stephen Soules is an "audit committee financial expert" (as defined in
Item 16A of Form 20-F) serving on our Audit Committee. Stephen Soules is an "independent" director, as defined under New York Stock Exchange rules.

Item 16B.    Code of Ethics

We have adopted a code of ethics that applies to our principal executive officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions. You can view our Code of Ethics for CEO and Senior Financial Officers on the Governance page on our website at
http://www.novachemicals.com/governance.

Item 16C.    Principal Accountant Fees and Services

The following fees were billed to us by Ernst & Young LLP and approved by our Audit Committee during the prior
two years:

(U.S. dollars)

2011

2010Audit Fees

$
2,376,713

$
2,443,201Audit-Related Fees


285,605


90,409Tax Fees


15,319


41,982Total Fees

$
2,677,637

$
2,575,592


Audit
fees include fees for the audit of our annual audited consolidated financial statements, statutory audits of subsidiaries, review of quarterly reports, provision of consent letters
and comfort letters in connection with certain regulatory matters. Fee amounts for 2011 are based on invoices relating to the 2011 year-end audit that have been received and those
expected to be billed.

Audit-related
fees include fees for services that are related to the audit of our annual audited consolidated financial statements. These services include an audit and documentation of
conclusions for the adoption of IFRS and an audit of the IFRS opening balance sheet, non-statutory audits of subsidiaries and affiliates, consultation on our disposal of a joint venture
and consultation on other accounting and disclosure matters.

Tax
fees include fees for advice on tax compliance and planning, customs filings for us and our subsidiaries, and advice on tax-related matters.

Our
Audit Committee approves all fees paid to the external auditors. In addition, in accordance with applicable rules regarding audit committees, the Audit Committee reviews and approves
(in advance) the scope and related fees for all non-audit services which are to be provided by the external auditors. In considering whether to approve non-audit
services, the Audit Committee considers whether the provision of these non-audit services may impact the objectivity and independence of the external auditor and, in respect of
non-audit services provided by Ernst & Young LLP in 2011, the Audit Committee has concluded that it does not.

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Item 16D.    Exemptions from the Listing Standards for Audit Committees

Not Applicable

Item 16E.    Purchases of Equity Securities by the Issuer and Affiliated Purchasers

Not Applicable

Item 16F.    Change of Registrant's Certifying Accountant

Not Applicable

Item 16G.    Corporate Governance

Not Applicable

PART III

Item 17.    Financial Statements

Our annual audited consolidated financial statements for the fiscal year ending December 31, 2011, including the notes thereto
and together with auditor's report thereon, are included in this annual report beginning on page F-1.

Item 18.    Financial Statements

Not Applicable

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Item 19.    Exhibits

Exhibit No.

Description1.1

Certificate and Articles of Continuance of NOVA Chemicals Corporation dated July 6, 2009(1)1.2

General By-Law No. 3 of NOVA Chemicals Corporation dated July 6, 2009(1)2.1

Indenture, dated as of October 16, 2009, between NOVA Chemicals Corporation, as Issuer and U.S. Bank National
Association, as Trustee in respect of the 8.375% Senior Notes due 2016 and 8.625% Senior Notes due 2019(2)2.2

Indenture, dated as of September 21, 1995, between NOVA Chemicals Corporation, as successor to NOVACOR Chemicals Ltd.,
and JP Morgan Trust Company, N.A., as successor trustee to The First National Bank of Chicago(3)2.3

Indenture, dated as of October 31, 2005, between NOVA Chemicals Corporation, as Issuer and U.S. Bank National
Association, as Trustee(4)4.1

Restated Credit Agreement, dated as of November 17, 2009, among NOVA Chemicals Corporation, as Borrower, The
Toronto-Dominion Bank, as Administrative Agent, and the lenders from time to time party thereto(5)4.2

First Amending Agreement, dated as of October 28, 2010, to Restated Credit Agreement, dated as of November 17, 2009,
among NOVA Chemicals Corporation, as Borrower, The Toronto-Dominion Bank, as Administrative Agent and the lenders from time to time party thereto(6)4.3
*
Second Amending Agreement, dated as of October 18, 2011, to Restated Credit Agreement, dated as of November 17, 2009,
among NOVA Chemicals Corporation, as Borrower, The Toronto-Dominion Bank, as Administrative Agent and the lenders from time to time party thereto4.4

Form of Indemnity Agreement by and among NOVA Chemicals Corporation and Directors(7)7.1
*
Computation of Ratio of Earnings to Fixed Charges8.1
*
List of Subsidiaries12.1
*
Certification of Randy Woelfel, Chief Executive Officer of NOVA Chemicals Corporation, pursuant to Section 302 of the
Sarbanes-Oxley Act of 200212.2
*
Certification of Todd Karran, Senior Vice President and Chief Financial Officer of NOVA Chemicals Corporation, pursuant to
Section 302 of the Sarbanes-Oxley Act of 200213.1
*
Certification of Randy Woelfel, Chief Executive Officer of NOVA Chemicals Corporation, pursuant to 18 U.S.C.
Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 200213.2
*
Certification of Todd Karran, Senior Vice President and Chief Financial Officer of NOVA Chemicals Corporation, pursuant to
18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002


(1)Incorporated
by reference from the Report on Form 6-K of NOVA Chemicals Corporation filed on August 6, 2009.(2)Incorporated
by reference from Exhibit 4.1 to the Registration Statement on Form F-4 of NOVA Chemicals Corporation,
File No. 333-163915 filed on December 21, 2009.(3)Incorporated
by reference from Exhibit 7.1 to the Registration Statement on Form F-9 of NOVA Chemicals Corporation,
File No. 333-6108.(4)Incorporated
by reference from the Report on Form 6-K of NOVA Chemicals Corporation filed on November 1, 2005.(5)Incorporated
by reference from Exhibit 10.1 to the Registration Statement on Form F-4 of NOVA Chemicals Corporation,
File No. 333-163915 filed on December 21, 2009.


94

---



(6)Incorporated
by reference from Exhibit 4.2 to the Annual Report on Form 20-F of NOVA Chemicals Corporation filed on
March 9, 2011.(7)Incorporated
by reference from Exhibit 10.4 to the Registration Statement on Form F-4 of NOVA Chemicals Corporation,
File No. 333-163915 filed on December 21, 2009.*Filed
herewith.


95

---





SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has
duly caused and authorized the undersigned to sign this annual report on its behalf.

NOVA CHEMICALS CORPORATIONBy:

/s/ TODD D. KARRAN Name: Todd D. Karran
Title: Senior Vice President and Chief Financial Officer


Date:
March 12, 2012

96

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

PageIndependent Auditors' Report of Registered Public Accounting Firm

F-1Consolidated Income Statements

F-2Consolidated Statements of Comprehensive Income

F-2Consolidated Statements of Financial Position

F-3Consolidated Statements of Cash Flows

F-4Consolidated Statements of Changes in Equity

F-5Notes to Consolidated Financial Statements

F-6


F-i

---





INDEPENDENT AUDITORS' REPORT OF REGISTERED PUBLIC ACCOUNTING FIRM

TO THE SHAREHOLDER OF NOVA CHEMICALS CORPORATION

We
have audited the accompanying consolidated financial statements of NOVA Chemicals Corporation, which comprise the consolidated statements of financial position as at
December 31, 2011 and 2010 and January 1, 2010 and the consolidated statements of income, comprehensive income, cash flows and changes in equity for the years ended December 31,
2011 and December 31, 2010 and a summary of significant accounting policies and other explanatory information.

Management's Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with
International Financial Reporting Standards as issued by the International Accounting Standards Board, and for such internal control as management determines is necessary to enable the preparation of
consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditors' Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in
accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we comply with
ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. We were not engaged to
perform an audit of the Company's internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no
such opinion.

An
audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the
auditors' judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. An audit also includes examining, on a test
basis, evidence supporting the amounts and disclosures in the consolidated financial statements, evaluating the appropriateness of accounting policies used and the reasonableness of accounting
estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We
believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of NOVA
Chemicals Corporation as at December 31, 2011 and 2010 and January 1, 2010, and its financial performance and its cash flows for the years ended December 31, 2011
and 2010 in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.

GRAPHIC


ERNST & YOUNG LLPChartered Accountants
March 12, 2012
Calgary, Canada

F-1

---





CONSOLIDATED INCOME STATEMENTS

Year ended December 31 (millions of U.S. dollars)

Notes

2011

2010Revenue



$
5,241

$
4,576Feedstock and operating costs




4,026


3,737Research and development




41


37Sales and marketing




29


27General and administrative




138


1784,234


3,979Operating profit from continuing operations




1,007


597Finance costs, net

18


(166
)

(186
)Other losses, net

19


(18
)

(50
)(184
)

(236
)Profit before income taxes from continuing operations




823


361Income tax expense

20


(215
)

(124
)Profit from continuing operations




608


237Profit from discontinued operations, net tax

5


7


26Profit



$
615

$
263


Refer to the accompanying Notes to the Consolidated Financial Statements

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Year ended December 31 (millions of U.S. dollars)

Notes

2011

2010Profit



$
615

$
263Exchange differences on translation of foreign operations from continuing operations




2


(5
)Exchange differences on translation of foreign operations from discontinued operations




(2
)

2Recycled to income statement on disposal of foreign operations




(5
)

(5
)

(3
)Actuarial losses arising from employee benefit plan liabilities from continuing operations

21


(167
)

(67
)Income tax effect




41


17(126
)

(50
)Actuarial losses arising from employee benefit plan liabilities from discontinued operations







(9
)Income tax effect










(9
)(126
)

(59
)Other comprehensive loss




(131
)

(62
)Comprehensive income



$
484

$
201




Refer to the accompanying Notes to the Consolidated Financial Statements

F-2

---



CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(millions of U.S. dollars)

Notes

December 31
2011

December 31
2010

January 1
2010ASSETSCurrent assetsCash and cash equivalents



$
960

$
306

$
238Trade and other receivables

6


510


477


376Inventories

7


575


450


495Income taxes receivable




31


48


50Restricted cash

8


85





Other current assets

8


82


57


512,243


1,338


1,210Assets held for sale

5


22


81


2,265


1,419


1,210Intangible assets

9


435


465


492Restricted cash

10





85


Other non-current assets

10


25


85


118Investments in joint ventures

11








33Deferred tax assets

20


37


65


61Property, plant and equipment

12


3,446


3,456


3,560$
6,208

$
5,575

$
5,474LIABILITIES AND EQUITYCurrent liabilitiesTrade and other payables

13

$
343

$
334

$
404Other current liabilities

14


178


125


116Income taxes payable




40


67


6Provisions

16


109


5


18Long-term debt due within one year

15


582


10


4341,252


541


978Liabilities associated with assets held for sale

5


7


4


1,259


545


978Long-term debt

15


1,159


1,685


1,512Other non-current liabilities

17


48


43


36Employee benefit plan liability

21


449


322


288Provisions

16


105


193


88Deferred tax liability

20


808


816


8023,828


3,604


3,704EQUITYIssued capital




786


861


861Foreign currency translation reserve




(3
)

2


5Retained earnings




1,597


1,108


9042,380


1,971


1,770$
6,208

$
5,575

$
5,474


On behalf of the Board of Directors:

/s/ Stephen Soules STEPHEN SOULESChairman of the Audit Committee

/s/ Randy Woelfel RANDY WOELFELDirector




Refer to the accompanying Notes to the Consolidated Financial Statements

F-3

---





CONSOLIDATED STATEMENTS OF CASH FLOWS

Year ended December 31
(millions of U.S. dollars)

Notes

2011

2010OPERATING ACTIVITIESProfit before tax



$
830

$
387Profit from discontinued operations, net of tax




(7
)

(26
)Profit before tax from continuing operations



$
823

$
361Non-cash adjustments to reconcile profit before tax to net cash flows:Depreciation and amortization




271


248Unrealized (gain) loss on derivatives

24


(2
)

15Unrealized foreign exchange gain







(1
)Other losses, net




1


Impairment charge

3, 12


6


20Movements in provisions and pensions




(27
)

65Finance costs, net




161


1821,233


890Working capital adjustments:Trade and other receivables




(38
)

(95
)Inventories




(124
)

50Other current assets




(24
)

(9
)Trade and other payables




18


(72
)Other current liabilities




(17
)

(6
)(185
)

(132
)Changes in other non-current assets and liabilities




57


(77
)(128
)

(209
)Interest received




3


6Income tax paid, net of refunds




(145
)

(16
)Cash provided by operating activities from continuing operations




963


671Cash used in operating activities from discontinued operations




(13
)

(16
)Cash provided by operating activities




950


655INVESTING ACTIVITIESPurchase of property, plant and equipment




(158
)

(126
)Turnaround costs




(80
)

(23
)Proceeds from sale of property, plant and equipment




1


1Proceeds from sale of investment in joint ventures




55


Purchase of intangible assets




(2
)

(5
)Proceeds from dissolution of other investments




5


6Dividends received







1Cash used in investing activities from continuing operations




(179
)

(146
)Cash used in investing activities from discontinued operations




(1
)

Cash used in investing activities




(180
)

(146
)FINANCING ACTIVITIESLong-term debt repayments




(10
)

(315
)Increase in accounts receivable securitization funding




28


32Interest paid




(134
)

(158
)Cash used in financing activities




(116
)

(441
)Increase in cash and cash equivalents




654


68Cash and cash equivalents, beginning of year




306


238Cash and cash equivalents, end of year



$
960

$
306




Refer to the accompanying Notes to the Consolidated Financial Statements

F-4

---



CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(millions of U.S. dollars)

Notes

Issued
capital(1)

Foreign
currency
translation
reserve

Retained
earnings

Total
equityAt January 1, 2010




$
861

$
5

$
904

$
1,770Profit for the year











263


263Other comprehensive loss








(3
)

(59
)

(62
)Total comprehensive income (loss)








(3
)

204


201At December 31, 2010





861


2


1,108


1,971Profit for the year











615


615Other comprehensive loss








(5
)

(126
)

(131
)Total comprehensive income (loss)








(5
)

489


484Distribution


14, 25


(75
)







(75
)At December 31, 2011




$
786

$
(3
)
$
1,597

$
2,380


(1)Unlimited
number of authorized voting common shares without par value, non-voting first preferred shares and non-voting second
preferred shares. At December 31, 2011 and 2010 and January 1, 2010 there were 141,494,222 common shares issued and outstanding.




Refer to the accompanying Notes to the Consolidated Financial Statements

F-5

---





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

All amounts in U.S. dollars, unless otherwise noted.

1.     CORPORATE INFORMATION

These consolidated financial statements of NOVA Chemicals Corporation for the years ended December 31, 2011 and 2010 were authorized for issue in accordance with a resolution
adopted by our Board of Directors on March 12, 2012. NOVA Chemicals Corporation is a corporation continued under the laws of theBusiness Corporations
Act(New Brunswick) with its principal place of business located at 1000 Seventh Avenue S.W., Calgary, Alberta, Canada T2P 5L5. Where used in these
financial statements, "NOVA Chemicals" or "the Company" or "we" or "our" or "us" means NOVA Chemicals Corporation alone or together with its subsidiaries, depending on the context in which such terms
are used.

Our
principal activities are described in Note 23. Information on our ultimate parent is presented in Note 25.

2.     BASIS OF PREPARATION AND ACCOUNTING POLICIES



These consolidated financial statements of NOVA Chemicals Corporation have been prepared in accordance with International Financial
Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB").

For
all periods up to and including the year ended December 31, 2010, we prepared our consolidated financial statements in accordance with Canadian generally accepted accounting
principles ("Canadian GAAP"). These consolidated financial statements are the first annual consolidated financial statements we have prepared in accordance with IFRS. Refer to Note 26 for
information on how we adopted IFRS.

These
consolidated financial statements for the year ended December 31, 2011 have been prepared on a historical cost basis, except for derivative financial instruments and
available-for-sale financial assets that have been measured at fair value. These consolidated financial statements are presented in U.S. dollars with all values rounded
to the nearest million, except when otherwise indicated.



These consolidated financial statements comprise the financial statements of NOVA Chemicals Corporation and our subsidiaries as at
December 31, 2011.

Subsidiaries
are fully consolidated from the date of acquisition, being the date on which we obtain control, and continue to be consolidated until the date when such control ceases.
Control is achieved where we have, directly or indirectly through our subsidiaries, the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.
The financial statements of our subsidiaries are prepared for the same period as the parent company, using consistent accounting policies. All intercompany balances and transactions are eliminated
in full.



We have interests in jointly controlled assets and jointly controlled entities. Interests in jointly controlled assets involve a
contractual arrangement between venturers that establish joint ownership of one or more assets contributed to, or acquired for the purpose of, the joint venture and dedicated to the purpose of the
joint venture. The assets are used to obtain benefits for the venturers. In accounting for jointly controlled assets, our proportionate share of revenues, expenses, assets and liabilities are included
in the consolidated financial statements on a line-by-line basis.

F-6

---



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

2.     BASIS OF PREPARATION AND ACCOUNTING POLICIES (Continued)

Interests
in jointly controlled entities involve a contractual arrangement that establishes joint control over the economic activities of the entity. The arrangements require unanimous
agreement for significant financial and operating decisions among the venturers. We recognize our interests in jointly controlled entities using the equity method. Under the equity method, investment
in jointly controlled entities are carried in the consolidated statement of financial position at cost plus post acquisition changes in our share of net assets of the jointly controlled entities. Our
share of profit (loss) of jointly controlled entities is shown on a separate line in the consolidated income statement. Unrealized gains and losses resulting from transactions between us and our
jointly controlled entities are eliminated to the extent of our ownership interest.

After
application of the equity method, we determine whether it is necessary to recognize an impairment loss on our investments in jointly controlled entities. We determine at each
reporting date whether there is any objective evidence that the joint venture investments are impaired. If this is the case, we calculate the amount of impairment as the differences between the
recoverable amount of the joint venture and its carrying value and recognize the amount in share of equity earnings in joint ventures in the consolidated income statement.



Our consolidated financial statements are presented in U.S. dollars, which is also the functional currency of our U.S. and
Canadian operations.

Transactions
in foreign currencies are initially recorded by our subsidiaries and joint ventures at their respective functional currency rates prevailing at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies are translated to the functional currency at the exchange rate on the reporting date and the translation gains and losses are
recognized in the income statement, except for
employee benefit plan liabilities for which the resulting gains or losses are reported in other comprehensive income. Non-monetary items that are measured at historical cost in a foreign
currency are translated using the exchange rates as at the dates of the initial transactions.

The
assets and liabilities of foreign operations are translated into U.S. dollars at the exchange rate on the reporting date and their income statements are translated at the
monthly average exchange rate for the month of the transaction. The exchange differences arising on the translation are recognized in other comprehensive income. On disposal of a foreign operation,
the component of other comprehensive income relating to that particular foreign operation is recognized in the income statement.



Revenue is recognized to the extent that it is probable that the economic benefits will flow to us and the revenue can be reliably
measured. Revenue is measured at the fair value of the consideration received or receivable, excluding discounts, sales rebates and taxes or duty. The following specific recognition criteria must also
be met before revenue is recognized:



We recognize revenue from the sale of goods when significant risks and rewards of ownership have been transferred to the buyer, and we
neither retain continuing managerial involvement to the degree usually associated with ownership, nor effective control over the goods sold.



Revenue from sale of technology licenses is recognized in accordance with completion of milestones in the relevant contracts.

F-7

---



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

2.     BASIS OF PREPARATION AND ACCOUNTING POLICIES (Continued)



Dividend revenue from investments is recognized when our right to receive payment is established.



For all financial instruments measured at amortized cost and interest bearing financial assets classified as
available-for-sale, interest income or expense is recorded using the effective interest rate, which is the rate that exactly discounts the estimated future cash payments or
receipts through the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset or liability. Interest income is included in
finance costs, net on the income statement.



Current income tax assets and liabilities are measured at the amounts expected to be recovered from or paid to the taxation
authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted at the reporting date in the countries where the taxable income
is generated.

Current
income tax relating to items recognized directly in equity is recognized in equity and not in the income statement. We periodically evaluate positions taken in the tax returns
with respect to situations in which applicable tax regulations are subject to interpretation and establish provisions where appropriate. These provisions are included in deferred tax liabilities.



Deferred tax is provided using the liability method on temporary differences at the reporting date between the tax bases of assets and
liabilities and their carrying amounts for financial reporting purposes. Deferred tax liabilities are recognized for all taxable temporary differences. Deferred tax assets are recognized for all
deductible temporary differences, carry forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible
temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilized.

The
carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to
allow all or part of the deferred tax asset to be utilized. Unrecognized deferred income tax assets are reassessed at each reporting date and are recognized to the extent that it has become probable
that future taxable income will be available to allow the deferred tax asset to be recovered.

Deferred
tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realized or the liability is settled, based on tax rates
(and tax laws) that have been enacted or substantively enacted at the reporting date.

Deferred
tax relating to items recognized outside of profit or loss is recognized outside profit or loss. Deferred tax items are recognized in correlation to the underlying transaction
either in other comprehensive income or directly in equity.

Deferred
tax assets and liabilities are offset if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the
same taxable entity and the same taxation authority.

F-8

---



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

2.     BASIS OF PREPARATION AND ACCOUNTING POLICIES (Continued)



Revenues, expenses and assets are recognized net of the amount of sales
tax except:



The
net amount of sales tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of financial position.



We account for investment tax credits using the cost-reduction approach. Investment tax credits related to the acquisition
of assets are deducted from the related assets with depreciation calculated on the net amount. Investment tax credits related to current expenses are included in the determination of profit (loss) for
the period.



Non-current assets and disposal groups classified as held for sale are measured at the lower of their carrying value amount
and fair value less costs to sell. Non-current assets and disposal groups are classified as held for sale if their carrying amounts will be recovered principally through a sale transaction
rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset or disposal group is available for immediate sale in its present condition.
Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification.

In
the consolidated income statement for the reporting period and the comparable periods of the previous year, income and expense from discontinued operations are reported separately
from income and expense from continuing operations, down to the level of profit after taxes and the resulting profit or loss (after taxes) from discontinued operations is reported separately.

Property,
plant and equipment and intangible assets once classified as held for sale are not depreciated or amortized.



PP&E is stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. The cost of an item of PP&E is the
purchase cost and all costs incurred to bring the item to the condition where it is capable of operating in the manner intended by management. Borrowing costs incurred during major construction
projects are capitalized as part of the cost of the asset until the asset is available for use. The present value of the expected cost for decommissioning the asset at the end of its useful life is
included in the cost of the respective asset. See Notes 3 and 16 for further information about our decommissioning provisions. If the cost of replacing a part of an item of plant and
equipment is capitalized, the carrying amount of the part that has been replaced is derecognized. Significant components of an item of PP&E which are expected to be replaced prior to the end of the
useful life of the item are recognized as individual assets and depreciated separately. The cost of performing a major inspection ("turnaround") is recognized in the carrying value of PP&E as a
replacement, if the recognition criteria are satisfied, and any remaining carrying amount of the cost of the previous inspection is derecognized. Turnaround costs are amortized over the period
remaining until the

F-9

---



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

2.     BASIS OF PREPARATION AND ACCOUNTING POLICIES (Continued)

next
scheduled turnaround. All other repair and maintenance costs are recognized in the income statement as incurred.

Depreciation
on PP&E is calculated on a straight-line basis over the estimated useful lives of the assets as follows:

Buildings, structures and production plants

5 to 20 yearsOffice furniture and fixtures

5 to 13 yearsMachinery and equipment

5 to 10 yearsVehicles

5 yearsInformation system hardware

3 years


Parts
of an item of plant and equipment that are recognized as individual assets are depreciated based on the estimated useful life of the individual parts. The cost of an asset under
construction is not depreciated until the asset is available for use. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the
carrying amount of the asset) is included in the income statement when the asset is derecognized.

The
assets' residual values, useful lives and methods of depreciation are reviewed at each financial year end, and adjusted prospectively as a change in accounting estimate,
if appropriate.



The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at the inception
date. An arrangement is considered to contain a lease if the fulfillment of the arrangement is dependent on the use of a specific asset or assets, and the arrangement conveys a right to use the asset,
even if that right is not explicitly specified in an arrangement.

A
lease is classified as a finance lease if it transfers substantially all the risks and benefits incidental to ownership of the leased item. Finance leases are recognized at the
commencement of the lease as assets and liabilities measured at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned
between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognized in finance
costs, net in the income statement.

A
leased asset is depreciated over the useful life of the asset or if there is no reasonable certainty that we will obtain ownership by the end of the lease term, the asset is
depreciated over the shorter of the estimated useful life of the asset and the lease term.

Operating
lease payments are recognized as an operating expense in the income statement on a straight-line basis over the term of the lease.



Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial
period of time to get ready for its intended use are capitalized as part of the cost of the respective assets. All other borrowing costs are expensed in the period they occur. Borrowing costs consist
of interest and other costs that we incur in connection with the borrowing of funds.

F-10

---



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

2.     BASIS OF PREPARATION AND ACCOUNTING POLICIES (Continued)



Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are
carried at cost less any accumulated amortization and any accumulated impairment losses. Internally generated intangible assets, excluding capitalized development costs, are not capitalized and the
expenditure is reflected in the income statement in the year in which the expenditure is incurred.

The
useful lives of intangible assets are assessed as either finite or indefinite. Intangible assets with finite lives are amortized over their useful economic life on a straight-line
basis as follows:

Licenses and technology

10 to 20 yearsContracts

6 to 20 yearsSoftware

3 to 5 years


The
amortization period and the amortization method for an intangible asset with a finite useful life are reviewed at least at each financial year end. Changes in the expected useful
life are accounted for by changing the amortization period, as appropriate, and are treated as changes in accounting estimates. The amortization expense on intangible assets with finite lives is
recognized in the income statement in the expense category consistent with the function of the intangible asset. We have no intangible assets with indefinite useful lives. Intangible assets with
finite lives are assessed for impairment whenever there is an indication that the intangible asset may be impaired.

Gains
or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset, and are
recognized in the income statement when the asset is derecognized.



Research costs are expensed as incurred. Development expenditures, on an individual project, are recognized as an asset when we can
demonstrate:



Following
the initial recognition of development expenditures as an asset, the asset is typically included within PP&E or intangible assets at cost less any accumulated depreciation or
amortization and impairment losses. Depreciation or amortization of the asset begins when development is complete and the asset is available for use. During the period of development, the asset is
tested for impairment annually.



Financial assets within the scope of International Accounting Standard ("IAS") 39,Financial Instruments:
Recognition of Measurement, are classified as financial assets at fair value through profit or loss, loans and receivables, held-to-maturity
investments, available-for-sale financial assets, or as derivatives designated as

F-11

---



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

2.     BASIS OF PREPARATION AND ACCOUNTING POLICIES (Continued)

hedging
instruments in an effective hedge, as appropriate. We determine the classification of our financial assets at initial recognition. All financial assets are recognized initially at fair value
plus, in the case of assets not at fair value through profit or loss, directly attributable transaction costs.

Purchases
or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the marketplace (regular way trades) are recognized
on the trade date, i.e., the date that we commit to purchase or sell the asset.

Our
financial assets include cash and cash equivalents, trade and other receivables, loans and other receivables included in other current assets and other non-current
assets, quoted and unquoted financial instruments included in other non-current assets and derivative financial instruments.

The
subsequent measurement of financial assets depends on their classification as follows:



Financial assets at fair value through profit or loss includes financial assets held-for-trading and financial assets designated upon
initial recognition at fair value through profit or loss. Financial assets are classified as held-for-trading if they are acquired for the purpose of selling or repurchasing in the near term. This
category includes derivative financial instruments we have entered into that are not designated as hedging instruments in hedge relationships as defined by IAS 39. Separated embedded
derivatives are also classified as held-for-trading unless they are designated as effective hedging instruments. Financial assets at fair value through profit and loss are carried in the statement of
financial position at fair value with changes in fair value recognized in feedstock and operating costs in the income statement.

We
have not designated any financial assets upon initial recognition as at fair value through profit or loss.

Derivatives
embedded in host contracts are accounted for as separate derivatives and recorded at fair value if their economic characteristics and risks are not closely related to those
of the host contracts and the host contracts are not held-for-trading or designated at fair value though profit or loss. These embedded derivatives are measured at fair value with changes in fair
value recognized in the income statement. Reassessment only occurs if there is a change in the terms of the contract that significantly modifies the cash flows that would otherwise be required.



Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an
active market. After initial measurement, such financial assets are subsequently measured at amortized cost using the effective interest rate method ("EIR"), less impairment. Amortized cost is
calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is included in finance costs, net in the income
statement. The losses arising from impairment are recognized in the income statement in general and administrative expense.



Non-derivative financial assets with fixed or determinable payments and fixed maturities are classified as
held-to-maturity when we have the positive intention and ability to hold the instrument to maturity. After initial measurement, held-to-maturity
investments are measured at amortized cost using the EIR, less impairment. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an
integral part of the EIR. The EIR amortization is included in finance costs, net in the income statement. The losses arising from impairment are recognized in the income statement in finance costs,
net. We did not have any held-to-maturity investments during the years ended December 31, 2011 and 2010.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

2.     BASIS OF PREPARATION AND ACCOUNTING POLICIES (Continued)



Available-for-sale financial investments include equity and debt securities. Equity investments classified as
available-for-sale are those, which are neither classified as held-for-trading nor designated at fair value through profit or loss. Debt securities in this category are those
which are intended to be held for an indefinite period of time and which may be sold in response to needs for liquidity or in response to changes in the market conditions.

After
initial measurement, available-for-sale financial investments are subsequently measured at fair value with unrealized gains or losses recognized as other
comprehensive income in the available-for-sale reserve until the investment is derecognized, at which time the cumulative gain or loss is recognized in finance costs, net, or
determined to be impaired, at which time the cumulative loss is reclassified to the income statement in finance costs, net and removed from the available-for-sale reserve.



A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is
derecognized when:



When
we have transferred our rights to receive cash flows from an asset or have entered into a pass-through arrangement, and have neither transferred nor retained
substantially all of the risks and rewards of the asset nor transferred control of the asset, the asset is recognized to the extent of our continuing involvement in the asset. In that case, we also
recognize an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that we have retained.

Our
accounts receivable securitization programs do not qualify under IFRS for derecognition and therefore the receivables sold into the programs remain in trade and other receivables and
the funded amount of the programs is recognized as a liability and is included in long-term debt on the statement of financial position.



We assess at each reporting date whether there is any objective evidence that a financial asset or a group of financial assets is
impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after
the initial recognition of the asset (an incurred "loss event") and that loss event has an impact on the estimated future cash flows of the financial asset or the group of financial assets that
can be reliably estimated. Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or
principal payments, the probability that they will enter bankruptcy or other financial reorganization and where observable data indicate that there is a measurable decrease in the estimated future
cash flows, such as changes in arrears or economic conditions that correlate with defaults.

For
an impairment of a financial asset carried at amortized cost, the carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is
recognized in the income statement. Loans together with the associated allowance are written off when there is no realistic prospect of future recovery and all collateral has been realized or
transferred to us.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

2.     BASIS OF PREPARATION AND ACCOUNTING POLICIES (Continued)

When
there is evidence of impairment of an available-for-sale financial asset, the cumulative loss, measured as the difference between the acquisition cost and
the current fair value, less any impairment loss on that investment previously recognized in the income statement, is removed from other comprehensive income and recognized in the income statement.
Impairment losses on equity investments are not reversed through the income statement; increases in their fair value after impairments are recognized directly in other comprehensive income. In the
case of debt instruments classified as available-for-sale, the amount recorded for impairment is the cumulative loss measured as the difference between the amortized cost and
the current fair value less any impairment loss on that investment previously recognized in the income statements. If, in a subsequent year, the fair value of a debt instrument increases and the
increase can be objectively related to an event occurring after the impairment loss was recognized in the income statement, the impairment loss is reversed through the income statement.



Financial liabilities within the scope of IAS 39 are classified as financial liabilities at fair value through profit or loss,
loans and borrowings, or as derivatives designated as hedging
instruments in an effective hedge, as appropriate. We determine the classification of our financial liabilities at initial recognition.

All
financial liabilities are recognized initially at fair value and in the case of loans and borrowings, carried at amortized cost. This includes directly attributable transaction
costs.

Our
financial liabilities include trade and other payables, long-term debt, and derivative financial instruments.

The
subsequent measurement of financial liabilities depends on their classification as follows:



Financial liabilities at fair value through profit or loss include financial liabilities held-for-trading and financial liabilities
designated upon initial recognition as at fair value through profit or loss. Financial liabilities are classified as held-for-trading if they are acquired for the purpose of selling in the near term.
This category includes derivative financial instruments entered into by us that are not designated as hedging instruments in hedge relationships as defined by IAS 39. Separated embedded
derivatives are also classified as held-for-trading unless they are designated as effective hedging instruments. Gains or losses on liabilities held for trading are recognized in the income statement.
We have not designated any financial liabilities upon initial recognition as at fair value through profit or loss.



After initial recognition, interest bearing loans and borrowings are subsequently measured at amortized cost using the EIR. Gains and
losses are recognized in the income statement when the liabilities are derecognized as well as through the EIR amortization process. Amortized cost is calculated by taking into account any discount or
premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is included in finance costs, net in the income statement.



A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires. When an existing
financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification

F-14

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

2.     BASIS OF PREPARATION AND ACCOUNTING POLICIES (Continued)

is
treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognized in the income statement.



Financial assets and financial liabilities are offset and the net amount reported in the statement of financial position if, and only
if, there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, or to realize the assets and settle the liabilities
simultaneously.



The fair value of financial instruments that are traded in active markets at each reporting date is determined by reference to quoted
market prices. For financial instruments not traded in an active market, the fair value is determined using appropriate valuation techniques. Such techniques may include, using recent arm's length
market transactions, reference to the current fair value of another instrument that is substantially the same, a discounted cash flow analysis or other valuation models.

An
analysis of fair values of financial instruments and further details as to how they are measured is provided in Note 24.



We use derivative financial instruments such as forward currency contracts, interest rate swaps and forward commodity contracts to
hedge our foreign currency risks, interest rate risks and commodity price risks, respectively. Such derivative financial instruments are initially recognized at fair value on the date on which a
derivative contract is entered into and are subsequently remeasured at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the
fair value is negative.

The
fair value of commodity contracts that meet the definition of a derivative as defined by IAS 39 and are not entered into in accordance with our expected purchase requirements
are recognized in the income statement in feedstock and operating costs.

Any
gains or losses arising from changes in the fair value of derivatives are taken directly to the income statement, except for the effective portion of cash flow hedges, which is
recognized in other comprehensive income.

For
the purpose of hedge accounting, hedges are classified as:



At
the inception of a hedge relationship, we formally designate and document the hedge relationship to which we wish to apply hedge accounting and the risk management objective and
strategy for undertaking the hedge. The documentation includes identification of the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and how we will assess the
effectiveness of changes in the hedging instrument's fair value in offsetting the exposure to changes in the hedged item's fair value or cash
flows attributable to the hedged risk. Such hedges are expected to be highly effective in achieving offsetting changes in fair value or cash

F-15

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

2.     BASIS OF PREPARATION AND ACCOUNTING POLICIES (Continued)

flows
and are assessed on an ongoing basis to determine that they actually have been highly effective throughout the financial reporting periods for which they were designated.

As
of December 31, 2011 and 2010 and during the years then ended, we have not designated as hedging instruments, any of our derivative financial instruments.

Derivative
instruments that are not designated as effective hedging instruments are classified as current or non-current or separated into a current and
non-current portion based on an assessment of the facts and circumstances (i.e., the underlying contracted cash flows).





Short-term investments with an initial maturity of three months or less are considered to be cash equivalents and are
recorded at cost, which approximates fair market value.



Inventories are valued at the lower of cost or net realizable value. Net realizable value is the estimated selling price in the
ordinary course of business, less the estimated costs of completion and estimated costs necessary to make the sale. Cost is determined on first-in first-out basis, except for
spare parts and supplies which are determined based on weighted average cost. Cost includes purchase cost, freight, insurance and other related expenses incurred in bringing the inventories to their
present condition and location. Cost also includes directly attributable production costs and a proportionate share of fixed production overheads, such as depreciation, and variable production
overheads based on normal operating capacity that are incurred in converting the materials into finished goods. Financing costs are not included in production costs.



We assess at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when annual
impairment testing for an asset is required, we estimate the asset's recoverable amount. An asset's recoverable amount is the higher of an asset's or cash-generating unit's ("CGU") fair
value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or
groups of assets. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in
use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks
specific to the asset. In determining fair value less costs to sell, recent market transactions are taken into account, if available. If no such transactions can be identified, an appropriate
discounted cash flow model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded companies or other available fair value indicators.

F-16

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

2.     BASIS OF PREPARATION AND ACCOUNTING POLICIES (Continued)

We
base our impairment calculation on detailed budgets and forecast calculations which are prepared separately for each of our CGU's to which the individual assets are allocated. These
budgets and forecast calculations generally cover a period of five years. For longer periods, a long term growth rate is calculated and applied to project future cash flows after the fifth year.
Impairment losses of continuing operations are recognized in the income statement in those expense categories consistent with the function of the impaired asset.

For
assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may
have decreased. If such indication exists, we estimate the asset's or CGU's recoverable amount. A previously recognized impairment loss is reversed only if there has been a change in the assumptions
used to determine the asset's recoverable amount since the last impairment loss was recognized. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount,
nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in the income
statement.



Provisions are recognized when we have a present obligation (legal or constructive) as a result of a past event, it is probable that an
outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where we expect some or all of a
provision to be reimbursed, for example under an insurance contract, the reimbursement is recognized as a separate asset but only when the reimbursement is virtually certain. The expense relating to
any provision is presented in the income statement net of any reimbursement. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate
that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognized as a finance cost.



Restructuring provisions are only recognized when general recognition criteria for provisions are fulfilled. We follow a detailed,
formal plan about the business or part of the business concerned, the location and number of employees affected, a detailed estimate of the associated costs and appropriate time-line.
Additionally, there must be a valid expectation for the people affected that the restructuring will be carried out or the implementation has been initiated already.



Provisions for decommissioning costs are recognized at the time of acquisition or construction of manufacturing facilities.
Decommissioning liabilities are provided at the present value of the expected costs to settle the obligation and are recognized as part of the cost of the particular asset. The expected costs are
discounted at a current pre-tax rate that reflects the risks specific to the decommissioning liability (which we interpret to be a risk-free rate). The unwinding of the
discount is recognized in the income statement in finance costs, net as it occurs. The estimated future costs of decommissioning are reviewed annually and adjusted as appropriate. Changes in the
estimated future costs or in the discount rate applied are added to or deducted from the cost of the asset.



We sponsor both defined benefit and defined contribution plans covering substantially all employees.

F-17

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

2.     BASIS OF PREPARATION AND ACCOUNTING POLICIES (Continued)

The
cost of providing benefits under defined benefit plans is determined separately for each plan using the projected unit credit method and is expensed as employees provide services.
Actuarial gains and losses for defined benefit plans are recognized in full in the period in which they occur in other comprehensive income. Such actuarial gains and losses are also immediately
recognized in retained earnings and are not reclassified to profit and loss in subsequent periods. The past service costs are recognized as an expense on a straight-line basis over the average period
until the benefits become vested. If the benefits have already vested, immediately following the introduction of, or changes to, a pension plan, past service costs are recognized immediately. The
defined benefit asset or liability is the present value of the defined benefit obligation, using a discount rate based on high quality corporate bonds, in the respective country, with terms to
maturity that approximate the duration or projected cash flows of our pension liabilities, less past service costs and less the fair value of plan assets out of which the obligations are to be
settled. Fair value for plan assets is based on market price information. The value of any defined benefit asset recognized is restricted to the sum of any past service costs and the present value of
any economic benefits available in the form of refunds from the plan or reductions in future contributions to the plan.

The
cost of defined contribution benefits is expensed as earned by employees. In North America, we also provide medical care and life insurance benefits to eligible retirees and their
dependents. These benefits are unfunded and are expensed as the employees provide service.



Our accounting policies adopted are consistent with those of the prior period, except for the following amended International Financial
Reporting Interpretations Committee ("IFRIC") interpretations effective as of January 1, 2011 and are described below:

IFRIC 14,Prepayments of a Minimum Funding Requirement (Amendment), is effective for annual periods beginning on or after
January 1, 2011, with retrospective application. This amendment permits entities to treat the benefit of prepayments of minimum funding requirements as an asset and provides guidance on
assessing the recoverable amount of a net pension asset. This amendment was adopted as of January 1, 2011 and did not have an impact on our consolidated financial statements.

IFRIC 24, Related Party Disclosures (Amendment), is effective for annual periods beginning on or after January 1, 2011, with
retrospective application. Among other things, this amendment clarifies the definition of a related party to simplify the identification of such relationships and to eliminate inconsistencies in its
application. This amendment was adopted as of January 1, 2011 and did not have an impact on our consolidated financial statements.

3.     SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS

The preparation of our consolidated financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets
and liabilities, and the disclosure of contingent liabilities at the end of the reporting period. Uncertainty about these assumptions and estimates could result in outcomes that require a material
adjustment to the carrying amount of the asset or liability affected in future periods.

F-18

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

3.     SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS (Continued)



In the process of applying our accounting policies, management has made the following judgments, which currently have or in the future
could have the most significant effects on the amount recognized in our consolidated financial statements:



The "NOVA 2020 Project" includes plans for growth of our proprietary polyethylene technology to serve North American markets. As a part
of our strategy to capitalize on emerging feedstock opportunities and growing North American demand, we have begun feasibility and engineering work for the construction of two new polyethylene assets
to be located at our sites in Alberta and Ontario. We will also complete studies for a further debottleneck of our low-density polyethylene ("LDPE") line located at our Mooretown, Ontario
facility.

Throughout
2011, we entered into a number of key agreements, including agreements for additional sources of ethane supply and related pipeline transportation services for our Joffre
complex which should provide sufficient ethane for us to move towards full utilization of our Joffre PE assets; and agreements to support the revamp of our Corunna cracker to utilize up to 100%
natural gas liquids ("NGL") feedstock, including definitive agreements for long-term ethane supply from the Marcellus Shale Basin, a transportation service agreement for the
transportation of ethane feedstock from the Marcellus Shale Basin into the Sarnia, Ontario region and related storage agreements.

These
agreements have been evaluated in relation to various IFRS principles, the most significant of which was IFRIC 4,Determining Whether an Arrangement
Contains a Lease. IFRIC 4 requires that determining whether an arrangement is, or contains, a lease shall be based on the substance of the arrangement and requires an
assessment of whether:



Management
has determined that based on evaluation of the terms and conditions of the arrangements that the feedstock and pipeline arrangements do not meet both criteria under
IFRIC 4 and therefore do not contain leases, but that a material storage cavern arrangement contains a lease. Currently, there is only one material storage agreement that has been signed and
management has determined this to be an operating lease.



The sale of our 50% interest in the INEOS NOVA joint venture closed on February 28, 2011. Associated results of operations and
cash flows are separately reported as discontinued operations for all periods presented and the associated financial position is separately reported as assets and liabilities held for sale as of
December 31, 2010.

During
the second quarter of 2010, our Board of Directors approved the sale, subject to certain conditions, of our building and construction business, collectively known as SYNTHEON. The
SYNTHEON portfolio of businesses, which was part of our Performance Styrenics segment, includes SYNTHEON Inc.; Accelerated Building Technologies LLC; NCE Inc.; NOVA Chemicals
Chile Limitada; our 50% interest in both Novidesa S.A. de C.V. and Reliance Innovative Building Solutions Pvt. Ltd (both joint ventures); and intellectual property relating to both the
building and construction products and the Elemix® concrete additive. We initially anticipated that the sale would be completed in 2010; however, negotiations with the intended acquirer
ended without a sale being completed. Management has since developed a formal plan for the sale of SYNTHEON assets. Associated results of operations, financial position and cash flows are separately
reported as discontinued

F-19

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

3.     SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS (Continued)

operations
and assets and liabilities held for sale as of and for the years ended December 31, 2011 and 2010. SYNTHEON assets are available for immediate sale and can be sold to a potential
buyer(s) in their current condition. Management has initiated an active plan to locate a buyer(s) and expects any potential disposal to be completed within the next 12 months. Accordingly,
management considers that SYNTHEON meets the criteria to be classified as held for sale as of December 31, 2011.

For
more details on discontinued operations, refer to Note 5.



Actual results could differ materially as a result of our estimates of factors such as commodity prices, foreign exchange rates,
interest rates, changes in economic conditions and regulatory changes. The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date that have a
significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are described below. We base our assumptions and estimates on
parameters available when the consolidated financial statements were prepared. Existing circumstances and assumptions about future developments may change due to market changes or circumstances
arising beyond our control. Such changes are reflected in the assumptions when they occur.



Impairment exists when the carrying value of an asset or CGU exceeds its recoverable amount, which is the higher of its fair value less
costs to sell and its value in use. The fair value less costs to sell calculation is based on available data from binding sales transactions in an arm's length transaction of similar assets or
observable market prices less incremental costs for disposing of the asset. The value in use calculation is based on a discounted cash flow model. The cash flows are derived from the budget for the
next five years and do not include restructuring activities that we have not yet committed to or significant future investments that will enhance the performance of the asset or CGU being tested. The
recoverable amount is most sensitive to the discount rate used for the discounted cash flow model as well as the expected future cash-inflows and the growth rate used for extrapolation
purposes. Other factors that management must estimate include: industry and market conditions, sales volumes and prices, costs to produce, inflation, etc. We use reasonable, supportable and where
available third-party, industry expert assumptions when performing impairment reviews.

We
assessed all of our non-financial assets for indicators of impairment and determined that certain impairment indicators exist in our Performance Styrenics segment during
the fourth quarter of 2011.
In accordance with IFRS 1,First-time Adoption of International Financial Reporting Standards, (see Note 26), we
elected to use the fair values of assets and liabilities, as determined in connection with the International Petroleum Investment Company ("IPIC") acquisition of us on July 6, 2009, as "deemed
cost" for the assets and liabilities that could be recognized under IFRS, which included PP&E of our Performance Styrenics segment. Since July 6, 2009, the market for certain products has not
improved significantly, but we continue to spend a significant amount on capital expenditures for the business and other common facilities at our manufacturing sites, resulting in a carrying value of
these assets at December 31, 2011, of $10 million prior to any impairment charge. The carrying value of these assets at December 31, 2011, was written down to their estimated fair
value of $4 million, resulting in an impairment charge of $6 million. The impairment charge is included in feedstock and operating costs in the consolidated income statement for the year
ended December 31, 2011.

We
also assessed impairment indicators at the end of 2010 and determined that although the Performance Styrenics segment continued to add new packaging applications for items such as
televisions and computer equipment, demand had not materialized as expected due to poor economic conditions and competitive pressure, which resulted in lower sales volumes during 2010. Accordingly,
during the fourth quarter of 2010,

F-20

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

3.     SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS (Continued)

management
determined that the carrying value of certain assets within the Performance Styrenics segment were greater than the estimated future cash flows. The carrying value of these assets at
December 31, 2010 prior to write-down was $26 million. The fair value was estimated to be $6 million. Thus, the assets were written down to their estimated fair value,
resulting in an impairment charge of $20 million during 2010. The impairment charge is included in feedstock and operating costs in the consolidated income statement for the year ended
December 31, 2010.

The
write-downs will reduce future depreciation charges in the Performance Styrenics segment by approximately $3 million per year from 2012 to approximately 2019.



Judgmental aspects of accounting for intangibles involves selection of an appropriate method of amortization, estimates of the life of
assets and determining whether an impairment of our assets exists and measuring such impairment. The amortization period and the amortization method for intangible assets with a finite useful life are
reviewed each financial year end. We made no changes to the amortization periods or methods for intangible assets during 2011, and have no intangible assets with indefinite useful lives.



Judgmental aspects of accounting for PP&E involves selection of an appropriate method of depreciation, estimates of the life of assets
and determining whether an impairment of our assets exists and measuring such impairment. We are able to choose from alternative methods of depreciation. The straight-line method was
chosen rather than other methods, such as units of production, because the straight-line method is consistent with the pattern of economic benefits that are expected from the use of our
plants and equipment, requires less estimation and judgment, and is a systematic and rational basis for allocating the depreciable cost over the period in which the assets' benefit is realized. We
review the estimated useful lives and the depreciation method of PP&E at each financial year end and make adjustment prospectively when appropriate. This review is completed by Company engineers
familiar with the plant sites and requires management's assessment of economic utility. We made no changes to the estimated useful lives or depreciation methods for PP&E during 2011.



Uncertainties exist with respect to the interpretation of complex tax regulations, changes in tax laws, and the amount and timing of
future taxable income. Given the wide range of international business relationships and the long-term nature and complexity of existing contractual agreements, differences arising between
the actual results and the assumptions made, or future changes to such assumptions, could necessitate future adjustments to tax income and expense already recorded. We establish provisions, based on
reasonable estimates, for possible consequences of audits by the tax authorities of the respective countries in which we operate, if it is probable that an outflow of resources will be required to
settle the obligation. The amount of such provisions is based on various factors, such as experience of previous tax audits and differing interpretations of tax regulations by the taxable entity and
the responsible tax authority. Such differences of interpretation may arise on a wide variety of issues depending on the conditions prevailing in the respective company's domicile. We review the
adequacy of these provisions at the end of each reporting period and include any required liability in deferred tax liabilities.

Deferred
tax assets are recognized for all unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilized. Significant
management judgment is required to

F-21

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

3.     SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS (Continued)

determine
the amount of deferred tax assets that can be recognized, based upon the likely timing and the level of future taxable profits together with future tax planning strategies.

We
have tax loss carry forwards, in the United States, amounting to $117 million at December 31, 2011 (December 31,
2010  $131 million; January 1, 2010  $141 million). In addition, at December 31, 2011, we have
$205 million of unrecognized losses in Switzerland (December 31, 2010  $256 million; January 1,
2010  $319 million). These relate to subsidiaries that have had a history of losses and expire in 2028.

If
we were able to recognize all unrecognized deferred tax assets, profit would have increased by $65 million for the year ended December 31, 2011.



We sponsor both defined benefit and defined contribution pension arrangements covering substantially all of our employees. The cost and
obligations for the defined benefit pension plans and other post-employment medical benefits and the present value of the pension obligation are determined using actuarial valuations. An
actuarial valuation involves making various economic and demographic assumptions to estimate future liabilities, which are discounted back to today's value using interest rates as of the valuation
date. Some of the assumptions used in the valuations include future salary increases, mortality rates, future pension increases, and termination and retirement rates. Given the long term nature of the
obligations and the fact that assumed rates can vary from short term actual experience, the liabilities are subject to volatility and are particularly sensitive to changes in interest rates. In
addition, as the assets are invested in equities and bonds, the market value of the plans' assets are sensitive to changes in capital markets. All significant assumptions and asset values are reviewed
at each reporting date.

In
determining the appropriate discount rate, management considers the yields of high quality corporate bonds, in the respective country, with terms to maturity that approximate the
duration or projected cash flows of our pension obligations. The mortality rate is based on publicly available mortality tables for each country. Future salary increases are based on our long term
view of compensation trends. Pension indexation, which is only applicable to the Canadian defined benefit plans, is based on expected future inflation rates. Retirement and termination rates are based
on actual experience or standardized tables which are reflective of our experience.

Given
the decline in interest rates during 2011, management decreased the discount rates used in determining pension and post retirement obligations and applied actual asset values,
which reflected weak investment returns, as of December 31, 2011 as compared to December 31, 2010. These changes increased our employee benefit plan liability and decreased other
comprehensive income and retained earnings by approximately $125 million at December 31, 2011.



Where the fair value of financial assets and financial liabilities recorded in the statement of financial position cannot be derived
from active markets, their fair value is determined using quoted prices in active markets adjusted for factors specific to the asset or liability, such as basis and location differentials. This
includes over-the-counter derivatives with values based upon observable commodity futures curves and derivatives with input validated by broker quotes or other publicly
available market data providers. This also includes fair values determined using valuation techniques, such as regression or extrapolation formulas, where the inputs are readily observable, including
commodity prices for similar assets or liabilities in active markets. The key inputs to valuation models and regression or extrapolation formulas include interest rate yield curves, currency rates,
credit spreads, implied volatilities, and commodity prices for similar assets or liabilities in active markets, as

F-22

---



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

3.     SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS (Continued)

applicable.
Changes in assumptions about these factors could affect the reported fair value of financial instruments.



We have recognized a provision for decommissioning obligations associated with our manufacturing facilities. In determining the amount
of the provision, assumptions and estimates are made in relation to discount rates, the expected cost to dismantle and remove the plant, restore the site, and the expected timing of those obligations.
The carrying amount of the provision as at December 31, 2011 was $101 million (December 31, 2010  $99 million; January 1,
2010  $86 million).



When assessing the possible outcomes of legal claims that are filed against us, we rely on the opinions of our legal counsel. The
opinions of our legal counsel are based on the best of their professional judgment, and take into consideration the current stage of the proceedings and the legal experience accumulated with respect
to the various matters. As the results of the claims may ultimately be determined by the courts or otherwise settled, they may be different from such estimates.

4.     STANDARDS ISSUED BUT NOT YET EFFECTIVE

Standards issued up to the date of issuance of our consolidated financial statements but not effective as of December 31, 2011 are listed below. We intend to adopt these standards
when they become effective.

Amendments to IAS 12: Deferred Tax  Recovery of Underlying Assets, amends IAS 12, Income Taxes, by creating an exception to the principle that
the measurement of deferred tax liabilities and deferred tax assets should reflect the tax
consequences that would follow from the manner in which the entity expects to recover or settle the carrying amount of its assets and liabilities. In specified circumstances, such as when the deferred
tax liability or asset arises from investment property or property, plant and equipment or intangible assets, the measurement of deferred tax liabilities and assets should reflect a rebuttable
presumption that the carrying amount of the underlying asset will be recovered entirely by sale. Standing Interpretations Committee ("SIC") 21, Income
Taxes  Recovery of Revalued Non-Depreciable Assets, is no longer applicable to investment properties carried at fair value.
The remaining guidance from SIC 21 was added to IAS 12, which requires businesses to measure the deferred tax relating to an asset to be measured based upon the expectation that the
carrying amount of the asset will be recovered by selling the asset or using it. The amendments are effective January 1, 2012. We do not expect the application of the revised standard to have
an impact on our consolidated financial statements.

In
January 2011, the IASB amended IFRS 7,Financial Instruments: Disclosures. The amendment is effective for annual periods
beginning on or after July 1, 2011, with earlier adoption permitted. The amendment relates to required disclosures for transfers of financial assets to help users of the financial statements
evaluate the risk exposures relating to such transfers and the effect of those risks on an entity's financial position. We are currently evaluating the impact of adopting this amended standard.

IFRS 9, Financial Instruments: Classification and Measurement, as issued, reflects the first phase of the IASB work on the
replacement of IAS 39. In subsequent phases, the IASB will address hedge accounting and derecognition. IFRS 9 introduces new requirements for the classification and measurement of
financial assets and is effective for annual periods beginning on or after January 1, 2015, with early adoption permitted. The adoption of this standard will have an effect on the
classification and measurement of our financial assets and financial liabilities. We are currently evaluating the impact and will quantify the effect in conjunction with the other phases, when issued,
to present a comprehensive picture.

F-23

---



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

4.     STANDARDS ISSUED BUT NOT YET EFFECTIVE (Continued)

In
May 2011, the IASB issued several standards, all of which are effective for annual periods beginning on or after January 1, 2013 with earlier application permitted:

IFRS 10,Consolidated Financial Statements, establishes principles for the presentation and preparation of consolidated financial
statements when an entity controls one or more other entities and replaces the consolidation requirements in SIC 12, Consolidation  Special Purpose Entitiesand IAS 27,Consolidated and Separate
Financial Statements. IFRS 10 builds on existing principles by identifying the concept of control as the determining factor in whether an entity should be included
within the consolidated financial statements of the parent company. This standard also provides additional guidance to assist in the determination of control where this is difficult to assess. We are
currently evaluating the impact of adopting this standard.

IFRS 11,Joint Arrangements, provides for a more realistic reflection of joint arrangements by focusing on the rights and
obligations of the arrangement, rather than its legal form (as is currently the case). IFRS 11 addresses inconsistencies in the reporting of joint arrangements by requiring a single
method (the equity method) to account for interests in joint ventures. In conjunction with the issuance of IFRS 11, IAS 28,Investments in Associates and
Joint Ventures, was amended. An entity should apply IFRS 11 to determine the type of joint arrangement in which it is involved. Once it has determined that it has an
interest in a joint venture, the entity should recognize an investment and account for it using the equity method in accordance with IAS 28 (as amended in 2011), unless the entity is
exempt from applying the equity method as specified in the standard. We are currently evaluating the impact of adopting this standard and amendment.

IFRS 12,Disclosure of Interests in Other Entities, is a new and comprehensive standard on disclosure requirements for all forms of
interests in other entities, including subsidiaries, joint arrangements, associates and unconsolidated structured entities. IFRS 12 will require an entity to disclose information that enables
users of financial statements to evaluate the nature of, and risks associated with, its interests in other entities, and the effects of those interests on its financial position, financial performance
and cash flows. We are currently evaluating the impact of adopting this standard.

IFRS 13,Fair Value Measurement, provides new guidance on fair value measurement and disclosure requirements. IFRS 13 will
improve consistency and reduce complexity by providing a precise definition of fair value and a single source of fair value measurement and disclosure requirements. We are currently evaluating the
impact of adopting this standard.

In
June 2011, the IASB issued the following amended standards:

IAS 19, Employee Benefits, provides the accounting and disclosure requirements by employers for employee benefits. The amendments
to IAS 19 will provide investors and other users of financial statements with a better understanding of an entity's obligations resulting from the provision of defined benefit plans and how
those obligations will affect its financial position, financial performance and cash flow. Among other things, the amendment eliminates the option to defer the recognition of gains and losses, known
as the 'corridor method', and further aligns IFRS with Generally Accepted Accounting Principles in the United States ("US GAAP"). The amendments to IAS 19 are effective for annual
periods beginning on or after January 1, 2013, with earlier application permitted. We are currently evaluating the impact of adopting this amended standard.

IAS 1,Presentation of Financial Statements, was amended to improve the quality of the presentation of other comprehensive income
("OCI") and align the presentation of OCI in financial statements prepared in accordance with IFRS with those prepared in accordance with US GAAP. The amendments require companies preparing financial
statements in accordance with IFRS to group together items within OCI that may be reclassified to the profit or loss section of the income statement. The amendments also reaffirm existing requirements
that items in OCI and profit or loss should be presented as either a single statement or two

F-24

---



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

4.     STANDARDS ISSUED BUT NOT YET EFFECTIVE (Continued)

consecutive
statements. The amendments to IAS 1 are effective for annual periods beginning on or after July 1, 2012. We are currently evaluating the impact of adopting this amended
standard.

In
December 2011, the IASB amended IAS 32,Financial Instruments Presentation, for disclosure requirements for the
offsetting of assets and liabilities on the statement of financial position. The amended standard requires entities to disclose both gross information and net information about both instruments and
transactions eligible for offset in the statement of financial position and instruments and transactions subject to an agreement similar to a master netting arrangement. The scope includes
derivatives, sale and repurchase agreements and reverse sale and repurchase agreements and securities borrowing and securities lending agreements. The amendments to IAS 32 are effective for
annual periods beginning on or after January 1, 2014 and require retrospective application. We are currently evaluating the impact of adopting this amended standard.

5.     DISCONTINUED OPERATIONS



On October 31, 2010, we entered into an agreement with an affiliate of INEOS Group Ltd. ("INEOS") providing for the sale
of our 50% interest in the INEOS NOVA joint venture. The negotiated sale price was subject to several deductions. Some of these deductions were fixed as of October 31, 2010, such as our 50%
share of the joint venture's net indebtedness and some were estimated on the closing date, such as indemnified and unindemnified pension liabilities. The anticipated windup of certain indemnified
pension liabilities resulted in us increasing the estimated amount of our liabilities by $11 million in December 2010.

The
sale closed on February 28, 2011. At closing we received approximately $65 million (€47 million). During 2011, we finalized estimates for all but
one of the remaining pension liabilities and paid INEOS a net of $10 million, resulting in net proceeds on the sale totaling $55 million in 2011. This amount does not represent our final
net proceeds from the sale, because one of the pension liabilities which was estimated as of closing has not been finalized. The final determination of this liability is not expected to be completed
until necessary regulatory approval is received, at which time the proceeds will again be adjusted. We do not expect the adjustment to be material. We recognized a loss on the sale of
$1 million during 2011. Associated results of operations and cash flows are separately reported as discontinued operations for all periods presented and the associated financial position is
separately reported as assets and liabilities held for sale as of December 31, 2010.



During the second quarter of 2010, our Board of Directors approved the sale, subject to certain conditions, of our building and
construction businesses, collectively known as SYNTHEON. The SYNTHEON portfolio of businesses, which is part of our Performance Styrenics segment, includes SYNTHEON Inc.; Accelerated Building
Technologies LLC; NCE Inc.; NOVA Chemicals Chile Limitada; our 50% interest in both Novidesa S.A. de C.V. and Reliance Innovative Building Solutions Pvt. Ltd (both joint
ventures); and intellectual property relating to both the building and construction products and the Elemix concrete additive. We initially anticipated that the sale would be completed in 2010;
however, negotiations with the intended acquirer ended without a sale being completed. Management has since developed a formal plan for the sale of SYNTHEON assets. Associated results of operations,
financial position and cash flows are separately reported as discontinued operations and assets and liabilities held for sale as of and for the years ended December 31, 2011 and 2010.

F-25

---



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

5.     DISCONTINUED OPERATIONS (Continued)

Summarized
financial information for our 50% share of the INEOS NOVA joint venture ("INJV") and SYNTHEON are shown below:

Year ended December 31 (millions of U.S. dollars)

2011

2010INJV

SYNTHEON

TOTAL

INJV

SYNTHEON

TOTALTotal revenues

$


$
20

$
20

$


$
14

$
14Profit (loss) from discontinued operations, before tax

$
22

$
(13
)
$
9

$
39

$
(14
)
$
25Loss on disposal, before tax


(1
)




(1
)







Income tax (expense) recovery


(4
)

3


(1
)




1


1Profit (loss) from discontinued operations, net of tax

$
17

$
(10
)
$
7

$
39

$
(13
)
$
26




December 31, 2011

December 31, 2010(millions of U.S. dollars)

INJV

SYNTHEON

TOTAL

INJV

SYNTHEON

TOTALCurrent assetsCash and cash equivalents

$


$
2

$
2

$


$
3

$
3Trade and other receivables





5


5





2


2Inventories





2


2





2


2Income taxes receivable














1


1Other current assets





2


2





2


2


11


11





10


10Investments in joint ventures





3


3


58


4


62Property, plant and equipment





8


8





9


9Assets held for sale

$


$
22

$
22

$
58

$
23

$
81Current liabilitiesTrade and other payables

$


$
7

$
7

$


$
4

$
4Liabilities associated with assets held for sale

$


$
7

$
7

$


$
4

$
4


6.     TRADE AND OTHER RECEIVABLES

(millions of U.S. dollars)

Notes

December 31
2011

December 31
2010

January 1
2010Trade receivables




$
457

$
381

$
303Trade receivables  related parties


25





49


36457


430


339Allowance for doubtful accounts





(4
)

(5
)

(5
)453


425


334Trade accruals





53


52


42Other





4





$
510

$
477

$
376


F-26

---



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

6.     TRADE AND OTHER RECEIVABLES (Continued)

Trade
receivables are non-interest bearing and are generally on 30-90 day terms. See Note 24 for further discussion of credit risk.



We sell interests in certain trade accounts receivable pursuant to revolving securitization transactions in which we retain servicing
responsibilities. The receivables are sold at a discount approximating the purchaser's financing cost of issuing commercial paper backed by the accounts receivable. We pay a fee on this same basis,
plus a margin. As the purchaser receives collections on the previously sold interests, new accounts receivable are sold by us to a maximum amount equal to the lesser of eligible receivables or the
maximum amount of the programs which was $200 million at December 31, 2011 and 2010 (January 1, 2010  $130 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).

In
February 2010, we entered into two new accounts receivable securitization programs (one in the U.S. and one in Canada) to replace the prior programs which were to expire
in February 2010. The new programs were scheduled to expire in February 2012 and each allow for a maximum funding of $100 million. The programs in existence at December 31,
2011 and 2010 are governed by the same financial covenants as our senior secured revolving credit facility (see Note 15). The programs in existence at January 1, 2010 were
governed by the same financial covenants as the total return swap (see Note 15).

In
January 2012, the Canadian accounts receivable securitization program was amended to extend the expiration date from February 2012 to February 2015. In
February 2012, the U.S. accounts receivable securitization program was amended to extend the expiration date from February 2012 to January 2014 and increase the maximum
funding from $100 million to $125 million.

Information
regarding our securitization programs is as follows:

(millions of U.S. dollars, unless otherwise noted)

December 31
2011

December 31
2010

January 1
2010Amount sold at end of year(1)

$
182

$
154

$
122Loss, dilution and other reserves (as a % of eligible accounts receivable)


27
%

26
%

35
%Finance costs, net of servicing fees

$
5

$
7





---

One of our securitization programs involves the use of a special purpose entity ("SPE"). In that program, we sell certain trade accounts
receivable to the SPE, which then sells interests in such receivables to a purchaser. The SPE is wholly owned by us and is consolidated in accordance with SIC 12. The assets of the SPE (including the
receivables transferred to it) are not available to our creditors, and the transferred receivables are legally not our asset (see Note 2).

F-27

---





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

7.     INVENTORIES

(millions of U.S. dollars)

December 31
2011

December 31
2010

January 1
2010Spare parts and supplies

$
32

$
29

$
28Raw materials


239


159


274Finished goods


304


262


193$
575

$
450

$
495


For
the years ended December 31, 2011 and 2010, costs of inventories recognized as expense were $3,749 million and $3,461 million, respectively, and are included in
feedstock and operating costs in our consolidated income statements.

8.     OTHER CURRENT ASSETS

(millions of U.S. dollars)

Notes

December 31
2011

December 31
2010

January 1
2010Commodity-based derivatives not designated as hedges




$
5

$
2

$
6Note receivable





46





Interest receivable  related party


25








3Recoverable taxes








12


10Prepaid expenses





8


20


12Other assets





23


23


20$
82

$
57

$
51Restricted cash




$
85

$


$





At December 31, 2011, balance represents a Euro denominated unsecured note receivable, bearing interest at 4.5% per annum and
due in November 2012. After the sale of our interest in the INEOS NOVA joint venture in February 2011 (see Note 5), the note was reclassified to third-party notes
receivable (see Note 10).



Restricted cash of $85 million secures a bond related to patent litigation and in 2011 was reclassified from
non-current assets to current assets (see Note 22).

F-28

---



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

9.     INTANGIBLE ASSETS

(millions of U.S. dollars)

Software

Licenses &
technology

Contracts

TotalCostAt January 1, 2010

$
17

$
117

$
375

$
509Additions


5








5At December 31, 2010


22


117


375


514Additions


2








2At December 31, 2011

$
24

$
117

$
375

$
516Amortization and impairmentAt January 1, 2010

$
3

$
3

$
11

$
17Amortization


6


7


19


32At December 31, 2010


9


10


30


49Amortization


6


7


19


32At December 31, 2011

$
15

$
17

$
49

$
81Net book valueAt December 31, 2011

$
9

$
100

$
326

$
435At December 31, 2010

$
13

$
107

$
345

$
465At January 1, 2010

$
14

$
114

$
364

$
492


10.   OTHER NON-CURRENT ASSETS

(millions of U.S. dollars)

Notes

December 31
2011

December 31
2010

January 1
2010Available-for-sale investments  unquoted equity shares




$
1

$
6

$
13Available-for-sale investments  quoted debt securities and equity shares





12


13


12Note receivable








5


13Note receivable  related party


25





47


58Other receivable  related party


25





2


2Commodity-based derivatives not designated as hedges








2


12Other assets and deferred costs





12


10


8$
25

$
85

$
118Restricted cash




$


$
85

$





At December 31, 2010, includes a $5 million (January 1,
2010  $12 million) investment in sEnergy, an insurance pool for business interruption, classified as available-for-sale securities
with no published market price and recorded at cost and $1 million of other miscellaneous investments classified as available-for-sale securities with no published
market price and recorded at cost. During 2010, we received $7 million for a portion of our investment in sEnergy. In February 2011, sEnergy was dissolved and we received an additional
$5 million, which represented the remaining amount of our investment.

F-29

---



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

10.   OTHER NON-CURRENT ASSETS (Continued)



We have investments in listed equity and debt securities. The fair value of the quoted debt securities and equity shares is determined
by reference to published quotations in an active market.



At December 31, 2010, the note is net of an allowance of $8 million for which the impairment charge is included in
general and administrative expenses in the 2010 consolidated income statement. During 2011, the note receivable was restructured and settled for $5 million in cash.



At December 31, 2010 and January 1, 2010 includes a Euro denominated unsecured note receivable, bearing interest at 4.5%
per annum and due in November 2012. After the sale of our interest in the INEOS NOVA joint venture in February 2011 (see Note 5), the note was reclassified to third-party
notes receivable and as of December 31, 2011 is included in other current assets (see Note 8).



Restricted cash of $85 million secures a bond related to patent litigation and in 2011 was reclassified from
non-current assets to current assets (see Note 22).

11.   INVESTMENTS IN JOINT VENTURES



We had a 50% interest in the INEOS NOVA joint venture, two jointly controlled entities, which produced styrene and styrenic polymers in
Europe and North America. On October 31, 2010, we entered into an agreement with INEOS providing for the sale of our 50% interest in the INEOS NOVA joint venture. The negotiated sale price was
subject to several deductions. Some of these deductions were fixed as of October 31, 2010, such as our 50% share of the joint venture's net indebtedness and some were estimated on the closing
date, such as indemnified and unindemnified pension liabilities. The anticipated windup of certain indemnified pension liabilities resulted in us increasing the estimated amount of our liabilities by
$11 million in December 2010.

The
sale closed on February 28, 2011. At closing we received approximately $65 million (€47 million). During 2011, we finalized estimates for all but
one of the remaining pension liabilities and paid INEOS a net of $10 million, resulting in net proceeds on the sale totaling $55 million in 2011. This amount does not represent our final
net proceeds from the sale, because one of the pension liabilities which was estimated as of closing has not been finalized. The final determination of this liability is not expected to be completed
until necessary regulatory approval is received, at which time the proceeds will again be adjusted. We do not expect the adjustment to be material. We recognized a loss on the sale of
$1 million during 2011. Associated results of operations and cash flows are separately reported as discontinued operations for all periods presented and the associated financial position is
separately reported as assets and liabilities held for sale as of December 31, 2010 (see Note 5).



On March 24, 2010, we entered into an agreement with Reliance Industrial Investments & Holdings Limited to form a
50:50 joint venture in India known as Reliance Innovative Building Solutions Private Limited. The joint venture focus is on the building and construction markets. The joint venture plans to
leverage our

F-30

---



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

11.   INVESTMENTS IN JOINT VENTURES (Continued)

green
building and construction technology to design, engineer and build a range of high-efficiency structures for the Indian sub-continent. This business is included in
SYNTHEON and is currently classified as held for sale (see Note 5).

On
October 1, 2005, the Corporation and Grupo IDESA commenced operations of a 50:50 joint venture in Mexico called NOVIDESA, S.A. de C.V. The joint venture develops,
manufactures and markets products and
systems such, as insulating concrete forms, for the Mexican building and construction market. The joint venture previously marketed expandable polystyrene ("EPS") for construction and packaging
applications in the growing Mexican market. The EPS was manufactured at a Grupo IDESA facility. In January 2011, the parties agreed that the joint venture would no longer market EPS and would
focus on its products and systems for building and construction applications. This business is included in SYNTHEON and is currently classified as held for sale (see Note 5).

As
of December 31, 2011 and 2010 and for the years then ended, all jointly controlled entities are included in discontinued operations (see Note 5). The following is
a summarized statement of financial position for all jointly controlled entities as of January 1, 2010.

(millions of U.S. dollars)

January 1
2010Current assets

$
241Non-current assets


36Current liabilities


(138
)Non-current liabilities


(106
)Equity

$
33




We own a 50% interest in the Joffre E3 ethylene plant and a 20% interest in a cogeneration facility located at Joffre, Alberta.
These are accounted for as jointly controlled assets and are proportionately consolidated in our consolidated financial statements.

The
following is summarized financial information for our interests in jointly controlled assets.

Year ended December 31 (millions of U.S. dollars)

2011

2010Revenue

$
438

$
364Operating expenses, depreciation and income taxes


(294
)

(284
)Profit

$
144

$
80




(millions of U.S. dollars)

December 31
2011

December 31
2010

January 1
2010Current assets

$
94

$
69

$
41Non-current assets


955


1,018


1,058Current liabilities


(27
)

(13
)

(29
)Non-current liabilities


(31
)

(33
)

(27
)Equity

$
991

$
1,041

$
1,043


F-31

---



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

11.   INVESTMENTS IN JOINT VENTURES (Continued)



Year ended December 31 (millions of U.S. dollars)

2011

2010Cash inflows (outflows) from:Operating activities

$
15

$
18Investing activities

$
(11
)
$
(19
)Financing activities

$


$



12.   PROPERTY, PLANT AND EQUIPMENT

(millions of U.S. dollars)

Land

Buildings,
structures &
production
plants

Machinery &
equipment

Information
system
hardware

Vehicles

Office
furniture &
fixtures

Assets under
construction

TotalCostAt January 1, 2010

$
46

$
3,498

$
6

$
5

$
7

$
9

$
98

$
3,669Additions





95


2


3








49


149Classified as held for sale


(2
)

(6
)













(2
)

(10
)Disposals





(8
)
















(8
)Transfers





73





1








(74
)

At December 31, 2010


44


3,652


8


9


7


9


71


3,800Additions





145


3


3


1





85


237Disposals





(9
)













(1
)

(10
)Transfers





44


1


1








(46
)

At December 31, 2011

$
44

$
3,832

$
12

$
13

$
8

$
9

$
109

$
4,027Depreciation and impairmentAt January 1, 2010

$


$
107

$
1

$
1

$


$


$


$
109Depreciation





213


1


3





1





218Classified as held for sale





(1
)
















(1
)Disposals





(2
)
















(2
)Impairment





20

















20At December 31, 2010





337


2


4





1





344Depreciation





227


1


3


1


1





233Disposals





(2
)
















(2
)Impairment





6

















6At December 31, 2011

$


$
568

$
3

$
7

$
1

$
2

$


$
581Net book valueAt December 31, 2011

$
44

$
3,264

$
9

$
6

$
7

$
7

$
109

$
3,446At December 31, 2010

$
44

$
3,315

$
6

$
5

$
7

$
8

$
71

$
3,456At January 1, 2010

$
46

$
3,391

$
5

$
4

$
7

$
9

$
98

$
3,560


We assessed all of our non-financial assets for indicators of impairment and determined that certain impairment indicators exist in
our Performance Styrenics segment during the fourth quarter of 2011. In accordance with IFRS 1 (see Note 26), we elected to use the fair values of assets and liabilities, as
determined in connection with the IPIC acquisition of us on July 6, 2009, as "deemed cost" for the assets and liabilities that could be recognized under IFRS, which included PP&E of our
Performance Styrenics segment. Since July 6, 2009, the market for certain products has not improved significantly, but we continue to spend a significant amount on capital expenditures for the
business and other common facilities at our manufacturing sites, resulting in a carrying value of these assets at December 31, 2011, of $10 million prior to any impairment charge. The
carrying value of these assets at December 31, 2011, was written down to their estimated fair value of

F-32

---



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

12.   PROPERTY, PLANT AND EQUIPMENT (Continued)

$4 million,
resulting in an impairment charge of $6 million. The impairment charge is included in feedstock and operating costs in the consolidated income statement for the year ended
December 31, 2011.

Although
the Performance Styrenics segment continued to add new packaging applications for items such as televisions and computer equipment, demand has not materialized as expected due
to poor economic conditions and increasing pricing pressure on the packaged applications which resulted in lower sales volumes during 2010. Accordingly, during the fourth quarter of 2010, management
determined that the carrying value of certain assets within our Performance Styrenics segment were greater than the estimated future cash flows. These assets' carrying value at December 31,
2010 prior to write-down was $26 million. The fair value was estimated to be $6 million. Thus, the assets were written down to their estimated fair value, resulting in an
impairment charge of $20 million during 2010. The impairment charge is included in feedstock and operating costs in the consolidated income statement for the year ended
December 31, 2010.

The
write-downs will reduce future depreciation charges in the Performance Styrenics segment by approximately $3 million per year from 2012 to approximately 2019.

$2.2 billion
(December 31, 2010  $2.3 billion; January 1,
2010  $2.4 billion) in net book value of assets in Canada, including real estate, is pledged as collateral for our $425 million senior secured
revolving credit facility (December 31, 2010  $425 million; January 1, 2010  $350 million).
The remaining credit facilities are unsecured (see Note 15).

13.   TRADE AND OTHER PAYABLES

(millions of U.S. dollars)

Notes

December 31
2011

December 31
2010

January 1
2010Trade payables




$
290

$
279

$
369Trade payables  related parties


25





2


Other payables





53


53


35$
343

$
334

$
404


14.   OTHER CURRENT LIABILIITES

(millions of U.S. dollars)

Notes

December 31
2011

December 31
2010

January 1
2010Accrued interest




$
29

$
30

$
32Accrued distribution  related party


25


75





Other current liabilities  related party


25





22


Commodity-based derivatives not designated as hedges





1


2


Other liabilities





73


71


84$
178

$
125

$
116




Represent amounts due to the former INEOS NOVA joint venture for indemnified pension liabilities (see Note 5).

F-33

---



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

14.   OTHER CURRENT LIABILIITES (Continued)



In the fourth quarter of 2011, our Board of Directors approved a $75 million distribution for the 2011 financial year, payable
to our shareholder at the end of March 2012. The distribution will occur by a reduction of our stated capital account maintained for our common shares.

15.   LONG-TERM DEBT

(millions of U.S. dollars, unless otherwise noted)

Interest rate

Maturity

December 31
2011

December 31
2010

January 1
2010Revolving credit facilities


Floating


2013-2015

$


$


$
Accounts receivable securitization programs


Floating


2012
(1)

182


154


122Unsecured debentures and notes


See below


2012-2025


1,529


1,501


1,709Preferred shares


5.2%


2010








75Share of a joint venture's loan(2)


8.6%


2020


20


20


17Advanced Manufacturing Investment Strategy Loan ("AMIS loan")


4.9%


2019


10


10


10Obligation under a finance lease


2.5%


2011





10


131,741


1,695


1,946Less amounts due within one year








(582
)

(10
)

(434
)$
1,159

$
1,685

$
1,512


---



The remaining debentures and notes are unsecured borrowings, which rank pari passu in all respects with our other unsecured and
unsubordinated debt. Terms of the outstanding unsecured debentures and notes are as follows:

(millions of U.S. dollars, unless otherwise noted)

Face
amount

Stated
interest rate

December 31
2011

December 31
2010

January 1
2010Maturity:2010(1)

$
239


7.85%

$


$


$
2342012(2)

$
400


6.5%


400


389


3782013(3)

$
400


Floating
(4)

369


355


3422016(3)

$
350


8.375%


342


341


3402019(3)

$
350


8.625%


341


340


3392025(3)

$
100


7.875%


77


76


76$
1,529

$
1,501

$
1,709


---

F-34

---





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

15.   LONG-TERM DEBT (Continued)



We engage in accounts receivable securitization programs to obtain lower financing rates than those available from other sources. In
February 2010, we entered into two new accounts receivable securitization programs (one in the U.S. and one in Canada) to replace our prior programs before they expired. In
January 2012, we amended our Canadian accounts receivable securitization program to extend the term for three years to February 11, 2015. The Canadian program allows for maximum funding
of $100 million. In February 2012, we amended our U.S. accounts receivable securitization program to extend the term for two years to January 30, 2014 and to increase the
maximum funding from $100 million to $125 million. As of December 31, 2011 and 2010, the maximum availability of the programs was $200 million. As of January 1,
2010, the maximum availability of the programs was $130 million. At December 31, 2011, $182 million (December 31,
2010  $154 million; January 1, 2010  $122 million) was funded under the programs.

The
programs in existence at December 31, 2011 and 2010 are governed by the same financial covenants as our senior secured revolving credit facility. The programs in existence at
January 1, 2010 were governed by the same financial covenants as the total return swap (seeCovenantsbelow).

The
receivables transferred to financial counterparties do not meet the IAS 39 derecognition criteria and accordingly, the funded amount of the programs are classified as
long-term debt due within one year and long-term debt, respectively, based on the expiry date of the programs. See Note 6 for further details on our accounts receivable
securitization programs.



We had entered into a total return swap with respect to the Series A preferred shares of our subsidiary, NOVA
Chemicals Inc. The equity notional amount of the total return swap was $75 million as of January 1, 2010. We allowed the total return swap to terminate in accordance with its
terms on March 31, 2010 and repaid the equity notional amount of $75 million. The associated Series A preferred shares were returned to NOVA Chemicals Inc.
and cancelled.



In June 2009, our subsidiary, NOVA Chemicals (Canada) Ltd., entered into a loan agreement for a loan in the principal
amount of Cdn$10 million made available under the Province of Ontario's Advanced Manufacturing Investment Strategy. We were permitted to use the loan proceeds only to finance certain eligible
costs associated with the modernization and expansion of our LDPE capability at our Mooretown facility that was completed in 2010. We drew down the full Cdn$10 million in the fourth quarter of
2009. The maturity date of the loan is December 1, 2019.



During 2011, we amended our senior secured revolving credit facility to extend the maturity date two years to December 17, 2015.
In addition, on March 20, 2011, one of our $100 million unsecured bilateral credit facilities expired undrawn and was not extended and on September 20, 2011, a $30 million
tranche of one of our unsecured bilateral credit facilities expired undrawn and was not extended. Accordingly, as of December 31, 2011, we had the following three revolving credit facilities
totaling $565 million (of which $17 million was utilized):



F-35

---



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

15.   LONG-TERM DEBT (Continued)



During
2010, we amended our senior secured revolving credit facility to extend the maturity date one year to November 17, 2013 and increase the size from $350 million to
$425 million. In addition, we entered into a new $100 million unsecured bilateral credit facility, which expires on September 20, 2015 and on March 20, 2010,
$95 million of our undrawn unsecured bilateral credit facilities expired and were not extended. Accordingly, as of December 31, 2010, we had the following four revolving credit
facilities totaling $695 million (of which $19 million was utilized):



As
of January 1, 2010, we had four revolving credit facilities totaling $615 million in borrowing capacity and had utilized $51 million of the facilities. These
facilities included:



The
indentures governing our public debt allow for debt up to 10% (15% for the 2016 and 2019 notes) of consolidated net tangible assets to be secured without having to secure the public
debt. If consolidated net tangible assets (defined in accordance with the indentures and calculated on a quarterly basis) fall below the applicable threshold, availability of the $425 million
senior secured revolving credit facility will be reduced proportionately. As of December 31, 2011, we had full availability of the $425 million senior secured revolving credit facility
(December 31, 2010  $425 million; January 1, 2010  $350 million).



At December 31, 2011 and 2010, our senior secured revolving credit facility and our accounts receivable securitization programs
were governed by the following financial covenants, which require quarterly compliance:



F-36

---



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

15.   LONG-TERM DEBT (Continued)

The
table below shows our actual financial covenant ratios as of the end of each quarter during 2011.

March 31
2011

June 30
2011

September 30
2011

December 31
2011Senior debt-to-cash flow ratio


0.19


0.17


0.16


0.16Debt-to-capitalization ratio


39.0


34.5


26.8


25.2


At
January 1, 2010, our $350 million senior secured revolving credit facility, the total return swap and our accounts receivable securitization programs required a minimum
consolidated cash flow (calculated quarterly) of not less than $50 million.



On November 19, 2010, we entered into an uncommitted revolving standby letter of credit and/or guarantee facility with one of
the banks in the syndicate of lenders for our senior secured revolving credit facility. During 2011, we increased the size from $60 million to $125 million. The facility is supported by
an account performance security guarantee issued by Export Development Canada. The facility is only available for issuance of standby letters of credit (and/or guarantees) by the bank on our behalf.
As of December 31, 2011, we utilized $43 million (December 31, 2010  $26 million) of this facility.



Repayment requirements as of December 31, 2011 in respect of long-term debt are as follows:

(millions of U.S. dollars)2012(1)

$
5822013


4022014


32015


22016


353Thereafter


469$
1,811


---

F-37

---



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

16.   PROVISIONS

(millions of U.S. dollars)

Restructuring

Decommissioning

Environmental

Legal

TotalAt January 1, 2010

$
17

$
86

$
3

$


$
106Additions





5





92


97Interest expense





4








4Utilized


(13
)










(13
)Foreign exchange





4








4At December 31, 2010

$
4

$
99

$
3

$
92

$
198Additions











15


15Transferred from a disposal group








2





2Interest expense





4








4Utilized


(2
)










(2
)Reversed


(1
)










(1
)Foreign exchange





(2
)







(2
)At December 31, 2011

$
1

$
101

$
5

$
107

$
214


Our
provisions are classified in our consolidated statements of financial position as follows:

(millions of U.S. dollars)

December 31
2011

December 31
2010

January 1
2010Current

$
109

$
5

$
18Non-current


105


193


88$
214

$
198

$
106




Our restructuring provisions consist of severance payments relating to specific restructuring programs. Outstanding restructuring
programs relate primarily to union employees at our Corunna facility. All payments are expected to be made within the next year.



Our decommissioning provisions are comprised of expected costs to be incurred upon termination of operations and the closure of active
manufacturing plant facilities. The estimated cash flows are expected to be incurred on closure of active plants in 10 to 20 years. In arriving at the estimated decommissioning provision, a
risk-free rate was used to discount the estimated future cash flows. The estimated decommissioning provision will increase, or accrete, each year over the lives of active plants.



Our environmental provisions relate to environmental liabilities and restoration costs associated with inactive sites. Cash outflows
relating to these liabilities are expected to occur within one to three years.



We have recorded a provision in connection with a patent infringement claim in the United States. See Note 22 for further
details.

F-38

---



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

17.   OTHER NON-CURRENT LIABILITIES

(millions of U.S. dollars)

Notes

December 31
2011

December 31
2010

January 1
2010Other non-current liabilities  related party


25

$


$


$
6Other liabilities





48


43


30$
48

$
43

$
36




Represent amounts due to the former INEOS NOVA joint venture for indemnified pension liabilities (see Note 5).

18.   FINANCE COSTS

Year ended December 31 (millions of U.S. dollars)

Notes

2011

2010Interest on long-term debt




$
141

$
159Interest on securitizations and other





24


29Accretion of decommissioning provisions


16


4


4169


192Interest income





(3
)

(6
)$
166

$
186


19.   OTHER LOSSES, NET

Year ended December 31 (millions of U.S. dollars)

Notes

2011

2010Patent litigation


22

$
(20
)
$
(95
)Insurance claim








45Other





2


$
(18
)
$
(50
)




In 2011 and 2010, we recognized a loss of $20 million and $95 million, respectively, related to a jury verdict that we
infringed The Dow Chemical Company's patents, resulting in awarded damages in the amount of $61.8 million, plus interest of $14.3 million in 2010, as well as amounts based on sales of
alleged infringing grades of SURPASS® polyethylene film resins plus interest of $15 during 2011 (2010  $16 million) and other related costs of
$5 million during 2011 (2010  $3 million) (see Note 22).



In 2010, we recognized a $45 million gain related to an arbitration award resulting from an insurance claim involving our
Corunna facility that dated back to 2005.

F-39

---





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

20.   INCOME TAXES

The major components of income tax expense included in the consolidated income statements are:

Year ended December 31 (millions of U.S. dollars)

2011

2010Current income tax:Current income tax expense

$
183

$
83Adjustments in respect of current income tax of previous year


(4
)

10Total current income tax expense


179


93Deferred tax:Relating to the origination and reversal of temporary differences


36


31Total deferred income tax expense


36


31Income tax expense

$
215

$
124


The
major components of income tax benefit included in the consolidated statements of other comprehensive income statement are:

Year ended December 31 (millions of U.S. dollars)

2011

2010Deferred tax related to items charged or credited directly to equity:Deferred tax benefit on actuarial losses from employee benefit plan liabilities

$
(41
)
$
(17
)Income tax benefit recognized directly in the consolidated statements of other comprehensive income

$
(41
)
$
(17
)


Income
tax expense (benefit) by country is as follows:

Year ended December 31 (millions of U.S. dollars)

2011

2010Current income tax expense (benefit):Canada

$
187

$
82Foreign


(8
)

11Total current income tax expense


179


93Deferred tax expense (benefit):Canada


20


36Foreign


16


(5
)Total deferred income tax expense


36


31Income tax expense reported in the consolidated income statements

$
215

$
124


F-40

---



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

20.   INCOME TAXES (Continued)

A
reconciliation of income tax expense and amounts computed by applying the Canadian federal and provincial statutory income tax rates is as follows:

Year ended December 31 (millions of U.S. dollars, except as noted)

2011

2010Profit before income taxes from continuing operations

$
823

$
361Statutory income tax rate


26.5
%

28
%Computed income tax expense


218


101Increase (decrease) in tax resulting from:Non-deductible expenses for tax purposes


1


Non-taxable income





6Foreign earnings


1


2Utilization of previously unrecognized tax losses


(7
)

6Adjustments in respect to current year income tax on previous years


2


10Other





(1
)Income tax expense on continuing operations reported in the consolidated income statements

$
215

$
124




Deferred tax relates to the following:

Consolidated statement of financial position

Consolidated income statement

Other comprehensive incomeYear ended
December 31

Year ended
December 31December 31
2011

December 31
2010

January 1
2010(millions of U.S. dollars)

2011

2010

2011

2010Deferred tax asset:Investment tax credits

$
37

$
63

$
61

$


$


$


$
Other temporary differences





2














Total deferred tax assets


37


65


61Deferred tax liability:Intangible assets


(98
)

(106
)




(8
)







Accelerated depreciation on PP&E


(746
)

(752
)

(886
)

(6
)

(28
)




Employee benefit plan liabilities


41


47


50





(4
)

(41
)

(17
)Corporate minimum tax credits





1


22


1


22





Losses





20


19


20


(1
)




Reduction to tax rates








22





22





Temporary difference on accrued expenses


(5
)

(26
)

(29
)

29


20





Total deferred tax liability


(808
)

(816
)

(802
)Deferred tax expense (benefit)










$
36

$
31

$
(41
)
$
(17
)Net deferred tax liability

$
(771
)
$
(751
)
$
(741
)


F-41

---



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

20.   INCOME TAXES (Continued)

We
offset tax assets and liabilities only if we have a legally enforceable right to set off current tax assets and current tax liabilities and the deferred tax assets and deferred tax
liabilities relate to income taxes levied by the same tax authority for the same legal entity.

At
December 31, 2011, we have U.S. federal tax loss carryforwards of $117 million. These tax losses will expire in 2028. In addition at December 31, 2011, we
have $205 million of tax loss carryforwards in Switzerland (December 31, 2010  $256 million; January 1,
2010  $319 million), with expiration dates from 2012 to 2017. However, as these losses relate to subsidiaries that have a history of losses, deferred tax
assets have not been recognized as these losses may not be used to offset taxable profits elsewhere within the consolidated group. If we were able to recognize all unrecognized deferred tax assets,
profit would increase by $65 million.

A
tax reserve is used to provide for uncertain tax positions which consist of potential tax liabilities associated with possible disputes with tax authorities. At December 31,
2011 the tax reserve for uncertain tax positions is $47 million (December 31, 2010  $41 million; January 1,
2010  $44 million) and is included in our deferred tax liability on the consolidated statement of financial position.

There
are no income tax consequences as a result of the distribution accrued by us to our shareholder at December 31, 2011.

21.   EMPLOYEE BENEFITS



The components of employee benefits expense included in the consolidated income statement are as follows:

Year ended December 31 (millions of U.S. dollars)

2011

2010Wages and salaries

$
261

$
246Defined contribution plans


11


10Defined benefit plans


23


23Bonuses


53


51Other


32


32Total employee benefits expense

$
380

$
362




We sponsor both defined benefit and defined contribution pension arrangements.

Defined
benefit pensions at retirement are mainly related to credited years of service and remuneration either based on earnings during the last years of employment, or in the case of
one of the U.S. plans, based on earnings over a participant's whole career. The Canadian defined benefit pension plans have a provision for partial indexation that is subject to a maximum
annual percentage increase. Actuarial reports are prepared regularly by independent actuaries for accounting and funding purposes using the projected unit credit method. The last actuarial valuation
for all plans in the United States and in Canada was as of December 31, 2011.

Plan
assets are measured at fair value while pension obligations are discounted using current yield rates of high quality corporate bonds, in the respective country, with terms to
maturity that approximate the duration or projected cash flows of our pension liabilities. The plans' assets consist of publicly traded equity and fixed income securities or units of pooled funds or
publicly traded mutual funds. We use a measurement date of December 31 for our pension and post-retirement plans.

F-42

---



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

21.   EMPLOYEE BENEFITS (Continued)

On
February 28, 2011, we sold our equity interest in the INEOS NOVA joint venture to INEOS (see Notes 3 and 5). In exchange for us deducting from the sale
proceeds agreed upon amounts valued in accordance with the sale agreement, INEOS assumed certain pension liabilities from us. Certain employees of the INEOS NOVA joint venture continued to participate
in our Retirement Plan for Eastern Canadian Salaried Employees until February 28, 2011. INEOS assumed financial responsibility for their obligations in respect of all plan service for its
members. As part of the sale agreement, all benefits accrued up to February 28, 2011 will be transferred from the Plan once regulatory approval is received.



Net benefit expense for all significant defined benefit plans consisted of the following:

Pension Plans

Post-Retirement Plans

TotalYear ended December 31
(millions of U.S. dollars)2011

2010

2011

2010

2011

2010Current service cost

$
16

$
14

$
2

$
1

$
18

$
15Interest cost


40


41


5


6


45


47Expected return on plan assets


(40
)

(39
)







(40
)

(39
)Net benefit expense

$
16

$
16

$
7

$
7

$
23

$
23Actual return on plan assets

$
13

$
50

$


$


$
13

$
50


Net
benefit expense is included in the consolidated income statements as follows:

Year ended December 31 (millions of U.S. dollars)

2011

2010Feedstock and operating costs

$
14

$
14Research and development


2


2Sales and marketing


1


1General and administrative


6


6Net benefit expense

$
23

$
23


Actuarial
gains and losses are recognized in full in the period in which they occur in other comprehensive income. Cumulative actuarial losses recorded in the statement of comprehensive
income since January 1, 2010, our date of transition to IFRS, are $240 million.



The following tables summarize the amounts recognized in the consolidated statements of financial position:

Pension Plans

Post-Retirement Plans

Total(millions of U.S. dollars)

December 31
2011

December 31
2010

December 31
2011

December 31
2010

December 31
2011

December 31
2010Defined benefit obligation

$
(908
)
$
(777
)
$
(118
)
$
(107
)
$
(1,026
)
$
(884
)Fair value of plan assets


577


562








577


562Employee benefit plan liability

$
(331
)
$
(215
)
$
(118
)
$
(107
)
$
(449
)
$
(322
)


F-43

---



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

21.   EMPLOYEE BENEFITS (Continued)



Pension Plans

Post-
Retirement
Plans

Total(millions of U.S. dollars)

January 1
2010

January 1
2010

January 1
2010Defined benefit obligation

$
(694
)
$
(100
)
$
(794
)Fair value of plan assets


506





506Employee benefit plan liability

$
(188
)
$
(100
)
$
(288
)




Changes in the present value of the defined benefit obligation are as follows:

Pension Plans

Post-Retirement Plans

TotalYear ended December 31
(millions of U.S. dollars)2011

2010

2011

2010

2011

2010Benefit obligation at beginning of year

$
777

$
694

$
107

$
100

$
884

$
794Current service cost


16


14


2


1


18


15Interest cost


40


41


5


6


45


47Actuarial loss


139


58


11


3


150


61Settlement gain





(9
)










(9
)Participant contributions


2


4


2


2


4


6Benefits paid


(47
)

(59
)

(7
)

(7
)

(54
)

(66
)Transfer of obligation


1











1


Foreign exchange differences


(20
)

34


(2
)

2


(22
)

36Benefit obligation at end of year

$
908

$
777

$
118

$
107

$
1,026

$
884


The
defined benefit obligation is analyzed as follows:

(millions of U.S. dollars)

December 31
2011

December 31
2010

January 1 2010Unfunded

$
122

$
110

$
108Partly funded


904


774


686Total benefit obligation

$
1,026

$
884

$
794


F-44

---



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

21.   EMPLOYEE BENEFITS (Continued)



Changes in the fair value of the plan assets are as follows:

Pension Plans

Post-Retirement Plans

TotalYear ended December 31
(millions of U.S. dollars)2011

2010

2011

2010

2011

2010Fair value of plan assets at beginning of year

$
562

$
506

$


$


$
562

$
506Expected return on plan assets


40


39








40


39Actuarial (loss) gain


(27
)

11








(27
)

11Employer contributions


60


44


5


5


65


49Participant contributions


2


4


2


2


4


6Settlement loss





(9
)










(9
)Benefits paid


(47
)

(59
)

(7
)

(7
)

(54
)

(66
)Foreign exchange differences


(13
)

26








(13
)

26Fair value of plan assets at end of year

$
577

$
562

$


$


$
577

$
562


We
expect to contribute approximately $110 million to our defined benefit plans in 2012.

The
major categories of plan assets as a percentage of the fair value of the total plan assets are as follows:

Percentage of Plan AssetsAsset Category

December 31
2011

December 31
2010

January 1
2010Equities


59%


61%


59%Fixed Income


41%


39%


41%Total


100%


100%


100%




The principal assumptions used in determining pension and post-retirement benefit obligations for our plans are
as follows:

Pension Plans

Post-Retirement PlansWeighted-average assumptions used
to determine end of year obligations

December 31
2011

December 31
2010

January 1
2010

December 31
2011

December 31
2010

January 1
2010Discount rate


4.2%


5.0%


5.8%


4.4%


5.4%


6.1%Expected rate of return on plan assets(1)


6.9%


7.4%


7.4%








Rate of increase of future earnings


4.0%


3.9%


3.9%








Long-term health care inflation(2)











5.0%


5.0%


5.0%Initial health care trend rate











6.9%


7.2%


7.8%


---

F-45

---



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

21.   EMPLOYEE BENEFITS (Continued)



A 1% increase in the discount rate would have decreased the defined benefit pension obligation by $94 million at
December 31, 2011. A 1% decrease in the discount rate would have increased the defined benefit pension obligation by $114 million.

A
1% increase in the health care inflation rate would have increased the post-retirement benefit obligation by $17 million at December 31, 2011. A 1% decrease
in the same health care inflation rate would have decreased the post-retirement benefit obligation by $13 million.

A
1% increase or decrease in the health care inflation rate would have had an impact of $1 million on the current service and interest cost components of the
post-retirement benefit expense in 2011.



Amounts for the current and previous period are as follows:

Pension Plans

Post-Retirement Plans(millions of U.S. dollars)

December 31
2011

December 31
2010

December 31
2011

December 31
2010Defined benefit obligation

$
(908
)
$
(777
)
$
(118
)
$
(107
)Fair value of plan assets


577


562





Deficit

$
(331
)
$
(215
)
$
(118
)
$
(107
)Experience adjustments on plan liabilities

$
(19
)
$
9

$
(1
)
$
10Experience adjustments on plan assets

$
(27
)
$
11

$


$





Our consolidated statement of financial position includes a liability of $4 million at December 31, 2011
(December 31, 2010  $6 million; January 1, 2010  $5 million) for the following: health and
welfare benefit continuation to disabled individuals and dependents until the earliest of the disabled's attainment of age 65, death or recovery; short-term disability income continuation;
and COBRA continuation for medical and dental benefits. This liability is not included in the
table above. A formal actuarial valuation is performed at least every three years with the most current valuation having been performed as of December 31, 2009.



We provide medical care and life insurance benefits to eligible retirees and their dependents in North America. We accrue the cost of
providing post-retirement benefits as the employees provide services. Post-retirement costs are funded as they are incurred.

The
Patient Protection and Affordable Care Act ("PPACA") was signed into law on March 23, 2010, and on March 30, 2010, the Health Care and Education Reconciliation Act of
2010 ("HCERA") was signed into law, which amends certain aspects of the PPACA. Among other things, the PPACA reduces the tax benefits available to an employer that receives the Medicare Part D
subsidy. This change did not have a material impact for us. The PPACA and HCERA will have both immediate and long-term ramifications for many employers that provide retiree health
benefits.

F-46

---



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

21.   EMPLOYEE BENEFITS (Continued)



We have a number of defined contribution arrangements providing retirement benefits to certain groups of employees. The total expense
for our contributions to these plans was $11 million in 2011 (2010  $10 million). In 2012, we expect to contribute approximately $14 million
to our defined contribution plans.

Expense
related to our defined contribution plans is included in our consolidated income statements as follows:

Year ended December 31 (millions of U.S. dollars)

2011

2010Feedstock and operating costs

$
7

$
6Research and development


1


1Sales and marketing


1


1General and administrative


2


2Defined contribution expense

$
11

$
10


22.   CONTINGENCIES AND COMMITMENTS



We are involved in litigation from time-to-time in the ordinary course of business. Among these items is a
claim filed against us in the Court of Queen's Bench of Alberta by Dow Chemical Canada ULC and its European affiliate concerning our third ethylene plant at our Joffre site. The amount of the
claim was initially $120 million, but, on August 12, 2010, the court granted an application to amend the amended statement of claim to update the damage claims and add new claims.
Accordingly, the amount of the claim is now approximately $300 million. We initially counterclaimed in the same action for approximately $300 million. We have filed an amended statement
of defense and counterclaim. The amount of our counterclaim is now approximately $700 million.

In
2005, The Dow Chemical Company ("Dow Chemical") filed a complaint against us for alleged patent infringement. The complaint, filed in the Federal District Court in Delaware,
alleged that certain grades of our SURPASS® polyethylene film resins infringe two Dow Chemical patents. In June 2010, a jury trial took place resulting in a June 15, 2010,
verdict against us which awarded damages in the amount of $61.8 million based on sales of SURPASS resin in the United States through the end of 2009. On July 30, 2010, the court
awarded Dow Chemical pre-judgment interest in the amount of $14.3 million. In a subsequent bench trial, the judge ruled that Dow Chemical had standing to bring the suit, holding
that Dow Chemical continuously owned the patents in suit.

Following
the jury verdict, both parties filed certain motions with the District Court in Delaware, including a motion by Dow Chemical seeking a permanent injunction to require us to
stop importing and selling certain sLLDPE grades of SURPASS resin in the United States. Given the substantial issues for appeal, including the question of Dow Chemical's standing in the case,
the short unexpired term of the patents and the possibility that we would prevail on appeal, the court was not persuaded that entry of a permanent injunction would serve the parties or the public
interest and the judge denied Dow Chemical's motion for a permanent injunction. Accordingly, the court's order allowed us to continue to sell the alleged infringing grades of the SURPASS resin to
existing customers in the United States pending expiration of the patents in October 2011.

We
appealed the verdict to the Court of Appeals for the Federal Circuit ("CAFC") on several grounds. To stay execution (i.e., collection) of the money judgment pending the outcome
of the appeal, we posted a bond in the amount of the jury verdict plus pre-judgment interest as awarded by the court, post-judgment interest at a prescribed statutory rate and
costs as determined by the court. The bond is secured with cash collateral in the

F-47

---



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

22.   CONTINGENCIES AND COMMITMENTS (Continued)

amount
of $85 million, which is reported as restricted cash on the consolidated statements of financial position. Oral arguments for the appeal were heard on October 4, 2011. In January
2012, a panel of three CAFC judges affirmed the District Court ruling in a 2-1 non-precedential disposition. In February 2012, we petitioned the CAFC for an en banc(all members of the
CAFC) review of the panel decision and have not yet received a response.

The
patents at issue in the U.S. patent litigation expired on October 15, 2011. No accruals have been made beyond that date on the sales of the alleged infringing grades of
SURPASS resin in the United States. As of December 31, 2011, $107 million (December 31, 2010  $92 million; January 1,
2010  $0 million) has been accrued with respect to this claim, which represents the $76 million award plus $31 million based on sales and
interest through December 31, 2011 (December 31, 2010  $16 million; January 1,
2010  $0 million) (see Notes 16 and 19). As of December 31, 2011 and 2010, both the provision and restricted cash are reported
as current and non-current, respectively, on the consolidated statements of financial position.

In
December 2010, Dow Chemical filed a Statement of Claim against us in Federal Court in Canada alleging that certain grades of our SURPASS polyethylene film resins infringe a Dow
Chemical Canadian patent that is related to the U.S. patents subject to the suit in the United States. We filed our statement of defense and counterclaim in March 2011. In
April 2011, the Court ordered the trial to commence in January 2013. As this litigation is still in its early stages, and we believe it is not probable that Dow Chemical's action will
succeed, no amount has been accrued as of December 31, 2011 with respect to this claim.



In late 2011, our Mooretown LDPE facility suffered an unplanned shutdown. We will need to perform extensive repairs to return the
facility to full operations, which we expect will be completed in the second quarter of 2013. In the interim, we have modified the facility and are in the process of recommissioning to test the
capability of the modified facility. It is our intent to operate the modified facility with lower production rates and a reduced product slate until the final repairs are completed.

Through
December 31, 2011, the net book value of PP&E that was damaged and disposed of and repairs and maintenance costs were insignificant. We don't expect the cost of further
repairs and replacement parts to be material to our consolidated financial statements.



On November 14, 2011, our Board of Directors approved approximately $250 million to move the Corunna Revamp project into
the implementation stage. Completing the revamp of Corunna by early 2014 will allow us to utilize up to 100% NGL feedstock.

At
December 31, 2011, we had capital commitments of $55 million, of which $15 million relates to the Corunna Revamp project and $40 million relates primarily
to various sustaining capital projects.



Our guarantees consist of letters of credit and other guarantees entered into in the ordinary course of business. In addition, we
previously had guarantees related to our interest in the INEOS NOVA joint venture which were terminated when we sold our interest in that joint venture on February 28, 2011.

(millions of U.S. dollars)

December 31
2011

December 31
2010

January 1
2010Letters of credit

$
60

$
45

$
51Joint venture guarantees





25


44Other guarantees


12


17


5$
72

$
87

$
100


F-48

---





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

22.   CONTINGENCIES AND COMMITMENTS (Continued)



We lease office space and transportation equipment under various operating leases. These leases have a life of between 1 and
15 years. Certain railcar lease agreements contain financial covenants for our subsidiary, NOVA Chemicals Inc.

Future
minimum rentals payable under non-cancellable operating leases are as follows:

(millions of U.S. dollars)

December 31
2011

December 31
2010

January 1
2010Within one year

$
45

$
43

$
43After one year but not more than five years


147


143


138More than five years


142


164


200$
334

$
350

$
381


Rental
expense under operating leases was $51 million for the year ended December 31, 2011 (2010  $50 million) and is included
in our consolidated income statements as follows:

Year ended December 31 (millions of U.S. dollars)

2011

2010Feedstock and operating costs

$
40

$
38Research and development


2


2Sales and marketing


1


1General and administrative


8


9Rental expense

$
51

$
50




We have entered into other arrangements for the purchase of minimum amounts of feedstock and other raw materials for short- and
long-term supply and related transportation and storage agreements. The resulting commitments are as follows:

(millions of U.S. dollars)

December 31
2011

December 31
2010

January 1
2010Within one year

$
1,406

$
1,294

$
1,262After one year but not more than five years


3,693


2,290


2,314More than five years


6,571


1,620


1,730$
11,670

$
5,204

$
5,306


23.   SEGMENTED INFORMATION

We consider both qualitative and quantitative factors in determining reportable segments. Before applying quantitative analyses, we aggregate the business units with similar economic
characteristics and business units with similarities in each of the following areas: nature of the product and service, nature of the production process, type or class of customer, methods used to
distribute the products or provide the services and, if applicable, the nature of the regulatory environment. Based on the aggregation of the operating segments, we

F-49

---



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

23.   SEGMENTED INFORMATION (Continued)

perform
quantitative tests based on revenue, profit and loss and assets and have determined that we have the following four reporting segments.



Products:Ethylene and co-products, including propylene, crude
C4 and crude C5 hydrocarbons and hydrogen.

Applications:Ethylene is used internally by us to produce polyethylene or sold to third-parties who use ethylene to produce
polyethylene and other products.



Products:Ethylene and co-products, including propylene, crude
C4 hydrocarbons, C5 dienes, dicyclopentadiene, aromatics, C9 resin oils, hydrogen and fuels. Feedstock mix determines the type and volume of co-products manufactured.

Applications:Ethylene is used internally by us to produce polyethylene or sold to customers who use the ethylene to make
other products. Chemical co-products are building blocks that are used by customers to make items such as tires, carpet and clothing fibers and household goods. Energy
co-products are primarily used by customers for fuel.



Products:LLDPE, LDPE, HDPE and PE manufactured using Advanced
SCLAIRTECH technology.

Applications:Polyethylene is sold to customers for production of a variety of end-use industrial and consumer
products. Consumer products include packaging film, plastic bags, bottles and toys. Industrial applications include storage drums, industrial wrap, retail packaging and building products.



Products:EPS and ARCEL® resins, as well as downstream
business ventures including SYNTHEON which is classified as held for sale (see Note 5).

Applications:Performance Styrenics polymers are sold to customers who make products for end-use applications
including packaging for food and consumer products and insulation for the building and construction industry.

Management
monitors the operating results of the business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance
is evaluated based on operating profit or loss and is measured consistently with operating profit or loss in the consolidated financial statements. However, financing costs and finance income, income
taxes and other income and loss items as well as other corporate items described below are not allocated to operating segments.



Corporate includes all long-term incentive compensation and profit sharing costs, all unrealized gains and losses on
mark-to-market feedstock derivatives, impairment charges, restructuring and corporate operating costs.

We
account for intersegment sales and transfers as if the sales or transfers were to third-parties, that is, at current market price.

F-50

---



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

23.   SEGMENTED INFORMATION (Continued)

The
following tables provide information for each segment:



Year ended December 31 (millions of U.S. dollars)

2011

2010Joffre Olefins

$
914

$
819Corunna Olefins


1,776


1,257Polyethylene


2,175


1,940Performance Styrenics


310


217Eliminations





(13
)Total revenue from continuing operations from external customers

$
5,175

$
4,220


---



Year ended December 31 (millions of U.S. dollars)

2011

2010Joffre Olefins

$
1,088

$
701Corunna Olefins


533


748Polyethylene


7


7Performance Styrenics


17


87Eliminations


(1,579
)

(1,187
)Total intercompany and related party revenue from continuing operations

$
66

$
356




Year ended December 31 (millions of U.S. dollars)

2011

2010Joffre Olefins

$
2,002

$
1,520Corunna Olefins


2,309


2,005Polyethylene


2,182


1,947Performance Styrenics


327


304Eliminations


(1,579
)

(1,200
)Total revenue from continuing operations

$
5,241

$
4,576


---

F-51

---



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

23.   SEGMENTED INFORMATION (Continued)



Year ended December 31 (millions of U.S. dollars)

2011

2010Joffre Olefins

$
902

$
383Corunna Olefins


227


137Polyethylene


33


298Performance Styrenics


7


3Corporate


(125
)

(192
)Eliminations


(37
)

(32
)Total operating profit from continuing operations

$
1,007

$
597Finance costs, net


(166
)

(186
)Other losses, net


(18
)

(50
)Income tax expense


(215
)

(124
)Profit from continuing operations

$
608

$
237




Year ended December 31 (millions of U.S. dollars)

2011

2010Joffre Olefins

$
145

$
145Corunna Olefins


24


20Polyethylene


90


70Performance Styrenics


3


4Corporate


9


9Total depreciation and amortization from continuing operations

$
271

$
248


Depreciation
and amortization is included in feedstock and operating costs in our consolidated income statements, except for $9 million for each of the years ended
December 31, 2011 and 2010 which is included in general and administrative.



Year ended December 31 (millions of U.S. dollars)

2011

2010Joffre Olefins

$
35

$
20Corunna Olefins


57


28Polyethylene


61


75Performance Styrenics


5


3Total capital expenditures for continuing operations

$
158

$
126


F-52

---



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

23.   SEGMENTED INFORMATION (Continued)



(millions of U.S. dollars)

December 31
2011

December 31
2010(1)

January 1
2010Joffre Olefins

$
2,396

$
2,518

$
2,592Corunna Olefins


742


530


570Polyethylene


1,745


1,713


1,619Performance Styrenics


118


117


144Corporate


1,237


722


552Eliminations


(30
)

(25
)

(3
)Total assets

$
6,208

$
5,575

$
5,474


---



Year ended December 31 (millions of U.S. dollars)

2011

2010Canada

$
2,398

$
1,814United States


2,529


2,182Europe and Other


248


224$
5,175

$
4,220


---



(millions of U.S. dollars)

December 31
2011

December 31
2010

January 1
2010Canada

$
3,815

$
3,848

$
3,949United States


37


41


64Europe and Other


29


32


39$
3,881

$
3,921

$
4,052


Non-current
assets for this purpose consists of property, plant and equipment and intangible assets.

F-53

---





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

24.   FINANCIAL INSTRUMENTS

The table below is a comparison by class of the carrying value and fair values of our financial instruments that are carried in the consolidated financial statements.

Carrying amount

Fair value(millions of U.S. dollars)

Note

December 31
2011

December 31
2010

January 1
2010

December 31
2011

December 31
2010

January 1
2010Financial assetsTrade and other receivables

6

$
510

$
477

$
376

$
510

$
477

$
376Other financial assets:Loans and receivables

8, 10


46


54


73


46


54


73Available-for-sale investments  unquoted equity shares

10


1


6


13


1


6


13Available-for-sale investments  quoted debt securities and equity shares

10


12


13


12


12


13


12Commodity-based derivatives not designated as hedges

8, 10


5


4


18


5


4


18Cash and cash equivalents




960


306


238


960


306


238Total



$
1,534

$
860

$
730

$
1,534

$
860

$
730




Carrying amount

Fair value(millions of U.S. dollars)

Note

December 31
2011

December 31
2010

January 1
2010

December 31
2011

December 31
2010

January 1
2010Financial liabilitiesLong-term debt


15

$
1,741

$
1,695


1,946

$
1,873

$
1,853

$
2,047Trade and other payables


13


343


334


404


343


334


404Commodity-based derivatives not designated as hedges


14


1


2





1


2


Total




$
2,085

$
2,031

$
2,350

$
2,217

$
2,189

$
2,451


The fair values of financial assets and liabilities are included at the amount at which the instrument could be exchanged in a current transaction
between willing parties, other than in a forced or liquidation sale. We have no plans to unwind these positions prior to maturity and have no significant exposure to any individual customer or
counterparty. The following methods and assumptions were used to estimate the fair values:



F-54

---



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

24.   FINANCIAL INSTRUMENTS (Continued)





Assets carried at fair value on the consolidated statements of financial positions at December 31, 2011, December 31,
2010 and January 1, 2010 are included in the following fair value hierarchy categories:

December 31, 2011

December 31, 2010(millions of U.S. dollars)

Total

Level 1

Level 2

Level 3

Total

Level 1

Level 2

Level 3Assets measured at fair valueHeld-for-trading financial assets:Commodity-based derivatives not designated as hedges

$
5

$


$
5

$


$
4

$


$
4

$
Available-for-sale investments  quoted debt securities and equity shares


12


12








13


13





Liabilities measured at fair valueHeld-for-trading financial liabilities:Commodity-based derivatives not designated as hedges


1





1





2





2





During
the periods ending December 31, 2011 and 2010 there were no transfers between Level 1 and Level 2 fair value measurements.

January 1, 2010(millions of U.S. dollars)

Total

Level 1

Level 2

Level 3Assets measured at fair valueHeld-for-trading financial assets:Commodity-based derivatives not designated as hedges

$
18

$


$
18

$
Available-for-sale investments  quoted debt securities and equity shares


12


12





Liabilities measured at fair valueHeld-for-trading financial liabilities:Commodity-based derivatives not designated as hedges














The
Level I, II and III classifications in the fair value hierarchy utilized by us are defined as follows:

Level I.Fair values are determined using inputs that are quoted prices (unadjusted) in active markets for identical
assets or liabilities that we have the ability to access. In determining Level I commodity derivatives trading fair values, we use quoted prices for identically traded commodities obtained from
active exchanges such as the New York Mercantile Exchange and the Intercontinental Exchange.

Level II.Fair values are determined using inputs other than unadjusted quoted prices that are observable for the
asset or liability, either directly or indirectly.

F-55

---



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

24.   FINANCIAL INSTRUMENTS (Continued)

Commodity
derivatives fair values falling within the Level II category are determined through the use of quoted prices in active markets adjusted for factors specific to the asset
or liability, such as basis and location differentials. We include over-the-counter derivatives with values based upon observable commodity futures curves and derivatives with
input validated by broker quotes or other publicly available market data providers in Level II. Level II fair values also include fair values determined using valuation techniques, such
as regression or extrapolation formulas, where the inputs are readily observable, including commodity prices for similar assets or liabilities in active markets. The key inputs to valuation models and
regression or extrapolation formulas include interest rate yield curves, currency rates, credit spreads, implied volatilities, and commodity prices for similar assets or liabilities in active markets,
as applicable.

Level III.Fair values are determined using inputs for the asset or liability that are not readily observable. We have
not determined any fair values using Level III.

We
are exposed to foreign currency risk, commodity price risk, interest rate risk, liquidity risk and credit risk. Our senior management oversees the management of these risks and is
supported by certain committees and individuals that advise on financial risks and the appropriate financial risk governance framework for us. These committees and individuals provide assurance to our
senior management that our financial risk-taking activities are governed by the appropriate policies and procedures. It is our policy that no trading in derivatives for speculative
purposes shall be undertaken.



Foreign currency risk is the risk that the fair value of future cash flow of a financial instrument will fluctuate because of changes
in foreign exchange rates. Our exposure to the risk of changes in foreign exchange rates relates primarily to our operating activities (when revenue or expenses are denominated in a different currency
from our functional currency). We have established a policy that provides a framework for foreign currency management, hedging strategies and approved hedging instruments. Hedging instruments may be
used to minimize the gains and losses due to short-term foreign currency exchange rate fluctuations. The exposure that may be hedged in accordance with our foreign exchange policy is
limited to operational transaction exposure and is generally used only to balance out our cash positions. Foreign currency risks resulting from the translation of assets and liabilities of foreign
operations into our functional currency are generally not hedged; however, we may hedge this risk under certain circumstances.

To
address the risks associated with having the U.S. dollar as our functional currency we entered into a series of foreign currency forwards in January 2010, to effectively
hedge the foreign currency exposure on the Cdn$250 million 7.85% notes that were due and settled in August 2010. The foreign currency forwards locked in repayment of the
Cdn$250 million 7.85% notes at U.S.$237 million.

Translation
currency effects occur when we or one of our subsidiaries incurs monetary assets or liabilities in a currency different from its functional currency. These translation gains
and losses are recorded in feedstock and operating costs on the consolidated income statement, except for employee benefit plan liabilities for which the resulting gains or losses are reported in
other comprehensive income.

Foreign
currency risks may also result from certain investing activities such as the acquisition and disposal of investments in foreign companies, and may be caused by financial
liabilities in foreign currencies and loans in foreign currencies that are extended to affiliated entities for financing purposes. In recent years, these risks generally have not been hedged.

Our
subsidiaries and affiliated entities generally execute their operating activities in their respective local currencies. We historically have not used currency derivatives to hedge
such payments.

F-56

---



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

24.   FINANCIAL INSTRUMENTS (Continued)



Our investing, financing and operating activities are exposed to currency risks. The following table demonstrates the sensitivity to a
10% strengthening of the Canadian dollar against the U.S. dollar, with all other variables held constant, of our after-tax profit and other comprehensive income. The impact of
translating the net assets of foreign operations into our reporting currency is excluded from the sensitivity analysis. Any change in the Euro would not be material.

(millions of U.S. dollars, except as noted)

Change(1)

Decrease
in after-tax
profit

Decrease in other
comprehensive
income2011


+10%

$
64

$
282010


+10%

$
62

$
19


---



We use commodity-based derivatives to manage our 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. The extent to which commodity-based derivatives are used depends on market conditions and requires adherence to our hedging policy. We limit our positions in futures
markets to proprietary feedstock requirements and do not use derivative instruments for speculative purposes.

Commodity
swaps are sometimes used and designated as fair value hedges intended to hedge the fair value of our feedstock inventory against changes in the market price. At inception of a
hedging relationship, we document the relationship between the hedging instrument and the hedged item, our risk management
objective and our strategy for undertaking the hedge. We also require a documented assessment, both at hedge inception and on an ongoing basis, of whether or not the derivatives that are used in
hedging transactions are highly effective in offsetting the changes in the fair value of the hedged items. Unrealized gains and losses on derivative instruments designated and qualifying as fair value
hedging instruments, as well as the offsetting unrealized gains and losses on the hedged items, are included in income in the same accounting period within feedstock and operating costs in the
consolidated income statement. As of December 31, 2011 and 2010 and as of January 1, 2010, we had no outstanding commodity-based derivatives designated as fair value hedges.

In
addition we utilize options, swaps and futures instruments as economic hedges of commodity price exposures, but they either do not meet the hedge accounting criteria of IAS 39
or are not designated as qualifying hedges. Gains and losses on commodity-based derivatives are included in feedstock and operating costs in the consolidated income statement.

The
notional volume and fair value of outstanding derivative contracts for crude oil and refined products that are not designated or do not qualify for hedge accounting are
as follows:

December 31, 2011

December 31, 2010

January 1, 2010(millions of U.S. dollars, except as noted)Crude oil

Propane

Butane

Crude oil

Propane

Butane

Crude oil

Propane

ButaneNotional volume  mm bbls


0.4


0.1


0.3


1.5


0.9


0.9


2.9


2.7


1.9Weighted-average price per bbl

$
107.84

$
55.45

$
68.02

$
94.75

$
48.46

$
72.67

$
88.61

$
45.75

$
72.25Fair value

$
3

$


$
2

$
2

$
4

$
(4
)
$
16

$
17

$
(15
)Term to maturity  months


1-12


10-12


10-12


1-24


1-24


1-24


1-36


1-36


4-36


F-57

---



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

24.   FINANCIAL INSTRUMENTS (Continued)

The notional volume and fair value of outstanding derivative contracts for natural gas that are not designated or do not qualify for hedge
accounting are as follows:

(millions of U.S. dollars, except as noted)

December 31,
2011

December 31,
2010

January 1,
2010Notional volume  mm gjs


1.2


1.8


Weighted-average price per gj

$
3.43

$
3.75

$
Fair value

$
(1
)
$


$
Term to maturity  months


1-2


1-3







Year ended December 31 (millions of U.S. dollars)

2011

2010Unrealized gain (loss)

$
2

$
(15
)Realized gain

$
8

$
3


We
lock in a portion of our propane and butane feedstock requirements as a percentage of crude oil using forward contracts that extend to 2012. In 2011 and 2010, our portfolio also
included trades to re-price excess feedstock inventory, and a small volume of our winter natural gas requirements was locked in at a fixed price. Changes in forward propane and butane
prices as a percentage of forward crude oil prices and a decrease in the notional volumes drove the mark-to-market change in 2011 as compared to 2010. At December 31,
2011, each 10% change in the price of crude oil, propane and butane would have impacted the value of our derivative contracts and changed our after-tax profit by approximately
$1 million, $2 million and $3 million, respectively. At December 31, 2010, each 10% change in the price of crude oil, propane and butane would have impacted the value of
our derivative contracts and changed our after-tax profit by approximately $11 million, $4 million and $4 million, after tax, respectively. At December 31, 2011
and 2010, each 10% change in the natural gas price would not have materially impacted the value of our derivative contracts. The sensitivity analysis of our commodity derivative contracts does not
consider any adjustments for credit risk. See below for further sensitivity analysis of our primary feedstocks, which does not include the above commodity derivatives. There are no other items except
as noted, that are excluded or partially excluded from this analysis. At December 31, 2011, we remain exposed to price risk on open commodity derivatives until their maturity. There have been
no other changes in our market risk exposure or how this risk is managed.

The
following table illustrates how changes in various feedstock costs could affect our after-tax profit and equity assuming all other factors are held constant. The
sensitivity is based on 2011 actual consumption volumes (excluding hedged items and respective hedging instruments, if any) and the periodic effects are determined by relating a reasonably possible
change in the risk variables.

(millions of U.S. dollars, except as noted)

Change(1)

Decrease
in After-Tax
profit

Decrease
in EquityCrude oil


+10%

$
77

$
77Natural gas


+10%

$
15

$
15Propane


+10%

$
20

$
20Butane


+10%

$
40

$
40


---

F-58

---



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

24.   FINANCIAL INSTRUMENTS (Continued)



Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in
market interest rates. Changes in the market interest rates of long-term debt with fixed interest rates only affects our profit if such debt is measured at fair value. All of our
fixed-rate long-term debt is carried at amortized cost and therefore is not subject to interest rate risk. Our exposure to the risk of changes in market interest rates relates
primarily to our long-term debt obligations with floating interest rates.

We
manage our interest rate risk by balancing our exposure to fixed and variable rates while attempting to minimize our interest costs. When deemed appropriate, we enter into interest
rate swap agreements to manage our 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 2011 and 2010, we had no floating-for-fixed interest rate swaps outstanding.

For
the disclosure of market risks, management has prepared a sensitivity analysis that shows the effects of reasonably possible changes in relevant risk variables on
after-tax income and equity. The periodic effects are determined by relating the reasonably possible changes in the risk variables to the balance of financial instruments at the reporting
date. For purposes of this analysis, long-term debt balances as of December 31, 2011 and 2010, were used.

Changes
in market interest rates would affect interest expense on our variable rate, long-term debt which is included in the sensitivity analysis calculation.

At
December 31, 2011 and 2010 if interest rates at that date had been 0.5% higher, with all other variables held constant, after-tax profit and equity for each year
would have been $2 million lower, arising mainly as a result of higher interest expense on variable rate borrowings.



Liquidity risk is the risk that we will not have sufficient funds available to meet our liabilities. We seek to maintain liquidity
within a targeted range in the form of cash and cash equivalents and undrawn revolving credit facilities to position us to make scheduled cash payments, pay down debt, ensure ready access to capital,
and assist in the solvency and financial flexibility of our operations. Adjustments to the liquidity reserve are made upon changes to economic conditions, anticipated future debt maturities and
funding of our defined benefit pension obligations, underlying risks inherent in our operations and capital requirements to maintain and grow operations. Liquidity totaled $1,508 million at
December 31, 2011, $982 million at December 31, 2010 and $802 million at January 1, 2010. Our primary objective has always been to focus on and monitor liquidity and
cash flow.

F-59

---



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

24.   FINANCIAL INSTRUMENTS (Continued)

The
table below summarizes the maturity profile of our liabilities based on contractual undiscounted payments:

December 31, 2011(millions of U.S. dollars)

On
demand

Less than
3 months

3 to 12
months

2 years

3 years

4 years

5 years

> 5 years

TotalTrade and other payables

$
179

$
164

$


$


$


$


$


$


$
343Long-term debt





582





403


3


2


352


469


1,811Income taxes payable








40

















40Other liabilities





154


26


12


3








19


214Liabilities held for sale


5


2




















7$
184

$
902

$
66

$
415

$
6

$
2

$
352

$
488

$
2,415




December 31, 2010(millions of U.S. dollars)

On
demand

Less than
3 months

3 to 12
months

2 years

3 years

4 years

5 years

> 5 years

TotalTrade and other payables

$
190

$
141

$
3

$


$


$


$


$


$
334Long-term debt





1


9


555


403


3


2


821


1,794Income taxes payable








67

















67Other liabilities





111


13


7


7








24


162Liabilities held for sale


3


1




















4$
193

$
254

$
92

$
562

$
410

$
3

$
2

$
845

$
2,361




January 1, 2010(millions of U.S. dollars)

On
demand

Less than
3 months

3 to 12
months

2 years

3 years

4 years

5 years

> 5 years

TotalTrade and other payables

$
315

$
85

$
4

$


$


$


$


$


$
404Long-term debt





198


236


10


401


402


2


822


2,071Income taxes payable








6

















6Other liabilities





101


14














31


146$
315

$
384

$
260

$
10

$
401

$
402

$
2

$
853

$
2,627


Repayment of amounts due within one year may be funded by cash flows from operations, cash-on-hand, accounts receivable securitization
programs, and undrawn revolving credit facilities. Capital market transactions may also be used in managing the balance between maturing obligations and available liquidity. Our future liquidity is
dependent on factors such as cash generated from ongoing operations and other potential sources of financing. For further discussion about our liquidity, seeCredit
FacilitiesandCovenantsin Note 15.



Counterparty credit risk on financial instruments arises from the possibility that a counterparty to an instrument in which we are
entitled to receive payment fails to perform on its obligations under the contract. This includes any cash amounts owed to us by those counterparties, less any
amounts owed to the counterparty by us where a legal right of offset exists and also includes the fair value of contracts with individual counterparties which are recorded in the consolidated
financial statements.

F-60

---





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

24.   FINANCIAL INSTRUMENTS (Continued)

For derivative financial instruments, we have 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. We do not anticipate that any counterparties we currently transact with will fail to meet their obligations. At December 31, 2011 and 2010 and
at January 1, 2010, we had no credit exposure for foreign currency or interest rate instruments. At December 31, 2011, we had $5 million credit exposure for commodity-based
instruments (December 31, 2010  $7 million; January 1, 2010  $17 million).

In
order to manage credit and liquidity risk we invest only in highly rated instruments that have maturities of nine months or less. Limits on the term of an investment, the type of
investment and concentration limits per institution are established. Typically we invest only in overnight bank term deposits.

Trade
credit risk includes an unexpected loss in cash and earnings if a customer is unable to pay its obligations or the value of security provided declines. Concentration of credit risk
relates primarily to our receivables, as certain customer groups are located in the same geographic area and operate in the same industry. We monitor receivables based on two such concentrations:
North America and Europe. At December 31, 2011, approximately 91% of our receivables were from North American customers and 9% were from customers in Europe. Trade receivables over
30 days were approximately 1% of total trade receivables at December 31, 2011 and 2010. We do not consider our trade receivables to be impaired. There is no current indication as of
December 31, 2011, that the debtors will not meet their obligations. We continue to monitor all trade receivables. Bad debt write-offs during 2011 were also immaterial as a
percentage of total revenue and in line with prior years' experience. We manage our credit risk relating to trade receivables through credit approval and monitoring procedures. We establish and review
limits for all active customers. Such limits are based on trade information, payment history, credit score, credit rating and financial analysis, where possible. All credit limits are subject to
evaluation and revision at any time based on changes in levels of credit worthiness; sales orders cannot be processed unless a credit limit has been properly approved. Customer credit risk ratings
range from low (companies with investment grade bond ratings and very strong financial conditions) to high business risk (companies with an unstable financial condition, a strong possibility of
failure and slow payment). Accounts rated low risk are reviewed and approved every eighteen months (although a review may be accelerated if payment deterioration is noted) and accounts rated medium
risk are reviewed and approved every twelve months. Upper level management approval is needed for customers with existing credit limits above $5 million. Accounts rated high risk are reviewed
every six months. It is sometimes necessary to increase existing credit limits to accommodate rapid price increases. In those cases, we may grant temporary credit limit increases of up to
25%, subject to meeting certain conditions. High risk and high business risk accounts are not eligible for temporary credit limit increases. Customer accounts may be placed on "credit watch" when a
slow payment trend is noticed and the account balance consistently goes beyond the approved payment terms or when credit limit review reveals the customer's financial condition is weakening. If
necessary, we can utilize credit insurance programs to ensure payment. We may also request collateral when a customer does not meet the financial qualifications for the size credit limit requested or
there is a political or economic risk of selling in a certain country. The most prominent forms of security used by us are letters of credit and personal or corporate guarantees. Letters of credit
must be issued through acceptable banks with international standing. At December 31, 2011, we held collateral of approximately $6 million in a combination of letters of credit and
personal and corporate guarantees from various customers.

The
maximum exposure to credit risk is represented by the carrying amounts of each class of financial assets disclosed in Note 24.

F-61

---



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

25.   RELATED PARTIES

NOVA Chemicals Corporation and its wholly owned subsidiaries, in the ordinary course of business, enter into various purchase and sale transactions with joint ventures and other related
parties. The effect of these transactions is included in our consolidated financial statements. Sales to and purchases from related parties are made at terms equivalent to those that prevail in arm's
length transactions.

Our
ultimate parent company is International Petroleum Investment Company, which is an investment company established by the government of the Emirate of Abu Dhabi. There were no
transactions with IPIC in 2011 or 2010 other than a distribution of $75 million accrued at December 31, 2011 which is scheduled to
be paid to NOVA Chemicals Holding GmbH (a 100% indirectly owned subsidiary of IPIC) at the end of March 2012 (see Note 14). There are no other entities with
significant influence over us.

The
following list includes all significant subsidiaries of NOVA Chemicals. All of the voting securities of each significant subsidiary are held directly or indirectly by us.

NameNOVA Chemicals (Canada) Ltd./NOVA Chimie (Canada) Ltée.NOVA Chemicals Inc.NOVA Petrochemicals Ltd.NC Holdings USA Inc.


Disclosure
of joint ventures is provided in Note 11.

The
following tables provide the total amount of transactions that have been entered into with related parties:

(millions of U.S. dollars)

Sales to
related
parties

Purchases
from related
parties

Receivables
from related
parties(1)

Payables to
related
parties(1)

Notes
receivable
from related
parties(1)

Other
liabilities 
related
parties(1)

Interest
received
from related
partiesJoint ventures:INEOS NOVA


2011

$
66

$
28

$


$


$


$


$
2010

$
356

$
140

$
51

$
2

$
47

$
22

$
3As at January 1, 2010







$
41

$


$
58

$
6


Other:Borealis AG


2011

$
19

$


$
1

$


$


$


$
2010

$
5

$


$
4

$


$


$


$
As at January 1, 2010







$


$


$


$






---



Year ended December 31 (millions of U.S. dollars)

2011

2010Short-term employee benefits

$
4

$
4Post-employment benefits(1)





Other long-term benefits


6


2Termination benefits





3$
10

$
9


---

The amounts disclosed in the table above are the amounts recognized as an expense during the respective periods.

F-62

---



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

26.   CHANGES IN ACCOUNTING PRINCIPLES  TRANSITION TO IFRS

These consolidated financial statements, for the year ended December 31, 2011, are the first we have prepared in accordance with IFRS. For the periods up to and including the year
ended December 31, 2010, we prepared our consolidated financial statements in accordance with Canadian GAAP.

Accordingly,
we have prepared consolidated financial statements which comply with IFRS applicable for periods ending December 31 2011, together with the comparative period data as
at and for the year ended December 31, 2010, as described in our accounting policies in Note 2. In preparing these consolidated financial statements, our opening statement of financial
position was prepared at January 1, 2010, our date of transition to IFRS. This note explains the principal adjustments we made in restating our Canadian GAAP consolidated statement of financial
position as at January 1, 2010 and our previously published Canadian GAAP consolidated statements of financial position, income and comprehensive income as at and for the year ended
December 31, 2010. The significant difference in our consolidated statement of cash flows under IFRS is classifying interest paid in financing activities and income taxes paid, net of refunds
in operating activities. Under Canadian GAAP, these items were included as supplemental disclosures.



IFRS 1 allows first-time adopters certain exemptions from the retrospective application of certain standards. We
have elected to apply the following IFRS 1 exemptions:





The estimates at January 1, 2010 and at December 31, 2010 are consistent with those made for the same dates in accordance
with Canadian GAAP (after adjustments to reflect any differences in accounting policies).

F-63

---





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
All amounts in U.S. dollars, unless otherwise noted.

26.   CHANGES IN ACCOUNTING PRINCIPLES  TRANSITION TO IFRS

Reconciliation of equity as at January 1, 2010 (date of transition to IFRS)

Presentation Reclassifications

Re-measurement Adjustments(millions of U.S. dollars)

Canadian
GAAP

Notes

Equity
method

Assets held
for sale

Other
(see notes)

ARO

SPE

Employee
benefits

Derecognition

Push-down
acctg

Other

IFRSASSETSCurrent AssetsCash and cash equivalents

$
232



$


$
2

$


$


$
4

$


$


$


$


$
238Trade and other receivables


305

A,B


(4
)

9


(68
)




12





122








376Inventories


494




(2
)

3























495Income taxes receivable




A








50




















50Other current assets


44

B,C,D





1


7





(1
)













51Deferred tax asset


3

E








(3
)



















1,078




(6
)

15


(14
)




15





122








1,210Assets held for sale


251




(236
)

(15
)






















1,329




(242
)




(14
)




15





122








1,210Intangible assets


492




(1
)

1























492Other non-current assets


121

C








12





(15
)













118Investments in joint ventures




D


34





(1
)



















33Deferred tax asset


58

E








3




















61Property, plant and equipment


3,553







7























3,560Assets held for sale


43




(35
)

(8
)






















$
5,596



$
(244
)
$


$


$


$


$


$
122

$


$


$
5,474LIABILITIES & EQUITYCurrent LiabilitiesBank loans

$


F

$


$
1

$
(1
)
$


$


$


$


$


$


$
Trade and other payables


555

A,F,G,H,I


(3
)

6


(154
)



















404Other current liabilities




G








115

















1


116Deferred tax liability


6

E








(6
)



















Income taxes payable




A








6




















6Provisions




H








18




















18Long-term debt due within one year


312






















122








434873




(3
)

7


(22
)










122





1


978Liabilities associated with assets held for sale


142




(135
)

(7
)






















1,015




(138
)




(22
)










122





1


978Long-term debt


1,512































1,512Other non-current liabilities


366

H,I








(326
)







(6
)







2


36Employee benefit plan liability




I








302








(14
)










288Provisions




H








40


48

















88Deferred tax liability


804

E








6


(13
)




6








(1
)

802Liabilities associated with assets held for sale


106




(106
)

























3,803




(244
)







35





(14
)

122





2


3,704EQUITYIssued capital


849

























12





861Contributed surplus


941

























(941
)




Foreign currency translation reserve


5































5Retained earnings (deficit)


(2
)












(35
)




14





929


(2
)

9041,793













(35
)




14








(2
)

1,770$
5,596



$
(244
)
$


$


$


$


$


$
122

$


$


$
5,474


F-64

---





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
All amounts in U.S. dollars, unless otherwise noted.

26.   CHANGES IN ACCOUNTING PRINCIPLES  TRANSITION TO IFRS

Reconciliation of equity as at December 31, 2010

Presentation Reclassifications

Re-measurement Adjustments(millions of U.S. dollars)

Canadian
GAAP

Notes

Equity
method

Assets held
for sale

Other
(see notes)

ARO

SPE

Employee
benefits

Derecognition

Push-down
acctg

Other

IFRSASSETSCurrent AssetsCash and cash equivalents

$
300



$


$


$


$


$
6

$


$


$


$


$
306Trade and other receivables


374

A,B








(61
)




10





154








477Inventories


450































450Income taxes receivable




A








48




















48Other current assets


57

B,C








1





(1
)













57Deferred tax asset


2

E








(2
)



















1,183










(14
)




15





154








1,338Assets held for sale


321




(240
)

9











(9
)










811,504




(240
)

9


(14
)




15


(9
)

154








1,419Intangible assets


465































465Restricted cash


85































85Other non-current assets


87

C








13





(15
)













85Deferred tax asset


63

E








2




















65Property, plant and equipment


3,456































3,456Assets held for sale


10




(1
)

(9
)






















$
5,670



$
(241
)
$


$
1

$


$


$
(9
)
$
154

$


$


$
5,575LIABILITIES & EQUITYCurrent LiabilitiesTrade and other payables

$
579

A,G,H,I

$


$


$
(245
)
$





$


$


$


$


$
334Other current liabilities




G








125




















125Deferred tax liability


2

E








(2
)



















Income taxes payable




A








67




















67Provisions




H








5




















5Long-term debt due within one year


10































10591










(50
)



















541Liabilities associated with assets held for sale


245




(241
)

























4836




(241
)




(50
)



















545Long-term debt


1,531






















154








1,685Other non-current liabilities


419

H,I








(378
)
















2


43Employee benefit plan liability




I








285








37











322Provisions




H








142


51

















193Deferred tax liability


835

E








2


(11
)




(10
)










8163,621




(241
)




1


40





27


154





2


3,604EQUITYIssued capital


849

























12





861Contributed surplus


941

























(941
)




Foreign currency translation reserve


2































2Retained earnings


257













(40
)




(36
)




929


(2
)

1,1082,049













(40
)




(36
)







(2
)

1,971$
5,670



$
(241
)
$


$
1

$


$


$
(9
)
$
154

$


$


$
5,575


F-65

---





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

26.   CHANGES IN ACCOUNTING PRINCIPLES  TRANSITION TO IFRS



IAS 31,Interests in Joint Ventures, provides that jointly controlled entities
may be accounted for either by proportionate consolidation or by using the equity method. Under Canadian GAAP, jointly controlled entities were consolidated by proportionate consolidation. We have
adopted the equity method of accounting for jointly controlled entities under IFRS. The adjustments required as at January 1, 2010 and December 31, 2010 had no impact on equity.



In our consolidated statement of financial position as at January 1, 2010, assets and liabilities previously reported as held
for sale under Canadian GAAP can no longer be reported as such under IFRS. This is because IFRS does not allow the restatement of prior periods for comparative purposes with respect to the statement
of financial position presentation of asset and liabilities held for sale. In our consolidated statement of financial position as at December 31, 2010, assets and liabilities reported as held
for sale were reclassified to current to conform with proper IFRS presentation.



Other reclassifications were made in our consolidated statement of financial position as at January 1, 2010 and
December 31, 2010, to conform to IFRS presentation and include:



Under Canadian GAAP, the discount rate used to determine the present value of our decommissioning liabilities was based on our credit
adjusted risk-free rate. IFRS requires us to use pre-tax discount rate that

F-66

---



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

26.   CHANGES IN ACCOUNTING PRINCIPLES  TRANSITION TO IFRS (Continued)

reflects
the current market assessments of the time value of money and risks specific to the liability (which we interpret to be a risk-free rate). Measuring our decommissioning
liabilities with a risk-free rate of 4.33% results in an increase in the present value of our decommissioning liabilities at the date of transition to IFRS (January 1, 2010) and
December 31, 2010.



Under Canadian GAAP, we were not required to consolidate NOVA Chemicals Receivable Corporation ("NCRC"), a wholly owned SPE utilized in
connection with our U.S. accounts receivable securitization program. SIC 12 requires all subsidiaries to be consolidated if they are determined to be controlled. Because all benefits of the
securitization program flow-back to us, NCRC is considered to
be a controlled subsidiary and therefore it must be consolidated under IFRS. Intercompany balances have been eliminated.



Under Canadian GAAP, we recognized adjustments arising from changes in assumptions and experience gains and losses in defined benefit
plans based on the "corridor method". Under this method, if the cumulative unrecognized actuarial gains and loss exceeded 10% of the greater of the accrued obligations or plan assets at the beginning
of the year, the excess was recognized as a component of pension expense on a straight line basis over the estimated average remaining service lifetime of the participating employees. Recognition of
actuarial gains and losses within the 10% corridor was deferred. Under IFRS, we elected to recognize cumulative actuarial gains and losses (retrospectively back to July 6, 2009, the date on
which we revalued all of our assets and liabilities to fair value) as an asset or liability with the offset to other comprehensive income, and recognized directly in retained earnings. Under IFRS,
actuarial gains and losses also includes foreign exchange gains and losses on translation of the respective pension liabilities. Under Canadian GAAP, these were recognized in the consolidated income
statement.



Although the transfer of accounts receivable under our Canadian and U.S. securitization programs comply with the standards for
derecognition under Canadian GAAP, under IAS 39, the receivables transferred to financial counterparties do not meet the derecognition criteria. Accordingly, the funded amount of the programs
at the IFRS transition date (January 1, 2010) and December 31, 2010 have been reclassified to long-term debt due within one year and long-term debt, respectively,
based on the expiry date of the programs.



We elected to use push-down accounting under Canadian GAAP (CICA 1625,Comprehensive Revaluation of
Assets and Liabilities) to account for the IPIC acquisition of us on July 6, 2009. This resulted in our assets and liabilities being comprehensively revalued to be
consistent with the values recorded by IPIC in accordance with CICA 1582,Business Combinations. IFRS has no equivalent push-down accounting
standard, however IFRS 1 does allow us to use the fair values of assets and liabilities, as determined in connection with the IPIC acquisition of us, as "deemed cost", for the assets and
liabilities that can be recognized under IFRS. The excess of the acquisition date fair values of our identifiable asset and liabilities over the total purchase consideration ("bargain purchase") was
reclassified from contributed surplus under Canadian GAAP to retained earnings under IFRS.

F-67

---



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

26.   CHANGES IN ACCOUNTING PRINCIPLES  TRANSITION TO IFRS (Continued)



We have a 20% interest in the Joffre Cogeneration Facility which is accounted for as a jointly controlled asset and proportionately
consolidated under both Canadian GAAP and IFRS. Under IFRS a portion of our share of the revenues, under a cost pass-through formula that was recognized in prior periods under Canadian
GAAP, must be deferred. The deferred revenue will be recognized in income over the period in which the corresponding assets will be depreciated. Also, at the date of transition to IFRS
(January 1, 2010) other current liabilities has been adjusted to recognize a liability for future payments under a contract for maintenance service of the Joffre Cogeneration Facility's
electrical generation equipment.



(millions of U.S. dollars)

Notes

Canadian
GAAP

Presentation
reclassifications

Re-measurements

IFRSRevenue



$
4,576

$


$


$
4,576Feedstock and operating costs

A


3,466


278


(7
)

3,737Research and development




35


2





37Sales and marketing

A





27





27General and administrative

A,B


209


(31
)




178Foreign exchange loss

A


13


(13
)




Restructuring

A


20


(20
)




Depreciation and amortization

A,B


243


(243
)




3,986





(7
)

3,979Operating profit from continuing operations




590





7


597Finance costs, net

A


(183
)

(4
)

1


(186
)Other losses, net

A


(54
)

4





(50
)(237
)




1


(236
)Profit before income taxes from continuing operations




353





8


361Income tax expense




120





4


124Profit from continuing operations




233





4


237Discontinued operations, net of tax




26








26Profit



$
259

$


$
4

$
263




(millions of U.S. dollars)

Notes

Year ended
Dec. 31 2010Comprehensive income as reported under Canadian GAAP



$
256Differences in profit




4Actuarial losses arising from employee benefit plan liabilities, net of tax

C


(59
)Comprehensive income reported under IFRS



$
201


F-68

---



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All amounts in U.S. dollars, unless otherwise noted.

26.   CHANGES IN ACCOUNTING PRINCIPLES  TRANSITION TO IFRS (Continued)



27.   SUBSEQUENT EVENTS



On January 17, 2012, we repaid our $400 million 6.5% notes using cash-on-hand.



In January 2012, we amended our Canadian accounts receivable securitization program to extend the expiration date from
February 2012 to February 2015. In February 2012, we amended our U.S. accounts receivable securitization program to extend the expiration date from February 2012 to
January 2014 and increase the maximum funding from $100 million to $125 million.



In 2005, Dow Chemical filed a complaint against us for alleged patent infringement in the U.S. (see Note 22). In
January 2012, a panel of three CAFC judges affirmed the District Court ruling in a 2-1 non-precedential disposition in favor of Dow Chemical. In
February 2012, we petitioned the CAFC for anen banc(all members of the CAFC) review of the panel decision and have not yet received
a response.

F-69

---



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